presented by dale k. forsythe, esq. – [email protected]@waymanlaw.com scott w....

Presented by Dale K. Forsythe, Esq. [email protected]@waymanlaw.com Scott W. Stephan, Esq. [email protected]@waymanlaw.com 1

Fraud by the Numbers In 2007 alone, fraudulent and abusive auto injury claims added $4.8 billion to $6.8 billion in excess payments to auto injury claims. Insurance Research Council, November 2008 2

Fraud by the Numbers The U.S. spends more than $2 trillion on healthcare annually. At least three percent of that spending or $68 billion is lost to fraud each year. National Health Care Anti-Fraud Association, 2008 3

Fraud by the Numbers The number of employees misclassified by employers increased from 106,000 workers to more than 150,000 workers between 2000 and 2007. This is a conservative figure because states generally audit less then two percent of Employers a year. (U.S. Government Accountability Office, 2009) 4

Fraud by the Numbers Medicare and Medicaid made an estimated $23.7 billion in improper payments in 2007. These included $10.8 billion for Medicare and $12.9 billion for Medicaid. Medicares fee-for-service reduced its error rate from 4.4 percent to 3.9 percent. (U.S. Office of Management and Budget, 2008) 5

Fraud by the Numbers Arson and suspected arson account for nearly 500,000 fires a year, or one of every four fires in the U.S. Only 2 percent of arson or suspect arson fires result in convictions. Arson and suspected arson are the largest causes of property damage in the U.S. National Fire Protection Association (1998) 6

Fraud by the Numbers Insurance fraud steals at least $80 billion every year. With $80 billion, you could pay... salaries of 2.2 million American workers for a year. all personal income taxes for 7.4 million Americans for a year. tuition for nearly 15.6 million students at America's fouryear public universities for a year. healthcare costs for nearly two out of every three seniors aged 65 and over for a year. every CEO of America's 500 largest companies for the next 16 years. Coalition Against Insurance Fraud, 2014 7

Fraud by the Numbers Victims: financial costs. Insurance buyers pay billions of dollars in higher premiums annually by absorbing fraud costs. Fraud, for instance, can add several hundred dollars to a familys annual auto premium in some states. Insurance schemes also cost victims their life savings. Swindled businesses also can be weakened and even bankrupted, and may have to freeze salaries or lay off employees. Victims: personal costs. Thousands of fraud victims pay a steep personal price. People die and are injured by swindles. They also suffer humiliation, despair, depression, lost productivity and lower earning capacity. Families are broken up when convicted fraudsters go to jail. Victims: societal costs. Fraud steadily drains Americas economic vitality. Swindles also erode our social order and sense of justice, reinforcing a crime-pays mentality that encourages insurance fraud to become an accepted way of moving up in life. This encourages more people to commit fraud, thus threatening a costly upward fraud spiral. Millions of young people and recent immigrants, who are looking for role models of behavior, are especially at risk. Coalition Against Insurance Fraud, December 2006 8

What is Fraud Elements of common law fraud: 1. A misrepresentation; 2. A fraudulent utterance thereof; 3. An intention by the maker that the recipient will thereby be induced to act 4. Damage to the recipient as the proximate result Scaife Co. v. Rockwell-Standard Corp., 285 A.2d 451 (1971), cert. den. 407 U.S. 920, quoting Newman v. Corn Exchange Nat. B&T Co., 51 A.2d at 763; See e.g., Edelson v. Bernstein, 115 A.2d 382 (1955); Gerfin v. Colonial Smeltin, 97 A.2d 71 (1953). 9

What is Fraud Fraud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture. Frowen v. Blank, 425 A. 2d 412 (Pa. 1981). To be actionable, the misrepresentation need not be in the form of a positive assertion. Shane v. Hoffman, 324 A. 2d 532 (Pa.Super. 1974). It is any artifice by which a person is deceived to his disadvantage. McLellans Estate, 75 A.2d 595 (Pa.1950). 10

