Edina MRI company, chiropractors sued for insurance fraud

Illinois Farmers Insurance claims an Edina-based magnetic resonance imaging provider has been paying off chiropractors and clinics to order bogus scans for insurance claims.

The allegations, laid out in a lawsuit filed in U.S. District Court in Minneapolis, say Mobile Diagnostic Imaging has recently collected more than $500,000 in improper insurance claims from Farmers. It also says MDI has paid out nearly half that to chiropractors and clinics in return for the referrals — a scheme the lawsuit calls illegal.

MDI and its owner, Michael Appleman, have not yet filed a response to the lawsuit. Appleman declined comment for this story.

The lawsuit alleges the MRI company offers a bogus "confidential rental agreement" to pay the clinic or office for phones, Internet access, parking space and other items unnecessary for its mobile scanning unit when car accident victims are referred to MDI for scans.

Some clinics and chiropractors, the complaint alleges, got more than $15,000 in improper payments in 2011 alone. It also alleges that some scans are ordered at the end of treatment and that the agreements are "merely a pretext for paying kickbacks" to the defendant clinics and chiropractors for patient referrals.

"It's called soft fraud," said Mark Kulda, a spokesman for the Insurance Federation of Minnesota. "It's medical treatment that occurs that wasn't necessary...If this happened under a different system, like the health insurance system or workers compensation, there's a really good chance they might say 'That's not medically necessary. We're not paying for an MRI. An X-ray would be just fine.'"

In Minnesota's no-fault auto insurance system, Kulda said, "we don't have the tools to say that, which means everybody who buys auto insurance winds up paying for it."

The Legislature needs to set more rigorous standards for car of people injured in vehicle crashes and make insurance claims, he added.