California decision hits physicians for fraud against Allstate

A jury finding that doctors and clinics were liable for false billing practices against the insurer could encourage more such lawsuits in civil court.

By Tanya Albert, AMNews staff. April 2, 2001.

In what is being called a landmark fraud decision, a California jury recently ordered three doctors and nine clinics to pay Allstate Insurance Co. $8.2 million after finding them liable for billing for services they never provided, and for changing bills to justify excessive charges.

Legal experts have been watching the lawsuit closely because it is the first to go to trial under a unique California law modeled after the federal False Claims Act.

Allstate's success in this case could lead more people to start using civil suits as a tool to pursue fraud-and-abuse cases, some in the industry say. They also believe other states could now adopt their own legislation. "This case is extraordinarily important," said Los Angeles-based attorney Dennis B. Kass, of Manning & Marder, Kass, Ellrod, Ramirez, who represented Allstate in the case. "Hopefully, it will encourage more people to use the law to stop fraud. Upcoding is very, very costly. It's unfair to good doctors."

Since California passed the state insurance fraud law, major insurance companies have filed about 20 lawsuits, Kass said. But before this trial, others had been settled out of court.

In this case, Allstate filed a lawsuit against six doctors who ran nine clinics in Southern California. Allstate alleged that the doctors and clinics had altered records and bills to support insurance claims or personal-injury lawsuits filed after auto accidents.

Allstate settled with three doctors before the trial went to court, Kass said. Three other doctors and the clinics -- Tri-Star Family Health Center, Wilshire Tri-Star Medical Clinic, Van Nuys Family Health Center, Carson Community Medical Clinic, Carson Medical Clinic, Wilshire Rampart Health Center, Value Care Medical Clinic, Anaheim Walk-in Medical Clinic and El Monte Valley Health Center -- went to trial. [...]