NBC News
July 25 — “Dateline NBC” had people talking from coast to coast last month — about car insurance. Maybe you thought your insurance would cover your medical bills if you were hurt in an accident — until our story about “paper reviews.” State Farm Insurance company — and others — can use those reviews to deny medical claims — leaving you uncovered when you need help most. We heard from more than 1,000 people, most of whom praised our report. We also heard from some State Farm employees who said that we misrepresented the fine job their company was doing. We’re back with new documents. We’ve talked to new sources and we have more to tell you about what State Farm knew and when it knew it. Correspondent John Larson reports the latest on a “Dateline NBC” investigation.
IN THE NATION’S capitol, reaction to Dateline NBC’s investigation of insurance practices was swift and strong. The chairman of the House Commerce Committee promised “full investigative powers” to examine the issue. Rep. Billy Tauzin, who is on the committee, said he will fully investigate first. “What you’ve uncovered is probably just the tips of the iceberg,” says Rep. Tauzin. “But you can bet there will be hearings.” Within a week of our broadcast, Sen. John McCain, who chairs the Senate Commerce Committee, fired off a letter to the nation’s insurance commissioners, expressing concern over “possible collusion” among insurance companies and paper review companies. George Nichols: “It will be a massive undertaking.”
State insurance commissioners responded, launching a multi-state examination of the subject of Dateline’s report — State Farm Insurance. George Nichols is the president of their national association. George Nichols: “We feel like ‘Dateline’ has provided a public service that has allowed us to recognize a national problem.”
And in Washington state last week, the insurance commissioner said she’ll take the investigation further to include five other major insurers.
Most people buy insurance trusting it will pay off when they need it. And most of the time, that’s exactly what happens. But what happens behind the scenes when an insurance company decides
The “Dateline” story which began it all started in Fairbanks, Alaska, completely by accident.
In June of 1993, Lecreca Duffey was driving through her neighborhood when, out of nowhere, a
truck ignored a yield sign and broad-sided her car. Lecreca Duffey: “All I saw was black truck and grill.”
Lecreca was hurt and almost immediately began racking up expensive doctors’ bills. She didn’t have health insurance, but she did have auto insurance which covered injuries caused by accidents. So she called her insurance agent, who promised to help.
Lecreca: “‘All my medical bills would be taken care of. Don’t worry about a thing.’ But that ’s not whathappened.”
If you’re like a lot of people, you buy insurancetrusting it will pay off when you need it. And most of
the time, that’s exactly what happens. But what happenswhen it doesn’t? What happens behind the scenes whenan insurance company decides to challenge your claim?
We’re going to tell you about part of the insurancebusiness you’ve probably never heard of — a practiceused by nearly every major insurance company in thenation, involving some people who may not have yourbest interests at heart.
Our questions into what happened to LecrecaDuffey launched a 15-month “Dateline” investigation into her insurance company, State Farm — the largestin the nation. We interviewed more than 250 people, reviewed more than 70,000 pages of documents, and examined two companies that State Farm did business with. What we found was a disturbing pattern in the way State Farm handled thousands of accident claims.
Lecreca Duffey, a home daycare operator, had
faithfully paid her premiums for 15 years. But before
State Farm paid her bills, it did what a lot of insurance
companies do. It said it wanted the advice of another
doctor — a second opinion to decide which bills to pay.
After all, some injuries like Lecreca’s, which
involve pain in the joints and muscles, are easier to fake
than most. The auto insurance industry estimates it
loses $5.5 billion to phony claims every year. And
Lecreca was taking an unusual amount of time to heal.
Plus, her X-rays showed a degenerative condition in her
joints and she had had polio as a child.
Lecreca Duffey
had faithfully paid
her premiums for
15 years. But
before State Farm
paid her bills, it
did what a lot of
insurance
companies do. It
said it wanted the
advice of another
doctor — a second
opinion to decide
which bills to pay.
So State Farm shipped Lecreca’s paperwork from
Alaska to a doctor in San Diego.
Lecreca Duffey: “I had no idea who this person
was.”
John Larson: “Didn’t you go see him?”
Lecreca: “No.”
Larson: “Didn’t he examine you?”
Lecreca: “No.”
But nine months after Lecreca’s accident, State
Farm got back a report, signed by a doctor, that
surprisingly called her injuries “minor.” The doctor
concluded that her difficulties were most likely not
caused by the accident, but by a pre-existing bone
condition.
Bottom line — State Farm took the doctor’s
recommendation that only a small fraction of Lecreca’s
bills were “justified in relation to the accident,” and
paid only $780 of Lecreca’s bills.
