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Physicians Cheat Insurer for Covid Testing

Health Care Providers Created Fraudulent Billing for Covid Instant Tests

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In OPEN MRI AND IMAGING OF RP VESTIBULAR DIAGNOSTICS, P.A. v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, Civ. No. 21-10991 (WJM), United States District Court, D. New Jersey (September 19, 2022) an insurer sued for not paying bills cross-claimed

for fraud damages and violation of the the New Jersey Insurance Frauds Prevent Act (IFPA).

Open MRI and Imaging of RP Vestibular Diagnostics, P.A. sued Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) for violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., based on Horizon’s alleged failure to pay insurance claims for COVID-19 rapid testing.

Horizon’s operative pleading, which the Court refers to as the Second Amended Consolidated Counterclaim and Third-Party Complaint, asserts twelve counts for violations of the common law and the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1, et seq., based on an alleged scheme to defraud Horizon. Horizon brings its claims against Plaintiff/Counterclaim Defendant Open MRI et al (collectively, the “Third-Party Defendants”).


Horizon is an insurance company with its principal place of business in Newark, New Jersey. It provides healthcare benefits for insured subscribers pursuant to a variety of healthcare plans and policies issued or administered throughout the state.

Open MRI and others are medical practices all located in Rochelle Park, New Jersey.

The Alleged Scheme to Defraud Horizon

In April of 2020, as the novel COVID-19 virus spread throughout the United States, Open began offering rapid COVID-19 tests to members of the public at their joint practice location. Overall, these rapid test “appointments” at Open MRI as reported by Horizon members, were very brief, taking no longer than five minutes and involved little to no interaction with a licensed physician. Open MRI charged patients $35 at the time of service and then submitted claims to Horizon for further payment.

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To submit a health insurance claim, healthcare providers must complete standard billing forms. The billing forms require providers to use specific numeric codes that describe the services for which the provider seeks payment. Federal regulations designate the standard code systems that providers use in order to ensure that health insurance claims are processed efficiently and consistently. In turn, insurance companies like Horizon rely on providers to input codes that most appropriately and accurately describe the services provided to patients so that the insurer can adjudicate claims and secure reimbursement pursuant to the patient’s health benefits plan.

According to Horizon, from April of 2020 onward, the cross-defendants submitted insurance claims seeking grossly inflated billed charges for medical services that were performed unlawfully or not performed at all, and that were unnecessary or inappropriate to administering rapid COVID-19 tests.

Billing for Services Rendered Unlawfully

From April of 2020 through September of 2020, the cross-defendants were not certified as “Authorized Laboratories” under the Comprehensive Laboratory Improvement Act (“CLIA”), and thus were not permitted to administer rapid COVID-19 tests. Nonetheless the cross defendants, administered rapid COVID-19 tests to patients and then submitted claims to Horizon for reimbursement. Horizon ultimately paid more than $140,000, and these claims for services that were rendered unlawfully.

Billing for Services That Were Not Rendered

Each time the cross-defendants submitted a claim for a rapid COVID-19 test rendered on a Horizon member, they also billed for “specimen handling,” which requires the sample collected for testing to be transferred from the provider’s office to a laboratory. Rapid COVID-19 tests, however, do not require transfer of the patients’ specimens to a laboratory for testing because they are “point of care tests” performed in the provider’s office. Yet, the cross-defendants knowingly submitted claims for “specimen handling” services that never occurred and were unnecessary in administering rapid tests. Horizon collectively paid them more than $7,000 on these claims.

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Additionally, each time the cross-defendants submitted a claim for a rapid COVID-19 test rendered on a Horizon member, they also billed for moderate- and high-level evaluation and management (“E&M”) services. These moderate- and high-level E&M billing codes are to be used where a healthcare provider spends thirty to sixty minutes face-to-face with a patient, takes a detailed medical history and performs a detailed examination, and utilizes medical decision making of low, moderate, or high complexity. Even though Horizon members’ minutes-long encounters for a rapid COVID-19 test involved only a temperature check, a few “prescreen” questions, and a nasal swab, and cross-defendants nonetheless billed Horizon for more significant E&M services that were not actually rendered. Horizon collectively paid them in excess of $300,000 on these claims.

Horizon’s Claims Against the Third-Party Defendants

Horizon asserts twelve causes of action against the Third-Party Defendants all involving illegal or fraudulent billing.


A claim for common law fraud resembles a private action brought by an insurance company under the IFPA, but because the IFPA New Jersey Insurance Frauds Prevent Act (IFPA) sweeps more broadly than common law fraud plaintiffs are required to establish fewer elements when alleging fraud in violation of the statute. Unlike common law fraud, the IFPA does not require proof of reliance on the false statement or resultant damages, nor proof of intent to deceive. A plaintiff need only establish that (1) defendant presented false or misleading information in connection with submitting an insurance claim; (2) defendant knew the information was false or misleading; and (3) information was material to a claim for reimbursement under an insurance policy.

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Horizon has pleaded ample details of the who, what, when, where, and how of the underlying fraudulent scheme to state a claim for common law fraud and violations of the IFPA.


Horizon should be commended for using the IFPA to defeat fraud related to alleged COVID-19 testing and medical treatment that was neither rendered nor necessary. The group of testers and physicians had the unmitigated gall to sue for payment of claims that they new or should have known were not appropriate, were provided by unlicensed professionals and were were inflated billing for 30 minutes face to face with a patient when they never spent more than 5 minutes if any time at all. Fraud will only be defeated or deterred if the profit motive is taken from the act and hopefully the evidence collected in this civil action is also evidence of multiple crimes.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and and receive videos limited to subscribers of Excellence in Claims Handling at to Excellence in Claims Handling at available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover.

Write to Mr. Zalma at;;; daily articles are published at Go to the podcast Zalma On Insurance at; Follow Mr. Zalma on Twitter at; Go to Barry Zalma videos at at; Go to Barry Zalma on YouTube-; Go to the Insurance Claims Library –

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