Insurance Fraud By Statute Pennsylvania 4117. Insurance Fraud. (a) Offense defined.A person commits an offense if the person does any of the following: (1) Knowingly and with the intent to defraud a State or local government agency files, presents or causes to be filed with or presented to the government agency a document that contains false, incomplete or misleading information concerning any fact or thing material to the agency's determination in approving or disapproving a motor vehicle insurance rate filing, a motor vehicle insurance transaction or other motor vehicle insurance action which is required or filed in response to an agency's request. 11

Insurance Fraud By Statute Pennsylvania (2) Knowingly and with the intent to defraud any insurer or self-insured, presents or causes to be presented to any insurer or self-insured any statement forming a part of, or in support of, a claim that contains any false, incomplete or misleading information concerning any fact or thing material to the claim. 12

Insurance Fraud By Statute Pennsylvania (3) Knowingly and with the intent to defraud any insurer or self- insured, assists, abets, solicits or conspires with another to prepare or make any statement that is intended to be presented to any insurer or self-insured in connection with, or in support of, a claim that contains any false, incomplete or misleading information concerning any fact or thing material to the claim, including information which documents or supports an amount claimed in excess of the actual loss sustained by the claimant. 13

Insurance Fraud By Statute Pennsylvania (5) Knowingly benefits, directly or indirectly, from the proceeds derived from a violation of this section due to the assistance, conspiracy or urging of any person. (6)Is the owner, administrator or employee of any health care facility and knowingly allows the use of such facility by any person in furtherance of a scheme or conspiracy to violate any of the provisions of this section. (7)Borrows or uses another person's financial responsibility or other insurance identification card or permits his financial responsibility or other insurance identification card to be used by another, knowingly and with intent to present a fraudulent claim to an insurer. 14

Insurance Fraud By Statute Pennsylvania (8) If, for pecuniary gain for himself or another, he directly or indirectly solicits any person to engage, employ or retain either himself or any other person to manage, adjust or prosecute any claim or cause of action against any person for damages for negligence or for pecuniary gain for himself or another, directly or indirectly solicits other persons to bring causes of action to recover damages for personal injuries or death, provided, however, that this paragraph shall not apply to any conduct otherwise permitted by law or by rule of the Supreme Court. 15

Insurance Fraud By Statute Pennsylvania (W.Comp.) 1039.2. Offenses A person, including, but not limited to, the employer, the employee, the health care provider, the attorney, the insurer, the State Workmen's Insurance Fund and self-insureds, commits an offense if the person does any of the following: (I) Knowingly and with the intent to defraud a State or local government agency files, presents or causes to be filed with or presented to the government agency a document that contains false, incomplete or misleading information concerning any fact or thing material to the agency's determination in approving or disapproving a workers' compensation insurance rate filing, a workers' compensation transaction or other workers' compensation insurance action which is required or filed in response to an agency's request. 16

Insurance Fraud By Statute Pennsylvania (W.Comp) (2)Knowingly and with intent to defraud any insurer presents or causes to be presented to any insurer any statement forming a part of or in support of a workers' compensation insurance claim that contains any false, incomplete or misleading information concerning any fact or thing material to the workers' compensation insurance claim. (3)Knowingly and with the intent to defraud any insurer assists, abets, solicits or conspires with another to prepare or make any statement that is intended to be presented to any insurer in connection with or in support of a workers' compensation insurance claim that contains any false, incomplete or misleading information concerning any fact or thing material to the workers' compensation insurance claim. 17

Insurance Fraud By Statute Pennsylvania (W. Comp) (4)Engages in unlicensed agent or broker activity as defined by the act of May / 7,1921 (EL. 789, No. 285), (FN1] known as "The Insurance Department Act of 1921," knowingly and with the intent to defraud an insurer or the public. (5)Knowingly benefits, directly or indirectly, from the proceeds derived from a violation of this section due to the assistance, conspiracy or urging of any person. (6)Is the owner, administrator or employee of any health care facility and knowingly allows the use of such facility by any person in furtherance of a scheme or conspiracy to violate any of the provisions of this section. 18