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John Larson: “When you got that information,
what was your reaction?”
Lecreca Duffey: “Stunned.”
Lecreca may have been stunned, but medical
reviews like the one she got are written all the time.
State Farm says it uses them for claims that seem
questionable — about one out of every 20 percent.
That’s at least 35,000 claims a year. And what better
way for State Farm to get an honest, independent
opinion than from a doctor who doesn’t work for State
Farm? It’s called a “paper review,” because the patients
are never actually examined, only their medical files and accident reports. And doctors tell us you can learn a lot from paper work, even find fraud. But consider what happened in Lecreca’s case. Larson: “The bills were $500, a $1000?”
Lecreca: “Oh, they were thousands.”
Larson: “Thousands of dollars?”
Lecreca: “They were over $10,000 probably by that time.”
Larson: “Could you pay them?”
Lecreca: “No.”
It seemed to come down to one doctor’s opinion versus another’s. At least that’s what it looked like, until we discovered who was really writing some of the doctor’s reports sent to State Farm. It seemed to come down to one doctor’s opinion versus another’s. At least that’s what it looked like, until we discovered who was really writing some of the doctor’s reports sent to State Farm.
Edwin Newton: “I did over 30. I completed over
30 cases myself.”
We found this man, Edwin Newton, who told us he
created medical opinions for the same San Diego
company as the doctor who did Lecreca’s paper review
— Comprehensive Medical Review or CMR. But
Newton wasn’t exactly a doctor.
John Larson: “What kind of training do you
have?”
Edwin Newton: “I’m a writer.”
Larson: “A writer? What was your college degree
in?
Newton: “News editing.”
Larson: “Journalism?”
Newton: “Journalism.”
Larson: “No medical training at all?”
Newton: “None.”
Newton, who now works for a small newspaper,
told us in the CMR Vancouver office where he worked
that he, along with a paralegal, a former teacher and a
nurse, created doctors’ opinions, deciding whether
accident victims like Lecreca had received appropriate
treatment.
Newton: “And of course with my great medical
ability, I could really make the determination, now
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couldn’t I?”
Newton says CMR provided him with a computer
containing stock paragraphs of medical opinions —
opinions that were put into reports and sent to State
Farm.
Larson: “These are pre-programmed bits of
information?”
Newton: “Right.”
Larson: “That you just slide in.”
Newton: “Right.”
Larson: “Makes you sound like a doctor.”
Newton: “It sounds pretty impressive.”
Newton told us
that he, along with
a paralegal, a
former teacher
and a nurse,
created doctors’
opinions, deciding
whether accident
victims like
Lecreca had
received
appropriate
treatment.
Newton worked at CMR for three months until he
was let go shortly before the branch office closed.
Remember, this is the same company whose doctor
produced Lecreca’s report — the report State Farm used
to justify not paying her bills.
Unable to afford more treatment, Lecreca says her
pain became too much to handle.
Lecretia: “So you start planning ways of killing
yourself. You plan how you’re going to do it.”
Did State Farm know that people with no medical
training were writing what were supposed to be doctors’
reports? And what would the paper review company,
CMR, say when we confronted its president?
Bill Marvin: “I’ve been hearing rumors of this for
six months, so you may as well fire away.”
Bill Marvin: “I think on one occasion we even
employed a journalist.”
Bill Marvin is CMR’s president. He told us that
CMR has written 27,000 reports for some of the
nation’s leading insurance companies. He says in the
mid-1990s, non-medical people often did research and
write medical reports, but that doctors always checked
them to make sure the reports were accurate.
Marvin: “The reports when they were issued were
the opinions of the doctors who signed them.”
But were they? “Dateline” found a number of
confidential sources who told us otherwise.
CMR Insider: “There was really not much of a
review going on from the physician’s point of view. ”
This CMR insider was so afraid of reprisals he
would only speak if we disguised him. He told us he
saw doctors at CMR sign stacks of reports while barely
reviewing the records.
John Larson: “How many reports would a doctor
look at and sign in maybe an hour?”
CMR Insider: “Anywhere between 30 to 50.”
Larson: “Fifty reports in one hour?”
CMR Insider: “In one hour.”
Larson: “So it was more like an autograph
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session?”
CMR Insider: “That’s exactly what it was.”
Sources told us some doctors did diligently review
reports. Yet, this man and others told us frequently the
reports were then changed without the doctors’
knowledge and then sent on to insurance companies like
State Farm.
CMR Insider: “Bill Marvin would feel free to go
in and just make a change to the report. We witnessed it
every day.”
