WY Department of Workforce Services

Special Investigations Unit (SIU)

Workers' Compensation Fraud - Red Flags – What Every Employer Should Know

National Insurance Crime Bureau (NICB)

– Workers' Compensation Fraud estimates by

the National Insurance Crime Bureau (NICB)

• $30 billion problem annually in the United States. • Fastest growing segment of insurance fraud • Creates a significant strain on Worker’s Comp

system

National Insurance Crime Bureau (NICB)

As one company executive put it:

‘If workers’ comp fraud was a legitimate business, it would rank among Fortune

500 companies.’

Fraud

What is Fraud?

Fraud • Any intentional or deliberate act to deprive

another of property or money by guile, deception, or other unfair means.

Categories of Fraud

• Misrepresentation of material facts • Concealment of material facts • Bribery • Extortion • Conflicts of interest • Forgery • Theft of money or property • Theft of trade secrets • Breach of fiduciary duty • Statutory offenses

Misrepresentation of Material Facts

• Deliberate making of false statements to induce the intended victim to part with money or property

• Most often thought of when the term fraud is used

• Can be prosecuted criminally or civilly under a variety of statutes, such as false statements, false claims, or mail and wire fraud

Misrepresentation of Material Facts

• Required elements may vary according to the jurisdiction and whether the case is prosecuted criminally or civilly – Material false statement – Knowledge of its falsity – Reliance on the false statement by the victim – Damages suffered

Wyoming Worker’s Compensation Act W.S. §27-14-510. Misrepresentations or false statements; failure of employer to establish account or furnish payroll report. (a) Any person who knowingly makes, authorizes or permits any misrepresentation or false statement to be made for the purpose of him or another person receiving payment of any kind under this act is guilty of:

(i) A misdemeanor punishable by a fine of not more than seven hundred fifty dollars ($750.00), imprisonment for not more than six (6) months, or both, if the value of the payment is less than five hundred dollars ($500.00); (ii) A felony punishable by a fine of not more than ten thousand dollars ($10,000.00), imprisonment for not more than ten (10) years, or both, if the value of the payment is five hundred dollars ($500.00) or more.

Wyoming Worker’s Compensation Act

W.S. § 27-14-101 Workers’ compensation laws require employers or their insurance plan (Wyoming Workers’ Compensation) to reimburse an employee (or on his behalf) for injuries that occurred on the job regardless of who is at fault and without delay of legal proceedings to determine fault.

Workers’ Compensation Fraud

Common Schemes – Premium Fraud (Employer Fraud) – Claimant Fraud – Organizational Fraud (Provider Fraud)

Claimant Fraud

• Misrepresenting the circumstances of any injury or fabricating that an injury occurred

• Secondary Employment – Securing a job with another employer

• Fake identity • Assuming another’s identity • Working “under the table” • Self employment

Indicators of Claimant Fraud

• Injured worker: – disgruntled, soon to retire, or facing imminent

firing or layoff – involved in seasonal work that is about to end – unexplained or excessive time off prior to

injury – takes more time off than the injury seems to

warrant – nomadic/history of short-term employment – new on the job

Indicators of Claimant Fraud

• Injured worker: – experiencing financial difficulties – recently purchased private disability policies – changes physician when a release for work

has been issued – history of reporting subjective injuries

• Review of rehab report describes claimant as “muscular, well-tanned, with callused hands and grease under the fingernails” or other similar descriptions

Circumstances of the Accident

• Occurs late Friday afternoon or shortly after the employee reports to work Monday

• No witnesses • Claimant has injury at odd time, i.e. at lunch hour • Rumors circulating that the accident was not legitimate • Occurs in an area where the injured employee would not

normally be • Accident is not the type customarily associated with

those within the injured worker’s position or job classification, i.e. an office worker who is lifting heavy objects on a loading dock

DWS SIU Organization

• Three full time state employees • Four contract investigators located

throughout the state • One additional contractor used for

investigations outside Wyoming

Process

• Referral received – Claims analyst, employer, Fraud Hotline, etc.

• Determine whether to open an investigation

• Assign case to contract investigator – Provide preliminary information

• Conduct investigation – Provide surveillance/reports

Process con’t

• Notify analyst of result of investigation – Analyst notifies employer (if applicable)

• Analyst determine cause of action based on

investigation and applicable statutes/rules/regulations

• Provable violations may be presented for

prosecution

Employer: What can you do?

