Medical Provider Fraud and FECA Claims

The investigation process is slow, but that should not deter those with suspicions, evidence or inconsistencies in medical invoicing from sending the information to their investigative units.  This article illustrates the cost of just one fraudulent medical provider.



Workers compensation claims adjusters who have retailers as insureds, must prepare for the affect of the upward bound economy.  With markedly increased growth for retailers, claims have the ability to rise in three distinct areas.

three up arrows


It will be easier for an employee out on a comp claim to find another retail position to work while collecting.

Retail worker’s compensation claims are more transient than an artisan or professionally licensed occupation where the opportunities for relocation are less prolific.  The multitude of positions available and the transference of skills in most of the retail sectors create an environment where employees have the leverage in a strengthening economy.  Median turnover rates for part-time retail workers jumped back up to 74.9 percent in 2013, according to Hay Group, a management consulting firm cited in a September 23 2014 CNBC article .  The availability of positions is on the rise again, and so with it will be the ease for an employee to find work.  As there is a churn of labor, retailers often compete for the same talent, and are willing to be less stringent in their screening processes, more apt to lower some of their standards and for smaller independent retailers, may even hire help off the books.

To retain workers, larger companies have raised their pay, but this also has the effect of creating an enticement for an employee to change companies to get a better paycheck.  Allegiance to a retailer is often lacking as employees in retail have felt the whiplash effect of economy as they were cut, replaced, merged and placed in reduced positions of earnings and advancement.

This is a fertile forest of opportunities growing for retail workers compensation claims to increase in volume and in level of deceit.


Not every employer/ employee relationship is adversarial.  A spike in bad claims can occur when everyone involved is just trying to help each other out.

As it becomes harder to locate and finance new hires in the strengthening market,  some  Mom and Pop stores will struggle to keep the people they have.   It has happened that an employee with a workers’ compensation claim is asked to come in and help out some.  This happens at first when the employee’s injury is legitimate.  The employer, grateful for the assistance allows the employee to collect for the worker’s compensation claim albeit while continuing to work.  It is a way for the store to supplement the wages and keep the store operational while temporarily reducing payroll.  The employee can be paid off the books, or through deferred or non wage compensation.  If the person on a workers’ compensation claim happens to be a principle of the company, then the ability to extract non payroll disbursement  is even easier.

An employer can also be complicit in allowing an employee to work for them while collecting workers compensation from another employer.  The turnover rate of a retail work force creates lots of opportunities for public and proprietary records to be camouflaged so no red flags appear on first perusal.  When an employee that works for three employers in the year, records don’t necessarily show that there was a 6 month overlap of being on workers compensation from store 2 while working for store 3.


Fraud and abuse is not limited to the small companies.  Larger companies allow the claims to rise, unchecked as a cost of doing business.  To let a trouble-employee collect workers compensation without reporting apparent abuse to the claims administrators is often seen as a way to maintain morale, without “sicking”  the insurance adjuster on the employee, and without bringing back a troublemaker.  To Return To Work is not a desire for the manager of a trouble-employee anymore than it is for the employee. Enough work is coming and profit numbers are high enough that it doesn’t matter how much is paid in workers compensation claims; profits are coming in fast enough to make up for the loss and then some.  It would be disruptive to the core business of selling, if time were devoted to the claims process of bringing a problem-employee back to work.

GOOD TIMES, BAD TIMES  -In a recession a claimant who is well enough to return to work, might not have a job to return to, or at least not the hours needed.   There are fewer opportunities for fraud and more potential for simply malingering.   However, with a lower unemployment rate, if a claimant has an opportunity to collect and if there is no desire to return to the insured company, then there is a way to try out a new employment position   before ending their claim.  Of course there is also the realized benefit for those who are so tempted to collect the workers compensation check and a pay check from a new employer.

Backgrounds, Social Media Searches, and Surveillance of activities are often the most cost effective answer to quickly determine the validity of the claim.   Working with professional field investigators and being diligent is the only way to keep control of the claims and reduce non deserved claims as the flurry of economic activity heats up in the retail sector.


Top 5To ensure their legitimacy, claims in these categories need to be viewed along with the circumstances of the injury and the extent of the medicals versus the lost time.  If a cumulative cloud of duplicity forms then the claim warrants closer scrutiny by field investigation and surveillance.