John Larson: “Did you ever change reports after a
doctor had signed them?”
Bill Marvin: “No, I don’t believe so.”
Larson: “Think about that. Never?”
Marvin: “Not to my recollection.”
The review
showed Marvin
had changed the
doctor’s report —
more than 30
changes in his
handwriting. Most
were stylistic, but
some made things
better for State
Farm and worse
for the accident
victim.
But what Marvin didn’t know was that we had
tracked down someone else who had boxes of
documents nearly forgotten in a garage. In the boxes,
we found rough drafts of medical reviews — reviews
sent to Bill Marvin after doctors had already signed
them, in this case a Dr. Viglotti.
Larson: “Why would they send you a report that
Viglotti has already reviewed and signed?”
Marvin: “I don’t know. If you know the answer,
please, please enlighten me. I don’t know.”
We did know the answer.
Larson: “This is the same case.”
Because we had a later draft of the same review. It
showed Marvin had changed the doctor’s report —
more than 30 changes in his handwriting. Most were
stylistic, but some made things better for State Farm
and worse for the accident victim. For example, the
doctor had written about the “unlikelihood” of a back
injury. Marvin had crossed that out and changed it to
“extremely unlikely.”
Larson: “Why would you be saying this after a
doctor has already signed off on it?”
Marvin: (sighs, pause)
Larson: “By the way, did you go to medical
school?”
Marvin: “No.”
So we asked him again. Why did he change the
doctor’s report?
Marvin: “Because I was probably the most
experienced person in the company at that point in time,
in terms of looking at the wide assortment of types of
cases that would come in from the insurance
companies.”
Marvin, who at first had said he never changed
doctors’ reports, then said that if he did, he would
always run the changes by the doctor. But did he?
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“Dateline” found the doctor and showed him the
changes.
John Larson: “All these changes, are these your
notes?
Dr. Joseph Viglotti: “No, they’re not.”
Dr. Joseph Viglotti, a well-respected, Harvardeducated
doctor worked for CMR in 1993 and 1994.
Larson: “If that happened, that happened without
your knowledge?”
Viglotti: “Absolutely. I did not authorize it. When I
finish a report and my signature was on it, that was it.
No more changes were to be made.”
John Larson: “We showed this to Dr. Viglotti.
And he said it’s obvious to him that somebody is
changing his medical opinion after he signed it and he
didn’t like it.”
Bill Marvin: “I guess it depends on your
perspective.”
Larson: “Under what perspective would this be the
right thing to do?”
Marvin: “Well, show me in there what was
changed medically, please.”
So, we showed him his changes again.
Marvin: “You know, the process was not entirely
paint by the numbers. Maybe the president of the
company shouldn’t be involved in, in the report writing
process at all — which I am not anymore.”
Larson: “Maybe the president of the company,
who’s not a doctor, should not be rewriting reports after
the doctor has already signed them.”
Marvin: “Or maybe the president of the company
and doctors need to be spending a little bit more time
together?”
So, why would Marvin change reports — reports
insurance companies like State Farm were using to help
analyze medical costs? The answer may lie in what was
usually in the reports — what they said.
Edwin Newton: “We were not in the process or
business of healing. We were in the process of
limiting.”
“We were never
told exactly, ‘deny
care, you’re paid
to deny care.’ ...
But the
information we
had to work with,
to come up with a
conclusion, was
slanted in that
Remember Edwin Newton, the journalist who
wrote so-called doctors’ reports for CMR? He told us
the reports were not at all what State Farm was saying
they were, fair and objective, but in fact, were secretly
biased, written to favor the insurance companies.
Newton: “We were never told exactly, ‘deny care,
you’re paid to deny care.’ We were never told that. But
the information we had to work with, to come up with a
conclusion, was slanted in that way.”
“Dateline” obtained copies of the 160 stock
computer paragraphs given to CMR case writers like
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way.”
— EDWIN NEWTON
Claims reviewer
Newton. And we were surprised to discover almost
every single paragraph cut or limited medical care.
John Larson: “It’s almost like you were, your job
was to come up with the excuse.”
Newton: “The excuse. We were the excuse.”
“Dateline” also found documents that suggest CMR
case writers were taught to downplay injuries, even
going so far as to avoid the word. “Watch the word
‘injury’ because it’s inflammatory.” On another
document, “use ‘discomfort’ as a substitute for ‘pain’.”
And here, an employee suggests leaving out
medical information that could be helpful to the
accident victim — “her bones were possibly more
brittle and we don’t want to point this out.”
John Larson: “‘And we don’t want to point this
out’ — should that be on here?”