• Develop a culture of zero tolerance • Fraud awareness program

– Anti fraud training and education • Diligent post injury management program

– Light duty works in some cases – Proactive interaction w/Claims Analyst

• When fraud is suspected: Report promptly – Fraud Hotline; Internet; Call SIU; Through

Claims Analyst

Benefits of Light Duty Contracts • In Light Duty contracts the Division pays 80% of

the difference of the gross wages on light duty and pre-injury gross wages

• Light Duty wages are non-chargeable to the employers account

• If an employee refuses a bona fide light duty work offer – TTD will be reduced to 1/3 (non-chargeable to the

employer)

As an Employer • Request 2nd opinion on medical treatment

• Receive the medical records

• Appeal any final determination

• Request an investigation from SIU

• Request an audit of your claims and/or account

Report through Internet

Prosecutions • In May of 2016, Michael J. Roth of Wheatland

plead guilty to one misdemeanor count for making a false statement and paid full restitution of $5,401.30 in workers’ compensation benefits back to the division.

• In February of 2016, Victor Rodriguez of

Sheridan entered a no contest plea to one count of workers’ compensation fraud. Rodriguez is currently awaiting sentencing in District Court in Sheridan County.

Prosecutions

• In April of 2016, Andrew Jivelekas of Worland was sentenced for wire fraud. Jivelekas received one year imprisonment in a federal penitentiary, to be followed by two years of probation, and was ordered to pay $25,781.73 in restitution.

• In March of 2018, Michael Gudim of Gillette was sentenced for Obtaining Benefits by Fraud. Gudim received 5 years probation and ordered to pay $7,452.20 in restitution.

* Image used to enhance effectiveness, not to promote sales

Internal audits help organizations achieve corporate objectives by keeping a pulse on the consistency of internal business practices.

The goal of an internal audit is to ensure organizational policies and procedures are followed and to alert management of gaps in policy compliance.

Making sure that the audit practice is done consistently can help organizations manage performance and product quality.

However, making sure that the audit practice is done consistently can help organizations manage performance and product quality.

Performing an internal audit can be time consuming and resources need to be allocated to the process. An audit can be done daily, weekly, monthly or annually. Some departments may need to be audited more often than others.

1. Identify Areas that Need Audit Identify departments that operate by using policies and procedures written by the organization or by regulatory agencies. This can include areas as complex as manufacturing processes or as simplistic as accounting procedures. Make a list of each area and the functions of the area that require review.

2. Determine Audit Frequency Some areas may only need to be audited annually while some benefit types may require more frequent audits. For example, a Temporary Total Disability review may require weekly audits for quality control purposes while the Permanent Total Disability benefits may only require an annual audit of records and processes.

3. Create Audit Calendar A structured and systematic approach to the auditing process can help ensure the function gets completed. And, like any other business goal, audits should be integrated into corporate objectives. Scheduling audits on the business calendar ensures that it is done consistently.

https://www.surveymonkey.com/mp/sample-size-calculator/

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Interval Random Number

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### 0.204 Random Date 3/2/2010 2 23 2013 Sample Interval Starting Point K= P I = (R*K) + 0.5 N P= Universe

Starting Point N= Sample Size I = (R*K) + 0.5 R= Random Number

The rule of thumb is that the larger the sample size, the more statistically significant it is—meaning

there’s less of a chance that your results happened by chance.

4. Alert Districts of Random Scheduled Audits It is simply common courtesy to provide transparency that claims will be audited. A surprise audit should only be done if there is suspicion of unethical or illegal activity. Managers should not feel threatened by an audit but view them as a valued resource to help them better manage their area.

5. Be Prepared The auditor should come prepared with an understanding of policies and procedures and a list of items that will be reviewed. Objective Yes or No questions should be formulated based on legal, procedural, and/or best industry practices. For example, an Injury Report Audit requires 27 critical conditions (Legal), 27 major conditions (Procedures/Policy), and 22 minor conditions (Best industry practices). The more prepared the auditor is the more efficient the process will be and the less down time there will be for the area being reviewed.

Q1 2017

CRITICAL DIST

1 DIST

2 DIST

3 DIST

4 DIST

5 DIST

6

INJ 1 A Injury filed with Division within 10 working days or reported to employer within 72 hrs?

