Allstate prevails in $7M radiology fraud suit

Los Angeles County Superior Court is awarding Allstate Insurance Company more than $7 million in a qui tam action filed by the insurer on its behalf and on behalf of the People of the State of California against a Long Beach chiropractor, Daniel H. Dahan, DC, and his business, Progressive Diagnostic Imaging, arising from a scheme to defraud insurance companies.

In the judgment, Superior Court Judge Ernest M. Hiroshige found Dahan and Progressive Diagnostic Imaging violated the state's Insurance Frauds Prevention Act in 487 claims presented to Allstate in radiology reports that were determined to be "falsified medical records" that "have no diagnostic, clinical, or medical value whatsoever," according to a press release issued by Allstate. Hiroshige further concluded that health insurance claim forms and billing statements submitted in connection with the falsified radiology reports were "false and fraudulent."

The judge ordered that Dahan pay Allstate $4,870,000 in civil penalties, $918,516.78 in assessments and $1,222,151.62 in attorney's fees, costs and investigative expenses—$7,010,668.40 in all.

Allstate alleged that Dahan purchased report-writing software that purported to analyze x-rays and form medical opinions and diagnoses, including opinions concerning permanent impairment ratings, and thereafter formed Progressive Diagnostic Imaging to solicit x-rays from chiropractors, with the assurance that "board-certified radiologists" would analyze the films.

Allstate further claimed that, unbeknownst to patients and healthcare providers using Progressive Diagnostic Imaging, Dahan recruited untrained and unlicensed individuals to work with the report-writing software to prepare the fraudulent radiology reports. To make it appear that the reports were genuine, Allstate claimed that Dahan instructed staff to cut and paste the signatures of board-certified radiologists to the reports, without the knowledge, approval or authorization of the radiologists.  The reports and bills were presented to Allstate in support of claims, either directly by Dahan and Progressive Diagnostic Imaging or by plaintiff attorneys in auto accident cases.

At trial, four radiologists, whose names appeared on reports, testified they never wrote, reviewed, approved or signed the reports.

Allstate also alleged violation of California's Unfair Business Practices Act, claiming that Dahan was practicing medicine without a license, operating a professional medical corporation in violation of California's Moscone Knox Professional Corporation Act, and that he was falsifying patient medical records. Judge Hiroshige agreed. 

Beyond the verdict, Hiroshige also issued an injunction prohibiting Dahan from owning, operating or working as an employee in any business engaged in the practice of medicine. He ordered that letters be sent to all of the affected patients and their referring healthcare providers, to advise them of the court's findings and judgment, including the court's order that the reports generated by Dahan and Progressive Diagnostic Imaging are "to be disregarded on the basis that such reports [are] . . . falsified medical record[s]" and have "no diagnostic, clinical or medical value whatsoever," and that "records are not to be considered by any person or entity as part of the . . . patient's medical history, medical record, or medical chart at any time and for any purpose."