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On 4/04/04, wake up wrote:
> StateFarmAgentsWhoCare.org Document Archives
>
> Cutting Claims with Fraud?
> Records Sealed In Major Insurer's Case
>
> Edward Walsh
> Washington Post Staff Writer
> Sunday, July 4, 1999
>
> The nation’s largest automobile insurer has settled several lawsuits over
> the past year that allege the company used fraudulent medical reports by
> outside firms to slash or deny insurance claims submitted by people
> injured in car accidents.
>
> Now, three consumer groups have gone into federal court in Oregon seeking
> to unseal the records of one of the cases, arguing that it holds clues to
> what could be a widespread practice within the industry.
>
> The case, in U.S. District Court in Eugene, Ore., involves the settlement
> of a lawsuit filed by Debbie Foltz, an Oregon woman, against State Farm
> Mutual Automobile Insurance Inc. After her son was injured in an auto
> accident, Foltz alleged that State Farm sent her medical claim to a
> supposedly independent outside firm for review, knowing that the firm
> would return a phony medical analysis that said State Farm should deny or
> reduce the claim.
>
> According to Foltz’s lawyer and others who have represented plaintiffs in
> lawsuits against auto insurers, the Foltz case, which began in 1994, is
> but a small piece of a larger pattern. The use of independent, outside
> firms to review medical claims is extremely common in the insurance
> industry, and is even mandated in two states. The plaintiffs’ lawyers
> charge that, in an effort to keep down costs, insurance companies are
> systematically using dubious reports from some such firms as a pretext to
> cut their payments for medical treatment.
>
> Last year, a jury in Idaho found State Farm did exactly that in one case.
> A few months later, the insurer settled with Foltz and several other
> policyholders who had made similar allegations.
>
> But the details of the Foltz case and others that were settled may never
> be known. A key provision of the settlement, insisted upon by State Farm,
> was that U.S. District Judge Michael R. Hogan seal virtually the entire
> case record, an apparently voluminous file containing four years of
> pretrial skirmishing by lawyers for the two sides. Lawyers involved in
> the case are precluded from discussing it or identifying the related
> cases that were settled at the same time.
>
> The records in those cases are also believed to be sealed. The secrecy
> surrounding the Foltz settlement, and the insurance industry practices
> that it may shroud, is the focus of the new legal action by the consumer
> groups and the Washington-based Trial Lawyers for Public Justice
> Foundation. The groups are attempting to persuade Hogan to unseal the
> court records in an effort to shed light on a relatively new practice by
> the insurance industry that plaintiffs’ lawyers say is saving insurance
> giants like State Farm millions of dollars a year at the expense of their
> policyholders.
>
> "Consumers cannot fight what they do not know about," said Linda Sherry
> of Consumer
>
> Action, one of the groups that is attempting to intervene in the case. At
> the heart of the Foltz case and several others against major insurance
> companies is a process known as "utilization review" or "paper review."
> It involves the review of insurance claims by outside companies that
> employ physicians and other medical experts to determine whether medical
> treatments were necessary and the charges reasonable, the standard set in
> law. Much of the analysis is done by computer, matching the claims
> submitted to an insurance company against stored information on past
> treatments and charges for the same condition.
>
> But critics charge that some insurance companies, which began using
> utilization review about 10 years ago in an attempt to root out claims
> for unnecessary medical treatments and inflated charges, have entered an
> alliance with unscrupulous outside firms that promise they will reduce
> insurers’ costs by generating reports that are all but guaranteed to
> recommend denial or slashing of claims.
>
> One such case that reached trial was in Idaho, where in 1994 Cindy
> Robinson sued State Farm over a three-year delay in the payment of
> medical claims stemming from an automobile accident. When the trial ended
> last year, the jury awarded Robinson $2,500 in damages under her policy,
> $100,000 in additional damages for intentional infliction of emotional
> distress and $9.5 million in punitive damages.
