Florida has been plagued with insurance fraud for decades. All insurance coverages are susceptible to fraud, but scams are especially prevalent in the context of automobile accidents. Staged crashes, patient brokering, kickbacks to cover up services not actually rendered, unlicensed health care, excessive charges … and the list goes on and on.
Florida’s PIP statute hasn’t been very helpful in this regard. In fact, it has complicated things. The primary reason for PIP is to get money in the hands of the injured quickly, so they have immediate funds available to get the care needed. Generally, PIP insurers are required to pay their insureds' medical bills within 30 days. The problem is that 30 days is a very short time to investigate questionable claims. Medical providers know that if insurers don't pay claims within 30 days, the insurer faces significant penalties. Unscrupulous medical providers have taken full advantage of it.
To tackle the problem, the PIP statute prohibits excessive charges and various kinds of unlawful and fraudulent claims. It also provides certain pre-suit discovery rights to insurers so they don't pay claims that shouldn't be paid. But the part of the statute that tackles discovery [F.S. § 627.736(6)] is weak. It doesn’t adequately address excessive charges; and it doesn't refer to the fraud prohibitions set forth in the statute at all.
Last week, the Florida Supreme Court entered its decision in State Farm Mutual Automobile Insurance Company v. Shands Jacksonville Medical Center, Inc., Case No. SC 15-1257 – So.3d – (Fla. Feb. 16, 2017). In legal briefs and at oral argument, I asked the Florida Supreme Court to give a broad interpretation to the discovery provisions that help insurers investigate PIP claims. I asked them to read the statutory prohibitions together with the discovery provisions. It’s a basic rule that courts should view the statute as a whole, including the harm the legislature intended to prevent. The discovery is supposed to protect insureds from bills that shouldn’t be paid. Paying questionable bills depletes PIP benefits, leaving injured insureds with greater personal exposure for medical expenses.
The issue in State Farm v. Shands was reasonableness of the hospital's charges. Shands had billed more than 10 times what Medicare would have paid. Shands' cost of providing CT scans was less 8% of the amount billed. Shands' net patient revenue was less than 22% of its gross billed charges after adjusting for “contractual discounts and allowances.” So State Farm requested the hospital's managed care contracts to figure out what an appropriate reimbursement would be. Shands said "no."
Florida's high court sided with Shands, holding that PIP discovery doesn't extend to the hospital's managed care contracts. It reasoned that anything not explicitly mentioned in Section 627.736(6) is not subject to pre-suit discovery. In doing so, the Florida Supreme Court dealt a blow to PIP investigations. While reasonableness of the amount billed may not be as significant today as it was before the supreme court's recent "schedule maximum charges" decision (see Blog: "Is Florida's Crazy PIP Litigation a Thing of the Past?"), State Farm v. Shands also impacts the insurer's ability to investigate fraudulent claims and other improper charges within the 30 days for payment of PIP benefits.
The Florida Supreme Court’s message is simple. If insurers want access to pre-suit statutory discovery to protect their insureds from improper PIP claims, they will have to convince the legislature to amend subsection (6) of Section 627.736.
