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Just a few days ago, the California Department of Insurance announced that it put a stop to a ring of doctors and pharmacists who were taking advantage of the workers’ compensation system.  By prescribing unnecessary medications and ordering unnecessary tests, these medical professionals took over $23 million out of the pockets of California business owners and affected over 13,000 claims.

Allegedly, the network consisting of 26 doctors and pharmacists devised a fairly simple kickback scheme.  Essentially, the doctors were paid a kickback every time they prescribed a compounded cream or repackaged oral medicine or they ordered a urine drug test.  In order to enhance profits, the pharmacists would then bill insurance carriers between 10 to 20 times the actual price of the creams or medicines.  Items that cost the pharmacist $40 were billed out as high as $700!  To make matters even worse, the creams were not FDA approved, were not made for any specific patient, and have never even been tested to see if they work.

This, my friends, is what you would call a scam.

Unfortunately, it’s not the first kickback scheme involving workers’ compensation to get busted by the Department of Insurance, and, in all likelihood, it won’t be the last…

But here’s the important part:

The vast majority of business owners that we talk to seem to think that employees are the only people that you have to worry about when it comes to workers’ comp fraud.  We’ve heard countless stories about that one employee that files claims for everything from back issues to insomnia to diabetes.  To be clear, we’re not trying to say that that person doesn’t exist.  Employee workers’ comp fraud is a very real problem.

But what about when the employee has a legitimate injury, and they simply want to get checked out and get back to work?  It’s crucial to understand that even when your employee has the best intentions, you’re not out of the woods in terms of fraud.  A medical kickback scheme can harm your business just as much as a disgruntled employee, and it’s much harder to stop.

So, as always, what’s the bottom line?

Well, there’s two parts:

  1. Workers’ Compensation Fraud comes in many different forms, and…
  2. It is imperative that you have a plan for avoiding and dealing with it wherever it arises.