>
> In a blistering opinion last August, Idaho District Judge D. Duff McKee
> upheld the jury verdict and the amount of damages. Reviewing the
> testimony in the case, McKee wrote that "the evidence was overwhelming
> that the utilization review company selected by the claim examiner was a
> completely bogus operation. The company did not objectively review
> medical records but rather prepared ‘cookie-cutter’ reports of stock
> phrases, assembled on a computer, supporting the denial of claims by
> insurance companies. The insured’s medical records were not examined and
> reports were not prepared by doctors or even reviewed by doctors."
>
> McKee said that State Farm’s management knew that the reports it was
> receiving from outside utilization review companies were false but
> condoned the practice because it was "leading to reduced claim expenses."
>
> "The defendant’s conduct in this case was outrageous, intentional,
> harmful and an extreme deviation from reasonable conduct," McKee
> wrote. "The practice of manufacturing evidence to use in defeating a
> claim being made by the insurance company’s own insured is reprehensible."
>
> The utilization review firm that produced the reports in Robinson’s case
> was Medical Claims Review Services (MCRS), which was based in Bethesda
> and is now apparently defunct.
>
> Ten years ago, the company’s president, Ronald E. Gots, wrote an article
> in an insurance industry trade publication urging the industry to turn to
> utilization review as a way to combat what he described as the "vast
> economic interests" that were constantly pressing for "exaggerated
> medical losses." Gots, a physician who now heads two other companies in
> Rockville, did not respond to messages left at his office.
>
> State Farm, which has 36.7 million auto insurance clients, is appealing
> the Robinson verdict. Officials at the company’s Bloomington, Ill.,
> headquarters said they could not comment on any of the cases or the
> general subject of utilization review. "Anything we say about this topic
> could come back to haunt us in discovery in some case involving this,"
> said Dave Hurst, a State Farm spokesman.
>
> But the cadre of plaintiffs’ lawyers who daily do battle with the
> insurance industry in courtrooms and law offices across the country are
> more than eager to talk about the topic.
>
> Rick Friedman, an Anchorage lawyer who represented Robinson, said that
> during the case he obtained 79 MCRS reports on medical claims in Idaho
> and Montana and that every one said either that the claimant was not
> injured or that the injury was not caused by the accident that led to the
> claim.
>
> "These are supposed to be independent reviews of medical records,"
> Friedman said. "At the trial, a former State Farm adjuster said they get
> these reports, send them to the insured and tell them this is what the
> independent review concluded. She said most people just give up at that
> point. Some will call back and she said she was trained to say we have
> lawyers to fight this. She said then everybody gives up."
>
> "It’s all over the country, these phony medical review services," said
> Daniel J. Gatti, a personal injury lawyer who represented Foltz. "They
> have a computer program that says all soft tissue injuries heal in six
> months. To put everybody in the same group and use a computer program to
> say this is what they get is [expletive]. We think it’s fraud."
>
> Another person who will talk about this system is James Mathis, a former
> State Farm supervisor who sued the company in 1997 for wrongful discharge
> from his job in Washington state three years earlier. Last year, a
> federal judge issued a summary judgment against Mathis in the case. He is
> appealing.
>
> Mathis said that when he was in charge of processing medical claims by
> State Farm policyholders in Washington state the insurer’s position
> was "you don’t use an [outside utilization] company that did not provide
> you with at least a 20 percent reduction in the billing. Otherwise it
> would not be cost effective."
>
> Mathis said one company that he considered "too aggressive" in cutting
> medical claims was Comprehensive Medical Review (CMR), which is
> headquartered in San Diego and is headed by William J. Marvin, a former
> chairman of the San Diego County Republican Party. CMR provided the
> medical reports in the Foltz case.
>
> "CMR had a mind-set. They were going to prove to State Farm that they
> were a profit machine," said Mathis, who gave testimony in the Robinson
> and Foltz cases. "They were going to cut every bill." Attempts to reach
> Marvin by phone were unsuccessful.
>
> David Snyder, assistant general counsel of the American Insurance
> Association, a trade association of property and casualty insurers, said
> that during the 1990s there has been "tremendous pressure on insurers to
> reduce expenses and premiums. One way a number of insurers have responded
> is to more closely review medical bills to make sure they are ‘reasonable
> and necessary,’ which is the standard."
