Case 1:21-cv-01141-ENV-RML Document 1 Filed 03/03/21 Page 1 of 69 PageID #: 1
`
`Barry I. Levy, Esq.
`Michael A. Sirignano, Esq.
`Frank P. Tiscione, Esq.
`Philip P. Nash, Esq.
`RIVKIN RADLER LLP
`926 RXR Plaza
`Uniondale, New York 11556
`(516) 357-3000
`
`Counsel for Plaintiffs Government Employees Insurance
`Company, GEICO Indemnity Company, GEICO General
`Insurance Company and GEICO Casualty Company
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`-------------------------------------------------------------------------------X
`GOVERNMENT EMPLOYEES INSURANCE COMPANY,
`GEICO INDEMNITY COMPANY, GEICO
`GENERAL INSURANCE COMPANY and GEICO
`CASUALTY COMPANY,
`
`Plaintiffs,
`
`-against-
`
`LILY ZARHIN, M.D.,
`LZ MEDICAL DIAGNOSTIC, P.C., and
`JOHN DOE DEFENDANTS “1” – “10”,
`
` Defendants.
`------------------------------------------------------------------------------X
`
`COMPLAINT
`
`Docket No.:_____ ( )
`
`Plaintiff Demands
`Trial by Jury
`
`a
`
`Plaintiffs Government Employees Insurance Company, GEICO Indemnity Company, GEICO
`
`General Insurance Company, and GEICO Casualty Company (collectively “GEICO” or
`
`“Plaintiffs”), as and for their Complaint against defendants, Lily Zarhin, M.D., LZ Medical
`
`Diagnostic, P.C., and John Doe Defendants “1” through “10” (collectively, the “Defendants”),
`
`hereby allege as follows:
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`

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`NATURE OF THE ACTION
`
`1.
`
`This action seeks to recover more than $757,000.00 that the Defendants wrongfully
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`obtained from GEICO by submitting, and causing to be submitted, thousands of fraudulent no-
`
`fault insurance charges relating to medically unnecessary, illusory, and otherwise non-
`
`reimbursable healthcare services, including patient examinations, computerized range of motion
`
`(“ROM”) and muscle (“MT”) testing, activity limitation measurement (“ALM”) testing, nerve
`
`conduction velocity (“NCV”) testing and electromyography (“EMG”) studies (collectively the
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`“Fraudulent Services”), which allegedly were provided to individuals (“Insureds”) who claimed
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`to have been involved in automobile accidents and were eligible for coverage under New York no-
`
`fault insurance policies issued by GEICO.
`
`2.
`
`Defendant Lily Zarhin, M.D. (“Zharin”) is a physician licensed to practice in New
`
`York who purports to own a series of medical entities, including Defendants, LZ Medical
`
`Diagnostics, P.C. (“LZ Medical”) as well as a sole proprietorship known as Lily Zarhin, M.D. (the
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`“Unincorporated Practice”) (collectively, the “Provider Defendants”), through which billing was
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`submitted to GEICO for the Fraudulent Services. The Provider Defendants purport to be legitimate
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`medical practices, but operated on a transient basis, maintaining no stand-alone practice, having
`
`no patients of their own, and providing no legitimate or medically necessary services to GEICO’s
`
`Insureds. Zarhin, along with John Doe Defendants “1”-“10”, perpetrated the fraudulent scheme
`
`using illegal referral and kickback arrangements to permit the Provider Defendants to access a
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`steady stream of patients, fraudulently bill GEICO, and exploit New York’s no-fault insurance
`
`system for financial gain without regard to genuine patient care.
`
`3.
`
`Independent of the fraudulent scheme, Zarhin also breached the terms of a
`
`December 2016 settlement agreement that improperly caused No-Fault insurance charges to be
`
`2
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`

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`submitted to GEICO under the names of the Provider Defendants, for healthcare services
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`purportedly rendered to Insureds. More specifically Zarhin agreed to provide GEICO with thirty
`
`(30) days’ written notice of her intent to submit billing under any entity which she purportedly
`
`owned or controlled, and breached the terms of the 2016 agreement by failing to provide GEICO
`
`with the required notice before submitting billing to GEICO in the names of the Provider
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`Defendants and thereafter pursuing collection on the Fraudulent Services.
`
`4.