  1. Seasonal help and temporary help –Employees can be hired as a temporary solution, but some can become a full time problem when it is decided that a workers’ comp claim is a way to extend cash flowing past the season.
  2. Staff affected by location closings or moving – This group feels abandoned and so their allegiance wanes quickly.  Where they might have quickly returned to work so as not to leave co-workers shorthanded and shouldering their load, employees of a closing or relocation lose their connection socially as well as economically.  Watch for employees that know they might lose their job to lay the ground work for a potential worker’s compensation claim for a past minor injury from which they have returned to work.
  3.  The principles of a small retailer – An owner or principle involved with day to day operations of retail seldom has a contingency plan to be out sick for a week, never to mind considering being out for an extended period with a Workers Comp injury.  A principle will usually find a way back into the store, if they don’t, that is a red flag by itself.  They might actually be back in the store, but drawing worker’s comp checks also.  This can be a side effect of financial necessity/ poor cash flow.
  4.  Employees with attendance and disciplinary issues – By definition a person in this category is not an automatic abuser of compensation benefits, but anyone disgruntled does have a higher probability of seizing upon an opportunity to stage, elaborate or misrepresent an injury for the double purposes of creating a way out from the employer with whom they have had problems, and a way to “stick it to the man”.
  5.  Comp clusters – This is a group of claims usually created by poor management that doesn’t provide for advancement, training or give encouragement or considerations for extra efforts.  This boils up into a closed loop of employees complaining to each other how badly a manager or company policy treats the peons.  So, once an employee of this network happens onto a worker’s compensation claim, it becomes viewed as an escape from the job and retribution to the lousy work environment. Friends and co-workers quickly share the antidotes of the company reaction, the process and qualifications to make it work.  The collective absolve does not see a frivolous claim as wrong as everyone is doing it, the company deserves it, and it is only do it for awhile until something else comes along.



Are State P.I. Licenses required for federal government work?


We recently bid on a federal contract for investigation services  and lost to a competing  private American Flaginvestigation firm that submitted a bid that was significantly higher.  You can’t win them all.  But then I checked to see if the company that won the bid was even licensed as a PI agency to conduct work in all the states that were outlined in the solicitation.  They were not, so I sent a letter of protest.

I have removed the identifying information about the agency, contract and even the responding contracting officer, because this is more about the information –

The response contained the following …

The solicitation did not specifically require private investigator state licensing for the performance of the work.  While, the solicitation included Section xxxxxx-70 Contractor Responsibilities (APR 1984), which stated, “The contractor shall obtain all necessary licenses and/or permits required to perform this work,” state licenses were not specifically mentioned nor required by [gov. agency] in the solicitation.

No state workers’ compensation program, commission, or licensing structure can reach, affect, or control the federal system contemplated here. The essential element is the federal Government’s judgment as to what contractors it deems competent to fulfill Government requirements and the Federal Government’s right to administer federal law without interference from the states. The states cannot control federal decisions or requirements in this regard. Thus, no state can impose its licensing requirements on a federal contractor investigating federal workers’ compensation cases.

The two principles that support this are federal primacy and pre-emption.

Under America’s  federalism system, federal law commands primacy over state law so that a conflicting state law must be set aside in favor ofthe controlling federal law, PPL Energyplus, LLC v. Solomon,

766 F.3d 241 (C.A. N.J. 2014).  The federal system comes first and has the ultimate authority.  Any state law that interferes with or is contrary to federal law on the point must yield ground, see U.S. Const. Art.

6, Cl.2, and comp. Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962).  Federal law has primacy over state law, White v. National Steel Corp., 938 F.2d 474 (C.A. 4 1991).

Besides, in this matter, federal workers would be either under the Federal Workers’ Compensation  Act (FECA), 5 U.S.C. §§8101 et seq. or the Federal Longshoremen’s and Harbor Workers Compensation Act (FLHWCA), 33 U.S.C. §§901 et seq. Under federal primacy, federal installations are not subject to state workers’ compensation laws, and the U.S. Government cannot be  held secondarily liable under state law, Wilcox v. United States, 910 F.2d 477 (C.A.8 1990); the other federal system would be the Longshoremen’s and Harbor Workers’ Compensation Act, Kalaris v. Donovan, 697 F.2d 376 (C.A.D.C. 1983).

Under Leslie Miller, Inc. v. State of Arkansas, 352 U.S. 187,77 S.Ct. 257 (1956), United States contracts and written instruments are immune from state control. Under Johnson v. State of Maryland,

254 U.S. 51, 41 S.Ct. 16 (1920), states cannot interfere with federal primacy and work, a doctrine hearkening back to the landmark McCulloch v. Maryland, 4 Wheat 316. A state has no standing to interfere with either the award or administration of a federal contract.

