INSURERS’ LATEST SCHEME AGAINST DOCTORS-Alleging Fraud Based on Attorney Demand Letters

In previous articles I have explained why and how major auto insurers like State Farm, GEICO and Allstate use fake fraud claims to attack medical providers who specialize in helping accident victims recover from their injuries.  These attacks are generally focused on first-party claims involving direct billing by medical providers under PIP coverage.  But, increasingly, insurers around the country are expanding the scope of their “fraud funnel” to focus on medical records and bills included within settlement demand packages submitted by attorneys in third-party liability claims. 

In the third-party context, the scheme works like this: Insurers allege that a targeted doctor has ginned up exaggerated/fabricated injury diagnoses and bills for treatment and sent their records to patients’ lawyers knowing the lawyers will include the records in settlement demand packages.  Insurers allege (falsely) that their claims adjusters rely on the medical records in determining the ultimate settlement amount paid on the claim.  As “evidence” of the doctor’s intent to defraud, insurers point to the doctor’s willingness to treat the patient under a letter of protection and be paid out of whatever settlement might be obtained.  The insurer alleges as damages the entire amount paid in each bodily injury claim supported by the doctor’s records.  Depending on the type of medical practice involved, even just a few of these aggregated damages claims can easily exceed seven figures. 

Baratta Law has and is currently representing medical providers of all specialties in both affirmative and defensive litigation against such bogus fraud claims in Florida, Georgia, Nevada, New Jersey, New York, North Carolina, Pennsylvania, California, and Washington State.  In short, anywhere in the country medical providers allow their records to be submitted in support of personal injury claims, the providers are vulnerable to being sucked into the fraud funnel. 

It is important to note that the fraud accusation used for this purpose is factually ridiculous.  Absent any actual evidence of fraud such as ghost visits or kickbacks, insurers well know they will lose at trial once a jury learns the truth of how third-party injury claims are actually handled.  This truth is that after any liability insurer receives a settlement demand, its claims adjusters conduct a detailed, multi-faceted dissection of the claimant’s medical bills and records using highly-sophisticated computer software programs designed specifically to challenge (i) whether the medical care received was reasonable, necessary, and causally related to the accident, and (ii) whether the claimed costs of the medical care are usual, customary, and reasonable for the area.  Liability insurers aggressively contest treating doctors’ opinions in every claim with independent medical exams, medical document reviews, and numerous other investigative tools, all of which leads to often drawn-out negotiations in which both sides compromise from their initially stated hard line positions to reach a voluntary settlement.  In the end, insurers only ever pay simply that which they have determined they cannot avoid paying.

Aside from being factually devoid of merit, the fraud claim related to third-party settlement demands is also legally dubious under a line of Supreme Court cases which grant First Amendment immunity to statements made in connection with legitimate litigation activity.  In short, these cases stand for the proposition that so long as an injury claim has some value and is not objectively baseless, a demand for settlement of that claim which results in voluntary payment by the insurer cannot be the basis of a legitimate fraud lawsuit.  By paying any settlement at all insurers admit the injury claims were in fact not objectively baseless.

But as we have explained in prior articles, the truth is irrelevant to the fraud funnel.  Insurers know the crippling expense of litigation, which includes significantly reduced patient volume as lawyers get scared away from referring their clients for fear of their cases not settling, combined with the general reputational damage of being accused of fraud, precludes virtually all accused medical providers from ever making it all the way to a trial on the merits.  One prominent law firm which specializes in filing such suits on behalf of insurance companies has openly admitted the purpose of fraud lawsuits against doctors is to essentially terrorize them into a “settlement”.  Such settlements most frequently require the doctor not just to pay hundreds of thousands of dollars to the insurer, but also to waive payment on any present or future bill which might otherwise be owed by the insurer to any patient of the provider. 

One can easily appreciate how lucrative such settlements are to the insurer.  They do not just eliminate monies the insurer might have directly owed in medical payments to the provider over the course of many years, but also dramatically reduce the arguable value of each personal injury claim supported by the provider’s records and testimony.  Because of its incredibly high return on investment, insurers will continue to feed into the fraud funnel as many claims as it possibly can.  This makes every medical provider in the country who treats injury victims vulnerable to the scheme.

Access to quality, affordable medical care is obviously a major issue in America, but for people injured unexpectedly because of someone else’s negligence or recklessness, it is absolutely critical.  Baratta Law devotes its practice to helping seriously injured victims and their families recover what they have lost.  A major component of this mission is to make sure our clients can get the care they need when they need it without fear of the cost.  Accomplishing this means preventing insurers like State Farm, GEICO, and Allstate from intimidating medical providers with false accusations of fraud made for no other reason than to generate more profit.

Over the past two decades, Baratta Law has successfully defended and preempted baseless fraud accusations against medical providers of all specialties in every area of the country.  Any medical provider facing such accusations, or who treats injury patients and is thus vulnerable to them, is encouraged to reach out directly to us for advice. 

Baratta Law

3500 Reading Way, Huntingdon Valley, PA 19006


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