UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS D. M. ROBINSON CHIROPRACTIC, S.C. and M. W. WIDOFF, D.C, P.C., individually and on behalf of all others similarly situated, Plaintiffs, v. ENCOMPASS INSURANCE COMPANY OF AMERICA, ALLSTATE CORPORATION, and MITCHELL INTERNATIONAL, INC., Defendants. Case No. 1:10-cv-08159 Hon. Rebecca R. Pallmeyer JURY TRIAL DEMANDED (CORRECTED) FIRST AMENDED CLASS ACTION COMPLAINT Plaintiffs D. M. Robinson Chiropractic, S.C. and Marc W. Widoff, D.C., P.C., individually and on behalf of all others similarly situated, through undersigned counsel, alleges for its Class Action Complaint, upon personal knowledge as to itself and its acts, and as to all other matters upon information and belief, based upon, inter alia, the investigation made by its attorneys, as follows: INTRODUCTION AND BACKGROUND 1. This is a proposed class action against the Allstate Corporation (“Allstate”) and Mitchell International, Inc. (“Mitchell Medical”) challenging their fraudulent scheme to depress reimbursements for medical treatment provided to Allstate policyholders through Allstate’s use of Mitchell Medical’s “Decision Point” computer “fee review” software. The participation of Mitchell and Allstate was essential to the scheme, and both participated in the scheme by exercising direction and control of the enterprise. 2. Mitchell sells “Decision Point”, which is a computer “fee review” software that is riven with errors in both the underlying data used as well as with the computational algorithims Case: 1:10-cv-08159 Document #: 77 Filed: 05/04/12 Page 1 of 52 PageID #:2445
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
D. M. ROBINSON CHIROPRACTIC, S.C. and M. W. WIDOFF, D.C, P.C., individually and on behalf of all others similarly situated, Plaintiffs, v. ENCOMPASS INSURANCE COMPANY OF AMERICA, ALLSTATE CORPORATION, and MITCHELL INTERNATIONAL, INC.,
Defendants.
Case No. 1:10-cv-08159 Hon. Rebecca R. Pallmeyer JURY TRIAL DEMANDED
(CORRECTED) FIRST AMENDED CLASS ACTION COMPLAINT
Plaintiffs D. M. Robinson Chiropractic, S.C. and Marc W. Widoff, D.C., P.C.,
individually and on behalf of all others similarly situated, through undersigned counsel, alleges
for its Class Action Complaint, upon personal knowledge as to itself and its acts, and as to all
other matters upon information and belief, based upon, inter alia, the investigation made by its
attorneys, as follows:
INTRODUCTION AND BACKGROUND
1. This is a proposed class action against the Allstate Corporation (“Allstate”) and
Mitchell International, Inc. (“Mitchell Medical”) challenging their fraudulent scheme to depress
reimbursements for medical treatment provided to Allstate policyholders through Allstate’s use
of Mitchell Medical’s “Decision Point” computer “fee review” software. The participation of
Mitchell and Allstate was essential to the scheme, and both participated in the scheme by
exercising direction and control of the enterprise.
2. Mitchell sells “Decision Point”, which is a computer “fee review” software that is
riven with errors in both the underlying data used as well as with the computational algorithims
and computer code that is applied to analyzing the already flawed underlying data. It is a
“garbage in, garbage out” product – a fact well known to Mitchell as the seller and Allstate as the
purchaser.
3. Decision Point uses an “analysis engine” which purports to make medical
treatment reimbursement determinations by analyzing the Ingenix medical fee database, which
has been found by the New York Attorney General’s investigation to be suffused with fraud:
As a wholly-owned subsidiary of UnitedHealth, Ingenix has a conflict of interest in preparing schedules that are supposed to fairly reflect the market. Other subsidiaries of UnitedHealth, and many other insurers, use these schedules to determine reimbursement rates for consumers. Health insurers also have an incentive to manipulate the data they submit to Ingenix so as to depress reimbursement rates based on the data pool, which forces consumers to pay more. Moreover, the Ingenix databases are a “black box” to the consumer, who does not know before choosing a doctor what reimbursement rate to expect from the insurer. Our investigation has shown that . . . . the Ingenix databases understate market rate by up to 28 percent across the state. This translates to at least hundreds of millions of dollars in losses for consumers over the past ten years across the country. . . . [Insurance companies] pretend an independent database underlies these rates — it does not. Our investigation found that the Ingenix schedules themselves, created in a well of conflicts, are unreliable, inadequate, and wrong — usually at the expense of the consumer.
This lawsuit challenges the legality of the enterprise that has proliferated the use of the Ingenix
database in the context of the automobile insurance market and has unlawfully profited from its
massive, fraudulent, under-reimbursement scheme.
4. This lawsuit is not a challenge to all forms of computerized fee review of
insurance claims. Properly designed, such computerized review can and does speed up
reimbursement determinations with accuracy and with lower overhead than would manual
review. Instead, this lawsuit challenges the sale and use of a specific software programs
incorporating the aforementioned Ingenix database which has “cooked the books” through
conflicts of interest, selective data contribution, flawed algorithms and data scrubbing
techniques. A properly constructed database for reasonable charge determinations is entirely
feasible, as are data analysis engines, but such a database and analysis software was not in the
interests of the insurance companies because they would have to make more time consuming
determinations of proper reimbursement and reimburse more.
