RICO Violations by Health Care Providers Require Court to Enjoin Arbitrations
Man Bites Dog Story: GEICO Gets Injunction Against Medical Provider’s Allegedly Fraudulent Arbitrations
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Plaintiffs (collectively “GEICO”) sued Alexandr Zaitsev, M.D., Metropolitan Interventional Medical Services, P.C., and many others health care providers. GEICO alleged that defendants committed civil RICO violations, common law fraud, aiding and abetting fraud, unjust enrichment, and New Jersey Insurance Fraud Prevention Act violations. Additionally, GEICO sought a declaratory judgement that defendants may not recover on any of the outstanding bills submitted to GEICO. In Government Employees Insurance Company, et al. v. Alexandr Zaitsev, M.D., et al., No. 1:20-cv-03495-FB-SJB, United States District Court, E.D. New York (July 27, 2021) the USDC dealt with GEICO’s motion for a preliminary injunction to (1) stay all of defendants’ pending no-fault insurance collection arbitration against GEICO and (2) enjoin the defendants from commencing any new no-fault insurance collection arbitration or litigation against GEICO, pending the disposition of GEICO’s claims in this action.
Motion for Preliminary Injunction
In order to justify a preliminary injunction, the movant must establish
either
a likelihood of success on the merits or
sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant’s favor, and
irreparable harm in the absence of the injunction.
The Court looks to whether there is a serious question going to the merits to make them a fair ground for trial
Irreparable Harm
A showing of irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction. To establish irreparable harm, a party must show that there is a continuing harm which cannot be adequately redressed by final relief on the merits and for which money damages cannot provide adequate compensation.
Irreparable harm will occur where an insurer is required to waste time defending numerous no-fault actions when those same proceedings could be resolved globally in a single, pending declaratory judgment action. Defendants have at least 821 pending arbitrations against GEICO that present a risk of inconsistent judgments. This establishes irreparable harm.
Serious Question Going to the Merits
GEICO must demonstrate, at this stage, sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in GEICO’s favor. GEICO’s complaint provides sufficiently detailed allegations of a complex scheme of fraudulent activity.
The complaint alleged that the defendants:
submitted charges to GEICO for healthcare services that were medically unnecessary and in some cases not even performed,
submitted bills and treatment reports that misrepresented and exaggerated the level and type of medical services provided,
provided the alleged fraudulent healthcare services pursuant to illegal kickback and self-referral arrangements,
performed some of the alleged fraudulent healthcare services via independent contractors and/or unsupervised nurse practitioners and physician assistants, and
misrepresented that they were in compliance with all relevant laws and regulations.
Furthermore, these allegations are not conclusory since they are supported by detailed examples throughout the complaint. Collectively, the complaint’s detailed allegations and exhibits easily raise a serious question going to the merits of whether defendants were prescribing medically necessary treatments. Accordingly, GEICO has established a serious question going to the merits.
Balance of Hardships
The balance of hardships favors GEICO. First, all parties will benefit from having the issue of fraudulent incorporation determined in one action. Granting the stay and injunction will actually save all parties time and resources. Rather than adjudicating hundreds of individual claims in a piecemeal fashion, all claims can be efficiently and effectively dealt with in a single declaratory judgment action.
Furthermore, defendants will not be disadvantaged if the stay is granted since they will be entitled to statutory interest on their unpaid claims should they ultimately prevail.
The District Court agreed with GEICO that the requested injunction will not cause Defendants any prejudice at all. GEICO undoubtedly has the ability to pay if defendants prevail.
GEICO’s motion for a preliminary injunction was granted (1) staying all of defendants’ pending arbitrations against GEICO and (2) enjoining defendants from commencing new no-fault arbitrations and litigations against GEICO until resolution of the instant federal court action.
ZALMA OPINION
Insurance fraud is estimated to take between $80 and $300 billion every year. Insurance companies are mandated by Insurance Fraud Acts and Regulations to work to defeat insurance fraud. GEICO – unable to get assistance from the state – is proactive against health care providers who it believes are attempting to defraud it. By filing a RICO action and obtaining an injunction against the health care providers it is hitting them where it hurts, in their pocket books. If they succeed they will take the profit out of fraud. If they don’t they will pay the claims. If they succeed the local prosecutors should consider criminal prosecution of each of the health care providers.
© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.
He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4