Friday, July 10, 2020
Home News City News $20 Million Health Insurance Scandal Revealed In Orange County

$20 Million Health Insurance Scandal Revealed In Orange County

Felix Koltsov and Bradley Dean Groscost were charged with multiple felony counts of insurance fraud, money laundering and unlawful referrals for allegedly conspiring to bill insurers in excess of $20 million as part of a kickback referral scheme

Koltsov self-surrendered to the Orange County Justice Center on Jan. 22, and Groscost self-surrendered on Jan. 24. 

Groscost faces 54 felony counts related to tax evasion and insurance fraud while Koltsov faces 39 felony counts. Koltsov, pleading not guilty, was released on Jan. 22 while Groscost was released on Jan. 28 without an entered plea. Both were released on $500,000 bond. Groscot’s court date is scheduled for Feb. 18. Koltsov will be summoned to court on March 30. Deputy District Attorney Christine Oh of the Insurance Fraud Unit of the Orange County District Attorney’s Office is prosecuting the case. 

“These co-conspirators allegedly ordered screenings and prescriptions for patients in order to enrich themselves, as part of a kickback referral scheme,” insurance commissioner Ricardo Lara said. 

In healthcare, kickbacks are the exchange of money in order to influence a healthcare provider or physician to make decisions that may financially benefit the party offering the incentive.

From 2014-2017, Groscost operated his businesses as DSJ MGT, Inc. from Fountain Valley, CA and managed five workers’ compensation clinics in Southern California. Despite not holding a medical license, he controlled treatments, referrals, medical and financial records at the clinics. 

With the help of the National Insurance Crime Bureau, the Department of Insurance discovered that Groscost received about $2.1 million in kickbacks from Koltsov, the owner of LFPS Inc. and Resource Pharmacy Inc.

This money stemmed from patient referrals for urine drug screenings and compound cream prescriptions. Over $20 million was billed to workers’ compensation insurance carriers for these claims by Koltsov’s companies

The conducted investigation also found that Groscost paid his employees as independent contractors, failing to report their true employee status to the Employment Development Department (EDD). He also did not report $5.1 million in wages to the EDD, thus avoiding having to pay $510,000 in taxes. 

As of Jul. 5, 2019, he owed $1.6 million in taxes, penalties and interest to the EDD.

According to District Attorney Todd Spitzer, these fraudulent compensation claims take resources away from injured workers and “make it more difficult to provide treatment to these workers who truly need it.” 

According to an estimate by the National Health Care Anti-Fraud Association (NHCAA), tens of billions of dollars are lost each year due to health care fraud. 

This results in higher premiums, which are monthly fees paid to an insurance company to provide health coverage, and increased out-of-pocket expenses for consumers. Employers must face raised costs for providing health insurance benefits to employees, increasing their overall cost of doing business. 

Healthcare fraud produces a ripple effect on increased spending throughout the entire country. The economic cost of healthcare fraud in the U.S. is estimated to account for 3-10% of all healthcare spending. 

Workers compensation fraud can also risk employees’ safety and financial security. For some employees, workers’ compensation insurance is their only financial resource if they become unable to work due to injury or illness. Without it, workers may not be able to receive crucial medical treatment. 

“The Orange County District Attorney’s Office is collaborating with the California Department of Insurance to crack down on workers’ compensation fraud and preserve resources for the truly injured,” Spitzer said.

Alessandra Eiman Arif is a City News Intern for the 2020 winter quarter. She can be reached at