Shanti v. Allstate Ins. Co.

• Decision Date: 03 November 2011
• Docket Number: 14–10–01148–CV.,14–10–01147–CV,Nos. 14–10–01126–CV,s. 14–10–01126–CV
• Citation: 356 S.W.3d 705
• Parties: Ihsan SHANTI, M.D., Larry Likover, M.D., Rehab Alliance of Texas, Inc., d/b/a Steeplechase Family Healthcare and Steeplechase Pain Management & Surgical Associates, Sheila Smith, f/n/a Sheila Goyer, Dennis Smith, D.C., and Karl Covington, M.D., Appellants, v. ALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Allstate County Mutual Insurance Company, and Allstate Fire & Casualty Insurance Company, Appellees.
• Court: Texas Court of Appeals

356 S.W.3d 705

Ihsan SHANTI, M.D., Larry Likover, M.D., Rehab Alliance of Texas, Inc., d/b/a Steeplechase Family Healthcare and Steeplechase Pain Management & Surgical Associates, Sheila Smith, f/n/a Sheila Goyer, Dennis Smith, D.C., and Karl Covington, M.D., Appellants,

v.ALLSTATE INSURANCE COMPANY, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Allstate County Mutual Insurance Company, and Allstate Fire & Casualty Insurance Company, Appellees.

Nos. 14–10–01126–CV

14–10–01147–CV

14–10–01148–CV.

Court of Appeals of Texas, Houston (14th Dist.).

Nov. 3, 2011.

Samuel A. Houston, for appellant Ihsan Shanti, M.D., in No. 14-10-01126-CV.

Larry Likover, M.D., pro se, in No. 14-10-01147-CV.

Timothy Abraham Rothberg, Chris E. Ryman, Jerry McFaddin Young, Houston, for appellants Rehab Alliance of Texas, Inc., d/b/a Steeplechase Family Healthcare and Steeplechase Pain Management & Surgical Associates, Sheila Smith, f/n/a Sheila Goyer, Dennis Smith, D.C., and Karl Covington, M.D., in No. 14-10-01148-CV.David Kassabian, Bret W. Weatherford, Arlington, for appellees, in No. 14-10-01126-CV.Bret W. Weatherford, Arlington, for appellees, in No. 14-10-01147-CV.David Kassabian, Arlington, for appellees, in No. 14-10-01148-CV.Panel consists of Chief Justice HEDGES and Justices ANDERSON and CHRISTOPHER.

OPINION

ADELE HEDGES, Chief Justice.

In this accelerated interlocutory appeal, appellants challenge the trial court's denial of their motion to dismiss under section 74.351 of the Texas Medical Liability Act (“TMLA”). See Tex. Civ. Prac. & Rem.Code Ann. § 74.351(b) (West 2011); see also id. § 51.014(a)(9) (permitting interlocutory appeals from a trial court's ruling under Section 74.351). Finding no error, we affirm.

BACKGROUND

This case arises from a suit between a group of insurance companies on one side, and a group of health care providers and physicians on the other. In their live pleading, appellees Allstate Insurance Company, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Allstate County Mutual Insurance Company, and Allstate Fire & Casualty Insurance Company (collectively “Allstate”) asserted a cause of action for fraud, conspiracy, and unjust enrichment against appellants Rehab Alliance of Texas, Inc., d/b/a Steeplechase Family Healthcare and Steeplechase Pain Management & Surgical Associates; Sheila Smith, f/n/a Sheila Goyer; Dennis Smith, D.C.; Karl Covington, M.D.; Ihsan Shanti, M.D.; and Larry Likover, M.D. Sheila Smith is the owner and president of Rehab Alliance, a clinic specializing in the treatment of persons injured in automobile collisions. Sheila's husband, Dennis, serves as a chiropractor in one of Rehab Alliance's two Houston-area locations. Doctors Covington, Shanti, and Likover are all alleged to have had some external relationship with Rehab Alliance.

As a provider of automobile insurance, Allstate paid a number of settlement claims to persons who were purportedly involved in car accidents and later treated by appellants. Allstate alleges that it was damaged because these settlement sums were paid in reliance on false material representations reflected in documents, bills, and other records prepared by appellants. Allstate also alleges that appellants willfully conspired together, through referrals and other fee-splitting schemes, to defraud the insurance companies and to obtain funds to which they were not justly entitled.

Allstate alleges an elaborate set of facts in support of its three legal theories. Briefly summarized, those facts suggest that: (1) appellants solicited referrals from personal injury attorneys, offering to provide their clients with all of the medical services and documentation needed to support a personal injury claim; (2) in exchange for those services, appellants demanded a portion of any settlement or judgment obtained in their patients' litigation; (3) in an effort to maximize their financial gain, appellants conspired together and charged their patients for expensive and unnecessary medical procedures; and (4) through falsified records and other materials, appellants misrepresented to various insurance companies, including Allstate, that all of the services they performed were executed in honest and independent clinical judgment. The more precise details of Allstate's allegations are described in the following paragraphs.