INJ 2 A Initial or Final Determination issued in 15 days of entry to Analyst work queue? 1

INJ 3 A Employee is 18 or over and signature received? 1 1 INJ 4 A Employee under 18 and parent signature received? INJ 5 A Time of injury within stated work hours? INJ 6 A SOC (Occupation code) determined correctly? INJ 7 A Wyoming jurisdiction determined correctly? INJ 8 A AOE-COE determined correctly? INJ 9 A ICD determined to known specificity? 3 3 3 INJ 10 A Duplicates identified? INJ 11 A Definition of employee met? INJ 12 A Employer reporting to UI? INJ 13 A Employer reporting to WC? INJ 14 A Employer WC account in good standing on DOI? INJ 15 A DOI in policy coverage period?

INJ 16 A Drug & alcohol confirmation test reviewed under 49 CFR part 50 & R/R Chapter 10, Sect 2? 1

INJ 17 A Insured participating and a copy of confirmed test result sent? 3 2 2

INJ 18 A Initial and confirmation drug tests received above threshold and causation considered?

INJ 19 A Medical report requested (Hernia, heart attack, CTS, Seizure, Needle stick/exposure)? 1

6. Interview Users The auditor or trainer should interview employees and ask them to explain their work process. Compare the process, as the employee explained it, to what the written policy says. This step is to gain an understanding of employee competence and identify areas that need additional training.

6. Document Results

Document the results and any differences in practice to how the policies are written, when policies are complied with and when they are not. This may also include other information that is gathered from the interview process. Again, the goal is to identify gaps in compliance and to figure out a way to bridge that gap.

MEDICAL FRAUD- $6,276.65 Civil Recovery Casper, WY Chiropractor

TEMPORARY TOTAL DISABILITY VS UNEMPLOYMENT AUDIT 1,511 Claims receiving TTD benefits were audited to reveal: $1.5 million in potential overpayments on 16 separate claims

4 Claims Opened in Error

7 Delinquent Payroll: Claim Cost Liability Applied

2 Claimants Reporting Wages while Receiving TDD.

7. Report Findings Create an easy to read audit report. These reports should be reviewed with senior management and an improvement plan should be developed for areas that have gaps in practice compliance.

STATS

CATEGORY

DIST 1 (Albany, Laramie, Platte,

Goshen)

DIST 2 (Sheridan, Johnson, Campbell,

Crook, Weston)

DIST 3 (Park,

BigHorn, HotSprings, Washakie, Fremont)

DIST 4 (Teton,

Sublette, Lincoln, Unita, Sweetwater)

DIST 5 (Natrona, Converse, Niobrara, Carbon)

DIST 6 (Internal, Customer Service, Trainer, Lead)

AVER

AGE

Q1

2017

# INJRPT 638 418 486 561 517 4 524 # CLAIMS RECEIVING TTD 204 224 204 313 195 1 228

AVE DAYS DOI-PPI 715 609 695 736 598 654 671

AVE PPI % 7% 8% 5% 11% 8% 8% 8%

# PPD/VOC AWARDED 8 2 6 1 7 0 5

UNDERPAYMENTS-ALL $ 3,886.32 $ - $ - $ - $ 9,328.77 $ - $ 2,643.02

OVERPAYMENTS-ALL $ - $ - $ - $ - $ - $ - $ -

• When reviewing policies and procedures, it is

important to think about whether they are meeting the needs of customers and adding value to the organization.

8. Other things to think about

• Policies and procedures should focus on continuous improvement as it relates to how work is performed.

• Policies and procedures should be reviewed on a consistent basis to ensure policies reflect the changing business environment.

• Is there a strong team environment that supports compliance with policies and procedures?

A dysfunctional team can impact procedural compliance.

Businesses are only as successful as their ability to create products and services that meet the needs of their customers and their ability to deliver these products and services accurately, seamlessly and without error. Policies and procedures are how organizations maintain efficient and effective practices that support quality products and services. Internal audits are one tool that organizations use to ensure that their products and services are delivered the right way, the first time and every time.

How often do you audit your internal business practices?

http://www.wyomingworkforce.org/contact/fraud/

or call/email SIU/QA Manager- Chad Seidel

Chad.seidel2@wyo.gov 307-777-6370

SIU Operations - Jennifer Wilch jennifer.wilch@wyo.gov

307-777-7597 Internal Auditor- Patsi Sawyer

patsi.sawyer@wyo.gov 307-777-8207

THANK YOU!