Florida’s no-fault insurance system continues to generate fraud, judging by allegations in a lawsuit that insurer State Farm filed in federal court.
The suit, filed in the Southern District of Florida on Aug. 1, alleges three clinics cheated it out of $4.7 million.
Will suits like these help break the policy logjam that has prevented the Legislature from responding to problems with the state law requiring motorists to carry personal-injury protection (PIP) policies?
Not necessarily, according to Sen. Tom Lee. The Thonotosassa Republican’s PIP repeal bill died in committee last Session. That was amid wrangling with the House over whether to mandate that drivers carry at least $5,000 in medical coverage.
“The problem has to become more painful than the solution for consensus to develop in the Legislature,” Lee said in a telephone interview. “It was clear last year that we just weren’t there yet.”
Like Lee, Rep. Erin Grall, the Vero Beach Republican who carried the House PIP bill, declined to comment on the merits of the case.
“Having worked on legislation that would have repealed the PIP statute, I heard many stories about fraud and abuse,” she said in a statement to Florida Politics. “Whether the allegations in the State Farm complaint amount to fraud is a matter for the courts … (and) a jury of Floridians that have given the facts careful consideration.
“While I believe moving to a fault-based system of auto insurance will naturally eliminate or thoroughly reduce fraud, the overwhelming majority of health care providers in this state operate with professionalism and integrity and this suit shouldn’t be a standalone indicator of all providers’ treatment of the system,” she said.
The complaint alleges that three clinics — Health & Wellness Services Inc., Medical Wellness Services Inc., and the Pain Relief Clinic of Homestead, controlled principally by Beatriz Muse and her brother, Lazaro Muse, both of Miami — “orchestrated a scheme to defraud” State Farm. Beatriz Muse’s husband, Noel Santos, also is named.
The 59-page complaint alleges fraud, deceptive and unfair trade practices, and unjust enrichment. The clinics submitted “false, materially misleading, and/or fraudulent bills and supporting records to plaintiffs for services which were not medically necessary, and in some instances were never actually rendered,” State Farm says.
According to the complaint, the clinics administered a “predetermined treatment plan” regardless of the patients’ injuries. They failed to adequately examine patients to learn the true nature and extent of their injuries; diagnosed nearly every one with “non-specific pain/sprain/strains of the cervical, thoracic, and lumbar regions of the spine regardless of their true condition;” and treated nearly every one with “excessive therapy modalities regardless of the unique circumstances and needs of each patient.”
Nearly every patient got an X-ray scan, but the results weren’t used in the treatment plan. Patients were re-evaluated “to further the predetermined treatment plan rather than as part of individualized care.” Finally, the clinics submitted documents to State Farm falsely representing that these treatments were medically necessary.
“As a result of the predetermined treatment plan at the Muse clinics, insureds were not properly examined, diagnosed, or treated for conditions which they might have had; insureds were subject to medically unnecessary and sometimes excessive medical treatments; and insureds’ limited no-fault benefits were substantially depleted or exhausted, and therefore not available for appropriate treatment what the insureds may have needed.”
The complaint also alleges irregularities involving five doctors listed as the clinics’ medical directors and failure to ensure that clinic staff were properly licensed, and that the defendants appointed third-parties as clinic owners on paper to disguise their control of the businesses.
The scheme, the complaint alleges, extended back as far as 2007. A complaint in a lawsuit tells one side of a story; the defendants have not yet filed an answer, dockets show. Moreover, U.S. District Judge Robert N. Scola Jr. last week questioned whether the federal courts have jurisdiction, requiring an amended complaint from State Farm by Friday.
Meanwhile, in the Legislature, PIP repeal is likely to come up again, as are efforts to address assignment of benefits abuse and the workers’ compensation system. The Legislature has struggled for years to agree on approaches to those issues.
Here’s Lee’s diagnosis: “It all got caught up in the same dynamic of special interest groups battling it out over just what constitutes real reform. It all just went down in flames.”
He blames the insurance lobby for trying to “inject” language making it harder for policyholders to sue carriers for bad-faith in denying or delaying their claims. Plaintiffs who establish bad faith can recover far in excess of the amounts provided in their policies, as an incentive to good behavior by carriers.
“There’s probably some room for bad-faith reform, but often what is presented by the insurance companies amounts to bad-faith immunity, not reform,” Lee said.
“Without entirely rewriting insurance policies to alleviate the insurance companies of the traditional duty that they have to defend the insured, and to stand in and provide their expertise in helping the insured manage through a liability, you can’t pass the kind of bad-faith reform the insurance industry has been proffering,” he said.
“These are really complex issues. I’ve been working on them since the conference committee on the medical malpractice bills during those special sessions that took place in 2003. Bad-faith was a major issue. It’s just difficult to write statutes that don’t give one side or the other a tremendous amount of leverage to force a settlement.”
Toward the end of the session, Lee suggested to House Speaker Richard Corcoran settling for a hybrid bill.
“If you like your PIP, you can keep your PIP,” he said. “But everybody who’s willing to move to a mandatory bodily injury (BI) policy can drop their PIP. That would have been a substantial savings for a lot of people.” Around 10 percent of the driving population carry PIP only, Lee said.