Fraudulent Billing, Lack of Pursuit of Unrecovered Funds Mean Higher Costs for Healthcare Consumers

The N.Y.S. Supreme Court, First Appellate Division handed down a unanimous decision on September 21, affirming the Order of the Supreme Court, N.Y. County, which denied Guardian Life Insurance Company’s motion to dismiss the complaint of Dr. Berton Forman and his company, Rockville Recovery Associates.

Dr. Forman and Rockville are suing Guardian for $12 million in damages. The case illustrates why healthcare costs are rising and why fraudulent billing by providers and violations of HIPAA are routinely overlooked. The Appellate Court upheld the validity of each of the claims in the lawsuit, arising out of the company’s failure to uphold its promise to collect tens of millions of dollars in overbilling uncovered.

Dr. Forman, an anesthesiologist and owner of a patent for healthcare fraud software, was engaged by Guardian over a six-year period to find billing fraud on the part of doctors and hospitals, for which Dr. Forman would receive a fee of 25% of all recovered funds. Guardian provided Dr. Forman with hundreds of thousands of claims during this period to review. Dr. Forman identified tens of millions of dollars in fraudulently paid claims. Rockville’s findings included large hospital groups nationwide that, in many instances, were triple billing or using incorrect codes on claims they submitted to Guardian for payment.

The lawsuit alleges that Guardian’s failure to pursue the unrecovered monies was due to its having entered into separate contracts with Preferred Provider Organizations (PPOs), without Dr. Forman’s knowledge, not to conduct post-payment audits. Despite entering into such agreements, Guardian asked Dr. Forman to perform audits of claims from providers that were part of the PPOs’ plans. Guardian’s contracts with the PPOs effectively precluded any possibility of recovery by Dr. Forman and Rockville for nearly all of the claims that Guardian asked Rockville to audit.

The Appellate Division upheld the lower court’s ruling that Dr. Forman and Rockville presented viable claims for breach of contract, breach of the implied covenant of good faith and fair dealing, promissory or equitable estoppel, unjust enrichment, and quantum meruit.The case is now expected to proceed to trial.

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