Insurance Fraud By Statute Pennsylvania (W.Comp.) (7)Knowingly and with the intent to defraud assists, abets, solicits or conspires with any person who engages in an unlawful act under this section. (8)Makes or causes to be made any knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim. (9)Knowingly and with the intent to defraud makes any false statement for the purpose of avoiding or diminishing the amount of the payment in premiums to an insurer or self-insurance fund. 19

Insurance Fraud By Statute Pennsylvania (W.Comp.) (10)Knowingly and with intent to defraud, fails to make the report required under Section 311.1. [FN2] (11)Knowingly and with intent to defraud, receives total disability benefits under this act while employed or receiving wages. (12)Knowingly and with intent to defraud, receives partial disability benefits in excess ofthe amount permitted with respect to the wages received. 20

Insurance Fraud By Statute Oklahoma Title 15. Contracts Chapter 1 - Nature of Contracts [J Section 58 - Definition of Actual Fraud ] Actual fraud, within the meaning of this chapter, consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: (1)The suggestion, as a fact, of that which is not true, by one who does not believe it to be true. (2)The positive assertion in a manner not warranted by the information of the person making it, of that which is not true, though he believe it to be true. 21

Insurance Fraud By Statute Oklahoma (3)The suppression of that which is true, by one having knowledge or belief of the fact. (4)A promise made without any intention of performing it; or, (5)Any other act fitted to deceive. 22

Insurance Fraud By Statute Florida Title XLVI 2013 Florida Statutes 817.234 - False and Fraudulent Insurance Claims 1)(a) A person commits insurance fraud punishable as provided in subsection (11) if that person, with the intent to injure, defraud, or deceive any insurer:1. Presents or causes to be presented any written or oral statement as part of, or in support of, a claim for payment or other benefit pursuant to an insurance policy or a health maintenance organization subscriber or provider contract, knowing that such statement contains any false, incomplete, or misleading information concerning any fact or thing material to such claim; 23

Insurance Fraud By Statute Florida 2. Prepares or makes any written or oral statement that is intended to be presented to any insurer in connection with, or in support of, any claim for payment or other benefit pursuant to an insurance policy or a health maintenance organization subscriber or provider contract, knowing that such statement contains any false, incomplete, or misleading information concerning any fact or thing material to such claim; 24

Insurance Fraud By Statute Florida 3.a. Knowingly presents, causes to be presented, or prepares or makes with knowledge or belief that it will be presented to any insurer, purported insurer, servicing corporation, insurance broker, or insurance agent, or any employee or agent thereof, any false, incomplete, or misleading information or written or oral statement as part of, or in support of, an application for the issuance of, or the rating of, any insurance policy, or a health maintenance organization subscriber or provider contract; or b. Knowingly conceals information concerning any fact material to such application; or 25

Insurance Fraud By Statute Florida 4. Knowingly presents, causes to be presented, or prepares or makes with knowledge or belief that it will be presented to any insurer a claim for payment or other benefit under a personal injury protection insurance policy if the person knows that the payee knowingly submitted a false, misleading, or fraudulent application or other document when applying for licensure as a health care clinic, seeking an exemption from licensure as a health care clinic, or demonstrating compliance with part X of chapter 400. 26

Insurance Fraud By Statute California California Insurance Code 1871.4 a) It is unlawful to do any of the following: (1) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. (2) Present or cause to be presented a knowingly false or fraudulent written or oral material statement in support of, or in opposition to, a claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. 27

Insurance Fraud By Statute California (3) Knowingly assist, abet, conspire with, or solicit a person in an unlawful act under this section. (4) Make or cause to be made a knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim. For the purposes of this subdivision, "statement" includes, but is not limited to, a notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results, medical-legal expense as defined in Section 4620 of the Labor Code, other evidence of loss, injury, or expense, or payment. 28

