Insurance Fraud Expert Seeks Damages in Lawsuit Showing How Industry Fails to Take Fraud and Privacy Seriously

Where are our health care dollars going? According to a lawsuit filed on behalf of Dr. Berton Forman and his company, Rockville Recovery, our health care dollars are lining the pockets of the middlemen in Preferred Provider Organizations (PPO) and HMOs. Dr. Forman and his company are seeking $12 million in damages as well as punitive damages and attorneys fees from Guardian Life Insurance Company of America. In its lawsuit now pending in the New York State Supreme Court, Dr. Forman alleges that not only did Guardian breach its agreement with his company by failing to pursue tens of millions of dollars in fraudulently billed claims, but that it also violated HIPAA (Health Insurance Portability and Accountability Act), the law that protects the privacy of patients.

Forman, an anesthesiologist and owner of a U.S. Patent for Health Care Fraud Software, was engaged by Guardian over a six-year period with the charge of finding fraud in billing on the part of doctors and hospitals. Guardian provided Forman with hundreds of thousands of claims during this period and Forman and Rockville identified $46 million in fraudulent claims that Guardian itself confirmed had been improperly paid out. Rockville’s findings included large hospital groups throughout the country where it was discovered that the hospitals were in many instances triple billing on claims they submitted to Guardian for payment. With the exception of the claims pertaining to its own employees whose identities were fully protected, Guardian provided Forman with the claims in a format which identified their insured by their names, Social Security numbers, dates of birth and medical histories. HIPAA precludes dispensing this information to anyone in an unencrypted format.

In its lawsuit, Forman and Rockville allege that Guardian’s failure to pursue the monies it had identified as being fraudulently paid was occasioned by its having entered into contracts with third-party middlemen known as PPOs (Preferred Provider Organizations) including Multiplan, Inc.

Guardian refused to take legal action to recover the monies even after it confirmed Forman’s findings as to fraud because it was more important for them to maintain relationships with the extensive networks provided by the PPOs. Fraud was overlooked because Guardian needed the large provider networks with which the PPO middlemen supplied them and, in return for that access, entered into “no audit” or “no recovery” agreements with entities such as Multiplan which effectively prevented them from seeking the return of these monies. In return for these agreements, Guardian was given discounts ranging from ten to thirty-five percent. These savings, however, did not result in Guardian lowering the cost of its health care premiums. Instead, they enhanced its bottom line and those of the PPOs with whom it did business.

In entering into these agreements, Guardian knowingly permitted fraud to take place right under its eyes, yet pretended that it was actively seeking to prevent fraud. In reality, Guardian not only failed to prevent fraud but its inaction allowed fraud to take place with impunity and at the same time allowed the privacy rights of its patients to be compromised. Guardian’s actions, however, only serve to increase the premium costs to its subscribers and decreases the pool of money available to dedicate to health care.

While it may seem illogical for an insurance company, particularly one such as Guardian that holds itself out on its website as one which pursues fraud and ostensibly has created a Special Investigations Unit (SIU) for that purpose, to waive its right to discover health care billing fraud, it is in fact quite logical. PPOs and HMOs have enough leverage with their network physicians and hospitals that they regularly pay out less than the face value of the claims — thus, they receive discounts from the insurance companies (preferred pricing) and the insurance companies determine that the discounts result in saving them more money than is lost by overbilling.

Guardian’s motion to dismiss the pending New York State Supreme Court action was denied by the Hon. Eileen Bransten on October 15, 2009 in a reported decision. The case is still in the discovery phase and will be heading to trial in a few months.

For further information concerning this matter, contact Dr. Forman’s attorney, Kenneth L. Kutner, at 212-684-0088.