`
`GEICO seeks to recover the monies stolen from it and, further, seeks a declaration
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`that it is not legally obligated to pay reimbursement of more than $913,000.00 in pending no-fault
`
`insurance claims that have been submitted by or on behalf of the Provider Defendants because:
`
`(i)
`
`(ii)
`
`(iii)
`
`(iv)
`
`(v)
`
`the Fraudulent Services were not medically necessary and were provided –
`to the extent that they were provided at all – pursuant to pre-determined
`fraudulent protocols designed solely to financially enrich Defendants, rather
`than to treat or otherwise benefit the Insureds;
`
`the Fraudulent Services were provided – to the extent that they were
`provided at all – pursuant to the dictates of laypersons not licensed to render
`healthcare services and through the use of illegal kickback arrangements;
`
`the billing codes used for the Fraudulent Services misrepresented and
`exaggerated the level and type of services that purportedly were provided
`in order to inflate the charges submitted to GEICO;
`
`in many cases, the Fraudulent Services billed under New York no-fault
`insurance policies were provided by independent contractors, rather than by
`employees of the Provider Defendants, and therefore were not reimbursable
`under New York law; and
`
`Zarhin breached the 2016 settlement agreement by failing to notify GEICO
`of her intent to submit billing to GEICO in the names of the Provider
`Defendants.
`
`5.
`
`The Defendants fall into the following categories:
`
`(i)
`
`The Provider Defendants are a New York medical professional corporation
`and sole proprietorship through which the Fraudulent Services purportedly
`were performed and were billed to automobile insurance companies,
`including GEICO.
`
`3
`
`

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`(ii)
`
`(iii)
`
`Defendant Zarhin is a physician licensed to practice medicine in New York,
`who purported to own the Provider Defendants, and who purported to
`perform some of the Fraudulent Services.
`
`John Doe Defendants “1”-“10” are individuals who furthered the fraudulent
`scheme perpetrated against GEICO by, among other things, referring
`Insureds to the Provider Defendants in exchange for kickbacks from Zarhin
`and the Provider Defendants and spearheading the pre-determined
`fraudulent protocols used to maximize profits without regard to genuine
`patient care.
`
`6.
`
`As discussed herein, Defendants at all relevant times have known that: (i) the
`
`Fraudulent Services were not medically necessary and were provided – to the extent that they were
`
`provided at all – pursuant to pre-determined fraudulent protocols designed solely to financially
`
`enrich Defendants, rather than to treat or otherwise benefit the Insureds; (ii) the Fraudulent
`
`Services were provided – to the extent that they were provided at all – pursuant to the dictates of
`
`unlicensed laypersons and through the use of illegal kickback arrangements; (iii) the billing codes
`
`used for the Fraudulent Services misrepresented and exaggerated the level and type of services
`
`that purportedly were provided in order to inflate the charges submitted to GEICO; (iv) in many
`
`cases, the Fraudulent Services billed under New York no-fault insurance policies were provided
`
`by independent contractors, rather than by employees of the Provider Defendants, and therefore
`
`were not reimbursable under New York law; and (v) Zarhin breached the 2016 settlement
`
`agreement with GEICO by failing to notify GEICO of her intent to submit billing under the
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`Provider Defendants.
`
`7.
`
`As such, Defendants do not now have – and never had – any right to be
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`compensated for the Fraudulent Services that were billed to GEICO through the Provider
`
`Defendants.
`
`4
`
`

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`8.
`
`The charts annexed hereto as Exhibits “1” through “2” set forth a representative
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`sample of the fraudulent claims that have been identified to-date that Defendants submitted, or
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`caused to be submitted, to GEICO.
`
`9.
`
`Defendants’ fraudulent scheme continues uninterrupted through the present day, as
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`the Provider Defendants continue to seek collection on pending charges for the Fraudulent
`
`Services.
`
`10.
`
`As a result of Defendants’ fraudulent scheme, GEICO has incurred damages of
`
`more than $757,000.00.
`
`I.
`
`Plaintiffs
`
`THE PARTIES
`
`11.
`
`Plaintiffs Government Employees Insurance Company, GEICO Indemnity
`
`Company, GEICO General Insurance Company, and GEICO Casualty Company are Nebraska
`
`corporations with their principal place of business in Chevy Chase, Maryland. GEICO is
`
`authorized to conduct business and to issue automobile insurance policies in New York.
`
`II.
`
`Defendants
`
`12.