5. Indeed, as part of the settlement with the New York Attorney General, United
Healthcare, Aetna and Cigna have provided tens of millions of dollars of seed money to create a
legitimate computerized fee review database. As Ingenix’s parent-company, United Health
Group’s own press release notes:
In particular, the agreement commits UnitedHealth Group to pay $50 million to fund a not-for-profit entity to develop and own a new, independent database product to replace the Prevailing Health Charges System (PHCS) and Medical Data Research (MDR) database products owned by UnitedHealth Group’s subsidiary, Ingenix, Inc. Both products are used by a number of health plans and employers as tools that help determine the amount to reimburse members who receive physician services outside their managed care networks. When the new database product is ready, Ingenix will close the PHCS and MDR database products.
The specifics of this properly constructed database will be as follows:
• United will pay $50 million to establish a new, independent database run by a qualified nonprofit organization;
• The nonprofit will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database;
• The nonprofit will develop a website where, for the first time, consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area;
• The nonprofit will make rate information from the database available to health insurers;
• The nonprofit will use the new database to conduct academic research to help improve the health care system;
• The nonprofit will be selected and announced at a future date.
• The Allstate Policy obligates Allstate to pay “to or on behalf of an insured person
all reasonable expense actually incurred for necessary medical treatment, medical services or medical products actually provided to the insured person”;
• Employing virtually identical language, the Encompass Policy similarly obligates
Allstate to pay “reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, . . . and funeral services”; and
• Both Allstate and Encompass Policies define “unreasonable medical expenses,” which are excluded from coverage, as “fees for medical services which are
substantially higher than the usual and customary charges for those
services.”
10. By relying on Decision Point, Allstate fails to make any determination of whether
the submitted medical expenses are unreasonable1 because Decision Point is not designed in the
first instance to determine whether a charge is “reasonable,” “unreasonable,” “substantially
higher” and/or “usual and customary,” although Allstate uses it, and Mitchell Medical sells it, for
these very purposes.2
11. Decision Point simply compares the line-item charge billed for a medical
procedure to internal fee schedules embedded within the software (the Ingenix database).
Insurers such as Allstate work with Mitchell Medical to select a particular “percentile” payment
benchmark (e.g., the “85th percentile” of the Ingenix database), and any of the charged amount
that exceeds that payment benchmark is automatically capped and excluded from coverage. The
percentile benchmark chosen by Allstate for either the Allstate Policy or Encompass Policy is not
1 The “unreasonable medical expense” determination is the last step in Allstate’s fee review process.
In other words, Allstate does not begin to engage in any such determination unless and until all other categories of Policy exclusions or limitations have been assessed and determined acceptable. As such, the case does not involve: (1) the issue of “necessity” of treatment; (2) the issue of “relatedness” of the injury to a covered occurrence; or (3) any other Policy exclusion or limitation.
2 Before Decision Point, Allstate used proprietary software developed by ADP Integrated Medical Solutions. Allstate recently settled a national class action (the “Strasen” case) that challenged the ADP database and its “unreasonable medical expense” reductions. Prior to these automated systems, Allstate’s standard practice and custom was to pay the medical provider’s charge in full, in the absence of fraud (i.e., a claim being referred to its Special Investigative Unit).
A. Allstate Is Contractually Obligated To Pay All Reasonable Medical Expenses
But May Exclude “Unreasonable Medical Expenses” That Are
“Substantially Higher” Than the “Usual and Customary Charge.”
32. In the automobile insurance industry, medical payments coverage, or “Medpay,”
is a contractual form of “no fault” coverage entered into between insurers, such as Allstate, and
their insured persons, such as Plaintiffs (as assignees of the insured) and the Class – i.e., covered
claimants. Medpay coverage provides for payment of medical bills following a “covered
occurrence,” i.e., an automobile accident. The purpose of Medpay coverage is to provide a fund
for the reimbursement of medical expenses allowing the insured to obtain medical care for an
acute injury following an accident to improve recovery without concern for the source of
payment.
33. Allstate markets and sells its Medpay policies under two different brand names,
Allstate Policy and Encompass Policy. All Allstate Policies contain the following uniform
provisions:
• “Automobile Medical Payments” section provides: “Allstate will pay to or on
behalf of an insured person all reasonable medical expenses actually incurred for necessary medical treatment, medical services, or medical products actually provided to the insured person. Hospital, medical . . . expenses . . . are covered.”
• “Limits of Liability” section provides: Allstate will pay “the limits of our Personal Medical Payments” “stated on the Policy Declarations.”
• “Unreasonable or Unnecessary Medical Expenses” section provides: “If the insured person incurs medical expenses which are unreasonable or unnecessary, we may refuse to pay for those medical expenses and contest them.
Unreasonable medical expenses are fees for medical services which are
substantially higher than the usual and customary charges for those
services.”
• “Proof of Claim; Medical Reports” section provides: “as soon as possible, any person making a claim must give us written proof of claim. It must include all
details we may need to determine the amounts payable. We may also require any person making claim to submit to examination under oath and sign the transcript.”
34. Likewise, all Encompass Policies contain the following uniform provision, which
are virtually identical to the provisions contained in the Allstate Policies:
• “Medical Expense- Motor Vehicle” “Insuring Agreement” section provides: “we will pay medical expenses incurred or medically ascertained within three years from the date of accident except as excluded by the provisions listed in the Medical Expense- Losses We Do Not Cover. Medical Expense- Motor Vehicles applies to bodily injury caused by a vehicle accident and sustained by a covered person.”