Bill Marvin: “No.”
Larson: “Would that be objective if anybody in
your company was thinking like that?”
Marvin: “As I indicated, John, I’ve never seen that
note. I’ve never been asked about that note.”
Larson: “Because the way this appears, is
somebody had a bias here. Somebody said ‘let’s not
point out a medical reality. Let’s not mention that.’
That’s what it looks like.”
Marvin: “That’s what it looks like to me too.”
And there was more. “Dateline” legally followed a
trail of electronic footprints. We learned that CMR
computer files had been erased. But we found backups.
We collected 39 computer disks from a number of
sources. Some were encrypted, electronically locked so
no one could read them. But “Dateline” cracked the
codes and opened the files. Altogether we examined
thousands of memos and documents and something
caught our attention.
It was a reference to a sophisticated, computer
database. CMR claimed it could predict the likelihood
of an injury in a specific accident by comparing it to
thousands of other accidents. CMR called it
CRASHdata. We were told it was used to recommend
cutting care on up to 100 cases sent to State Farm.
Sounds impressive. But there’s just one problem.
CRASHdata never really existed.
CMR Insider: “It was a big joke down the
hallways of CMR. ”
John Larson: “A joke?”
CMR Insider: “A joke. We laughed. We couldn’t
believe that people were buying a false piece of paper.”
Bill Marvin told us he wasn’t sure if CRASHdata
had ever been cited in a CMR report.
Bill Marvin: “I don’t know.”
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So we took what
we had learned to
State Farm, to see
if it had any idea
that thousands of
paper reviews it
used to settle
accident claims
included reports
supposed to be
written by doctors,
but really written
by non-medical
people
But it was. “Dateline” found these CMR reports,
purchased by State Farm, quoting CRASHdata as a
reason to deny coverage.
In fact, “Dateline” found a State Farm letter, sent to
managers in the Northwest, promoting CMR’s “new
review service.” The letter trumpets CRASHdata’s fast
turnaround time and low cost. It even included order
forms.
So we took what we had learned to State Farm,
which was by far CMR’s biggest customer, to see if it
had any idea that thousands of paper reviews it used to
settle accident claims included reports supposed to be
written by doctors, but really written by non-medical
people — reports slanted against accident victims, and
some which included a bogus database.
Jack North: “The story you’re telling is one that
I’m not very happy with and is not State Farm and is
not the way we do business.”
Senior Vice president Jack North told us State
Farm, too, was shocked by CMR’s behavior. This was
the first time State Farm acknowledged publicly it knew
there were problems at CMR.
North: “We’ve learned some things about CMR
that disappoint us and when we learned about that, we
quit doing business with them.”
So if what happened at CMR was just a case of one
small paper review company deceiving the nation’s
largest insurance carrier, then our story would likely
end here. But it doesn’t.
In 1992, Cindy Robinson of Boise, Idaho, was
driving on a highway when suddenly her entire back
wheel fell off. Her axel hit the pavement hard.
Cindy Robinson: “It was like thunk, thunk, thunk,
thunk down the road.”
John Larson: “You were getting bounced around
pretty good.”
Cindy: “Right”.
Cindy was hurt, eventually, requiring surgery for a
herniated disk in her back. Her insurance company was
State Farm.
Now what you’re about to hear may sound familiar.
Because just like in Lecreca Duffey’s case, State Farm
got a paper review that called Cindy’s injuries “minor,”
blaming her medical problems on something else —
“work related activities.” And State Farm refused to pay
most of her medical bills.
Larson: “In the common slang, they’re basically
saying to you, ‘we don’t believe you.’”
Cindy: “Right.”
Larson: “We think you’re lying to us.”
Cindy: “Right.”
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We learned that
just like at CMR,
doctors didn’t
write many of the
reports it sent to
State Farm and
other insurance
companies. In
fact, they often
didn’t even sign
them. Other
people in the
office did that for
them.
But this time State Farm used a different paper
review company. It sent Cindy’s file from Boise, Idaho,
to Bethesda, Maryland, to a company called Medical
Claims Review Services or MCRS.
So we tracked down the company’s founder and
former medical director, Dr. Ronald Gots. Right away,
we learned that just like at CMR, doctors didn’t write
many of the reports it sent to State Farm and other
insurance companies. In fact, they often didn’t even
sign them. Other people in the office did that for them.
Dr. Gots: “It was our report, but someone else did
the calligraphy.”
But Dr. Gots assured us, just like the president of
CMR had, that doctors always, always read and
checked them all.
Gots: “A doctor looked at every one.”