`
`Defendant Zarhin resides in and is a citizen of Pennsylvania. Zarhin was licensed
`
`to practice medicine in New York on May 16, 2006 and serves as the nominal or “paper” owner
`
`of the Provider Defendants.
`
`13.
`
`Zarhin is no stranger to these types of fraudulent schemes and was previously sued
`
`by GEICO as part of a fraudulent No-Fault insurance scheme. In that matter, it was alleged that
`
`(i) Zarhin sold the use of her medical license to non-medical laypersons, (ii) the unlicensed
`
`individuals used Zarhin’s license to illegally own and operate her professional corporations, and
`
`Zarhin was never the true owner and had no control over the illegally controlled medical
`
`5
`
`

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`professional corporations. See GEICO et al v. LLJ Therapeutic Services, P.T. P.C. et al., Case
`
`No. 1:15-cv-04818 (E.D.N.Y. 2015). That case was ultimately resolved in December 2016
`
`pursuant to a confidential settlement.
`
`14.
`
`Defendant LZ Medical is a New York professional corporation incorporated on or
`
`about December 24, 2019 and purports to be owned and controlled by Zarhin.
`
`15.
`
`LZ Medical has been used by Zarhin and John Doe Defendants “1” – “10” as a
`
`vehicle to submit fraudulent billing to GEICO and other New York automobile insurers.
`
`16.
`
`Zarhin also has submitted fraudulent billing to GEICO through her sole
`
`proprietorship, the Unincorporated Practice, which has been used by Zarhin and John Doe
`
`Defendants “1” – “10” as a vehicle to submit fraudulent billing to GEICO and other New York
`
`automobile insurers.
`
`17.
`
`Upon information and belief, John Doe Defendants “1” – “10” reside in and are
`
`citizens of New York. John Doe Defendants “1” – “10” are unlicensed, non-professional
`
`individuals and entities, presently not identifiable, who knowingly participated in the fraudulent
`
`scheme by, among other things, referring Insureds to the Provider Defendants in exchange for
`
`kickbacks from Zarhin and the Provider Defendants and spearheading the pre-determined
`
`fraudulent protocols used to maximize profits, without regard to genuine patient care.
`
`JURISDICTION AND VENUE
`
`18.
`
`This Court has jurisdiction over the subject matter of this action under 28 U.S.C. §
`
`1332(a)(1) because the matter in controversy exceeds the sum or value of $75,000.00, exclusive
`
`of interest and costs, and is between citizens of different states.
`
`19.
`
`Pursuant to 28 U.S.C. § 1331, this Court also has jurisdiction over the claims
`
`brought under 18 U.S.C. §§ 1961 et seq. (the Racketeer Influenced and Corrupt Organizations
`
`6
`
`

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`[“RICO”] Act) because they arise under the laws of the United States. In addition, this Court has
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`supplemental jurisdiction over the subject matter of the claims asserted in this action pursuant to
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`28 U.S.C. § 1367.
`
`20.
`
`Venue in this District is appropriate pursuant to 28 U.S.C. § 1391, as the Eastern
`
`District of New York is the District where one or more of the Defendants reside and because this
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`is the District where a substantial amount of the activities forming the basis of the Complaint
`
`occurred.
`
`ALLEGATIONS COMMON TO ALL CLAIMS
`
`I.
`
`Pertinent New York Law Governing No-Fault Insurance Reimbursement
`
`21.
`
`22.
`
`GEICO underwrites automobile insurance in New York.
`
`New York’s “No-Fault” laws are designed to ensure that injured victims of motor
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`vehicle accidents have an efficient mechanism to pay for and receive the health care services that
`
`they need. Under New York’s Comprehensive Motor Vehicle Insurance Reparations Act (N.Y.
`
`Ins. Law §§ 5101, et seq.) and the regulations promulgated pursuant thereto (11 N.Y.C.R.R. §§
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`65, et seq.), automobile insurers are required to provide Personal Injury Protection Benefits (“PIP
`
`Benefits”) to Insureds.
`
`23.
`
`In New York, PIP Benefits include up to $50,000.00 per Insured for necessary
`
`expenses that are incurred for healthcare goods and services, including medical services.
`
`24.
`
`In New York, an Insured can assign his/her right to PIP Benefits to health care
`
`goods and services providers in exchange for those services.
`
`25.
