San Francisco

Workers' Comp Fraud Costs the System Billions, But Some Doctors Say They're Being Unfairly Targeted

When Dr. Gary Martinovsky was pulled over and arrested, he was driving one of his young children to school in San Francisco. It was the spring of 2014, and the Stanford-educated doctor had spent the last five years building up a successful pain management practice in Richmond.

“You basically use people as sheep and charge the insurance industry for services you never gave,” one of the arresting officers told Martinovsky.

The audio recording of the arrest was later obtained by Martinovsky and his attorney. Martinovsky can be heard denying the allegations against him, but the officer presses on.

“You are going to jail and we are going to prosecute you,” the officer tells Martinovsky. “And we are going to do everything we can to take your medical license from you, which I’m sure we will, and put you out of business.”

Martinovsky was charged with insurance fraud and unlawful dispensing of medicine. About half of his patients are injured workers, and investigators claimed he was bilking the California workers’ compensation system; a bad apple in an industry rife with abuse.

Click here to see Part I of a series about Workers' Comp 

By all accounts, fraud is a mammoth problem in California, a multi-billion dollar drain on the state’s economy each year, according to the California Department of Insurance. It’s one of the reasons California’s workers’ comp system is the most expensive to administer in the country. 

Unethical medical providers have caused losses of more than half a billion dollars since 2013 and often leave injured workers with more injuries, according to the department. But some workers’ comp doctors believe they become unfair targets of law enforcement by advocating for patients and pushing insurance companies to approve medical treatments that they say injured workers need to get back on the job.

Inspectors for the Alameda County District Attorney’s Office, the agency behind an undercover investigation into Martinovsky, accused him of running a medical mill and using injured workers for his own financial gain. They would claim in court documents that his office billed an insurance company for services he never performed and that Martinovsky had a “cavalier attitude” toward dispensing drugs.

But the case against Martinovsky fizzled in court. The case was dismissed in Alameda because it had been filed in the wrong county.

Prosecutors then filed a charge of insurance billing fraud against Martinovsky in Contra Costa County. But that case was also dismissed this summer after Martinovsky completed a one-year diversion program meant to keep people accused of low-level offenses out of court. He never entered a guilty plea or admitted guilt of any kind.

“There was no evidence, no real evidence, that a crime was committed in this clinic,” Martinovsky said. “I feel that there were significant misstatements made by investigators.”

Martinovsky's license was not suspended and he is now rebuilding the practice he almost lost.

Click here to see Part II of a series about Workers' Comp

John Burton, Martinovsky’s attorney, doesn’t mince words when he explains what he thinks happened to his client. He’s representing Martinovsky in a civil rights lawsuit against the Alameda County District Attorney’s Office and an investigator for the Department of Insurance. 

“He was framed by overzealous investigators who were carrying out a vendetta on behalf of the insurance industry,” Burton said.

The civil complaint alleges that ties between the insurance industry and law enforcement motivate unfounded investigations that “target and harass successful medical providers.”

The Alameda County District Attorney’s office declined to comment on the case. But law enforcement strongly rebuffs claims that doctors have become targets.

“I’m hard pressed to say that,” said Gary Fagan, chair of the Insurance Fraud Committee for the California District Attorneys Association, and a Chief Deputy District Attorney in San Bernardino County. “We are looking at complaints we receive or information we receive and if there’s evidence that supports an investigation or prosecution, we’ll proceed.”

Click here to see Part III of a series about Workers' Comp

Prosecutors investigate many types of suspected workers’ compensation insurance fraud, including patients who lie about injuries, employers who refuse to pay for insurance and medical providers who overbill.

The Department of Insurance receives tens of thousands of referrals of suspected workers’ compensation fraud every year, according to a department spokesperson. She said the department works with a variety of law enforcement agencies, including district attorneys, to investigate fraud.

The department says the conviction rate is nearly 90 percent. Special funds set aside specifically for workers’ compensation fraud could be credited with some of that success.

The money comes from California employers and it’s doled out by the Fraud Assessment Commission, which is housed inside the Department of Insurance. The commission is made up of seven members appointed by the governor who represent organized labor, employers and insurance companies.

An NBC Bay Area Investigative Unit analysis of conviction data from 2011 to 2015 reveals that district attorneys across the state have recovered more than $38 million and convicted 3,424 people. Prosecutors convicted 2,309 employers for insurance premium fraud or being willfully uninsured, 751 claimants seeking medical treatment and 41 medical providers.

In the Bay Area, prosecutors convicted 644 people, including six medical providers, over that same time period.

Yet some believe law enforcement is going too far, fueled by a funding scheme that’s raised eyebrows on critics like Burton. They claim the financial incentives in place to bust workers’ comp fraudsters can lead to overzealous prosecutions, as district attorneys need to show tangible results to justify the special funds flowing into their offices.

“What is so intriguing to me in this case is the insurance industry doesn’t need [law enforcement’s] help,” Burton said. “The insurance industry has a battery of lawyers, billing specialists and doctors. They can totally take care of themselves without cheating, so to speak, without sending infiltrators.”

Some might dismiss what Burton says because he’s got a dog in this fight. But Burton isn’t the only one troubled by this system. Some academics are, too.

“I believe there are too many financial incentives on the ethics of the prosecutor in these types of situations that can lead to a lot of problems,” said Aviva Abramovsky, a law professor at Syracuse University.

Abramovsky is the author of a paper titled, “An Unholy Alliance: Perceptions of Influence in Insurance Fraud Prosecutions and the Need for Real Safeguards.” 

She argues that specialized funding for prosecutors and investigators creates a conflict of interest that jeopardizes the impartiality of prosecutors.

“I think it raises a lot of constitutional issues about the purpose of the criminal justice system and the prioritization we give some crimes over other types of crimes,” Abramovsky said.

Whether those funds are buying influence or not, the Fraud Assessment Commission granted district attorneys $156 million from 2011 to 2015 to prosecute insurance fraud, an NBC Bay Area analysis of funding shows.

The Alameda County District Attorney’s Office and the California Department of Insurance declined to be interviewed for this story, but prosecutors say the fight against fraud would be hamstrung without those funds.

Fagan said prosecutors wouldn’t have the resources to put a dent in fraud schemes costing the system billions each year. He also doesn’t believe prosecutors would abandon impartiality to secure those resources.

“I don’t have much confidence in the idea that because prosecutors are getting money, they are overzealous,” Fagan said. “Our job is to prosecute only those people that we have a reasonable belief that the evidence will shows they are guilty beyond a reasonable doubt,” Fagan said.

Martinovsky acknowledges the role fraud plays in driving up premiums. But he also said doctors are leaving the workers’ comp system in droves, feeling squeezed by insurance companies, and in some cases, targeted by law enforcement. Despite that, Martinovsky doesn’t envision abandoning his practice.

“Many of my injured workers we treat are not rich people and I feel that serving that community is very important,” Martinovsky said. “Especially now that many doctors have shut the doors or dropped out of the system, it’s very important to be there for injured workers.”

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