• “Limits of Liability” section provides: Encompass’ “limit of liability shown in the Coverage Summary for “Medical Expense” is our maximum limit of liability for each person injured in any on accident.”
• “Unreasonable or Unnecessary Medical Expenses” section provides: “If the covered person incurs medical expenses which are unreasonable or unnecessary, we may refuse to pay for those medical expenses and contest
them. Unreasonable medical expenses are fees for medical services
which are substantially higher than the usual and customary charges
for those services.”
• “Proof of Claim; Medical Reports” section provides that any person making a claim must give us written proof of claim. It must include all details we may need to determine the amounts payable. Encompass may also require any person making a claim to submit to examination under oath and sign the transcript.
35. Thousands of covered claimants have been injured in covered occurrences and
incurred usual, customary and reasonable expenses for necessary medical treatment from
licensed medical providers.
36. While neither the Allstate Policy nor the Encompass Policy defines “reasonable
medical expenses” (except, on information and belief, in the State of Montana), both Policies do
define “unreasonable medical expenses” as “fees for medical services substantially higher than
the usual and customary charges for those services.” Neither Policies define, however, nor does
database of biased, flawed charges, reimbursed this charge at $64.00, excluding $3.00 of the line
item charge from coverage. The reduction was denoted by code X41.
44. Similarly, pursuant to an Encompass Policy, Plaintiff M. W. Widoff, D.C, P.C.
submitted a medical bill in May 2010 to Allstate that contained a line item charge for $59.00 for
CPT 98940. Allstate, using the Mitchell/Ingenix database of biased, flawed charges, reimbursed
this charge at $55.00, excluding $4.00 of the line item charge from coverage. The reduction was
denoted by code 41. In the same submitted medical bill, there were a total of two reductions
denoted by code X41 and nine reductions denoted by code 41, reducing the total covered amount
by $46.00.
45. There is no statistical definition of “reasonableness,” and no particular percentile
benchmark represents a “reasonable” expense. Likewise, there is no statistical definition of
“unreasonableness,” and no particular percentile benchmark represents an “unreasonable”
expense.3 Indeed, Decision Point itself provides an option to apply different payment percentiles
– such as the 70th, 85th or 95th percentile – which would then serve as an arbitrary, undisclosed,
and eminently modifiable, cap to the reimbursement amount on submitted claims.
46. The choice of percentile benchmark is indicative of the insurance business
climate, not the reasonableness of any medical expense. In fact, in states where it has been the
subject of litigation or state enforcement, Allstate and/or other insurers have stopped the use of
Decision Point altogether. Information regarding litigation and state enforcement are also shared
3 Likewise, there is no statistical definition of “substantially higher” or “usual and customary” and no particular percentile benchmark represents a “reasonable” charge or demonstrates that one charge is “substantially higher” than another.
visible to the Decision Point users (Allstate staff level claims processing personnel) who were
unaware that the “unreasonable medical expense” recommendation displayed was arbitrarily
produced by error suppression. 43. Allstate was aware that Decision Point was encountering
numerous programming and data errors, and that Mitchell was employing error suppression
techniques to disguise output of the “unreasonable medical expense” recommendations as valid
and reliable, when both Allstate and Mitchell knew the “unreasonable medical expense”
recommendations were not the product of reliable and valid data analysis but a pretext for
arbitrary generation of low reimbursement amounts.
49. In sum, as part of its fee review, Allstate, based on an undisclosed percentile of
the flawed Ingenix database, Decision Point’s analysis engine fraught with programming and
data errors that were arbitrarily suppressed, “unreasonable medical expense” recommendations
that were known to be the product of corrupt data and programming, creates an appearance of
conducting a line-by-line audit of provider bills without:
• disclosing to its insureds or their providers that it is making “unreasonable” charge determinations based upon a predetermined percentile of the flawed Ingenix database;
• disclosing to its insureds or their providers that it is making determinations of “unreasonable” charges without conducting an inquiry into whether a medical expense meets the definition of “unreasonable” provided in either the Allstate or Encompass Policies;
• increasing reimbursement for the submitted charges below Allstate’s determined maximum reasonable reimbursement;
• individually analyzing the claim or the provider’s usual and customary charge, and/or without eliciting any reasons why any particular medical charge was incurred;
• individually analyzing whether the charge was “the usual and customary charge [of the provider or in the community];
• considering whether the charges as a whole for the services provided were within Allstate’s determined maximum reasonable reimbursement; and
• representing that its usual, reasonable, and customary medical reimbursement determinations were unreliable and valid when they knew that they were not reliable.
50. As a result, Allstate refused payment to healthcare providers, and reduced medical
payments benefits to covered claimants, without having made a good faith, bona fide
determination of the “unreasonableness” of the charges submitted to it prior to its refusal; failed
to adopt and implement reasonable standards for the prompt investigation and settlement of
claims arising under its policies; used the Decision Point “unreasonable medical expense”
recommendation as a pretext for representing to its insureds and healthcare providers that
payment in conformity with policy requirements had been made; and used and continued to use
Decision Point as the primary determinant of medical benefits reimbursement when it knew or
should have known that Decision Point was incapable of making reimbursement determinations
in conformity with policy requirements..
C. Allstate’s Medpay Claims Reduction Scheme Has Been Undertaken In
Concert With Mitchell Medical And Ingenix.