Larson: “You read all the reports?”
Gots: “That’s right”.
But listen to what happened next when we told him
a former MCRS doctor had told us just the opposite.
Larson: “He said it was standard practice at MCRS
for reports to go out without a doctor ever looking at
them.”
Gots: “It was not standard practice.”
Larson: “You’re actually saying it never
happened.”
Gots: “It was certainly not standard practice. It
may, I can’t say that it, excuse me, never happened. But
it was certainly not standard practice.”
We kept asking and Dr. Gots eventually admitted
that 10 to 15 percent of MCRS’s reports, hundreds,
were never looked at by doctors at all.
Gots: “I mean, there are, there is, there were some
small percent of cases that probably went out.”
Larson: “10-15 percent?”
Dr. Gots
eventually
admitted that 10 to
15 percent of
MCRS’s reports,
hundreds, were
never looked at by
doctors at all.
Gots: “That would be my best guess. And it’s a
guess at this point, that went out under our medical
director’s signature, that had been reviewed by the
nurse.”
Larson: “If that’s the case, why didn’t the nurses
just sign them?”
Gots: “Well, because these represent the view of
the corporate medical director. Because the nurses…”
Larson: “Doctor, with all due respect, how do you
know it represented your view if you never even looked
at it?”
Gots: “Because the nurses were very well-trained.
They were very well supervised. It was only on the very
simple, straight-forward issues.”
But remember, State Farm used those reviews as
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doctors’ opinions. “Dateline” obtained copies of 79
MCRS reports done for State Farm. Although too small
a number to draw any definitive conclusions, we were
surprised to find every single medical review — 79 out
of 79 — favored State Farm, recommended cutting
back or denying care to accident victims. Dr. Gots told
us that’s because State Farm only sent him problematic
cases. But we asked State Farm’s Jack North.
John Larson: “What does that suggest to you
when this independent medical review company sends
back 79 cases and all 79 recommend cutting medical
reimbursement? Doesn’t that seem strange?”
Jack North: “Looking back, if we had been able to
look broader, at the time we may have seen that trend
earlier. And it is not a trend I’m happy about or
supportive of.”
But some State Farm employees told us from where
they sat, that trend was hard to miss.
Jim Mathis: “It is a company-wide program, and it
is decisively and deliberately orchestrated.”
Jim Mathis is a former State Farm superintendent
who had one of the bigger jobs at State Farm in
Washington state. He told us State Farm management
not only knew there was pattern of negative opinions,
but wanted it that way.
Mathis: “There’s only one motivation for using a
paper review. And that’s to increase profits by reducing
costs.”
Take a look at this — a page from a State Farm
manual — sent to hundreds of employees. It says if
adjusters want to deny a claim, they should hire a paper
review company “who will support your position.”
Mathis: “We knew that it was a tool to reduce
costs, and if we all, all of the management wanted to
promote or move forward in our careers, we would use
these tools.”
‘We knew that it
was a tool to
reduce costs, and
if we all, all of the
management
wanted to promote
or move forward
in our careers, we
would use these
tools.’
— JIM MATHIS
Former State Farm employee
Mathis says he resisted using paper reviews,
especially CMR ’s, because he didn’t think they were
fair. He says he shared his concerns with his supervisors
— concerns which should have gone up the ladder to
Deputy Regional Vice President Ralph Householder, a
top official at State Farm.
Mathis says he hoped the well-respected State Farm
veteran would set things right, but instead, rather than
doing less business with CMR, Mathis says
Householder pushed employees to do more business
with CMR.
John Larson: “You got in trouble because you
were trying to be a good neighbor?”
Mathis: “I believe so.”
Larson: “And where did it get you?”
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Mathis: “Well, I was terminated from State Farm,
yes.”
Larson: “Are you smiling because it’s funny or
because it’s sad?”
Mathis: “Because it ’s the only emotion I have left
over the issue.”
Mathis says he was fired because he wouldn’t go
along, and in 1997, filed suit against State Farm,
accusing it of conspiring with CMR to defraud its
policyholders. State Farm disputes the charges and says
Mathis was fired for “misconduct and abuse of his
position.” A judge dismissed Mathis’s suit, saying he
couldn’t prove his allegations. Mathis is appealing.
But you may be interested in what happened to
Mathis’s superior, Ralph Householder. Well, he got a
new job as senior vice president of CMR — a position
“Dateline” has learned he negotiated four months
before State Farm says he left his job. We asked
Householder to explain, but he declined. His lawyer
sent us a letter, saying Householder “did nothing
improper” and did not direct employees to use CMR or
any other paper review companies.
