Farmers Insurance Exchange is seeking $1 million in damages from 46 Minnesota chiropractors and a mobile diagnostic imaging facility for an illegal kickback scheme that sent Farmers customers for unneeded MRI scans.

“This type of alleged kickback scheme harms all of our insurance customers because of the adverse impact insurance fraud has on insurance premiums,” said Sean Zavala, director of special investigations for the Farmers Insurance Exchange, in a statement. “We are committed to investigating insurance fraud and doing all we can do to stop these practices.”

According to the lawsuit filed in U.S. District Court in Minneapolis, in 2011 Edina, Minn.-based business Mobile Diagnostic Imaging (MDI) courted local chiropractors, clinics and chiropractic students—sometimes with a vacation to the owner's property in the Cayman Islands—offering a “confidential rental agreement” to lease their office equipment, including telephones, fax machines, copiers and internet access.

However, MDI allegedly conducted scans in a self-sufficient trailer, and possibly used their own generator for electrical power. The court document says the lease agreements were “merely a pretext for paying kickbacks to the defendants” for referring car crash victims to MDI.

Farmers says MDI has collected more than $500,000 in claims from the insurer, and paid $221,800 out to its network of clinics and practitioners. Some of the defendants received more than $15,000 in unlawful payments in 2011 alone.

MRI scans are only used in evaluation of spinal pain if patient symptoms indicate muscle weakness, muscle atrophy, abnormal deep tendon reflexes, or meet other specific criteria, so the 46 defendant practitioners who transferred health insurance claims for the unnecessary scans violated the federal RICO act, the Minnesota No-Fault Act, and other state and federal fraud and conspiracy laws.

MDI's owner was operating without a medical license at the time of the transactions. In a previous incident, he was reprimanded by the Minnesota Board of Psychology for trying to pass as a clinical psychologist while really holding a degree in educational administration.

Special Reports /

Farmers Seeks $1M in Damages from Alleged Minnesota Referral Scheme

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