Insurance Fraud By Statute California (5) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any of the benefits or reimbursement provided in the Return-to-Work Program established under Section 139.48 of the Labor Code. (6) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of discouraging an employer from claiming any of the benefits or reimbursement provided in the Return-to-Work Program established under Section 139.48 of the Labor Code. 29

Insurance Fraud By Statute California b) Every person who violates subdivision (a) shall be punished by imprisonment in a county jail for one year, or pursuant to subdivision (h) of Section 1170 of the Penal Code, for two, three, or five years, or by a fine not exceeding one hundred fifty thousand dollars ($150,000) or double the value of the fraud, whichever is greater, or by both that imprisonment and fine. Restitution shall be ordered, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid. A person convicted under this section may be charged the costs of investigation at the discretion of the court. 30

Insurance Fraud By Statute California (c) A person who violates subdivision (a) and who has a prior felony conviction of that subdivision, of former Section 556, of former Section 1871.1, or of Section 548 or 550 of the Penal Code, shall receive a two- year enhancement for each prior conviction in addition to the sentence provided in subdivision (b). 31

Insurance Fraud Penalties Insurance fraud accounts for billions of lost taxpayer dollars and results in increasingly high insurance rates for everyone. The penalties are significant and typically stepped to reflect the serious of the fraudulent claim and the number of claims in the particular charge. Often, each act of fraud is treated as a separate count, increasing the penalties even on a first arrest. Possible Penalties Include Jail Time Significant Fines Probation Parole Restitution Community Service See http://criminaldefenselawyer.com/crime-penalties/federal/Insurance-Fraud.htm.http://criminaldefenselawyer.com/crime-penalties/federal/Insurance-Fraud.htm 32

Insurance Fraud - Penalties Sampling of state-by-state penalties: Fine Avg. Jail Avg. Prob. Other PA. $10,000 $200,000 5-7 yrs 3 yrscommunity service FL. $0 $25,000 10 yrs case by caselicenses taken IL. $5,000-$50,000 1-5 yrs 3-7 yrs LA. $1,000-$5,000 1 yr case by case general fine NC. Up to $2,500 up to 2 yrs case by case 33

Insurance Fraud Penalties Sampling of state-by-state penalties: Fine Avg. Jail Avg. Prob. Other NH $2,500- $10,.000 1.5-15yrs 5 yrscommunity serv. NY up to $15,000 case by case case by case OK $2,500-$10,000 up to 5 yrs up to 2 yrs possible restn TX dep. on val. of $20g case by case 34

Types of Fraud A. Fraud in the Application An attempt by an applicant to procure insurance on false terms (i.e. an attempt to prejudice the insurer in assessing the risk). Elements - a. a false application statement; b. on a subject material to the risk to be insured against; and, c. the applicants knowledge that the statement was made in bad faith or was untrue 35

Types of Fraud A. Fraud in the Application Ramifications policy void ab initio (premium must be returned) note: Evidence must be clear and convincing 36

Types of Fraud A. Fraud in the Application Indicators a. unsolicited new, walk-in business, not referred by existing policyholder b. applicant walks into agents office at the end of the day c. applicant neither works nor resides near agency d. applicant gives post office box as address e. applicant pays premium in cash and pays minimal amount etc. 37

Types of Fraud A. Fraud in the Application note: Line representative is at the mercy of the agent most likely wont detect fraud in the application unless there are other fraud indicators present during the investigation of the claim 38

Types of Fraud B. Fraud in the Claims/Investigation Process An attempt by the insured to recover the benefits on false pretenses. Elements a. a representation by the insured which was false b. the representation was made in bad faith or with knowledge of its falsity c. material to the risk being insured 39

Types of Fraud B. Fraud in the Claims/Investigation Process note - Issue of materialism in the investigations process materiality is met if the false statement is relevant and germane to the insurers investigation (i.e. would a reasonable insurer, in determining its course of action attach importance to the fact misrepresented note - Proven by a preponderance of the evidence 40

