Four Californians Indicted in $17 Million Workers’ Comp Scheme

The Orange County, Calif., District Attorney’s Office (OCDA) and California Department of Insurance (CDI) announced the indictment of a radiologist, a neurologist, and two co-defendants for a $17 million workers’ compensation insurance overbilling scheme. The indictments against the four defendants were issued May 11, 2011, and the grand jury transcripts were unsealed  June 13, 2011.

This case was investigated by CDI and the OCDA. Deputy District Attorney Shaddi Kamiabipour of the Workers’ Compensation Fraud Unit is prosecuting this case.

According to the DA, Dr. Sim Carlisle Hoffman of Newport Beach, Calif., is a radiologist and owner of Advanced Professional Imaging (API), Advanced Management Services (AMS), and Better Sleeping Medical Center (BSMC) in Buena Park. He is charged with 592 felony counts of insurance fraud for BSMC, 291 felony counts of insurance fraud for API, and one felony count of aiding and abetting the unauthorized practice of medicine.

If convicted, he faces a sentence ranging from two years up to 892 years and eight months in state prison. Hoffman is out of custody on $1.5 million bail. In 2001, Hoffman was disciplined by the Medical Board of California for excessive billing and subjecting a patient to radiology procedures that were not medically necessary.

Beverly Jane Mitchell of  Westlake Village is the administrator in charge of insurance billing for all of Hoffman’s businesses. She faces the same charges and maximum sentence as Hoffman. Mitchell is out of custody on $250,000 bail.

Dr. Thomas Michael Heric of Malibu, is a neurologist who worked for Hoffman at BSMC. He is charged with 296 counts of insurance fraud and one felony count of aiding and abetting the unauthorized practice of medicine. If convicted, he faces a sentence ranging from two years up to 315 years and eight months in state prison. Heric is out of custody on $500,000 bail. His medical license was suspended by the Board for 60 days as a result of a 2008 felony federal Medicare and Medi-Cal fraud conviction.

Louis Umberto Santillan of Chino Hills, worked for Hoffman in billing collections for API. He is charged with 141 felony counts of insurance fraud and faces a sentence ranging from two years up to 150 years in state prison if convicted. Santillan is out of custody on $250,000 bail. Santillan has no college degree or certification.

All four defendants are scheduled for continued arraignment June 22, 2011. Hearing on the revocation of Hoffman and Heric’s medical licenses as a condition of bail will also be heard at that time.

According to the DA, on January 2008, two BSMC employees filed a complaint with the California Department of Health Services regarding unsanitary conditions and lack of proper patient care at the facility. This complaint was forwarded to Don Marshall, vice president of the National Anti-Fraud Program for Zenith Insurance Co.

Based on this complaint, Zenith began a fraud investigation into BSMC and API and contacted CDI in July 2008. Zenith forwarded evidence that BSMC was not conducting an appropriate medical business and was overbilling for procedures that had no medical value or necessity.

CDI began investigating this case in July 2008 and turned over the case to the OCDA in June 2010. Following an investigation, the OCDA presented the case to the Orange County Grand Jury in May 2011. All four defendants were indicted May 11, 2011.

Hoffman is accused of opening API as a facility to perform Magnetic Resonance Imaging. In order to generate extra billing, he is accused of expanding to perform nerve testing called Electromyography (EMG), in which muscle cells are analyzed for neurological activity. This is a non-invasive, out-patient procedure that should be billed at approximately $35 per test.

Single Fiber EMG is an invasive, painful procedure that often requires hospitalization and can result in bleeding and infections if not performed properly. This test takes an hour to perform and involves sticking a massive needle into a single nerve to detect damage based on electricity conduction. This test is significantly more complex and costly that can be billed at $330 per procedure. Most neurologists are not qualified to perform this test based on the intense specialization and training required. Only two doctors in California are qualified.

Between June 2007 and March 2009, Hoffman is accused of conducting an EMG test on patients and overstating the nature of the test. Instead of billing for the performed EMG, he is accused of fraudulently billing insurance companies for Single Fiber EMGs.

