On March 8, 2012, the Department of Financial Services (DFS) issued a new regulation that will enable New York State to investigate and ban medical providers who engage in fraudulent and deceptive practices from participation in no-fault. The preamble to the new regulation makes it clear that the DFS investigation will focus on the “ownership, control, and daily operation of professional service corporations…by individuals who are not licensed to practice medicine.”

As per the new regulation, the DFS may investigate any reports or allegations (largely those made by insurers) that a no-fault provider is possibly engaging in fraud. After conducting its investigation, the DFS will send to the Department of Health (DOH) and the State Education Department (SED) a list of any no-fault providers who it believes may have engaged in unlawful activity, together with a description of the grounds for inclusion on the list. If after review, the DOH and SED confirm that there is a reasonable basis to suspect a listed provider, a hearing will be conducted of that provider to determine whether the no-fault healthcare provider should be banned from further participation in the no-fault system. In appropriate cases, the DOH and SED may revoke medical licenses and/or refer no-fault doctors for criminal investigation.

The DFS has already targeted 135 no-fault medical providers for investigation and has sent letters to them demanding information regarding their corporate structure, payment requests, and the doctor’s direct participation in the practice. The authority of the DFS to issue the questionnaire is suspect as there is a 90 day commentary period following the enactment of a regulation by the Superintendent. The DFS intends to use these answers as part of its investigation into whether the doctors are the true owners of their no-fault medical practices and directing operations therein. Any no-fault healthcare provider who refuses to respond to the DFS letters within 14 days may be banned from participating in the no-fault system.

Please contact Anthony J. Licatesi for any further questions regarding the new regulation and/or for further information on the no-fault fraud investigation, or see our blog post on no-fault fraud.