`
`In New York, pursuant to a duly executed assignment, a health care provider may
`
`submit claims directly to an insurance company and receive payment for medically necessary
`
`services, using the claim form required by the New York State Department of Insurance (known
`
`7
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`

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`as “Verification of Treatment by Attending Physician or Other Provider of Health Service” or,
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`more commonly, as an “NF-3”). In the alternative, in New York, a healthcare services provider
`
`may submit claims using the Health Care Financing Administration claim form (known as the
`
`“HCFA-1500 form”).
`
`26.
`
`Pursuant to the New York no-fault insurance laws, healthcare services providers
`
`are not eligible to bill for or to collect PIP Benefits if they fail to meet any New York State or local
`
`licensing requirements necessary to provide the underlying services.
`
`27.
`
`The implementing regulation adopted by the Superintendent of Insurance, 11
`
`N.Y.C.R.R. § 65-3.16(a)(12) states, in pertinent part, as follows:
`
`A provider of health care services is not eligible for reimbursement under section
`5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New
`York State or local licensing requirement necessary to perform such service in New
`York or meet any applicable licensing requirement necessary to perform such
`service in any other state in which such service is performed.
`
`(Emphasis added).
`
`28. Medical professional entities incorporated in New York must both be owned by a
`
`licensed professional authorized by law to practice in New York and who is actually engaged in
`
`the practice of medicine in such corporation. N.Y. Bus. Corp. Law §1507.
`
`29.
`
`In New York, only a licensed physician may practice medicine, may own and
`
`control a professional corporation authorized to practice medicine and, absent statutory exceptions
`
`not applicable in this case, may derive economic benefit from medical services. Unlicensed
`
`individuals in New York may not practice medicine, may not own or control a professional
`
`corporation authorized to practice medicine, may not employ or supervise physicians, and, absent
`
`statutory exceptions not applicable in this case, may not derive economic benefit from medical
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`services.
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`8
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`

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`30.
`
`New York law prohibits licensed healthcare services providers, including
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`physicians, from paying or accepting kickbacks in exchange for patient referrals. See, e.g., New
`
`York Education Law §§ 6509-a; 6530(18); and 6531.
`
`31.
`
`New York law prohibits unlicensed persons not authorized to practice a profession,
`
`like medicine, from practicing the profession and from sharing in the fees for professional services.
`
`See e.g., New York Education Law §6512, §6530 (11), and (19).
`
`32.
`
`Therefore, under the New York no-fault insurance laws, a healthcare services
`
`provider is not eligible to receive PIP Benefits if it is fraudulently licensed, if it pays or receives
`
`unlawful kickbacks in exchange for patient referrals, if it permits unlicensed laypersons to control
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`or dictate the treatments rendered, or allows unlicensed laypersons to share in the fees for the
`
`professional services.
`
`33.
`
`In State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 320 (2005), the New
`
`York Court of Appeals confirmed that healthcare services providers that fail to comply with licensing
`
`requirements are ineligible to collect PIP Benefits, and that insurers may look beyond a facially-
`
`valid license to determine whether there was a failure to abide by state and local law.
`
`34.
`
`Pursuant to the New York no-fault insurance laws, only healthcare services providers
`
`in possession of a direct assignment of benefits are entitled to bill for and collect PIP Benefits. There
`
`is both a statutory and regulatory prohibition against payment of PIP Benefits to anyone other than
`
`the patient or his/her healthcare services provider. The implementing regulation adopted by the
`
`Superintendent of Insurance, 11 N.Y.C.R.R. § 65-3.11, states – in pertinent part – as follows:
`
`An insurer shall pay benefits for any element of loss … directly to the applicant or
`... upon assignment by the applicant ... shall pay benefits directly to providers of
`healthcare services as covered under section five thousand one hundred two (a)(1)
`of the Insurance Law …
`
`9
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`

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`35.
`
`Accordingly, for a healthcare services provider to be eligible to bill for and to collect
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`charges from an insurer for healthcare services pursuant to New York Insurance Law § 5102(a), it
`
`must be the actual provider of the services. Under the New York no-fault insurance laws, a
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`healthcare services provider is not eligible to bill for services, or to collect for those services from
`
`an insurer, where the services were rendered by persons who were not employees of the healthcare
`
`services provider, such as independent contractors.
`
`36.
`
`In New York, claims for PIP Benefits are governed by the New York Workers’
`
`Compensation Fee Schedule (the “NY Fee Schedule”).