Under the parallel doctrine of pre-emption, if a state law interferes with Congress’s  purposes and objectives, federal law and requirements pre-empt the state law, Sickle v. Torres Advanced Enterprise Solutions, LLC, –F.Supp.–, 2013 WL 7231238 (D.D.C. 2013). Sickle states, “When a state law stands

as an obstacle to the accomplishment  and execution of the full purposes and objectives of Congress, that

state law is pre-empted under the doctrine of conflict pre-emption,” see also Hines v. Davidowitz, 312

U.S. 52,61 S.Ct. 399, 85 L.Ed. 581 (1940).  A Court will find pre-emption where it is impossible for a private party to comply with both state and federal law and where the state law is an obstacle to the accomplishment and execution of Congress’s full purposes and objectives, cf. Crosby v. National Foreign Trade Council, 530 U.S. 363, 120 S.Ct. 2288 (2000).  A state workers’ compensation commission could not bar an investigator under a federal contract looking into federal workers’ compensation matters for want of a state license.

In conclusion on this point, a contractor conducting federal administrative investigations involving federal matters under this [gov. agency] contract would not be required to be licensed in a given state. The states have no authority over federal operations.

How It Started

Before I started my own company, I had been working for a small PI agency.  The owner hired me, green off the street, when I responded to a newspaper ad.

The night he was killed I was trying to get a quick nap before going out on a date.  But the fire alarm in the multi-unit building wasn’t going to let that happen for long.  It bleated throughout the building sounding like a violated she-goat.  In the hallway the white emergency strobes flashed with a  techno-club veracity.  Neighboring apartment units opened their hallway doors as the residents; like horizontal prairie dogs looked out to assess the threat.  But no one was evacuating the building.  It was too cold and dark outside with a freezing February rain. The residents were willing to take the word of my roommate and his girlfriend that there was no danger.  They said they had let a piece of halibut catch fire.   They apologized to everyone and assured them that the pan fire was now out.  The fire department responded just the same.

At this point I gave up on my attempt to nap.  The red lights of the fire trucks bounced illumination through the open windows of the living room.  The smoke cleared in the unit as the temperature dropped with the rush of outside air struggling to displace the smell of fish and charcoal.  Two firefighters in full firefighting gear were in the kitchenette area, at least another was checking out the rest of the building and responding back by radio. When the firemen in the apartment confirmed that the fish was no longer aflame, the alarm stopped.

My roommate and his girlfriend asked if there was going to be a charge for the fire department’s response.  I was glad to hear that there would not be, as I was concerned I would have to come up with a third of any fine.

“We’d rather respond to something like this than the other call we just had.” The firefighter said.  “We just came from an accident where a man was crushed.  He was run over.  He was in his 40s.  Guess he slipped in the slush and fell in the road and was lying there.   An elderly guy came along and ran him over thinking it was just debris in the road. The roads are bad tonight.  No one should be out there once they’re in.”

The roads were bad.  There was a weather advisory to stay home.  It was the kind of bad weather where the only people that were out in it were snowplow drivers and guys with dates.

I got the call while still out that night.  My roommate said he took a call that my employer had died.  My employer had been the man run over – He was the man in the road that the firemen were talking about. The same firemen standing in our kitchenette had only just before been picking him out of the road.

It was one of those moments that felt like it should have more meaning than it really did.  There was no dramatic arc, more of detour that ended with nothing.  It was sad but there was no life lesson to be learned other than not to fall in the street.  That would have bothered my employer and I think it still bothers me.

Out of work, a week later I started my own company.Info Unlimited

Thinking Warrior

The practical and ethical considerationsThinker-Final_5x5

made before, during and after an action

create the differences between men who rely on luck

and those who make it.

Red Flag Criteria for Workers Compensation Claims

XXL red flag


Establishing a red flag criteria starts by determining what set of circumstances or behavior is considered unusual in nature.  First determine what baseline of activity is consistent with an injured employee making a good faith effort to heal and/or return to work.  A red flag is a variation from the base line.  It is the signal that something is out of the ordinary and needs to be investigated further. Red flags are only a warning that something could be amiss, but are not a sign of guilt or innocence.  It is through the investigation process that the aberration is justified or that abusive, malingering and fraudulent claims are uncovered.

Reduce a barrier to access of FECA claims benefits: investigate any and all red flags


For an employee to trust an organization’s claims processes the organization must be ethical and trustworthy.  For an organization to be considered ethical, and for employees to have the trust and confidence that fairness will prevail, it is important that there is a diligence in the application of the rules.  An organization must use all of the claims handling tools available so that an employee can trust in the organization’s competency.

