Insurance regulators plan to start kicking crooked doctors out of New York’s no-fault program next month, calling them linchpins in fake-accident scams that cost insurers and ultimately policyholders hundreds of millions of dollars.
Regulations are set to take effect June 12. The New York Department of Financial Services sent certified letters in March to 135 doctors, chiropractors, acupuncturists and physical therapists, demanding they explain suspect billing patterns and threatening to remove them from the program if they don’t respond.
That’s “just the tip of the iceberg,” Superintendent Benjamin Lawsky said. No-fault insurance lets drivers and passengers claim up to $50,000 for accident injuries regardless of who caused the accident.
“For every fraudulent medical mill, there’s got to be a doctor attached to it or they couldn’t do the billing,” Lawsky said. “The doctor is sort of at the top of this medical mill pyramid. So we have to go after these dirty doctors.”
Providers can challenge expulsion at hearings but they can still be suspended for up to 90 days while cases are pending.
The Medical Society of the State of New York is still reviewing the proposal, senior vice president for legislative and regulatory affairs Elizabeth Dears said.
Federal prosecutors charged 36 people in February in New York City, including 10 physicians, three lawyers, two acupuncturists and two chiropractors in what authorities called a systematic scheme to defraud insurance companies of more than $275 million using exaggerated or faked medical claims. U.S. Attorney Preet Bharara said the actual loss was $113 million and the operation involved intricate kickback arrangements.
Eight people were accused of operating more than 100 medical clinics that were incorporated by licensed doctors, as required by law, who were paid to falsely claim they controlled the clinics, Bharara said.
The Automobile Insurance Fraud Unit in the state attorney general’s office has charged 407 people, including clinic owners and doctors, since it was established in 2001, spokeswoman Jennifer Givner said. The office, funded by the Department of Financial Services, has multiple pending investigations of staged-accident rings and corrupt clinics, she said.
An Insurance Research Council study indicates that fraud added $385 million to $512 million to New York no-fault claims in 2010, or about roughly one-third the total no-fault payments, according to the New York Insurance Association. Twelve states have no-fault systems, 10 with individual medical claim caps lower than New York’s $50,000 limit.
Ellen Melchionni, association president, said the organization believes the system in New York right now is “severely broken,” and that cost will translate to higher premiums. There are many fraud rings and they keep evolving, she said, noting the new regulation to decertify deceitful doctors is a good step.
Lawsky’s letters demanded a raft of information from doctors including all professional addresses from which their no-fault claims are submitted, the people or legal entities who have an economic interest in their practices and any agreements with medical management companies and billing contractors, among other things.
Department spokesman David Neustadt said they received “many” responses, though he declined to say how many or identify them.
Gov. Andrew Cuomo asked for the crackdown and the new regulation implementing a 2005 law giving regulators the power to determine which doctors can participate in the no-fault system.
Meanwhile, the state Senate has passed additional penalties for others involved in the scams, making it a separate crime to act as a “runner,” who steers accident victims to crooked clinics or doctors, and to stage a fake accident. Another measure would let insurers retroactively cancel policies taken out by people who commit auto fraud and pay for policies with bad checks or stolen credit card shortly before staging accidents.
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