`
`37. When a healthcare services provider submits a claim for PIP Benefits using the
`
`current procedural terminology (“CPT”) codes set forth in the NY Fee Schedule, it represents that:
`
`(i) the service described by the specific CPT code that is used was performed in a competent manner
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`in accordance with applicable laws and regulations; (ii) the service described by the specific CPT
`
`code that is used was reasonable and medically necessary; and (iii) the service and the attendant fee
`
`were not excessive.
`
`38.
`
`Pursuant to New York Insurance Law § 403, the NF-3s and HCFA-1500 forms
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`submitted by a healthcare services provider to GEICO, and to all other automobile insurers, must be
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`verified by the health care provider subject to the following warning:
`
`Any person who knowingly and with intent to defraud any insurance company or other
`person files an application for insurance or statement of claim containing any materially false
`information, or conceals for the purpose of misleading, information concerning any fact
`material thereto, commits a fraudulent insurance act, which is a crime.
`
`II.
`
`The Defendants’ Fraudulent Scheme
`
`A.
`
`39.
`
`Overview of the Scheme
`
`Beginning in 2019, and continuing through the present, Zarhin, the Provider
`
`Defendants, and John Doe Defendants “1” – “10” (collectively, the “Defendants”), masterminded
`
`10
`
`

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`and implemented a complex fraudulent scheme in which the Provider Defendants were used to bill
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`GEICO and other New York automobile insurers millions of dollars for medically unnecessary,
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`illusory, and otherwise non-reimbursable services.
`
`40.
`
`The Fraudulent Services billed using the names of the Provider Defendants were not
`
`medically necessary and were provided – to the extent that they were provided at all – pursuant to
`
`pre-determined fraudulent protocols designed solely to financially enrich Defendants, rather than to
`
`treat or otherwise benefit the Insureds, and were further provided pursuant to the dictates of
`
`unlicensed laypersons not permitted by law to render healthcare services.
`
`Zarhin did not operate the Provider Defendants at any single, fixed location.
`
`Zarhin did not market the existence of any of the Provider Defendants to the general
`
`41.
`
`42.
`
`public.
`
`43.
`
`Zarhin did not advertise for patients, never sought to build name recognition or make
`
`any legitimate efforts of her own to attract patients on behalf of any of the Provider Defendants.
`
`44.
`
`45.
`
`Zarhin did not have her own patients and did nothing to create a patient base.
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`Zarhin did virtually nothing that would be expected of the owner of a legitimate
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`medical professional corporation and sole proprietorship to develop their reputation and attract
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`patients.
`
`46.
`
`Zarhin, nevertheless, operated the Provider Defendants on an itinerant basis from at
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`least thirty (30) “No-Fault” medical clinics, primarily located in Brooklyn, Queens, and Bronx,
`
`where the Provider Defendants received steady volumes of patients through no efforts of their own,
`
`including at the following clinics (collectively, the “Clinics”):
`
`
`
`
`
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`615 Seneca Avenue, Ridgewood;
`152-80 Rockaway Boulevard, Jamaica;
`8655 Broadway, Queens;
`2625 Atlantic Avenue, Brooklyn;
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`11
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`2488 Grand Concourse, Bronx;
`3250 Westchester Avenue, Bronx;
`222-01 Hempstead Avenue, Queens Village;
`764 Elmont Road, Elmont;
`1100 Pelham Parkway South, Bronx;
`111-20 Queens Boulevard., Forest Hills;
`3027 Avenue V, Brooklyn;
`6937 Myrtle Avenue, Queens;
`3432 E Tremont Avenue, Bronx;
`60 Belmont Avenue, Brooklyn;
`5414 Avenue N, Brooklyn;
`79-45 Metropolitan Avenue, Flushing;
`60-40 82nd Street, Queens;
`102-28 Jamaica Avenue, Queens;
`1336 Utica Avenue, Brooklyn;
`9701 101st Avenue, Queens;
`245 Rockaway Avenue, Valley Stream;
`3310 101st Street, Flushing;
`9208 Jamaica Avenue, Woodhaven;
`2 Gramatan Avenue, Mount Vernon;
`80-12 Jamaica Avenue, Woodhaven;
`5506 Avenue N, Brooklyn;
`90-16 Sutphin Boulevard, Jamaica;
`1568 Ralph Avenue, Brooklyn;
`1655 Richmond Avenue, Staten Island;
`24019 Jamaica Avenue, Jamaica;
`4720 Avenue N, Brooklyn;
`9701 Jamaica Avenue, Jamaica
`
`B.