To be invested in an employee’s medical recovery, rehabilitation and return to work is a morale booster to the employee and the entire organization.  The injured employee is dependent upon direction from others or on the clues their actions provide in order to know how to act.  When guides are provided, the injured worker can predict with greater certainty what he or she and others can expect; thus there is a greater satisfaction in the process.  The injured employee can be confident that they were not the fool for not taking advantage of the additional benefits that a porous system of oversight provides, or allows through default.  No amount of malingering, abuse or even outright fraud is ever done without a person’s justification that it is somehow allowed; necessary; or without risk.   An environment of non oversight creates confusion concerning the positive and negative effects of what is acceptable. When claims are administered from an objective position, with as much information as possible, and there is even-handedness applied, the Claims Handler and the injured worker will achieve a group effectiveness in the claims process. The results is lower costs paid to undeserved beneficiaries and increased moral of all employees.

It is a Claims Handlers responsibility to ensure that they are not creating barriers to benefits.  Field investigations of claims do not create a barrier to benefits as they do not obstruct legitimate access.  Field investigations are; however, a filter to screen out abuses of the system. Some organizations justify not investigating claims by stating that they don’t have to, because they trust their employees.  A Claims Handler may trust employees not to abuse the system, just like the employees are trusted to drive safely, but still they are required to wear seat belts. Outside factors can interfere and impede.

The degree to which an organization trusts an employee is a measure of belief in the honesty, fairness, and confidence in the employee to understand the situation, expectations and penalties for infractions. An employee needs to be able to trust the organization too.

A fair and effective program that investigates claims is advantageous for the entire work force.

  • Employees with legitimate injuries are no longer lumped in with the abusive, malingering and fraudulent claims.
  • The morale of co-workers and supervisors who are left picking up the slack of an out-of-work employee is increased as they have confidence that the system will ensure that their added load is necessary.
  • There is no air of suspicion cast upon the injured nor the stigma that needing the benefits is just a scam or manipulation to get more than what is entitled at the expense of remaining co-workers.
  • There is no perception that the organization is too slow, distracted or uncaring to react.

There is a great effort by society to reduce the stigma of collecting a needed benefit; some benefits are frequently renamed when over time the benefit becomes associated with a particular stereotype of behavior. (Think the renaming of Food Stamps). There is no better way to legitimize the collecting of a benefit than to diligently validate and continue to validate those who are collecting it.  When there is knowledge by society of the level to which the non deserving are culled from the rolls, then there will be trust that a collector of the benefit meets the minimum standards for qualification and continues to do so.


Facebook and Other Searches

Even if a Facebook user sets their friends list to private, an investigator might still be able to see part of that  list.  Check out the blog post of Shay Priel of The CyberInt Group, that reveals that even if a friends list is set to be private, that doesn’t exclude the friendship from showing up on a friend’s news-feed, on a list of mutual friends.  As the axiom goes, a “An enemy of my enemy is my friend, but a friend of my subject is a backdoor into learning about their activities through Facebook …”  Or something like that.

For access to a list of publicly available records,  searchable by state check out this website. http://www.publicrecordsources.comSocial Med

Trends in Technology

iStock_000045362422LargeFor investigators advancements in electronics and the internet continue to move rapidly, opening new opportunities and closing others.  (i.e. a phone book is pretty useless), but some of the new abilities are gimmicks and might give a marketing edge for an investigative vendor, but don’t usually add anything substantive to the investigation process- such as streaming video from the surveillance location.  Other technology is a mine field of potential litigation, such as vehicle tracking devices, or cell phone pings.  Some of the technology crosses ethical boundaries even when it does not break laws. One area of technology that has changed the most- the video tape is no longer a supported technology. Most cameras are digital using a hard drive or flash drive.  At first there had been a stumbling block as to how to use a consumer grade camera and send the digital video over the internet while at the same time capturing the time and date.  The time and date had not been a problem with analog technology and tapes but it didn’t transfer with the picture, at first with a Firewire or USB.  The time date info was always there in the metadata with most video formats, but when uploaded we couldn’t get to it. This was not just investigators but also taped depositions and anyone that needed to record evidence and send it over the internet with the time and date.   That seems to be solved with software that now will pull the metadata off the video and burn it over the original video.  One of the advances that most investigative vendors can now do is upload video from the field to the company’s home office.  There is no original tape as we were once used to producing, but with digital, the courts seem to rule in most jurisdictions that a digital copy is the same as an original.  (Legal departments need to fully weigh in on this subject).