When they first arrive at Rehab Alliance, patients are required to sign an assignment of benefits acknowledging their personal liability for the clinic's bills. This document is forwarded to the patient's attorney, who either includes it in demand packages or submits it directly to Allstate. Patients are also given a letter of protection, in which Rehab Alliance agrees to release the patient of all financial obligations incurred during treatment. The release comes with two conditions: (1) the patient must maintain his or her attorney representation, and (2) the patient must complete the treatment plan provided by Rehab Alliance. These letters of protection are never disclosed to insurers such as Allstate.

Dennis Smith is the sole chiropractor for Rehab Alliance, and Dr. Covington is its Medical Director. Despite the title, Dr. Covington maintains his own practice at a separate location, and he is rarely seen on the premises of either Rehab Alliance clinic. Pursuant to an oral agreement, Rehab Alliance pays Dr. Covington a flat quarterly fee for public use of his name.

Although Dr. Covington hardly ever visits Rehab Alliance, his name appears on many medical records signifying that he examined and provided services to clinic patients. These examinations are actually provided by nurse practitioners employed by Rehab Alliance on a contract basis. Dr. Covington neither supervises the nurse practitioners, nor provides them with any written protocols or instructions. The nurse practitioners prescribe and refill medications, including narcotics such as Vicodin, under Dr. Covington's auspices.

Following examinations, patients are often treated in uniform, “cookie cutter” fashion. They receive hot and cold packs and electric stimulation modalities. Rehab Alliance bills these modalities under a code for “attended” procedures, even though they are not attended. At the request of their attorneys, patients are also referred for MRI scans at a facility managed by U.S. Imaging, Inc. Radiologists at this facility falsely identify vertebral disc bulges and herniations and report these findings in medical narratives. Rehab Alliance has an agreement with U.S. Imaging, in which Sheila Smith has the authority to reduce or compromise the fees billed.

After the MRIs, patients are also referred for orthopedic and pain management consultations. Over the years, a number of physicians have conducted these consults, including Doctors Shanti and Likover. These doctors conduct cursory consultations, even though billing records show the patients are charged for “comprehensive examinations,” which typically involve sixty minutes of face-to-face time with the patient. Pursuant to agreements between Rehab Alliance and these physicians, billing for the consultations is managed exclusively by Rehab Alliance. As with the MRI procedures, Sheila Smith has the authority to reduce or compromise the physician's fees, collect the fees, and split the recovery with the treating physician. Because recovery depends upon the patient's successful collection of settlement or judgment, the doctors effectively work on a contingency basis.¹

Patients may also be referred for epidural steroid injections (“ESIs”). These procedures are costly and often performed at the behest of the patient's attorney. Billing for ESIs is managed by Steeplechase Pain Management & Surgical Associates, which is merely an assumed name of Rehab Alliance. The ESIs are performed in the same facility managed by U.S. Imaging where the MRIs are conducted. Dr. Shanti performs some of the procedures here himself. ² As with the MRIs, Sheila Smith has the authority to set the charge and reduce or compromise the billing. The billing represents all charges associated with the ESI, including the administering physician's fee.³ When Rehab Alliance collects the fee, it is split evenly with U.S. Imaging.

In addition to the letters of protection, appellants also conceal other documents, such as “patient update” notes. These notes reflect that medications are being prescribed by lay persons using Dr. Covington's name, that attorneys are making determinations as to whether MRIs and ESIs should be performed, and that attorneys are also requesting revisions in certain medical narrative reports. These documents are neither disclosed in the claims process, nor produced in response to subpoenas for clinic records.

Based on these factual allegations, Allstate seeks recovery of damages resulting from a number of misrepresentations, including: (1) that certain services charged by Rehab Alliance were provided by a medical doctor, or at least a properly supervised nurse practitioner; (2) that patients remained liable for their own medical bills; and (3) that certain referrals and procedures charged to the patients were medically necessary and a product of independent clinical judgment. Allstate also alleges that appellants specifically failed to disclose: (1) that doctors performing consultations and other procedures were effectively paid on a contingency basis; (2) that personal injury attorneys dictated whether certain procedures would be performed; (3) that partial payments were made for some surgical procedures; (4) that medications were prescribed and refilled by nurse practitioners, rather than licensed physicians; and (5) that appellants were interested parties in their patients' litigation. Allstate contends that appellants knew their representations to be false, that they conspired together to create these false and misleading statements, and that they ultimately caused...