Hoffman is accused of billing for Single Fiber EMGs as many as 20 times per patient, despite this test never being rendered by Hoffman or any physician employed at API on any patient. The defendant is accused of inflating insurance billings from what should legitimately have been under $2,000 to approximately $10,000 per patient.

After receiving payment from the insurance companies on the fraudulent bills, Hoffman is accused of re-submitting the same bill as a lien against the patient’s workers’ compensation insurance case in order to collect additional payment.

Hoffman is accused of fraudulently billing seven insurance companies including Berkshire Hathaway Homestate Companies, California State Compensation Insurance Fund, Commercial Property and Casualty Insurance, Fireman’s Fund Insurance Co., Liberty Mutual, Travelers Insurance, and Zenith.

In all, he is accused of billing insurance companies over $9 million in Single Fiber EMGs alone in the API scheme.

He also is accused of opening BSMC in 2007 and failing to hire a certified technician or a qualified physician to supervise the sleep center, as required by law. Between November 2007 and November 2008, Hoffman is accused of filing insurance claims for 1,247 patients. He is accused of billing for epilepsy and seizure testing for all 1,247 patients without ever conducting these tests on a single patient.

Hoffman is accused of paying Heric $100 per patient to write a report on the patient’s condition. Despite all of the 1,247 “reports” indicating that the patient needed medical treatment, none of the patients ever received medical treatment or care from BSMC.

In the course of the investigation it was determined that two of the patients who underwent “testing” suffered severe sleep disorders and were in dire need of medical attention. These disorders were neither diagnosed nor treated at BSMC. During the grand jury proceedings, medical experts opined that the service rendered to patients at BSMC was a “disgrace” and had “no medical value.”

Hoffman is accused of operating this facility as a “medical mill” for the sole purpose of insurance billing and without providing any legitimate treatment to any of his patients. For all 1,247 patients, Hoffman is accused of billing exactly $6,728 to the insurance company.

Hoffman is accused of fraudulently billing the City of Los Angeles and 19 insurance companies including Berkshire Hathaway Homestate Companies, California State Compensation Insurance Fund, Chartis division of American International Group, CNA Commercial Property and Casualty Insurance, Crum & Forster Holdings Corp., Employers Insurance, FirstComp Insurance, Fireman’s Fund Insurance Co., The Hartford Financial Services Group, Liberty Mutual, Matrix Direct Insurance Services, Republic Indemnity Company of America, SeaBright Insurance Co., Sentry Insurance, Specialty Risk Services, Travelers Insurance, Southern California Risk Management Associates (now York Insurance Services Group – California), Zenith, and Zurich Financial Services Group.

By November 2008, he is accused of billing insurance companies over $8.4 million in the BSMC scheme.

As a result of Hoffman’s 2001 Board discipline, he is accused of hiring Mitchell to manage all billing and administration for his businesses through AMS as part of his rehabilitation. Mitchell is accused of knowing that Hoffman had been disciplined by the Board and helping him to continue his fraudulent scheme. She is accused of directly supervising all fraudulent billing from API and BSMC to the insurance companies knowing that the procedures were overstated or never performed. Mitchell is also accused of “unbundling,” or breaking up procedures and billing them separately instead of together with the intention of fraudulently collecting higher payments.

Heric is a neurologist and is associated with Hoffman from several years ago. He was convicted in 2008 of felony federal fraud, for which his medical license was suspended by the Board for 60 days. In exchange for $100 per patient, Heric is accused of writing “reports” on all 1,247 sleep center patients evaluating the data generated during their sleep study. He is accused of finding in his “reports” that all 1,247 patients were “disabled” by using a formula entirely of his own invention not recognized in the medical community to reach his conclusions. None of these patients ever received any treatment for their supposed disability. All of his reports on the 1,247 patients are almost identical. Heric’s reports were used to lend legitimacy to the fraudulent insurance bills for each patient.

Santillan is accused of supervising the collections department for Hoffman’s businesses and collecting payment on the medical bills knowing they were inflated and fraudulent. He is accused of receiving approximately $800,000 in commission on all of the fraudulent monies collected for Hoffman between 2006 and 2007.

Source: OCDA