51. As discussed above, Allstate and Mitchell, with Ingenix’ consent and assistance,
have undertaken a fraudulent fee review scheme to underpay the healthcare providers who
provided necessary medical services to those entitled to Medpay coverage under the Allstate or
Encompass Policies. At the heart of the scheme lies Mitchell Medical’s Decision Point fee
review software, which incorporates the Ingenix database. Using Decision Point, Allstate limited
the amount of Medpay reimbursements to a predetermined percentile of the flawed Ingenix
database and manufactured pretextual “unreasonable medical expense” recommendations.
• selling its Decision Point fee review software to Allstate pursuant to a licensing agreement;
• working with Allstate to customize Decision Point to maximize Allstate’s interests at the expense of the policyholder;
• providing regular data updates;
• licensing the Ingenix database;
• providing fee determination verifications and contracting with Ingenix to provide litigation support;
• programming Decision Point to suppress programming and data errors;
• manufacturing values for inclusion in the Decision Point analysis of reimbursement rates that it knew were not the product any actual data analysis, and were done solely to produce an “unreasonable medical expense” recommendation that was not validly determined; and
• reaching agreements or understandings with Allstate to suppress errors in the analysis conducted by Decision Point in order to allow Decision Point to generate invalid and unreliable “unreasonable medical expense” determinations to be used as a pretext for the determination reimbursement to medical providers.
55. The Code 41 Enterprise is an “enterprise” as that term has meaning under 18
U.S.C. § 1961. The Code 41 Enterprise has and continues to have an ascertainable structure and
function separate and apart from the pattern of racketeering activity in which Allstate has
engaged. Decision-making within the Code 41 Enterprise with regard to the use of data from the
Ingenix database and the suppression of data and programming errors including manufacture of
arbitrary values for inclusion in the fee review analysis, that would reduce medical payments was
consensual. Ingenix, Mitchell Medical and Allstate all consented to the use of the database, and
error suppression techniques within the confines of the Decision Point software, each profited
from its use, and each knew that the “unreasonable medical expense” recommendations produced
pattern of racketeering activity at the expense of the Plaintiffs and Class. Absent participation in
the Enterprise, the members of the Enterprise would not have so benefitted.
68. Allstate and Mitchell, acting through their officers, agents, employees and
affiliates, committed numerous predicate acts of “racketeering activity,” as defined in 18 U.S.C.
§1961(5), and continues to commit such predicate acts, in furtherance of its underpayment
scheme for medical services, including (a) mail fraud, in violation of 18 U.S.C. §1341, and (b)
wire fraud, in violation of 18 U.S.C. §1343. Each use of the mail or wire in furtherance of the
fraudulent scheme described above is a predicate act of mail and wire fraud. Such predicate acts
include the following:
• mailing, causing to be mailed and/or knowingly agreeing to the mailing of various materials and information including, but not limited to, materially false or misleading information regarding the use of Ingenix, Decision Point or fictitious reimbursement methods to insureds, plan sponsors, or others; materially false or misleading data for use in the Ingenix database, materially false and misleading usual, customary and reasonable rate determinations, EOBs and remittance advices for the purpose of saving money at the expense of the Plaintiffs and the Class, with each such mailing constituting a separate and distinct violation of 18 U.S.C. §1341;
• transmitting, causing to be transmitted and/or knowingly agreeing to the transmittal of various materials and information including, but not limited to, materially false usual, customary and reasonable rate determinations and related explanation of such determinations, materially false or misleading information regarding Ingenix or usual, customary and reasonable rate reimbursement methods to plan sponsors, by means of telephone, facsimile and the Internet, in interstate commerce, for the purpose of effectuating the above-described false payment schemes, and each such transmission constituting a separate and distinct violation of 18 U.S.C. §1343; and
• regular and repeated communications between Allstate and Mitchell Medical, by means of telephone, facsimile, the Internet and mail, regarding the implementation, use and/or maintenance of the Decision Point software, and other similar assistance provided by Mitchell Medical, each such communication constituting a separate and distinct violation of 18 U.S.C. §1343 and/or §1341.
83. This action is brought pursuant to Fed. R. Civ. P. 23. The requirements of Fed. R.
Civ. P. 23(a), (b)(2) and (b)(3) are met with respect to the class defined below.
A. Class Definition
84. Plaintiffs bring this action individually and on behalf of the following classes (the
“Class”):
Consumer Fraud Class: All persons and entities that Allstate deemed covered claimants under an Allstate or Encompass Policy, and who: (a) submitted first-party medical claims to Allstate; (b) had their claim submitted to Mitchell/Ingenix fee review; and (c) received an amount less than the submitted line-item medical expense pursuant to a code
“41/X41” reduction, during the relevant period of January 2007 through the present.
Breach of Contract Class: All persons and entities that Allstate deemed covered claimants under an Allstate or Encompass Policy, and who: (a) submitted first-party medical claims to Allstate; (b) had their claim submitted to Mitchell/Ingenix fee review; and (c) received an amount less than the submitted line-item medical expense pursuant to a code
“41/X41” reduction, during the relevant period of January 2000 through the present.
RICO Class: All persons and entities that Allstate deemed covered claimants under an Allstate or Encompass Policy, and who: (a) submitted first-party medical claims to Allstate; (b) had their claim submitted to Mitchell/Ingenix fee review; and (c) received an amount less than the submitted line-item medical expense pursuant to a code
“41/X41” reduction, during the relevant period of January 2006 through the present.