>
> Snyder said this was particularly important because in some states the
> amount of medical charges set the parameters for the amount of awards
> for "pain and suffering" in lawsuits stemming from automobile
> accidents. "The higher you can drive the medical bills the greater the
> litigation value of the case," he said. "That’s why insurers need to
> control medical costs, because otherwise this can greatly increase the
> cost of insurance for everybody."
>
> Snyder added that the utilization review system is one factor behind a
> trend toward stable or lower auto insurance premiums and is considered so
> important in Pennsylvania and New Jersey two historically high-cost
> insurance states that such reviews are mandated by law.
>
> Friedman, Robinson’s lawyer, said, "Most people would agree that there is
> a place for paper review in handling insurance claims, but like any tool
> it can be misused." Speaking of the two companies that reviewed the Foltz
> and Robinson claims, he added, "I don’t think that you would find that
> these are two bad apples out of a healthy barrel, but that half the
> barrel is rotten. What’s going on, in my opinion, is the insurance
> industry is waging an undeclared war against American consumers. They
> know exactly what they are doing."
>
> "The insurance industry is making more and more use of utilization
> firms," said Matthew Whitman, an Oregon lawyer who is working with the
> consumer groups. "It’s an out for the insurance company."
>
> Whitman and other lawyers for the consumer groups argue that the sealing
> of records in the cases that have been settled makes it difficult to
> determine if there is widespread abuse in the industry and unnecessarily
> shields companies from public accountability. They also charge that the
> extent of secrecy in the Foltz case is virtually unprecedented, involving
> not only the court record but also the very existence of the case itself.
>
> According to Whitman, when he visited the federal courthouse in Eugene
> last April, the court clerk told him that Foltz v. State Farm did not
> exist because it did not show up in the court’s internal computer system.
> A physical search later located the thin case file that is public. But
> Whitman said the file contained references to about 450 motions and other
> items that have been sealed.
>
> Sarah Posner, a staff attorney for Trial Lawyers for Public Justice, said
> that as recently as last week an attempt to locate the case through a
> nationwide computer system that lawyers routinely use came up blank.
>
> "Inevitably, this favors big corporations such as insurance companies and
> other defendants," Whitman said of the system that enables companies to
> demand silence in exchange for large monetary settlements. "Debbie Foltz
> cannot defend the rights of everyone to access to the courts. At some
> point the money gets too big."
>
> Articles appear as they were originally printed in The Washington Post
> and may not include subsequent corrections.
>
> http://www.newslibrary.com/deliverccdoc.asp?SMH=303617
>
>
>
>
> Document end
>
>
> Back to Archive Index
>
>
>
>
> On 4/04/04, open eyes wrote:
>>
>> Cutting Claims With Fraud?
>> Records Sealed in Major Insurer's Case
>> By Edward Walsh
>> Washington Post Staff Writer
>> Sunday, July 4, 1999; Page A01
>>
>>
>> In a blistering opinion last August, Idaho District Judge D. Duff
>> McKee upheld the jury verdict and the amount of damages.
>> Reviewing the testimony in the case, McKee wrote that "the
>> evidence was overwhelming that the utilization review company
>> selected by the claim examiner was a completely bogus operation.
>> The company did not objectively review medical records but rather
>> prepared 'cookie-cutter' reports of stock phrases, assembled on a
>> computer, supporting the denial of claims by insurance companies.
>> The insured's medical records were not examined and reports were
>> not prepared by doctors or even reviewed by doctors."
>>
>> The utilization review firm that produced the reports in
>> Robinson's case was Medical Claims Review Services (MCRS), which
>> was based in Bethesda and is now apparently defunct. Ten years
>> ago, the company's president, Ronald E. Gots, wrote an article in
>> an insurance industry trade publication urging the industry to
>> turn to utilization review as a way to combat what he described
>> as the "vast economic interests" that were constantly pressing
>> for "exaggerated medical losses."
>>
>>

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