Report 2017-103 Recommendation 4 Responses

Report 2017-103: Workers' Compensation Insurance: The State Needs to Strengthen Its Efforts to Reduce Fraud (Release Date: December 2017)

Recommendation #4 To: Industrial Relations, Department of

To ensure the growth and effectiveness of its data analytics efforts to identify provider fraud, Industrial Relations should better document its data analytics effort within its protocol manual by June 30, 2018.

60-Day Agency Response

Thank you for the opportunity to address the CSA's report's finding and recommendation pertinent to DIR.

Following the landmark SB 863 reforms that succeeded in delivering better benefits to workers and controlling costs for employers, DIR proactively began tackling system abuse in partnership with district attorney's offices and other agencies, including CDI. We formalized efforts though MOUs and information sharing agreements to facilitate coordinated prosecution.

As demonstrated on the DIR website and in the Anti-Fraud Unit progress report (see supporting documentation), the department is aggressively combatting fraudulent activity among workers' compensation providers using the tools provided by SB 1160 and AB 1244. In addition to stopping the funding stream from lien payments during criminal prosecution and suspending convicted providers from practicing, DIR is consolidating and dismissing thousands of non-viable liens from the system (see AFU Protocol Manual submitted).

DIR has also been aggressively pursuing identification of fraudulent activity and exploitation of the workers' compensation system using data analytics, as documented in detail in an independent report by the RAND Corporation. To accomplish this, DIR is employing the multiple techniques recommended, including predictive modeling, network analysis, and rule-based pattern detection (see Data Analytics Overview submitted). Additionally, monthly meetings convene legal staff and analysts to discuss insights and links for data exploration and possible fraud detection.

While DIR is continually refining the approaches used to effectively identify suspicious behaviors, the nascent efforts to date have yielded promise. In addition to establishing a formal referral process with CDI, DIR is assisting prosecutors statewide with information about potential fraud and abuse that has gone undetected to date.

With this submission, DIR regards our status as fully compliant with the CSA's recommendation.

  • Completion Date: February 2018
  • Response Date: February 2018

California State Auditor's Assessment of 60-Day Status: Fully Implemented


All Recommendations in 2017-103

Agency responses received are posted verbatim.