Types of Fraud B. Fraud in the Claims/Investigation Process Indicators a. insured overly pushy for a quick settlement b. financial hardship at the time of loss c. insured has had multiple insurance claims d. inconsistencies in loss scenario or basic facts 41

Types of Fraud B. Fraud in the Claims/Investigation Process Indicators e. recently purchased insured item f. recently increased the insurance limits g. criminal background 42

Types of Fraud B. Fraud in the Claims/Investigation Process note - Too many indicators present - an internal company decision should be made to transfer to SIU. 43

Personal Injury Insurance Fraud Any act intended to cause a carrier to pay on a non-existent, exaggerated or on un-related/non-covered injury Soft/Opportunistic Hard 44

Malingers Hard to Spot Less long-term patient-physician relationships Mental conditions mimicking the appearance of malingering Faking symptoms is easy 97% of untrained people can identify symptoms of major depressive disorder 63% can identify at least 5 brain injury symptoms Easy online access of symptom information Doctors desire to be supportive Dr. Stewart Patterson, AMA Guides Newsletter, Cited at www.amednews/article/20120910/profession/309109942/4/.. 45

Examples of Fraud Creating a Claim Staged Auto Accidents Waive On/Drive Down Preexisting damage Swoop & Squat Sideswipe False Reports - the Bad Samaritan Phantom Victim / Passengers 46

Examples of Fraud Creating a Claim Staged Slip and Falls Foreign Object in Food Staged Homeowner Accident Possible Personal Injury Schemes/Fraudulent Attorney 47

Examples of Fraud Exaggerating a Claim Exaggerating the injuries Medical Mills Providers Inflating Billing or Upcoding 48

Medicaid Fraud What to look for:* Upcoding Providers bill Medicaid using a code that describes the amount of time with patient If provided bills Medicaid using a code that indicates and hour long complex visit = UPCODING Unbundling Some codes are all inclusive, e.g., for Lipid Panel, which has 3 component tests If coded separately for higher reimbursement rate = UNBUNDLING *From http://ahca.myflorida.com/Executive/Inspector_General/complaints.shtmlhttp://ahca.myflorida.com/Executive/Inspector_General/complaints.shtml 49

Medicaid Fraud Other common schemes Billing for patients who did not receive services Billing for service or equipment not provided Overcharging Concealing ownerships/relationships in companies Kickbacks for referrals Double billing for same service Ordering tests/procedures not needed Using false credentials 50

Handling claims / Investigation A. Reservation of Rights - on all potential bases of denial within policy 51

Handling claims / Investigation B. Methods of Investigation 1. Authorizations for financial records, phone records (land lines and cell), medical information, etc. 2. Third party search services (prior losses and financial information) 3. Civil and criminal docket information 52

Handling claims / Investigation C. Adjustment Procure necessary adjustment service companies, disaster relief companies and forensic experts (origin and cause, forensic automotive, electrical engineer, etc.) 53

Handling claims / Investigation D. Recorded Statements 1. Conduct in person if possible to measure the demeanor of the insured 2. Establish foundation of trust by explaining the process and why the statement is necessary (i.e. there are certain questions about the claim that must be resolved, and that you are attempting to find evidence to exonerate the insured) 3. Do not conduct in the presence of any other insured or potential witness 4. Company decision whether to confront insured with inconsistencies or damaging evidence (forensic or other wise) 54

Handling claims / Investigation E. Adjusters Log / Claim Handling Notes 1. Running notes of claims/investigation process 2. Enter notes as if you are an impartial reporter or observer to AVOID BAD FAITH (i.e. never inject you feelings of the claim or insured) 55

Handling claims / Investigation F. Examination Under Oath 1. Importance of counsel involvement 2. Claim representative should attend to access demeanor) 3. Insureds Examinations should be taken separately (most likely a right under the policy) 4. Company decision whether to confront insured with inconsistencies or damaging evidence (forensic or other wise) 56

Handling claims / Investigation G. Follow-up on new areas of investigation uncovered as a result of the Examination process 57