Excluded from the Class are persons and entities whose claims were referred to Allstate’s Special
Investigative Unit and found fraudulent. Also excluded from the Class are: (1) class members
who released their claims against Allstate as part of the settlement in Coffell et al. v. Allstate Ins.
Co., No. 05-2-33183-6SEA, Superior Court, King County, Washington (Nov. 19, 2007, Final
Judgment and Order Approving Settlement and Dismissing Claims of Class Members with
Prejudice); and (2) claims for amounts that were denied because the submitted bills were
duplicate bills, were not related to a covered occurrence, treatment took place prior to the date of
occurrence, or was flagged for coding errors. Further excluded are members of the judiciary, and
Defendant and any entity in which it has a controlling interest, including officers and directors
and the members of their immediate families.
B. Numerosity
85. The members of the Class, being geographically dispersed and believed to number
in the thousands, are so numerous that joinder of them in a single action is impracticable.
C. Common Questions of Law and Fact
86. There are questions of law and fact that are common to all Class members,
including, inter alia:
(a) Whether Allstate’s use of Decision Point/Ingenix software to audit claims conduct constitutes statutory fraud;
(b) Whether Allstate’s use of Decision Point/Ingenix software to audit claims constitutes breach of contract;
(c) Whether Allstate may reduce medical payment benefits
based upon a pre-selected percentile of charge data;
(d) Whether code 41/X41 reductions identify “fees for medical services which are substantially higher than the usual and customary charge for those services”;
(e) Whether basing the Policy’s covered amount on “provider
charges within the provider’s geographic region” comports with the Allstate and Encompass Policies’ obligation to pay reasonable charges except those which are “substantially
higher than the usual and customary charge for those services”;
(f) Whether Allstate unilaterally re-priced, or re-valued,
medical expense claims to a set percentile without disclosing this practice in its insurance policies;
(g) Whether the Allstate and Encompass Policies impose an
obligation in the absence of fraud to pay medical charges submitted by a licensed medical provider, other than those which are determined to be “substantially higher that the usual and customary charge for those services”;
(h) Whether the phrase “substantially higher than the usual and
customary charge for those services” is ambiguous, and should be interpreted in favor of coverage;
(i) Whether Allstate’s use of Mitchell’s Decision Point,in its
actual operation constitutes a secret or de facto exclusion or limitation of coverage;
(j) Whether Allstate’s use of Mitchell’s Decision Point fee
review constitutes consumer fraud;
(k) Whether Allstate limits payment of medical benefits under the provisions of its Medpay policies based upon a determination of “unreasonable” medical bills as defined in the Allstate or Encompass Policies;
(l) Whether Allstate fails to disclose coverage limitations and
exclusions for policy benefits in its Medpay policies;
(m) Whether Allstate limited medical payments for medical expenses by application of the analysis engine within Decision Point was authorized by the Allstate or Encompass Policies;
(n) Whether Allstate had a business practice to reduce medical
payments for medical expenses based upon using “unreasonable medical expense” recommendations produced by Decision Point that was in conformity with Allstate or Encompass Policies;
(o) If Allstate limited medical payments for medical expenses by application of a percentile of charge data whether the selection conforms to policy requirements;
(p) Whether all expenses excluded by Allstate from a medical
provider based upon a fee recommendation of Decision Point is a a breach of contract;
(q) Whether Allstate’s decision to reduce medical payments for
medical expenses may be based on a selected (and undisclosed) percentile limitation in charge data;
(r) Whether Allstate’s reduction of medical payments for
medical expenses, if done on a selected percentile of charge data is a reliable and accurate basis for rejecting payment upon grounds of unreasonableness in the absence of an opinion of unreasonableness by a qualified medical provider with knowledge of usual and customary charges in the community, or any other evidence;
(s) Whether the charged amount on a formal bill issued by a
licensed medical provider to a patient, on which Allstate made payment in part, is reasonable unless and until Allstate establishes it is unreasonable;
(t) Whether Allstate has reasons specific to each claimant why
a particular medical provider charge is “unreasonable”; (u) Whether the method by which Allstate limited payment of
medical bills by code “41/X41” was authorized by the contract of insurance;
(v) Whether the method by which Allstate limited payment of
medical bills by code “41/X41” was an unfair or deceptive practice; and
(w) Whether Plaintiffs and the Class have been damaged, and if
so, in what amount.
87. These questions of law or fact common to the Class overwhelmingly predominate
over any individual issues, such that by prevailing on its own claims, Plaintiffs will necessarily
establish Defendant’s contract liability as to all Class members.
88. Plaintiffs can and will fairly and adequately represent and protect the interests of
the Class.
89. The claims of Plaintiffs are substantially similar, if not identical, to those of
absent Class members. Without the Class representation provided by Plaintiffs, no Class
members will receive legal representation or redress for their injuries.
90. Plaintiffs and counsel have the necessary financial resources to adequately and
vigorously litigate this class action. Plaintiffs and Class counsel are aware of their fiduciary
responsibilities to Class members and are determined diligently to discharge those duties by
vigorously seeking the maximum possible recovery for the Class.