`
`47.
`
`The Illegal Kickback and Referral Relationships
`
`Though ostensibly organized to provide a range of healthcare services to Insureds at
`
`a single location, the Clinics in actuality were organized to supply “one-stop” shops for no-fault
`
`insurance fraud.
`
`48.
`
`The Clinics provided facilities for the Provider Defendants, as well as a “revolving
`
`door” of medical professional corporations, chiropractic professional corporations, acupuncture
`
`professional corporations, physical therapy professional corporations and/or a multitude of other
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`purported healthcare providers, all geared towards exploiting New York no-fault insurance system.
`
`12
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`

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`49.
`
`In fact, GEICO received billing from many of the Clinics from an ever-changing
`
`number of fraudulent healthcare providers, starting and stopping operations without any purchase or
`
`sale of a “practice”; without any legitimate transfer of patient care from one professional to another;
`
`and without any legitimate reason for the change in provider name beyond circumventing insurance
`
`company investigations and continuing the fraudulent exploitation of New York’s no-fault insurance
`
`system.
`
`50.
`
`For example, GEICO has received billing for purported healthcare services rendered
`
`at the clinic located at 764 Elmont Road, Elmont New York, from a “revolving door” of
`
`approximately 60 purportedly different healthcare providers.
`
`51.
`
` In addition, GEICO has received billing for purported healthcare services rendered
`
`at the clinics located at 615 Seneca Avenue, Ridgewood, New York and 2488 Grand Concourse,
`
`Bronx New York from a “revolving door” of more than 100 purportedly different healthcare
`
`providers.
`
`52.
`
`Unlicensed laypersons, rather than the healthcare professionals working in the
`
`Clinics, created and controlled the patient base at the Clinics.
`
`53.
`
`For example, at the clinic located at 615 Seneca Avenue, Ridgewood, New York,
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`one of the physicians that had worked at the location attested to the fact that medical services
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`submitted to GEICO were never provided or authorized, confirming that the treatment was not
`
`rendered even though GEICO received billing for the medical services.
`
`54.
`
`Zarhin, in order to obtain access to the Clinics’ patient base (i.e., Insureds), entered
`
`into illegal financial arrangements with unlicensed persons, including John Doe Defendants “1” –
`
`“10”, who “brokered” or “controlled” patients that were treated, or who purported to be treated, at
`
`the Clinics.
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`13
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`

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`55.
`
`The financial arrangements that Zarhin and the Provider Defendants entered into
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`included the payment of fees ostensibly to “rent” space or personnel from the Clinics or fees for
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`ostensibly legitimate services such as marketing, advertising, consulting, billing, and collection
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`services. In fact, however, these were “pay-to-play” arrangements that caused unlicensed laypersons
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`to steer Insureds to the Provider Defendants for medically unnecessary services at the Clinics.
`
`56.
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`Defendants made the various kickback payments in exchange for having Insureds
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`referred to one or more of the Provider Defendants for the medically unnecessary Fraudulent
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`Services at the Clinics, regardless of the individual’s symptoms, presentment, or actual need for
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`additional treatment.
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`57.
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`The amount of the kickbacks paid by Defendants generally was based on the volume
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`of Insureds steered to the Provider Defendants for the purported medically unnecessary services.
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`58.
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`Zarhin had no genuine doctor-patient relationship with the Insureds that visited the
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`Clinics, as the patients had no scheduled appointments with the Provider Defendants. Instead, the
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`Insureds were simply directed by the Clinics, and the unlicensed persons associated therewith, to
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`subject themselves to treatment by whatever physician was working for the Provider Defendants that
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`day, because of the kickbacks paid by Defendants.
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`59.
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`The unlawful kickback and payment arrangements were essential to the success of
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`Defendants’ fraudulent scheme. Defendants derived significant financial benefit from the
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`relationships because without access to the Insureds, Defendants would not have the ability to
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`execute the fraudulent treatment and billing protocol and bill GEICO and other insurers.
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`60.
`
`Zarhin at all times knew that the kickbacks and referral arrangements were illegal
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`and, therefore, took affirmative steps to conceal the existence of the fraudulent referral scheme.
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`61.
`
`In fact, Zarhin decided to incorporate a medical professional corporation and sole
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`proprietorship, splitting the billing for the Fraudulent Services across the practices in order to limit
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`the amount of billing and type of services being submitted by each Provider Defendant.
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`C.
