State Farm Lawsuit Moves Forward Alleging Fraudulent Billing Scheme
A federal judge in Florida has allowed State Farm Mutual Automobile Insurance Company to advance most of its claims in a lawsuit. The suit alleges a network of medical providers and surgery centers engaged in an illegal patient brokering scheme. State Farm claims this arrangement resulted in inflated medical bills and manipulated insurance settlements, totaling over $3 million.
In a ruling issued on March 21, U.S. District Judge Charlene Edwards Honeywell denied most of the defendants’ motions to dismiss. She found that State Farm had plausibly alleged violations of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA). The court also permitted the insurer’s unjust enrichment claim to proceed against several individuals and entities affiliated with Spine Centers of America.
However, the judge dismissed the unjust enrichment claims against a group of surgeons and surgery centers. The court concluded that State Farm had not directly conferred a financial benefit on those parties.
Alleged Scheme to Inflate Bills
State Farm’s complaint describes a network of entities and individuals. These include Spine Centers of America, surgeons, and two outpatient surgical centers. They allegedly orchestrated a referral and billing arrangement designed to maximize insurance payouts on personal injury claims.
The lawsuit claims that Spine Centers, a non-physician-owned marketing company, recruited patients and referred them to participating surgeons and facilities. In return, these providers allegedly accepted pre-arranged flat fees. However, Spine Centers was allowed to bill insurers for the full cost of procedures, often at many times the actual payment. For example, the insurer cited a case where a surgeon was paid $2,000 for a procedure. However, Spine Centers billed $47,688.
State Farm alleges that these inflated charges were submitted as part of “global bills” in settlement demand packages. Personal injury attorneys prepared these packages. State Farm argues that these billing practices distorted the value of claims. As a result, the insurer was forced into inflated settlements to avoid exposure to bad faith litigation.
Florida law prohibits the payment or receipt of kickbacks or fee splits for patient referrals. State Farm contends that the arrangement violated both state law and the terms of its insurance policies, which exclude coverage for fraudulent or illegal billing practices.
The defendants attempted to dismiss the case on multiple grounds. These included failure to plead fraud with the specificity required under federal rules. However, the judge ruled that State Farm had met the necessary standard. The insurer detailed a “multi-act scheme” and cited specific instances of alleged misconduct.
The court noted that when fraud is part of a complex, ongoing arrangement, courts may relax the usual requirement. This is the requirement to specify the exact “who, what, when, where and how” of each false claim. State Farm’s claims were deemed sufficiently specific. This was particularly true with respect to the role of Spine Centers and its executives in setting billing rates, submitting claims, and profiting from the arrangement.
The court also accepted State Farm’s argument. The argument was that the conduct at issue qualified as a per se violation of FDUTPA. This was because it involved alleged violations of Florida’s patient brokering and insurance fraud statutes.
The defendants also argued that FDUTPA claims were preempted by Florida’s Office of Insurance Regulation. But the court rejected that view. It cited precedent that allows FDUTPA claims based on fraudulent billing practices not directly overseen by state regulators.
Court Dismissals and Remaining Claims
While the FDUTPA claims remain intact, the judge dismissed State Farm’s unjust enrichment claims against several defendants. These included surgeons Zoltan Bereczki and George El Bahri, as well as their affiliated practices and surgery centers. The court reasoned that while these providers may have participated in the alleged scheme, they were paid fixed fees by Spine Centers before any insurance bills were submitted. Because State Farm did not directly or indirectly confer a benefit on those defendants, the court found that an essential element of unjust enrichment—direct receipt of a benefit—was missing.
In contrast, the unjust enrichment claims were allowed to proceed against Spine Centers and its executives. These individuals allegedly controlled the billing practices and directly profited from insurance settlements.
Prior Conviction Partially Addressed
One defendant, Anthony Hernandez, sought to remove references in the complaint to a past conviction for health care fraud and money laundering. The court agreed in part, ordering that allegations related to prior conduct involving a non-party entity be stricken from the complaint. This was because they were deemed irrelevant and potentially prejudicial. However, the judge allowed the fact of Hernandez’s 2020 conviction to remain.
What’s Next
All defendants are now required to respond to the remaining claims in the complaint within two weeks of the court’s order. Unless resolved by settlement or summary judgment, the case is expected to proceed through discovery.
A federal judge made several rulings regarding the lawsuit.
Case Information
- Case: State Farm Mutual Automobile Insurance Company v. Spine Centers of America, Inc., et al.
- Court: U.S. District Court for the Middle District of Florida
- Case No.: 8:24-cv-1064-CEH-AEP
- Judge: Charlene Edwards Honeywell
- Date of ruling: March 21, 2025
- Plaintiff: State Farm Mutual Automobile Insurance Company
- Defendants: Spine Centers of America, Robert Cagno, Lester Morales Jr., Brian Carlton, DC, Anthony Hernandez, Lifespine LLC, Dr. Zoltan Bereczki, North Florida Orthopedic Medicine LLC, Dr. George El Bahri, Surgical Center of North Florida LLC, Legacy Surgery Center LLC
