Insurance Company Caught Using Bogus Medical Consultants’ Reports To Deny Benefits

Earlier this year, this office received several letters from State Farm with checks enclosed to pay medical bills denied to our clients as early as 1993. The denied medical benefits were “no fault” PIP benefits claimed by State Farm’s own insureds who were shocked by how their own insurance company was treating them.

In the letter, State Farm admitted that “concerns have since been raised” about the procedures of the medical review company they had consulted, California Institute of Medical Research and Technology, Inc. (CMR). “Although we no longer use this company,” State Farm said, “we want to make sure your client was not adversely affected by CMR’s report.”

It appears State Farm is trying to “cut its losses” related to many lawsuits, including class action lawsuits, which have been filed against it nationwide, including several in the Northwest. One case, “Foltz v. State Farm and CMR,” has settled for an undisclosed amount.

In apparent response to this defeated attempt by the insurance industry to avoid paying legitimate claims, it appears that the Oregon PIP law is targeted for a major overhaul by insurance interests at the legislature this next season. We hope that various health associations concerned will vigorously oppose any proposed cutbacks in PIP benefits. (Note: There have been changes made to the Oregon PIP laws since this article was prepared)

What is going on here?

In June, NBC’s Dateline presented the results of their 15-month investigation for which they interviewed 250 people and reviewed over 70,000 pages of documents. Here is some of what NBC turned up.

The story featured a woman insured by State Farm who was plunged into over $10,000 in medical debt for treatment following an auto accident. State Farm followed CMR’s recommendation, after its “paper review” (review of the records as opposed to examining the injured person). CMR advised that the woman’s injuries were “minor” and her difficulties were “not caused by the accident, but by a preexisting bone condition.” Her claim for all but a mere $780 of her medical bills was denied.

The injured woman said that State Farm did not seem interested in the opinion of her own doctor who had examined and treated her and felt sure her injuries were caused by the accident.

Many of the thousands of “medical” reports generated by CMR which State Farm relied on were not written by doctors at all. NBC interviewed a former CMR employee who had authored many such reports. He was a writer, with a degree in journalism and absolutely no medical training. His co-workers producing medical reports included a para-legal and a nurse.

The former employee stated that CMR had provided him with a computer data base of stock medical phrases for him to put into the reports to be sent to State Farm to “make it sound like a doctor.” Almost every one of the 160 stock medical paragraphs given to him had the effect of cutting or limiting medical care. He had been trained to down play injuries and leave out medical information, which could be helpful to the accident victim.

The president of CMR admitted that in the mid-90’s non-medical people reviewed and wrote reports on many files, but doctors reviewed the reports before signing them. However, a CMR insider (whose voice and appearance were disguised due to his fear of reprisal) acknowledged that doctors would often sign stacks of reports (30 to 50 an hour) without ever reading the records.

The CMR insider stated that some doctors actually did review the records and reports before signing, but then other (non-medical) CMR staff would go in and change the reports before sending them to State Farm. The changes were always “better for State Farm; worse for the accident victims.”

CMR’s president claimed that they always ran the changes by the doctor. But NBC interviewed a doctor who said he never saw his reports again after he signed them. The same doctor was interviewed later relative to a medical report involved in a court case. State Farm had tried to block access to this medical record by filing a protective motion. When NBC showed the doctor the report which he had supposedly authored, the doctor stated that he had never seen the report before and questioned the validity of the signature intended to be his.

Following “electronic footprints,” NBC found many CMR files had been erased. However, NBC found encrypted, electronically locked “back-ups,” broke the code and discovered references to a sophisticated computer data base called “Crash Data” which had been used to predict the likelihood of injury by comparing accident data to that of 1,000 other accidents. The only problem was that this “scientific study” was bogus; it was not based on authentic data.

NBC Dateline found internal State Farm memos referring to its “medical costs reduction system” which encouraged staff to keep track of all the money saved by using “paper reviews.”

One former State Farm claims rep said it was common knowledge paper reviews were used to cut medical care, “a fast way to close a file.” One State Farm supervisor recommended paper reviews: “If you don’t want to pay on a claim, just find a paper review company who will support your position.”

CMR president, Bill Marvin, said he thought it was his job to save State Farm money.

One State Farm employee resisted using paper reviews. He thought they were not fair. He communicated his concerns up the corporate chain of command, hoping for a fair hearing from corporate execs. The employee ended up losing his job.

One well-respected veteran State Farm corporate exec encouraged using CMR more. Then, in 1993, he left State Farm to become Senior Vice President of CMR!

NBC reported that State Farm had set goals to lower on average what it paid out to its own policy holders on medical claims, not to exceed a certain dollar amount per claim. Dateline searched court files and had an economist analyze 100 claims, which State Farm had CMR review. Each accident victim had submitted on average $7,400 in medical bills after the accident. On CMR’s recommendations to slash, State Farm ended up paying on average $4,400 on each claim.

For a company which processes hundreds of thousands of injury claims each year, this data bespeaks a major boost to the bottom line. Yet State Farm acts as if it did not realize CMR was dramatically increasing its profits by providing fraudulent medical bases for cutting off millions of dollars in medical benefits.

One accident victim sued State Farm and the jury awarded $10 million in damages. State Farm requested a retrial. The judge refused, stating that CMR was bogus and State Farm knew it.

A representative of one paper review company, which went out of business, said some paper review companies don’t have any doctors. The practice of obtaining paper reviews of medical records and using the reports to deny or reduce medical benefits continues to this day.

The story originally appeared on Dateline.

This article was prepared by Dennis H. Black