Calif. Appellate Court Revives Allstate Whistleblower Suit Against Radiology ‘Broker’

August 18, 2023 by

A California appellate court revived two whistleblower lawsuits filed by Allstate against a Los Angeles-area business owner who has no medical license but allegedly operated medical practices that referred auto and workers’ compensation claimants to radiologists in order to send inflated bills to insurers.

A panel of the 2nd Appellate District on Tuesday reversed a Los Angeles County Superior Court judge’s decision to dismiss Allstate’s lawsuits. The court rejected Judge William Fahey’s finding that the lead defendant, Sattar Mirtabatabaee, provided only managerial or administrative services, not medical care.

Matthew J. Smith, executive director of the Coalition Against Insurance Fraud, said the ruling affirms that the California Insurance Fraud Prevention Act can be used to shut down the illegal corporate practice of medicine by non-physicians. He said the Coalition filed an amicus brief with the appellate court because insurers have seen a nationwide surge in medical corporations guiding treatment for business purposes rather than patient care.

“The vast majority of medical practices are doing a fabulous job for their patients,” Smith said. “What we are talking about here, and what the Coalition is focusing on, is the fraudsters and the scammers. They are realizing that the quicker they can run up the bills, the more money they can make before someone looks into it.”

Allstate alleges that Mirtabatabaee (also known as Sattar Mir) owns three medical corporations that hold themselves out to be providers of radiology services but actually act as brokers that refer patients to radiology facilities under contract with Mir’s companies. The insurer filed two qui tam lawsuits against Mirtabatabaee and physicians whom Allstate says pretend to be the owners of the medical corporations.

The California Insurance Fraud Prevention Act allows whistleblowers who file such lawsuits to collect three times the amount that was fraudulently billed, even if those bills were never paid.

Allstate filed one lawsuit against Discovery Radiology Physicians in La Palma and another against OneSource Medical Diagnostics in Bellflower. Radiologists Amjad Safvi and William Ira Feske were also named as defendants in the Discovery case. Safvi and radiologist Sana Khan were named as defendants in the OneSource case.

Allstate alleged that Mirtabatabaee owned and controlled both businesses even though physicians’ names were placed on the registration records filed with the California Secretary of State. The lawsuits say the corporations referred patients to contract facilities and radiologists in exchange for kickbacks or a fee-split and then marked up the costs of medical services when submitting bills to insurers, including Allstate.

The companies billed ten times the amount that they paid the radiologists, the civil complaint says. The inflated bills also served to increase the value of personal injury claims.

Judge Fahey granted Discovery’s and OneSource’s motion to dismiss, called a demurrer in California. He found that Allstate had not included enough specific details about the alleged fraud to back up its claims. The judge also found that Mirtabatabaee was not illegally practicing medicine because he provided only administrative or management services.

The 2nd Appellate District panel disagreed on both points. The panel said it could not find any appellate decisions that addressed the issue, but noted that the state Attorney General had issued an opinion that a corporation owned by a non-physician cannot indirectly practice medicine by “engaging [physicians] to perform professional services for those with whom the corporation contracts to furnish such services.”

What’s more, guidance by the California Medical Board states that decisions regarding coding and billing and the selection of medical equipment and supplies cannot be made by non-physicians.

“The authorities discussed above make clear that a non-licensed individual need not examine a patient or render a medical diagnosis to engage in the unlicensed practice of medicine—to the contrary, a non-physician unlawfully practices medicine if he or she exercises undue control over a medical practice,” the opinion says.

Ryan M. Fawaz, an attorney who wrote the anti-fraud coalition’s amicus brief, said the appellate panel’s decision does not break new ground exactly, but continues an evolution of case law that has made the Insurance Fraud Prevention Act a powerful fraud-fighting tool.

“This opinion crystalizes and brings legal principles together from case law, from the Attorney General’s opinions, from the Medical Board,” said Fawaz, who is with the Katten Muchin Rosenman law firm in Irvine. “They rely on very different sources to reach the conclusion that they did.”

The appellate panel reversed the Superior Court’s decision and remanded the case with instructions to rule against the demurrers and reinstate Allstate’s lawsuits.