Dozens Charged in Massive Insurance Fraud Scheme in New York

By | February 29, 2012

Federal and local authorities in New York unveiled charges today against 36 defendants — including 10 doctors and three attorneys — allegedly involved in a systematic scheme to defraud auto insurance companies of more than $275 million under New York’s no-fault insurance law.

According to the indictment, the scheme involved creating fraudulent medical clinics to defraud insurance companies under the state’s no-fault law. The charges include conspiracies to commit racketeering, healthcare fraud and money laundering dating back to around 2007.

The majority of defendants were arrested on Wednesday morning, according to news reports.

“While purporting to be legitimate medical care clinics specializing in treating patients, the no-fault clinics were, in fact, medical fraud mills that routinely billed automobile insurance companies under the no-fault law for medical treatments that were either never provided and/or unnecessary, because the patients did not medically need the treatments,” according to the indictment unsealed on Wednesday in U.S. District Court in Manhattan.

In actuality, the indictment stated, these clinics are not owned, operated and controlled by licensed medical practitioners. Instead, the actual owners, operators and controllers of the clinics were individuals who were not licensed medical practitioners and who were not identified on documents filed with New York State authorities.

These clinics allegedly pay a fee to licensed medical professionals for them to: incorporate a professional corporation under which the clinics could bill insurers; open a bank account for the clinics, sign the lease for the clinic property; sign the clinic’s bills for treatments under the no-fault law; and/or make excessive and unnecessary prescriptions and referrals for additional treatments and medical supplies to other fraudulent facilities.

The indictment charges that these clinics allegedly received cash kickbacks for each referral from other individuals who fraudulently owned, operated and controlled similarly fraudulently incorporated entities. These additional treatments included physical therapy, pain management, audiology, neurology, psychology, magnetic resonance imaging, x-rays, acupuncture and chiropractic medicine, among others.

The indictment stated that in order to increase the number of medical treatments that can be billed to auto insurers, these clinics use individuals — or “runners” — who recruit patients. The clinic controllers generally paid the runners between $2,000 and $3,000 per each patient referral, according to authorities. The amount of kickback depends on the quality of the police accident report and the ease of reimbursement by the insurance company.

The indictment also stated that these clinic controllers also allegedly referred the patients to personal injury lawyers, so that lawyers could file personal injury claims and lawsuits on behalf of the patients to obtain additional funds separate and apart from the $50,000 available to each patient under the no-fault law.

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