Handling claims / Investigation H. Claim Recommendation by Counsel 1. Should include a detailed summary of the facts of the investigation 2. Should break down the elements of the fraud defense a. Arson Incendiarism, Motive, Preparation and Opportunity b. Auto Motive, Preparation and Opportunity (including findings of forensic automotive expert) 58

Handling claims / Investigation I. Denial letter include all potential bases for denial J. Report any suspected fraudulent claim to the proper authorities 1. Immunity Acts 2. Role of NICB 59

Fighting Back (Medical Fraud) Know the Signs Issues with Medical Treatment Frequently changes physicians/providers Requests change of physicians/second opinions Reports not consistent with appearance or behavior Pattern of missing provider appointment 60

Fighting Back (Medical Fraud) Know the Signs Issues with The Worker/Patient Unstable work history History of subjective injuries Lack of cooperation Recently terminated/demoted 61

Fighting Back (Medical Fraud) Know the Signs Issues with The Worker/Patient In line for early retirement Making excessive demands Calls soon after injury/presses for quick settlement 62

Fighting Back (Medical Fraud) Know the Signs Issues with The Worker/Patient Moves soon after the injury Changes address to P.O. Box or relative Seasonal worker /timing 63

Fighting Back (Medical Fraud) Know the Signs Issues with The Injury No witnesses to injury Subjective /hard to prove Delay in reporting Notice is from attorney or clinic 64

Fighting Back (Medical Fraud) Know the Signs Issues with The Injury Widely differing medical opinions No medical support/full recovery Disability exceeds norm Accident late Friday/early Monday 65

Fighting Back (Medical Fraud) Know the Signs Issues with The Injury Accident at odd time / lunch Unusual location Not a typical job duty Details vague/inconsistent with Notice of Injury 66

Fighting Back Tools / Methods Private Investigators/Surveillance 67

Fighting Back Tools / Methods Analyze the Claims History / Cross Checking 68

Fighting Back Tools / Methods Suspicious Loss Indicators from NICB 69

Fighting Back Tools / Methods Social Media 70

Importance of Effective Investigation Conduct a prompt and thorough conference with the insured to obtain the following information: 1. Information regarding the incident a. Who was involved b. How it happened c. Where it occurred/surroundings d. Conditions weather, traffic, lighting e. Instrumentalities involved products, equipment, etc. f. Why it occurred 71

Importance of Effective Investigation 2. Witnesses a. Identify all the parties to the accident itself b. Identify passengers/relationships c. Identify any third party witnesses and/or disinterested witnesses d. Secure contact information 72

Importance of Effective Investigation 3. Document Investigation A. Reports of incident 1. Secure official reports of incident a. Police accident report b. Governmental agency reports where applicable (OSHA, NTSA, etc.) 2. Secure accident and/or incident reports prepared by store owner, property owner, employer, etc. 73

Importance of Effective Investigation B. Photos Secure or take photos of: 1. accident scene / surroundings 2. vehicles involved in accident if motor vehicle accident 3. road / skid marks if motor vehicle accident 4. product or other instrumentalities involved 5. videotape if warranted 74

Importance of Effective Investigation C. Records 1. Medical Records / physician reports: secure authorizations (HIPAA approved) for all hospitals, physicians or other health care providers and secure records and itemized statements of medical bills incurred 2. If appropriate, secure authorizations for and obtain: a. Workers compensation claim file b. Social security disability claim file c. First Party claim file d. Employment records e. Federal and state tax returns 3. Determine if claimant involved in other accidents or has pre-existing medical conditions secure appropriate records for these 75

Importance of Effective Investigation 4. Surveillance A. Determine if appropriate for case where physical activities do not appear to correlate with injuries claimed B. Investigate claimant information to determine if surveillance can be limited to most likely times / locations of physical activities 76

