Workers comp insurer sues DME

Tuesday, September 30, 2003

WOODLAND HILLS, Calif. - A workers’ compensation insurer is suing a Yorba Linda, Calif.-based DME, N-Care, for alleged over billing of durable medical equipment.

In a release announcing its suit, the insurer, Zenith Insurance Company, said that N-Care billed Zenith $995 for an orthopedic pillow that otherwise sells for $14-$16 and for a heat pack that sells for $62-$75.

Under California’s workers’ compensation laws, according to Zenith, a physician may seek reimbursement for DME dispensed to injured workers for the physician’s cost plus an additional 50% of the physician’s cost not to exceed $25.

Although Medicaid and Medicare regularly audit HME providers, it is unusual for a workers’ compensation insurer to aggressively pursue an HME it suspects of fraud.

“I’m not sure I have ever seen an insurance company sue a DME,” said Jeff Baird, a healthcare attorney at Brown & Fortunato in Amarillo, Texas. “That’s pretty unique.”

Zenith contends that N-Care’s owner conspired with physicians to misrepresent the DME N-Care dispensed to injured workers and further, that N-Care actually claimed to have manufactured, rather than purchased, the DME.

“This is the first time we have ever seen this, but it’s not the first time that we’ve ever litigated based on fraud,” said Zenith’s President Stanley Zax. “We have a long history of being pretty tough-nosed when it comes to people cheating us.”

Zenith fields about 250,000 workers’ compensation bills in California per year. But this year, with insurance costs escalating at double-digit rates, Zenith has been forced to scrutinize its bills to a greater degree than ever before.

“We’re dealing with fraud and abuse that’s bizarre and out of control,” said Zax. “We’re hoping the legislature is going to do something in the next week or two.”

In late August, California’s state auditor blasted the state’s workers compensation program, insisting that the payment system has failed to control and monitor costs.

Part of the problem, according to the auditor, are outdated and non-existent fee schedules.