`
`62.
`
`Defendants’ Fraudulent Treatment and Billing Protocol
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`Regardless of the nature of the accidents or the actual medical needs of the Insureds,
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`Defendants purported to subject virtually every Insured to a pre-determined fraudulent treatment
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`protocol without regard for the Insureds’ individual symptoms or presentment.
`
`63.
`
`Each step in Defendants’ fraudulent treatment protocol was designed to falsely
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`reinforce the rationale for the previous step and provide a false justification for the subsequent step,
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`and thereby permit Defendants to generate and falsely justify the maximum amount of fraudulent
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`no-fault billing for each Insured.
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`64.
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`No legitimate physician or other licensed healthcare provider or professional
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`corporation would permit the fraudulent treatment and billing protocol described below to proceed
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`under his or her auspices.
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`65.
`
`Defendants permitted the fraudulent treatment and billing protocol described below
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`to proceed because Defendants sought to profit from the fraudulent billing submitted to GEICO and
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`other insurers.
`
`1.
`
`The Fraudulent Examinations/Consultations
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`66.
`
`Upon receiving a referral pursuant to the kickbacks that Zarhin and the Provider
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`Defendants paid to the owners, operators, and/or medical professionals operating from the Clinics,
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`Defendants purported to provide most of the Insureds in the claims identified in Exhibits “1” – “2”
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`with an initial examination/consultation.
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`67.
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`In keeping with the fact that the initial examinations/consultations were performed
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`pursuant to the kickbacks that Zarhin and the Provider Defendants paid at the Clinics, the Provider
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`Defendants virtually always purported to perform the examinations/consultations at the Clinics
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`where they obtained their initial referrals, rather than at any stand-alone practice.
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`68.
`
`The examinations/consultations were performed as a “gateway” in order to provide
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`Insureds with an excessive number of phony, pre-determined “diagnoses” to allow Defendants to
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`then purport to provide medically unnecessary, illusory, or otherwise non-reimbursable EMG and
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`NCV tests, computerized range of motion and muscle tests, and activity limitation tests.
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`69.
`
`Typically, either Zarhin or someone associated with Zarhin and the Provider
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`Defendants purported to perform the examinations/consultations, which were billed to GEICO
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`through one of the Provider Defendants.
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`70.
`
`Defendants typically billed the examinations/consultations under CPT codes: (i)
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`99205, typically resulting in a charge of $200.68 or (ii) 99244, typically resulting in a charge of
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`$236.94 or $236.95.
`
`71.
`
`The charges for the examinations/consultations were fraudulent in that they were
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`medically unnecessary and were performed – to the extent they were performed at all – pursuant
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`to the kickbacks that Zarhin and the Provider Defendants paid at the Clinics in coordination with
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`John Doe Defendants “1” - “10”, not to treat or otherwise benefit the Insureds.
`
`72.
`
`Furthermore, the charges for the examinations/consultations were fraudulent in that
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`they misrepresented the nature and extent of the examinations/consultations.
`
`73.
`
`Pursuant to the New York Fee Schedule (the “Fee Schedule”), which is applicable
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`to no-fault billing, when Defendants submitted charges for examinations/consultations under CPT
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`code 99205, they represented that: (i) they took a “comprehensive” patient history; (ii) they
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`Case 1:21-cv-01141-ENV-RML Document 1 Filed 03/03/21 Page 17 of 69 PageID #: 17
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`conducted a “comprehensive” physical examination; and (iii) they engaged in medical decision-
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`making of “high complexity.”
`
`74.
`
`Further, according to the Fee Schedule, when Defendants submitted charges for
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`examinations/consultations under CPT code 99244, they represented that: (i) they took a
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`“comprehensive” patient history; (ii) they conducted a “comprehensive” physical examination;
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`and (iii) they engaged in medical decision-making of “moderate complexity.”
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`(a) Misrepresentations Regarding the Performance of Examinations
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`75.
`
`Pursuant to the Fee Schedule, the use of CPT code 99244 to bill for an initial patient
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`encounter represents that the examining physician performed a “consultation” at the request of
`
`another physician or other appropriate source.
`
`76.
`
`However, Defendants did not provide their purported “consultations” – to the extent
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`that they are provided at all – at the request of any other physicians or other appropriate sources.
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`Rather, to the extent that the putative “consultations” were performed in the first instance, they
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`were performed solely as part of Defendants’ fraudulent treatment protoco