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Primedex Pulls Out of Workers' Comp : Health: Its decision to close eight Southern California clinics was prompted mainly by recent reform legislation.

July 30, 1993|STUART SILVERSTEIN | TIMES STAFF WRITER

Primedex Corp., one of the biggest and most controversial workers' compensation medical enterprises in Southern California, announced Thursday that it is pulling out of the business of treating injured employees.

The Culver City-based firm--whose referral and billing practices are under investigation by the Federal Bureau of Investigation and the Los Angeles County District Attorney's office--said it will lay off 225 of its 300 employees.

All eight of the clinics it runs in Southern California will close in coming months, said the firm, which denies any wrongdoing.

Primedex said its decision was prompted mainly by the package of workers' compensation reforms enacted in California this month. The legislation, intended to slash expenses in the state's $11-billion-a-year system, imposes cost controls on medical care.

Among other things, the reform package restricts the number of so-called medical-legal evaluation exams that employers can be required to provide workers.

Primedex, which blossomed into a $40-million-a-year business after being launched in 1985, draws most of its revenue from such exams and from treating employees locked in workers' compensation disputes.

The company has advertised heavily on daytime television under the name "Injury Central." The commercials feature a helicopter newsman "reporting" on workplace injuries and encouraging viewers to call a toll-free number to get "all the medical and monetary benefits available through your employer's insurance."

Government investigators are looking into whether Primedex paid kickbacks for referrals and whether it bilked insurers by submitting bills for the services of doctors who did not actually treat certain patients.

Primedex is led by Robert E. Brennan, a controversial financier who took control of the company in February, 1992. In 1985, the federal government filed civil fraud charges against Brennan and his First Jersey Securities brokerage firm, accusing them of bilking droves of customers. That case is still pending.

A key consultant to Primedex is Stanley Goldblum, who served four years in prison in the 1970s after pleading guilty to fraud and other federal charges related to the spectacular collapse of Equity Funding Corp. of America.

The other major figure in Primedex is David G. Gardner, a neurosurgeon who founded the company and continued as its president after Brennan acquired control. A spokesman said all three key Primedex officials will stay on.

The spokesman said Primedex, a unit of publicly traded Primedex Health Systems, will be restructured as a smaller firm that provides management services to health care providers and other businesses.

Amerimed Medical Corp.--a competing medical firm being probed by authorities--also has scaled back its workers' compensation business recently.

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