And if all this sounds like an inappropriate
relationship between companies that were supposed to
be independent, it was even more surprising when we
learned what some people inside State Farm were
doing.
We reviewed a CMR memo about a meeting with
two State Farm employees. One is quoted as advising
CMR to change its medical opinions to give the
insurance company more “room for negotiation” —
room to get an accident victim to settle for less money.
John Larson: “It looks like these two State Farm
employees are telling CMR what to say, what to put in
their medical reports.”
Jack North: “That’s a document I have not seen
before.”
North says if anything like that was going on, it
was not widespread. But “Dateline” found out more
about the two State Farm employees quoted. They
weren’t just any employees. They were, in fact, trainers,
responsible for teaching hundreds of State Farm claim
representatives in the Northwest how to use paper
reviews.
One of the trainers
is quoted as
saying, “If you
don’t want to pay
a claim, send it to
CMR. They’ll
One of the trainers is quoted as saying, “If you
don’t want to pay a claim, send it to CMR. They’ll
reduce the amount and provide a strong foundation for
doing so.’”
North: “That’s going too far. I can’t support or
approve that and if that was going on, to my knowledge,
I’d deal with it very decisively.”
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reduce the amount
and provide a
strong foundation
for doing so.”
And there was something else about that memo that
indicated CMR was willing to change its reports the
way State Farm wanted. Next to each statement
someone had written “Concur.” We recognized the
handwriting as that of CMR president Bill Marvin.
John Larson: “It appears as though you and State
Farm are working together to come up with medical
opinions that will help them negotiate settlements.”
Bill Marvin: “Well if that’s the way it appears,
then I’m glad we’ve evolved away from this type of
scenario. The concept of what we were doing was
evolving over time. And you go through, it’s almost
like going through a rite of passage.”
Larson: “At any point in this journey that you
describe, would it have been proper for State Farm to
tell you to start approving or disapproving more
medical tests?”
Marvin: “No, no.”
But according to a CMR source, with some State
Farm adjusters, it happened repeatedly.
CMR Insider: “The claim adjuster would call us
and say, you know, I do not approve of this, we need to
adjust it, change the dollar amounts. If they wanted
some money taken away from these reports, we would
take away from the reports.”
Larson: “So they were helping author the reports.”
CMR Insider: “That’s exactly what they were
doing, yes.”
State Farm says that behavior would have been
unacceptable and doesn’t believe it ever happened.
John Larson: “It appears as though employees of
the biggest insurance company in the United States are
secretly conspiring to cheat the very people who are
trusting them.”
Jack North: “Well, your word is ‘appears,’ and I
can’t argue with what your perspective is. That just isn’t
the way we do business. I’m even bothered with the
notion that you may be thinking or suggesting that it
is.”
State Farm insists
paper reviews do
not ultimately cut
that many claims.
It cites its own
internal study of
65,000 accident
claims in Arizona,
which showed
only one of every
five claims sent
State Farm insists paper reviews do not ultimately
cut that many claims. It cites its own internal study of
65,000 accident claims in Arizona, which showed only
one of every five claims sent out for review resulted in
a final reduction or denial of payment.
And remember the 79 MCRS cases in which all the
paper reviews were negative? State Farm says it
eventually paid most of those claims in full.
But take a look at this. An economist hired by
someone suing State Farm analyzed nearly 100 claims
State Farm sent to CMR. This is the first public look at
how paper reviews profit State Farm.
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out for review
resulted in a final
reduction or
denial of payment.
He found the accident victims on average had about
$7,400 in medical bills. CMR’s paper review
recommended slashing those claims. In the end, State
Farm paid on average only $4,400, saving State Farm
about $3,000 in medical bills every time it used a paper
review. State Farm argues that the sample is not
statistically valid.
Cindy Robinson: “If State Farm were my
neighbor, I’d sell my house and move.”
As for Cindy Robinson, she began an uphill battle
against the resources of the insurance giant. State Farm
said they didn’t think Cindy’s injuries were caused by
the accident. It had the MCRS reports, and the opinions
of two neurologists who examined her and said her
injuries were “not compatible with her accident.”
All Cindy had were the opinions of her own doctors
and the feeling that all this wasn’t fair. So she sued
State Farm for bad faith. But then something happened.
State Farm hired yet another doctor to do another paper
review and that doctor sided with Cindy, saying her
injuries were likely caused by the accident. State Farm
finally paid all her medical bills.
Cindy: “My feeling was too little too late.”