E. Superiority
91. A class action is superior to any other available method for the fair and efficient
adjudication of this controversy, given that:
(a) Common questions of law and fact overwhelmingly predominate over any individual questions that may arise, such that there would be enormous economies to the Court and the parties in litigating the common issues on a class-wide instead of a repetitive individual basis;
(b) The size of each Class member’s relatively small claim is
too insignificant to make individual litigation an economically viable alternative, such that as a practical matter there is no "alternative" means of adjudication to a class action;
(c) Few Class members have any interest in individually
controlling the prosecution of separate actions (any that do may opt out);
(d) Class treatment is required for optimal deterrence and
compensation and for limiting the court-awarded reasonable legal expenses incurred by Class members;
(e) Despite the relatively small size of individual Class
members’ claims, their aggregate volume, coupled with the economies of scale inherent in litigating similar claims on a common basis, will enable this class action to be litigated on a cost-effective basis, especially when compared with repetitive individual litigations; and,
(f) No unusual difficulties are likely to be encountered in the
management of this class action insofar as Defendant’s liability turns on substantial questions of law or fact that are common to the Class and that predominate over any individual questions.
CAUSES OF ACTION
COUNT I
(Allstate)
(VIOLATION OF ILLINOIS CONSUMER FRAUD ACT; ALTERNATIVELY, VIOLATION OF
SUBSTANTIALLY SIMILAR CONSUMER FRAUD ACTS)
92. Plaintiffs repeat and re-allege the allegations of the preceding paragraphs as if
fully set forth herein.
93. At all times relevant hereto, there was in full force and effect the Illinois
Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1, et seq. (the “Consumer
Fraud Act”), which prohibits any concealment, suppression or omission of any material fact, with
the intent that others rely thereupon, in the conduct of any trade or commerce.4
94. At all times relevant hereto, Plaintiffs and Class, Allstate, and Mitchell Medical
were “persons” within the meaning of 815 ILCS 505/1(c).
4 The consumer fraud claims of Plaintiffs and resident absent class members is brought under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. If the Court finds that Illinois law may not be applied to the Class, then the consumer fraud claims of nonresident class members will be brought under the consumer protection statute(s) of their respective state of residence, each of which requires objective proof and analysis to demonstrate a violation of the act.
95. At all times relevant hereto, Allstate and Mitchell Medical conducted “trade” and
“commerce” within the meaning of 815 ILCS 505/1(f).
96. Plaintiffs and Class are “consumers” within the meaning of 815 ILCS 505/1(e).
97. Under the Consumer Fraud Act, the use or employment of any practice described
in Section 2 of the Uniform Deceptive Trade Practices Act (815 ILCS 510/2) in the conduct of
any trade or commerce is unlawful whether any person has in fact been misled, deceived or
damaged thereby.
98. Under Section 2 of the Uniform Deceptive Trade Practices Act (815 ILCS 510/2),
a person engages in a deceptive trade practice when, in the course of his or her business,
vocation, or occupation, the person represents that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has
a sponsorship, approval, status, affiliation, or connection that he or she does not have. 815 ILCS
510/2(a)(5).
99. Allstate’s determination of “unreasonable” medical expenses, through the use of
Decision Point software marketed and sold by Mitchell Medical, excusing payment under the
Medical Payments provisions contained in its Allstate and Encompass Policies is a deceptive
trade practice, and unfair, in violation of Section 2 of the Uniform Deceptive Trade Practices Act
(815 ILCS 510/2(2)), including:
• Allstate systematically limits Medical Payment benefits through implementation of an automated fee review scheme (“Decision Point”) created by Mitchell Medical that identifies a portion of medical bills submitted to it as “unreasonable” medical expenses when they exceed a pre-set cap without determining whether those expenses are substantially higher than the usual and customary charge for those services;
• Allstate requires submission of proof of loss which it claims provides all the details Allstate needs to determine amount payable and then makes determinations
of the amount payable by criteria and on information not contained in the proof of loss;
• Allstate falsely represents to its insureds and their healthcare providers that the portion of the submitted medical charge for which payment was refused “based upon provider charges within the provider’s geographic region” when Allstate knows that the 41/X41 refusal is actually based upon a percentile of charges applied to a selected database which Allstate chooses and which does not represent either the providers usual and customary nor the usual and customary charge within the providers medical community;
• Allstate systematically employs automated fee review – Decision Point - in which the output of “acceptable charges” is determined unilaterally by Allstate, and not the market for medical charges;
• Allstate conducts a line-by-line fee review with criteria secretly selected by Allstate, where line item charges above the selected benchmark are reduced to the benchmark but line items below the selected benchmark are not raised but paid at the amount charged so as to always pay less than what Allstate itself has determine to be “reasonable” medical expense in the aggregate;
• Allstate systematically employs the use of Decision Point to make determinations of whether a medical benefits claim submitted to it for payment under the Medical Payments benefits of its insurance policies is within policy coverage when it knows that Decision Point cannot produce a reliable or valid determination of usual and customary medical charges;
• Allstate systematically employs Decision Point to recommend claims decisions when it knows that Decision Point does not conduct reasonable investigation of usual and customary medical charges; and
• Allstate knowingly misrepresents to medical providers and its policy holders that it has refused a portion claim submitted for payment under the medical payments provisions based upon a valid and reliable determination of the usual and customary charges for medical services.
100. As a direct and proximate result of the foregoing acts and/or omissions of Allstate
and Mitchell Medical, Plaintiffs and Class were damaged in an amount to be determined at trial.
