Filed Under:Markets, Personal Lines

State Farm, Fla. Surgery Center Exchange Lawsuits Over Alleged Fraud

NU Online News Service, Jan. 21, 9:15 a.m. EST

State Farm has filed a federal lawsuit in South Florida alleging that a surgery center, its doctors, a medical manufacturer, and attorneys embarked on an intricate scheme to defraud the insurer out of $13 million.

The suit, filed in the U.S. District Court in the Southern District of Florida, accuses the group of working together to submit “fraudulent personal injury claims based upon medically unnecessary diagnostic procedures and percutaneous discectomies (PDs).”

The suit specifically names Palm Beach Lakes Surgery Center, doctors Jeffrey Kugler, Jane Bistline and Jonathan Cutler, and two others who allegedly coordinated members of the alleged scheme.

In response, the doctors and outpatient medical facility filed a defamation lawsuit against State Farm that alleges the insurer is trying to “destroy these doctors’ reputations in the medical and civilian communities they serve.”

State Farm and the surgery center have a legal history dating back to late 2008 when Palm Beach Lakes Surgery Center filed a suit looking to recover damages allegedly caused by State Farm’s previous “campaign to defame” the center and doctors. The insurer had threatened the center with federal and state prosecution and filed a complaint with Florida’s Department of Health, court documents say. The DOH concluded there was no evidence to initiate a probable cause finding.

spine wandThe new litigation centers on the use of PDs for back pain. A medical device called the SpineWand, manufactured by ArthroCare, is used during the procedure (pictured at right).

State Farm claims the diagnostic tests and PDs are not needed, and the close relationships between the center, attorneys, and ArthroCare is unethical and have resulted in each profiting from “fraudulent charges” related to the procedure. What State Farm describes as a scheme began at least as early as 2004, the company alleges.

In October 2010, ArthroCare agreed to pay Farmers Insurance $1.2 million as part of a settlement regarding the use of the SpineWand, according to a filing with the U.S. Securities Exchange Commission. ArthroCare admits no liability or wrongdoing as part of the settlement.

In its 2010 second quarter filing, ArthroCare said it entered into $4.8 million in settlement agreements “with certain private insurers” related to cases in which letters of protection were held by its DiscoCare subsidiary. ArthroCare acquired DiscoCare, a third-party billing company, in late 2007. The company’s first quarter filing reveals it entered into settlement agreements worth $3.2 million February and March 2010 with certain private insurers related to letters of protection.

Top Story

What does TRIA denial mean for workers’ compensation?

What does the denial of a TRIA renewal mean to the workers’ compensation industry?

Top Story

Shock, dismay and disappointment: P&C insurance industry's reaction to TRIA news

The U.S. Senate adjourned for the year on Dec. 15 without passing the Terrorism Risk Insurance Program Reauthorization Act.

More Resources

Comments

eNewsletter Sign Up

Personal Lines Pro eNewsletter

Critical insights into the personal auto, homeowners, and other consumer insurance markets to help P&C professionals stay informed – FREE! Sign Up Now!

Mobile Phone
         

Advertisement. Closing in 15 seconds.