Healthcare software firm CareCloud recently agreed to a $3.8 million settlement, in part to resolve allegations that it traded unlawful payments for referrals, in violation of federal anti-kickback laws. The US Justice Department alleges CareCloud offered “existing clients cash equivalent credits, cash bonuses and percentage success payments to recommend CareCloud’s EHR [Electronic Health Record] products to prospective clients.”

Last month we reported that in order to join the State Compensation Insurance Fund (SCIF) Medical Provider Network (MPN), SCIF requires physicians to also join the Anthem Network of Providers, which requires physicians to accept discounted reimbursements. The Anthem Network of Providers often reimburses providers at only 85% of the Official Medical Fee Schedule (OMFS).

This means in order for a physician to be a member of the State Comp MPN, SCIF forces a physician to pay an Anthem-imposed tax equaling 15% of the physician’s revenue. With CareCloud in the crosshairs of justice for paying physicians for ‘referrals’ and ‘recommendations,’ this enforcement action raises two questions:

1. If Anthem and SCIF share the 15% of reimbursements that Anthem takes from the provider, is this any less of a “kickback” scheme than what CloudCare is accused of?

2. Why does the California workers’ comp system allow SCIF to force physicians into this network, by which Anthem enriches itself with a portion of the reimbursement allotted by the OMFS to providers for treating injured workers?

An Opaque Arrangement

We do not know the specific terms of Anthem and SCIF’s arrangement. We know only that SCIF will boot from their MPN any provider who refuses to surrender a portion of their reimbursement to Anthem. However it works, it is reasonable for workers’ comp stakeholders to ask: Does Anthem share the spoils of this 15% reduction with SCIF in some way? 

If the answer is ‘Yes:’ can this be construed as Anthem paying SCIF to ‘recommend/force’ providers to join the Anthem Network of Providers?

If the answer is ‘No:’ Why does SCIF make physicians give up 15% of their revenue to join the Anthem Network of Providers?

One way or another, we have to wonder how Anthem incentivizes SCIF to shoehorn physicians into the Anthem Network of Providers, which essentially taxes 15% of provider revenue. Anthem and SCIF presumably both stand to gain from this arrangement, which has nothing to do with improving workers’ comp outcomes. As Acting U.S. Attorney for the Southern District of Florida Juan Antonio Gonzalez said regarding the CloudCare scheme:

"Product functionality, reliability, and safety should drive a medical software company’s success, not illegal kickbacks paid to promote its products. There is simply no place for kickbacks in our country’s healthcare system."

Surely Mr. Gonzalez would agree that the same should apply to workers’ comp. We should all be asking: how does the Anthem Network of Providers offer any increase in functionality, reliability, or safety? Clearly, the Anthem-imposed physician reimbursement tax increases Athem’s profit, at the expense of those who actually restore the health of workers.

Pay to Play in Workers’ Comp

Bear in mind that once a provider is forced into the Anthem Network of Providers, the 15% reimbursement reduction is not confined to bills for SCIF.

As we continue to warn providers, network reductions are often leased out to dozens of additional payers — like those who line up at Anthem’s trough for its discount. All that a given claims administrator (with apparently no obligation to perform any service or deliver any value whatsoever) must do is cite “Anthem BC” on the Explanation of Review (EOR) to reduce the provider’s payment.

In this way, Anthem, bill review vendors, insurers, and other arguably parasitical vendors profit without making any meaningful contribution to the workers’ comp system. It certainly whiffs of pay-to-play; providers must accept the 15% Anthem-imposed reduction (no matter what payer applies it), or be expelled from SCIF’s MPN and the employers it represents.

Hats off to Becker’s Health IT reporting for first drawing our attention to this case. It’s a glaring example of an unfortunate syndrome; that which is considered criminal in the rest of the healthcare industry is business as usual for California workers’ comp.

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