Trends in Accessibility

Access to open files continues with different approaches by vendors and SIU alike- some is too wide of a focus and some is too narrow. Full access to a file by the claims personnel looks at first pass to be the ultimate control mechanism, but the focus is too wide.  Until all the qualifiers are added and the information analyzed it is like the difference of watching the random video of a mall security camera, versus a documentary that has assembled and identified a cohesive narrative of information. Some SIU departments request direct access with the investigator in the field, and though this provides first hand information, it is too narrow of a focus.  It disengages the other resources of the investigative vendor.  The investigator in the field might not know all the alternatives available, as it might be in the best interest of the file to switch investigators for cost savings, logistical purposes, or variation in the investigative techniques being applied.  A conversation with the field investigator will not reveal this as easily or readily as dealing with the management.  Going through management also allows more request and instructions to be thoroughly documented.

Trends in Privacy

The ability to share confidential information securely is still a challenge to many companies. Even when there are policies and practices in place, shortcuts are sometimes taken due to the technology breakdown or time demands: emails get sent from non secure sources and encryption gets skipped.  On the vendor side of things, there is a dynamic at play where the vendor wants to comply with the encryption demands of the Client Company, but not frustrate the Client User with complicated logins and passwords.

The two answers that seem to be dominating the landscape of the industry are when a client company sets up Transfer Layer Security or TLS with vendors.  Email is then automatically secure between the two entities.

All of the larger investigative vendors and most of the intermediate size companies are using a Share Point based case management software that allows the confidential sharing of information, files and video, but does require a client to log in if wanting the information this way.  The down side of this is that with multiple vendors, there are multiple sites and variations to the logins.

Trends in Metrics

Business People In MeetingA chunk of resources for all investigative vendors is now devoted to updates and communications. Gone are the days when an assignment was picked up in a paper file and two weeks later a report submitted.

Investigations are a commodity for insurance companies and competition is being divided into those who can meet time service and communication demands and those who cannot.

There has been push-back from some of the more experienced field investigators who believe that focusing on the speed of report submissions and updates somehow diminishes the ability to conduct a thorough investigation. Their argument is that the results of an investigation can’t be rushed. An investigation takes time. An investigation is an art, with a beginning but no known end. The end occurs when it occurs, like the last brush stroke on a painting. They feel they are like an artist and need to have the control of the time table; otherwise, the investigator is just painting by the numbers. Forcing an investigator to meet exact deadlines somehow compromises their artistic integrity.

Investigative vendors are challenged with changing the mindset of the industry and are begrudgingly adopting the ability to deliver their masterpieces with the paint still wet.

The act of conducting an Insurance Investigation might be an art, but it is sold as a commodity.

The ability to keep schedules, and maintain updates, emails, and reports, is a reflection on a company’s overall handling of creative thinking, planning, organizational skills, and dedication to hard work.

Delivering the results of an investigation to clients is the business of every investigative vendor.

A Focus on Social Responsibility

Crowd under clocksLargeThere is increased public scrutiny cast upon the claims industry. Very few insurance companies can afford to subscribe to the “we don’t want to know how you got the information” line of thinking anymore.

Companies want to be a good social partner, so try to find investigation companies with high ethical standards.  Bad investigations can cost a claims organization money; unethical investigations can cost them moral integrity, reputation and heavy handed legislation.

Assumedly, most investigations fall within the laws and rules of the jurisdiction in which they are conducted, but that is a minimum measure of ethics.  Being legal is not an ethical standard. Practices can be employed that technically do not violate applicable laws, but to local sensibilities are cumulatively corruptive to producing a fair and just investigation.

SIU departments are educating their claims people, and the metrics of claims organizations is changing so as not to penalize an investigation company or the SIU for saying no to a request.

It often takes longer in an investigation to get the results while maintaining a high ethical standard with honesty and honest practices: using legitimate means to access information and documents; being nonintrusive with surveillance to remain objective and non manipulative with subjects; not using threatening or intimidating questioning and providing a professional openness to reveal common practices.

An investigator’s honesty with SIU in how and where information was obtained has to show the warts and all.  A transparency of effort does not require the disclosure of any confidential information, special technique, or business alliance.  An investigative agency can still be shrewd and competitive, but must be honest for the sake of the investigation to be above reproach.  Insurance companies want investigations that evoke reciprocity of goodwill from the community.  Goodwill is earned through integrity.