So Cindy pursued her lawsuit, two years ago, she
finally had her day in court. The jury awarded Cindy
nearly $10 million in damages.
State Farm asked for a new trial, but the judge said
“no” and issued this scathing opinion. He called the
paper review company, MCRS, a “completely bogus
operation,” which prepared “cookie cutter reports.” And
he said State Farm knew the paper reviews “were not
objective, but slanted to favor the denial or reduction of
claims.”
As for State Farm’s neurologist, it was discovered
during the trial that before writing his supposedly
independent medical opinion, he first talked to a State
Farm claim adjuster and consulted with a State Farm
lawyer — something the judge obviously did not like.
The judge found the doctor who claimed Cindy’s
injuries were not caused by the accident, could not be
considered objective. State Farm is appealing.
MCRS went out of business in 1995, one year after
Cindy filed her lawsuit. But Dr. Gots insists MCRS was
unfairly portrayed at the trial and that its medical
reports were good.
Dr. Gots: “In fact, we were above standards in the
industry by far.”
John Larson: “So you’re saying other medical
review companies probably looked at even less?”
Gots: “Oh, yeah. They don’t even have doctors.
They have all nurses or clerical people who do
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reviews.”
In Alaska, a year and a half after Lecreca’s
accident, State Farm had her examined by two doctors
and offered to pay more of her medical bills. But
Lecreca filed suit against State Farm and the paper
review company, CMR. And when her lawyer tried to
interview the doctor who supposedly wrote Lecreca’s
paper review, State Farm went to court and blocked all
efforts to question him.
So we went looking for the doctor ourselves, and
guess what? It was Dr. Viglotti — the same doctor
whose reports had apparently been altered at CMR. He
says he didn’t know State Farm blocked his testimony
and he was even more surprised when we showed him a
copy of Lecreca’s report.
Right away, he noticed something odd about the
signature.
Dr. Viglotti: “There’s a little kind of a circle
underneath it that doesn’t look right to me.”
Larson: “Is there any way that could be your
signature?”
Viglotti: “Highly unlikely.”
And after reading it, Dr. Viglotti felt sure he had
neither written nor approved it.
Viglotti: “I don’t think I’ve seen this report.”
This so-called
independent
medical review,
which devastated
Lecreca, which
State Farm not
only used to deny
her claim but also
blocked all
questions about,
apparently, was
forged.
This so-called independent medical review, which
devastated Lecreca, which State Farm not only used to
deny her claim but also blocked all questions about,
apparently, was forged.
Bill Marvin: ”This is the only incident to my
knowledge where something like this has happened.
And as captain of the ship…”
John Larson: “So, we just, out of 27,000 cases, we
just happened to be holding this one?”
Marvin: “I think that is probably right on the
mark.”
Lecretia Duffey: “They don’t have the right to do
this to people. It destroys their lives and they have no
right to do that. They are not gods.”
And that’s where our original broadcast ended. But
in the weeks to come, we found out more about forgery,
about other paper review companies, and about what
State Farm knew and when.
State Farm is the largest insurance company in the
nation. It says it handles about 750,000 medical
accident claims a year. They’ve been in business for 75
years and say they have millions of satisfied customers.
We want you to remember that the claims
discussed in our report, those involving paper reviews,
represent only 5 percent of all those claims. But 5
percent still adds up to about 35,000 cases every year.
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And if yours happens to be one of them, it is critical the
reviews be fair.
Jack North: “We admit something’s not right with
MCRS and CMR. We readily admit that.”
State Farm has always suggested that what
happened with CMR and MCRS was an unfortunate
exception which misrepresents their record with paper
reviews.
North: “We’ve learned some things along the way
rather painfully about dealing with those two
companies.”
But was it just two companies? Since our original
broadcast, we checked records regarding other review
companies. In Indiana, the Insurance Commission there
found in 1994 that State Farm committed “unfair claim
settlement practices” using another paper review
company in Illinois. Paper reviews by Professional
Evaluation Services helped State Farm slash
chiropractic bills on average 58 percent.
In Pennsylvania, State Farm was sued and it was
discovered State Farm, in the mid-1980s, was paying
Worldwide Auditing a piece of the action: 10 to 15
percent of the cuts Worldwide recommended in its
paper reviews. State Farm denied it was doing anything
wrong, but agreed it would no longer pay a percentage
of savings.
And since our broadcast, we’ve learned more about
what State Farm knew about its paper reviews and how
high that knowledge went.
Remember, State Farm claims it never knew there
was a pattern of negative reviews from paper review
companies — in this case, MCRS.
