State Claims Doctors Ran ‘Patient Mills’

SANTA ANA, Calif. (CN) - Two doctors and a slew of their "patient mills" bilked California for millions of dollars by submitting bogus workers' compensation claims, the state claims in Federal Court.

The State Compensation Insurance Fund sued Drs. Sana Ullah Khan and Alexander Zaks, the alleged masterminds of the scheme, more than 15 surgery centers, clinics, imaging centers and other offices, and three other people.

The State Compensation Insurance Fund is the largest provider of workers' compensation insurance in the state. It accuses the defendants of racketeering and fraud: operating "patient mills" to submit fraudulent claims.

The state claims the defendants billed its for services that were not delivered or were medically unnecessary, submitted inflated bills, and demanded payment from the state fund for liens that the defendants did not own.

Defendants include the Accident Help Line Medical Group, and Bruce McIntyre Roth, a former State Compensation Insurance Fund attorney who allegedly helped Zaks' clinics obtain a fraudulent settlement while Roth still worked for the fund.

The state claims Khan and Zaks cross-referred patients to their clinics, and made fraudulent submissions to the State Fund.

The state claims the defendants submitted thousands of fraudulent claims for unnecessary diagnostic tests, including MRIs and X-rays, from 2002-2006.

The clinics billed for a deep massages they did not actually offer, and recommended unnecessary rehabilitation treatments and pain injections, according to the complaint.

The state claims the defendant clinics' employees were rewarded with bonuses "based on the volume of tests and treatments ordered for their patients."

The California Department of Insurance investigated Accident Help Line Medical Group clinics by sending undercover workers' comp "patients" who "complained of little or no pain or discomfort" but nonetheless received treatment - even if their medical providers denied authorization, according to the complaint.

The state says Roth joined the fraud in the summer of 2009, while he was an in-house attorney at the State Funds' Special Litigation Unit.

"In that capacity, Roth was responsible for investigating fraudulent claims and representing State Fund in litigation before the WCAB [the Workers' Compensation Appeals Board]," the complaint states.

Roth was assigned to investigate Zaks' medical clinics in Los Angeles County in 2005 and uncovered evidence of fraud, including a State Fund payout of almost $2.4 million for nonexistent translation services, according to the complaint.

Though Roth was meant to defend the State Fund's interest in litigation with Zak's clinics, whereby those entities sought more than $10 million based upon alleged fraudulent billings, he negotiated a settlement detrimental to the fund, according to the complaint.

"Beginning in approximately July 2009, acting with intent to defraud State Fund and to further the fraudulent scheme, Roth secretly engineered a settlement agreement with the Zaks entities, which obligated State Fund to pay between 100 percent to 140 percent of the value of such claims and included interest and penalties (the 'fraudulent settlement')," the complaint states.

"As Roth was aware, in other similar settlement agreements, State Fund typically paid a small percentage of the billed amount and almost never paid any interest or penalties. In doing so, Roth knowingly acted without State Fund's knowledge or consent and took affirmative steps to attempt to conceal the unauthorized settlement agreement from State Fund."

The state says that Roth helped defraud the fund and executed the settlement because of the prospect of landing a job representing Zaks and Khan.

In early 2010, while Roth still worked for the State Fund he was hired as legal counsel for Global Holdings, of which Khan is chief medical officer, according to the complaint.

The state claims that Khan-owned medical clinics launched fraudulent litigation against the fund, accusing the state of racketeering by withholding medical liens worth $20 million. That lawsuit was thrown out this year for failure to state a claim, the state says.

"(E)ach of the liens related to the Khan Litigation was fraudulently billed at amounts significantly over the OMFS [Official Medical Fee Schedule], for services that were either not rendered or were medically unnecessary," the complaint states.

The state seeks treble damages and punitive damages for RICO conspiracy and fraud.

Neither Roth nor Khan immediately responded to requests for comment.

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