WHEREFORE, Plaintiffs, individually and on behalf of the Class of persons described
(d) Whether a percentile of a selected database of charges establishes whether a charge is “unreasonable” under the insuring policies; (e) Whether the determination of “unreasonable” charges is limited to the
information requested by Allstate and encompass in the Proof of Loss provisions of the policies;
(f) Whether “unreasonable expenses” excused from payment under Allstate’s
and Encompass’ policies can be established by comparison to a defined database of charges at a selected percentile limitation without disclosing that method to the insured;
(g) Whether Allstate uses the “reasonable expenses” coverage grant not as a
description of Policy benefits, but as a secret Policy exclusion, limitation of coverage and/or payment cap;
114. As a direct and proximate result of the foregoing acts and/or omissions of Allstate,
Plaintiffs and Class were damaged in an amount to be determined at trial.
WHEREFORE, Plaintiffs, individually and on behalf on the Class of persons described
herein, pray for an Order as follows:
A. Finding that this action satisfies the prerequisites for maintenance as a class action and certifying the Class defined herein;
B. Designating Plaintiffs as representative of the Class and counsel as Class
counsel; C. Awarding damages against Defendant in favor of Plaintiffs and Class in an
amount to be determined at trial; D. Awarding Plaintiffs and Class prejudgment interest on any damages
awarded by the Court; E. Awarding Plaintiffs and Class reasonable attorneys’ fees and costs of this
lawsuit; and F. Awarding Plaintiffs and the Class such further relief as the Court deems
(Violations of RICO, 18 U.S.C. §1962(c)) 115. Plaintiffs repeat and re-allege the preceding allegations set forth in the prior
paragraphs as if fully stated herein.
116. At all relevant times, Allstate and Mitchell Medical were “persons” within the
meaning of RICO, 18 U.S.C. §§ 1961(3) and 1964(c).
117. At all relevant times, and as described in this Complaint, Allstate and Mitchell
Medical carried out its Medpay claims reduction scheme to defraud Plaintiffs and the Class in
connection with the conduct of an association-in-fact “enterprise,” within the meaning of 18
U.S.C. §1961(4), comprised of Allstate, Mitchell Medical, and Ingenix (the “Enterprise”).
118. At all relevant times, the Enterprise was engaged in, and its activities affected,
interstate commerce within the meaning of RICO, 18 U.S.C. § 1962(c).
119. As described herein, the Enterprise has and continues to have an ascertainable
structure and function separate and apart from the pattern of racketeering activity in which
Allstate has engaged. In addition, the members of the Enterprise function as a structured and
continuous unit, and performed roles consistent with this structure.
120. Allstate and Mitchell Medical, acting through their officers, agents, employees
and affiliates, have committed numerous predicate acts of “racketeering activity,” as defined in
18 U.S.C. §1961(5), prior to and during the class period, and continue to commit such predicate
acts, in furtherance of their Medpay claims reduction scheme, including (a) mail fraud, in
violation of 18 U.S.C. § 1341, and (b) wire fraud, in violation of 18 U.S.C. § 1343. Such
predicate acts include the following:
• repeatedly mailing, causing to be mailed and/or knowingly agreeing to the mailing of uniform insurance policies issued by Allstate (e.g., Allstate Policy and
Encompass Policy), falsely promising that Allstate will determine whether any submitted medical payments claim is “substantially higher than the usual and customary charges for those services”;
• repeatedly mailing, causing to be mailed and/or knowingly agreeing to the mailing of letters regarding preauthorization approval(s) and/or appeals;
• repeatedly mailing, causing to be mailed and/or knowingly agreeing to the mailing of materially false and misleading “reasonable” amount determinations, EOBs and remittance advices for the purpose of saving Allstate money at the expense of Plaintiffs and the Class, with each such mailing constituting a separate and distinct violation of 18 U.S.C. §1341;
• On or about September 4, 2008, Allstate mailed an EOB form to Plaintiff D. M. Robinson Chiropractic, S.C. for services provided on July 3, July 7, and August 5, 2008, which denotes a reduction in reimbursement amount with code 41 and falsely states that “[t]he amount allowed is based on provider charges within the provider’s geographic region”;
• On or about October 16, 2008, Allstate mailed an EOB form to Plaintiff D. M. Robinson Chiropractic, S.C. for services provided on September 9 and September 25, 2008, which denotes a reduction in reimbursement amount with code 41 and falsely states that “[t]he amount allowed is based on provider charges within the provider’s geographic region”; and
• On or about July 23, 2008, Allstate mailed an EOB form to Plaintiff D. M. Robinson Chiropractic, S.C. for services provided on April 23, April 28, May 8, May 29, June 5, June 17, June 18, 2008, which denotes a reduction in reimbursement amount with code 41 and falsely states that “[t]he amount allowed is based on provider charges within the provider’s geographic region”;
• On or about May 25, 2010, Allstate mailed an EOB form to Plaintiff Marc W. Widoff, D.C., P.C. for services provided on February 3, February 5, February 8, February 10, February 11, February 12, February 13, and February 15, which denotes a reduction in reimbursement amount with
codes 41 and X41 and falsely states that “[t]he amount allowed is based on provider charges within the provider’s geographic region”;
• On or about May 25, 2010, Allstate mailed an EOB form to Plaintiff Marc W. Widoff, D.C., P.C. for services provided on February 16, February 17, February 18, February 19, February 22, February 24, February 26, March 1, and March 3, 2010, which denotes a reduction in reimbursement
amount with codes 41 and X41 and falsely states that “[t]he amount
allowed is based on provider charges within the provider’s geographic region”; and
• On or about May 25, 2010, Allstate mailed an EOB form to Plaintiff Marc W. Widoff, D.C., P.C. for services provided on March 3, March 5, March 8, March 10, March 15, March 18, March 22, and March 25, 2010, which denotes a reduction in reimbursement amount with code 41 and falsely states that “[t]he amount allowed is based on provider charges within the provider’s geographic region.”
