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Press Release

March 8, 2012

Contact: David Neustadt 212-709-1691

GOVERNOR CUOMO ANNOUNCES NEW STATEWIDE INITIATIVE TO RID THE STATE'S NO-FAULT INSURANCE SYSTEM OF DECEPTIVE DOCTORS AND SHUT DOWN MEDICAL MILLS

"New Regulation Enables DFS to Ban Doctors from No-Fault System if They Cheat the System"

"Without Doctors' Licenses, Fraudulent Medical Practices Will Be Forced to Close"

Governor Andrew M. Cuomo today announced a statewide initiative to stop deceptive doctors and shut down medical mills that plague New York's no-fault insurance payment system and cost New Yorkers hundreds of millions of dollars in insurance costs.

At the Governor's direction, the Department of Financial Services (DFS) is issuing a new regulation that will enable it to ban doctors who engage in fraudulent and deceptive practices as part of the no-fault system. The regulation implements a 2005 law that gives DFS the power to regulate doctor participation in the no-fault system.

Through audits as well as through information from law enforcement and insurance companies, DFS has already identified 135 medical providers whose billing practices have raised concerns regarding possible no-fault fraud. As part of an ongoing investigation, letters are being sent to all 135 medical providers demanding information. Failure to answer the letters may automatically lead to the medical provider being banned from the no-fault system

"The state has no tolerance for medical providers or doctors ripping off the system," said Governor Cuomo. "This affects all New Yorkers because we all pay the consequences with higher insurance premiums, and that's why I asked the Department of Financial Services to take this action. I commend Superintendent Lawsky and the team at DFS for their dedication to this investigation and look forward to bringing these health care providers to justice."

Superintendent Lawsky said, "Rather than caring for victims of auto accidents, these doctors and other health care providers engage in scams, bilking millions of dollars from insurance companies each year. Their unlawful schemes are also directly responsible for driving up insurance premiums for everyone. We are going to call them to account and put them out of the no-fault business."

A DFS investigation has found evidence of doctors and other practitioners providing unnecessary treatment to car accident victims as well as doctors "renting" their tax ID number to fraudulent medical practices that submit fake bills to insurance companies. Without the doctors, the scheme cannot work.

The plan has two parts:

  • Issuing a new regulation enabling DFS to ban doctors who engage in fraudulent and deceptive practices from participating in the no-fault system.
  • Sending letters to the already identified 135 medical providers, whose billing practices have raised concerns regarding possible no-fault fraud, and demanding information regarding their corporate structure, payment requests, and the doctor's direct participation in the practice. The providers are being directed to complete and return the DFS form 14 days after they receive the notice. The agency will use the answers to investigate their no-fault insurance billing practices and determine whether the providers are the true owners and operators of their businesses. Any provider who refuses to respond to the DFS letters may be banned from participating in the no-fault system.

The regulation says that DFS will have to send a list of any medical providers suspected of no-fault fraud to the Departments of Health (DOH) and the State Education Department (SED) for their review. DFS will then conduct hearings. Providers found to have violated the law will be banned from participating in the no-fault payment system. In appropriate cases, DOH and SED may revoke any medical licenses and law enforcement will decide whether criminal charges should be filed.

Rampant criminal abuse of New York's no-fault auto insurance system has driven up auto insurance premiums for consumers. Currently, New York has the fourth highest auto insurance rates in the nation. These sky high rates are due, in large part, to heavy fraud in NY's no-fault system.

The no-fault insurance law was designed to lower insurance premiums and make it easier for accident victims to receive medical treatment, regardless of who is at fault. Usually, no-fault insurers pay medical providers directly, assuming that a licensed doctor provided the treatment and the treatment was necessary.

Manhattan District Attorney Cyrus R. Vance, Jr., said, "My office has seen the massive fraud and abuse stemming from our state's no-fault insurance program, which has contributed to inordinately high auto insurance rates for New Yorkers. For example, we successfully prosecuted the members of a large medical mill ring called the St. Nicholas Group, which netted millions of dollars in fraudulent claims. I thank Governor Cuomo for his work to stop criminals from taking advantage of our state's insurance program. "

Senator James L. Seward, Chair of the Senate Insurance Committee, said, "I applaud Superintendent Lawsky and stand ready to support him in his fight to crack down on no-fault fraud and the criminals who profit from this illegal enterprise. Activating this powerful tool to decertify doctors who cheat the system is long overdue. I sponsored this reform in 2005 and am pleased the Superintendent is taking steps to implement it—helping fight fraud and get insurance rates under control. "

Assemblyman Joseph D. Morelle, Chairman of the Assembly Insurance Committee, said, "Every year auto insurance fraud unnecessarily costs New Yorkers millions of dollars. I applaud Governor Cuomo and Superintendent Lawsky for their commitment to ending auto insurance fraud in our state and bringing unscrupulous medical providers to justice."

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