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Allied Medical Associates v. State Farm Mutual Automobile Insurance Co.

June 3, 2009

ALLIED MEDICAL ASSOCIATES, PLAINTIFF,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY AND STATE FARM FIRE AND CASUALTY COMPANY, DEFENDANTS/COUNTERCLAIM-PLAINTIFFS,
v.
ALLIED MEDICAL ASSOCIATES, DAVID KIRSTEIN, D.C., AND BRYAN EHRLICH, D.C., COUNTERCLAIM-DEFENDANTS.



The opinion of the court was delivered by: Yohn, J.

Memorandum

On May 23, 2008, Allied Medical Associates ("Allied") commenced this civil action against State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (collectively, "State Farm"). On February 24, 2009, Allied filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 as to count I of its complaint. In count I, Allied asserts a claim for payment of medical expenses under the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa. Con. Stat. §§ 1701 et seq. For the reasons that follow, I will deny plaintiff's motion.

I. Facts and Procedural Background

State Farm provided automobile liability insurance policies for numerous customers.

These policies contained a provision for payment of first party benefits for medical treatments provided to persons covered under the policies. This case centers on the propriety of the payment requests Allied, a medical provider, submitted to State Farm for medical treatment Allied provided.

In the late 1990s, Allied began working with, and submitting payment requests to, State Farm. (Incollingo Dep. 367:14-16.*fn1 ) Pertinent to this motion, between 2007 and 2008, Allied submitted to State Farm payment requests, in which Allied sought payment for medical treatment allegedly provided to 125 patients. (Compl. ¶ 11; id. Ex. 1.) Allied accompanied its requests with HCFA-1500 forms ("Form 1500"),*fn2 corresponding medical files, and other relevant documentation. (Acornley Dep. 94:7-9, 95:2-7, Jan. 20, 2009.) State Farm received each patient's Form 1500 and each patient's medical file. (Id. 94:4-9.) State Farm, however, did not pay Allied. Rather, State Farm launched an investigation into Allied's business and billing practices. (Incollingo Dep. 27:7-8.) Since the investigation began in 2006, State Farm's Special Investigation Unit ("SIU") has shouldered the majority of the investigation into Allied.*fn3

A. State Farm's Investigation of Allied's Payment Requests

State Farm first became suspicious of Allied when a few policy holders complained to State Farm about telephone solicitations they had received. (Incollingo Dep. 27:7-12, 54:8-9, 160:11-12.) The telephone solicitors, who purported to work for insurance companies, the police, or law offices, (id. 51:21-52:5, 67:10-17), told the policy holders to seek treatment for injuries sustained in automobile accidents, (id. 30:8-11, 150:16-151:10, 181:20-22). Mario Incollingo, a claim representative who works in the SIU and who leads State Farm's investigation of Allied, (Incollingo Aff. ¶ 1), determined Allied was responsible for the phone solicitations.*fn4 (Acornley Dep. 181:20-22, 517:7-21, 522:2-4.) In light of this determination, Incollingo obtained, beginning in approximately December 2006, the medical files of several of State Farm's policy holders who had been treated at Allied and for whom Allied previously submitted payment requests. (Id. 181:12-22; see id. 517:7-21 (statingthat after learning of the telephonic solicitation he "realized it was Allied that was common to all these solicitations and that's when [he] started to review files").) Incollingo reviewed these files for several months. (Id. 190:7-8 (recalling that his review occurred "[s]ometime late [20]06 into [20]07 possibly").)

This review elevated Incollingo's suspicions. (Id. 187:1-19.) Specifically, Incollingo found that the physician narratives in each file were "template[d]" and "near identical in their form and substance." (Id. 186:15-16.) Moreover, the files lacked appropriate documentation, (id. 325:20-21), contained "coding" problems, (id. 325:14-15), and demonstrated large gaps in time between the date of an automobile accident and the date on which many patients first sought treatment, (id. 187:5-14). Incollingo also noted that many of the patient reports were unsigned or signed using "signature stamps." (Id. 187:1-4.) In addition to the files, Incollingo reviewed patient testimony. Incollingo discovered discrepancies between the patients' testimony and the bills Allied submitted.*fn5 (Id. 231:15-18.) After completing this initial review, Incollingo concluded that "documentation in the records indicated to [him] that there was treatment being billed for that wasn't being provided." (Id. 321:17-19.)

In approximately March 2007, based on Allied's role in the phone solicitation and on Incollingo's independent review of certain files, (id. 236:12-237:20), State Farm hired Detech Investigations to conduct surveillance of Allied's Haverford, Germantown, Frankford Avenue and Bridge Street offices. (Incollingo Dep. 307:7; Incollingo Aff. ¶ 3.) The surveillance took place between May 7, 2007 and July 19, 2007. (Incollingo Aff. ¶ 3.) After identifying the patients,*fn6 Incollingo would compare the arrival and departure times seen on the surveillance video with the amount of time for which Allied sought payment. (Incollingo Dep. 335:19-24.) For thirty-one patients, Incollingo detected time discrepancies between Allied's payment requests and the surveillance report that suggested to Incollingo that Allied billed State Farm for treatment even if the patient had already departed Allied's facilities. (Id. 338:2-5; Incollingo Aff. ¶ 6.)

Based on the surveillance and Incollingo's review of patient files and past patient testimony, Incollingo suggested to his superiors that State Farm should "hold" its payments to Allied pending the completion of his investigation.*fn7 (Incollingo Dep. 258:16-21.) Brian Acornley, the SIU team leader, testified that on September 24, 2007, State Farm placed a tax identification number block ("TIN block") on Allied.*fn8 The TIN block stopped all pending and future payments to Allied. (Acornley Dep. 33:11-24, 57:17-18.) Though State Farm did not disclose the imposition of the TIN block to Allied until this litigation, (id. 115:23-116:10), beginning in October 2007, State Farm sent letters to Allied (one per patient) informing Allied that State Farm was investigating Allied's payment requests. (Id. 108:19-23; 111:1-112:12, 131:1-6 (discussing content of October letter).) This first group of letters did not seek any additional information from Allied to assist State Farm in its investigation. (Id. 130:24-131:7.) Indeed, the first letter stated, in material part:

Please be advised that the above captioned claim is under investigation. As soon as we [State Farm] complete our investigation we will notify you of the outcome and our decision regarding all outstanding medical payments. (Compl. Ex. 2; see also Acornley Dep. 111:11-112:1 (discussing letter).)

After sending this first group of letters, State Farm took two months to develop the "absolutely correct questions" to ask Allied concerning Allied's payment requests. (Acornley Dep. 130:8-131:20.) In December 2007, State Farm sent a second group of letters to Allied (one per patient) that asked Allied to:

1. Identify the physician who performed the initial examination of the patient and prepared the initial report, if it is different from the physician ...


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