• repeatedly mailing, causing to be mailed and/or knowingly agreeing to the mailing of intentionally incomplete and misleading correspondence reducing Plaintiffs and Class memebers’ claims and appeals, which failed to identify the Mitchell Medical/Ingenix fee schedules and arbitrary percentile cut-offs as the basis for those denials;
• repeated electronic, mail and/or telephone communications between Allstate and Mitchell Medical regarding regular updates on the Decision Point software with information known to be inaccurate and fraudulent;
• repeated electronic, mail and/or telephone communications between Allstate and Mitchell Medical regarding regular updates on the Ingenix data module, up to several times a year;
• transmitting, causing to be transmitted and/or knowingly agreeing to the transmittal of preauthorization approvals;
• transmitting, causing to be transmitted and/or knowingly agreeing to the transmittal of materially false “reasonable” amount determinations and related explanation of such determinations, by means of telephone, facsimile and the Internet, in interstate commerce, for the purpose of effectuating the above-described false payment schemes, and each such transmission constituting a separate and distinct violation of 18 U.S.C. §1343;
• transmitting, causing to be transmitted and/or knowingly agreeing to the transmittal of uniform instructional and training literature to Allstate employees instructing them on how to reduce first-party Medpay claim payouts through the adversarial use of fee review, directing them to use fee review limits and exclusions, by means of telephone, facsimile and the Internet, in interstate commerce;
• transmitting, causing to be transmitted and/or knowingly agreeing to the transmittal of false reports to Plaintiffs and Class members that its reductions in amounts paid for medical service were based on usual, customary and reasonable
rates when, in fact, Allstate knew that its reductions were based on flawed and invalid Ingenix database; and
• regular and repeated communications between Allstate and Mitchell Medical, by means of telephone, facsimile, the Internet and mail, regarding the implementation, use and/or maintenance of the Decision Point software, and other similar assistance provided by Mitchell Medical.
121. Allstate used the U.S. Mail to send EOBs to Plaintiffs and the Class that showed
“reasonable” amount benefit reductions but did not sufficiently disclose the basis for Allstate’s
exclusion or reduction of charges, which prevented Plaintiffs and the Class from learning the
information needed to challenge or successfully appeal Allstate’s reasonable amount
determinations. Allstate concealed the methodology upon which it relied in determining
reasonable amounts, such as arbitrary selection of percentiles and use of undisclosed fee
schedules.
122. Collectively, these predicate acts constitute a long running pattern of racketeering
activity on the part of Allstate, Mitchell Medical and the Enterprise with the purposes delineated
above.
123. As demonstrated by the foregoing allegations, Allstate and Mitchell Medical, in
violation of 18 U.S.C. §§ 1341, 1343, 1961 and 1962, repeatedly and regularly used the U.S.
Mail and interstate wire facilities to further all aspects of the intentional underpayment to
Plaintiffs and the Class by delivering and/or receiving materials necessary to carry out the
scheme to defraud Plaintiffs and the Class.
124. Allstate’s representations and actions were knowingly false and misleading.
Allstate knew and recklessly disregarded that its methodology for establishing Medpay
reimbursements, which was to rely primarily on pre-selected arbitrary percentiles and Ingenix’s
fee schedules using Mitchell Medical and its Decision Point software, was inherently flawed; and
D. M. ROBINSON CHIROPRACTIC, S.C. and M. W. WIDOFF, D.C, P.C., Class Plaintiffs,
By: _/s/ Jeffrey A. Leon One of Its Attorneys Jeffrey A. Leon Jamie E. Weiss Grant Y. Lee COMPLEX LITIGATION GROUP LLC 513 Central Avenue, Suite 300 Highland Park, Illinois 60035 (847) 433-4500 Richard J. Burke COMPLEX LITIGATION GROUP LLC 1010 Market Street, Suite 660 St. Louis, Missouri 63101 Stephen I. Leshner STEPHEN I. LESHNER, P.C. 1440 East Missouri Ave., Suite 265 Phoenix, Arizona 85104 D. Brian Hufford Robert J. Axelrod Jay Dean POMERANTZ HAUDEK GROSSMAN & GROSS LLP 100 Park Avenue New York, New York 10017 Kevin T. Hoerner Alvin C. Paulson BECKER, PAULSON, HOERNER & THOMPSON, P.C. 5111 West Main Street Belleville, Illinois 62226 (618) 235-0020 Counsel for Plaintiffs and Proposed Class
I hereby certify that on May 4, 2012, I electronically filed the foregoing paper with the Clerk of the Court using the ECF system which will send notification of such filing to counsel of record. By: /s/ Jeffrey A. Leon Jeffrey A. Leon
COMPLEX LITIGATION GROUP LLC 513 Central Avenue, Suite 300 Highland Park, Illinois 60035 (847) 433-4500