Importance of Effective Investigation 5. Effective Recorded Statements/Interviews of Witnesses* Focus on Details Start with broad, open-ended question Look for obvious omissions Be wary of evasive answers Follow up Insist on specifics *Acknowledgment for much of this material to CLM 2014 Bad Faith/Coverage/Fraud Mini-Conference, 2/28/14, Atlanta, GA. 77

Importance of Effective Investigation Compare with Other Statements Other witnesses Insured Prior statements Subsequent Statements 78

Importance of Effective Investigation Look for language clues foreign language issues tone and phraseology unique words and phrases deceptive language deceptive phrases nature of interaction 79

Reporting Fraud Work with: SIU HCFA AHCA Insurance Department 80

Reporting Fraud SIU Special Investigation Units 81

Reporting Fraud CMS/HCFA Centers for Medicare and Medicaid Services (formerly Health Care Financing Administration) Federal Agency / part of Dept. of Health & Human Services Administers Medicare Program Administers Medicaid Program in partnership with state governments Headquartered in Woodlawn, MD 82

Reporting Fraud CMS/HCFA 10 Regional Offices 1. Boston6. Dallas 2. New York City7. Kansas 3. Philadelphia8. Denver 4. Atlanta9. San Francisco 5. Chicago10. Seattle 83

Reporting Fraud CMS/HCFA State by State Fraud and Abuse Reporting Contact List / On CMS.gov. http://www.cms.gov/Medicare-Medicaid- Coordination/Fraud- Prevention/FraudAbuseforConsumers/Downloads/sm afraudcontacts-october2013.pdf 84

Reporting Fraud AHCA American Health Care Association Non profit federation of various affiliate state health organizations Over 10,000 assisted living, nursing, developmentally disabled care facilities Over 1.5 million elderly and disabled individuals Fighting Medicaid Fraud 85

Reporting Fraud AHCA American Health Care Association Pennsylvania Health Care Association / Center for Assisted Living Management Stuart H. Shapiro, M.D. 315 N 2nd St Harrisburg PA 17101 PH (717) 221-1800 FX (717) 221-8690 Pennsylvania Health Care Association / Center for Assisted Living Management Oklahoma Association of Health Care Providers Rebecca A. Moore 200 NE 28th Oklahoma City, OK 73105 PH (405) 524-8338 FX (405) 524-8354 Oklahoma Association of Health Care Providers 86

Reporting Fraud AHCA American Health Care Association Florida Health Care Association J. Emmett Reed PO Box 1459 Tallahassee FL 32302-1459 PH (850) 224-3907 FX 850 681-2075 Florida Health Care Association California Association of Health Facilities James Gomez 2201 K Street Sacramento, CA 95816-4922 PH (916) 441-6400 FX (916) 441-6441 California Association of Health Facilities 87

Reporting Fraud State Insurance Departments 88

Caution: Unfair Insurance Practices Act Pennsylvania (sample) 40 P.S. 1171.1 Unfair Insurance Practices Act Section 1171.5 defines unfair methods of competition and unfair or deceptive acts or practices Subsection (10) provides that any of the following acts if committed or performed with such frequency as to indicate a business practice shall constitute unfair claim settlement or compromise practices: . (ii) failing to acknowledge and act promptly upon written or oral communications with respect to claims arising under insurance policies; 89

Caution: Unfair Insurance Practices Act . (iv) refusing to pay claims without conducting a reasonable investigation based upon all available information; . (vi) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which the companys liability under the policy has become reasonably clear; 90

Caution: Unfair Insurance Practices Act (vii) compelling persons to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts due and ultimately recovered in actions brought by such persons; (viii) attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application; 91

Caution: Unfair Insurance Practices Act (xi) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants to induce or compel them to accept settlements or compromises less than the amount awarded in arbitration; (xii) delaying the investigation or payment of claims by requiring the insured, claimant or the physician of either to submit a preliminary claims report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; 92

Caution: Unfair Insurance Practices Act (xiii) failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage or under other policies of insurance; 93

