Geico Alleges New York Physician Operating Fraudulent No-Fault Billing Scheme

Geico filed a complaint Wednesday in the Eastern District of New York against a physician for allegedly operating an insurance fraud scheme that purportedly has billed Geico more than $1.6 million in “medically unnecessary” no-fault claims.

Pursuant to New York’s Comprehensive Motor Vehicle Insurance Reparations Act, New York residents injured in automobile accidents are protected under no-fault laws, which require auto insurers to provide up to $50,000 in personal injury protection (PIP) benefits per insured person for expenses incurred resulting from any injury. A person injured in an accident may assign their PIP benefits to their health care provider, which in turn submits a claim directly to an auto insurance company to obtain reimbursement for the care.

Geico’s complaint against Lily Zarhin, M.D., LZ Medical Diagnostics PC, and other unknown defendants claimed that since 2019, Zarhin has been orchestrating an agreement among various clinics and health practitioners that pays kickbacks to “unlicensed laypersons” — the unknown defendants — to refer patients with PIP benefits to providers that Zarhin controls. Once referred, the complaint argued, patients would set up an initial examination with one of the providers, such as LZ Medical.

“The examinations/consultations were performed as a ‘gateway’ in order to provide Insureds with an excessive number of phony, pre-determined ‘diagnoses’ to allow Defendants to then purport to provide medically unnecessary, illusory, or otherwise non-reimbursable” services, according to the complaint.

Geico argued that these examinations were not performed for patients’ benefit, but to perpetuate the alleged fraudulent conduct and kickback scheme. The plaintiff doubted whether the providers even conducted examinations, given they allegedly never reported the results back to the referring physicians. In the claims Geico received to reimburse the providers, the providers represented patients’ injuries with billing codes that indicated injuries of “moderate to high severity,” but Geico argued that generally, the injuries of these patients were actually “soft tissue injuries such as sprains and strains” that “resolve after a short course of conservative treatment, or no treatment at all.”

No-fault laws do not cover medically unnecessary treatment, Geico noted, nor do they cover services provided by independent contractors. The plaintiff claimed that the physicians performing the purported services were paid by the defendants on a 1099 basis nor did they receive full employee benefits, among other alleged indicators that they were contractors.

Geico claimed it is owed more than $757,000 in alleged fraudulent claims it already has reimbursed to the defendants and that it should not be required to pay the outstanding billed charges of $913,000.

Rivkin Radler is representing Geico.