Jack North: “Looking back, if we had been able to
look broader at the time we may have seen that trend
earlier. And it is not a trend I’m happy about or
supportive of.”
But we found a letter from as far back as 11 years
ago sent by MCRS to State Farm’s own point person for
paper reviews nationwide — William Wallace, who
worked right at State Farm headquarters.
The MCRS letter brags they were saving State
Farm almost $2,000 per claim, making its case that it
was profitable for State Farm to do business with
MCRS.
And why were those numbers being sent to State
Farm? The letter says to follow up on a “conversation”
MCRS had with Wallace.
What does Wallace, who’s now retired, say about
that? He told “Dateline” he got stacks of letters like that
one, but that he didn’t even read them.
In fact he even wrote a letter to one paper review
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company saying, “it is not State Farm’s intent to save
money, but to clarify claims.”
While Wallace said he never looked at the reports
— he says he threw them right in the trash — he did
write about them in a letter in 1993 to MCRS warning it
“not to send reports of this type to any of the field
offices” of State Farm because they have “caused
difficulty (with) … litigation.”
In fact, plaintiff’s attorneys have used numbers like
this to try to prove that privately, State Farm knew
paper reviews were used to cut costs, while publicly
saying they were objective opinions.
As for CMR and Bill Marvin, remember Marvin’s
claim that Lecreca Duffey’s apparently forged paper
review was one of a kind?
John Larson: “So, we just, out of 27,000 cases, we
just happened to be holding the one?”
Bill Marvin: “I think that is probably right on the
mark.”
Well, guess what? So far, we’ve found what appear
to be two more forgeries — CMR paper reviews two
doctors tell us they never signed.
As for State Farm, following our interview with its
vice president, State Farm told us it checked thousands
of CMR reviews, and they found that they’d already
paid most of them in full. Most, but not all. Just before
our original broadcast, State Farm sent us this
videotaped statement:
Jack North: “We found about 500 where CMR’s
work may, and I really want to stress the word may,
have been the reason a medical bill wasn’t paid.”
State Farm has now paid those customers their
medical bills plus interest — more than $1 million. But
others remain unhappy with State Farm and say they’re
taking State Farm to court.
Karen Hutson: “I just wanted to get well and be
on my way.”
In 1993, Hutson was injured in an accident in
Oregon and was treated for five months for back pain.
State Farm refused to pay $774 of Hutson’s claim —
about a 1/4 of her bills, repeatedly citing a CMR paper
review as the reason. The review called Hutson’s
accident “extremely minor,” and said she did not have
any “serious consequential injuries.”
Hutson: “That’s a lie. I was in a lot of pain.”
We played our broadcast for Hutson because there
was something about one CMR report that she didn’t
know.
John Larson: “And here, an employee suggests
leaving out medical information that could be helpful to
the accident victim. Her bones were possibly more
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brittle and we don’t want to point this out. ‘And we
don’t want to point this out’ — should that be on here’?
Bill Marvin: “No.”
John Larson: “That particular report was yours.
You’re the accident victim that they’re talking about.”
Karen Hutson: “I’m just really angry. I’m really
angry at them because I just wanted to get on my feet
and get well. I didn’t want to take money that didn’t
belong to me. And then they do this to me. They made
me feel like I wasn’t in pain when I was in pain. And it
brings a lot of that back.”
Karen Hutson could only pay her bills after a
different insurance company representing the woman
who hit her paid a settlement two years later.
As for Lecreca Duffey, the woman whose story
launched our investigation, she settled her lawsuit with
State Farm for an undisclosed amount of money, never
learning what we had about her report and its
apparently forged signature until she watched our
broadcast along with the rest of the country.
Lecreca Duffey: “People have no right to lie and
mess up somebody else’s lives. Where does the buck
stop?”
State Farm says because it’s a mutual company
owned by its policyholders, it has no motive to cheat
them and it’s in the policyholders’ best interests to keep
insurance costs down.
In a letter to “Dateline,” company president
Vincent Trosino said that our report was fundamentally
unfair and a gross distortion and it’s simply not an
accurate reflection of the way State Farm does business.
And before our original broadcast, we received a
statement from State Farm’s Jack North, who
apologized for any problems the CMR reviews may
have caused. He says if any policyholders have
concerns about how their medical claims were handled,
they should contact their agent or him personally at the
company’s Bloomington, Illinois, headquarters.
‘Today’: Vote in our wedding survey
Equal Time: How liberal is Al Gore?
‘Brian Williams’: 100 Days, 1,000 Voices
‘Brian Williams’: Firestone tire controversy
HomePage: Smart TV for smart people
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