Caution: Bad Faith Statute Pennsylvania (sample) 42 Pa. C.S. Section 8371 provides as follows: Section 8371. Actions on insurance policies. In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions: 1. award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%; 2. award punitive damages against the insurer; 3. assess court costs and attorney fees against he insurer. 94

Good Faith Audit Checklist A. Claims Handler Level Did you undertake a thorough investigation? Did you avoid lulls or passive handling of the claim? Does the file reflect consideration and reconsideration of key facts as they develop and change during the investigation? If a liability claim, did you report timely developments to both the insurance company and the insured. 95

Good Faith Audit Checklist A.Claims Handler Level (continued) If a liability claim, did you advise the insured of all settlement negotiations? Did you obtain a second opinion to help evaluate the case for liability and damages? Possible second opinion from: - experiences lawyers - retired judges and mediators; or - focus groups and /or a mock trial Did you take the initiative in mediation and / or settlement? 96

Good Faith Audit Checklist A. Claims Handler Level (continued) Did you consider the best time to try for settlement? Possible times include: - before filing - right after filing and service and before answering the discovery; - after or during discovery; - after or before mediation; - during scheduling conference with the judge; - during any motion in limine or motion for summary judgment; or - during trial 97

Good Faith Audit Checklist AClaims Handler Level (continued) Did you check as needed with local claims-handling guidelines? Did you make an effort to ensure that any coverage positions were consistent with other positions taken by the company on that issue? 98

Good Faith Audit Checklist B.Supervisors Level Did you ensure that the claims handler had the appropriate amount of experience for the claim involved? Did you ensure that the claims handler was aware of internal company procedures and policies that might be applicable to the claim? Did you maintain a level of oversight that would permit you to describe, at lease generally, the status of the claim at any particular time? Did you consider whether the claims handlers procedures and coverage positions were consistent with other positions taken by the company that you are aware of? 99

Good Faith Audit Checklist C.Company Level Does the company maintain appropriate best practices procedures for claims handling? Do the best practices procedures require the claims handler to be aware of, and conform to, all local claims handling statutes and regulations? Does the company maintain an archive of any changes to policy forms, best practices guidelines, and training? Does the company have a means of retaining important historical information (institutional memory) beyond the retirement of key individuals? Has the company identified someone to oversee department production and provide uniform responses to document requests and electronic information requests? 100

Disclaimer This material is prepared for information/educational purposes only. It is not intended as legal advice, nor should it be construed as or relied upon as legal advice. You should consult with counsel before embarking on any course of conduct or refraining from any activity that may entail legal consequences. Although the above was prepared on the basis of the state of the law of Pennsylvania or other states as noted, as of the date of preparation, the law is subject to interpretation and may change in the future. Therefore, absolutely no representations are made relative to any specific legal situation or the application of law to any specific facts. NO EXPRESS OR IMPLIED WARRANTIES ARE INTENDED OR MADE. The foregoing is not intended to be a complete and exhaustive review of each and every reported or unreported decision issued by Pennsylvania Courts, state and federal, on the issues presented. Rather, the foregoing is intended as an overview of some of the recent and significant decisions with respect to these issues. 101

Wayman, Irvin & McAuley, LLC Founded in 1965, Wayman, Irvin & McAuley, LLC, has earned its reputation for zealous representation of clients in a diverse range of legal matters. Concentrating in the area of insurance defense for over 45 years, the firm has represented insurance carriers and their insureds in all state and federal courts in Pennsylvania, Ohio and West Virginia. We understand the insurance business and the unique needs of the carrier, the broker and the risk manager. Please visit our Web site, www.waymanlaw.com for a more detailed look at the firms capabilities and staff as well as a wealth of resource materials. 102

Wayman, Irvin & McAuley, LLC 401 Liberty Avenue 3 Gateway Center, Suite 1624 Pittsburgh, PA 15222 (412) 566-2970 Fax: (412) 391-1464 www.waymanlaw.com 103

presented by dale k. forsythe, esq. – [email protected]@waymanlaw.com scott w....

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