SACRAMENTO, Calif. -A new California law sharply curtails some of the most lucrative practices in personal-injury law, by prohibiting lawyers from receiving kickbacks from doctors to whom they refer clients and preventing investors from buying medical bills at a discount and marking them up in court.
The wrinkle in this new law is that it applies only to rideshare companies like Lyft and Uber. Ordinary consumers involved in vehicle accidents will still participate in a system in which lawyers provide a steady stream of patients to doctors who sometimes provide inflated bills and unnecessary medical treatments in return.
Senate Bill 623, signed into law by Gov. Gavin Newsome on June 25, represents a grand compromise between segments of California’s trial bar and the rideshare industry. In exchange for supporting the bill, trial lawyers pulled a ballot initiative that would have expanded Uber’s liability for passenger injuries and sexual misconduct, while Uber dropped a competing initiative that would have capped attorney fees in all vehicle crashes at 25%.
Each side was prepared to spend as much as $100 million on their campaigns and even ran dueling Super Bowl ads to try to push voters to their side. They dropped those plans after the compromise bill offering legal reforms for Uber and tighter regulations on driver hiring and background checks.
Left out in the compromise were California traffic-injury lawyers, who are the most likely to avail themselves of the financial services provided by third-party financiers and medical lien providers.
“The big hitter plaintiff lawyers, they don’t do this stuff,” said Joe Kessing, a longtime California insurance industry official who closely followed the drafting and passage of SB 623. “The billboard attorneys do.”
The law contains some of the most far-reaching reforms in the country to curb practices the insurance industry has struggled to combat across the country. Legal Newsline has detailed those practices in articles about traffic and personal-injury lawyers, including how plaintiff lawyers in Georgia ally with medical providers to inflate courtroom damages and attorneys in New York recruit illegal immigrants to participate in staged traffic and workplace accidents.
Central to these schemes are medical-lien providers, doctors, physical therapists and others who take referrals from law firms and sell the resulting bills at a steep discount to investors. The bills for higher amounts are presented in court as evidence, and the investors – often hedge funds – pocket the difference as profit. Court documents show doctors accepting $1,000 or less for a steroid injection billed at $10,000.
The new California law effectively outlaws that business for lawsuit against rideshare companies, by requiring medical lien providers to disclose how much they were paid to provide care and capping damages at the amount paid for a lien. With no markup possible on medical bills, investors will have to look elsewhere for opportunities.
The law also caps the fees medical lien providers can charge at the 70th percentile of industry rates unless the service was “exceptionally rare or highly specialized.” That serves as a second check on bills that far exceed what insurers normally pay.
Doctors also must disclose if a plaintiff was referred by a law firm and how many patients were referred by those same lawyers over a 24-month period. Attorneys are prohibited from receiving kickbacks from providers or holding an ownership stake in medical practices, either by themselves or through a relative.
Uber and the Consumer Attorneys of California released a joint statement after the bill passed.
"Both sides agree: Californians deserve a system that's safe, fair, and accountable. This agreement protects patients from unnecessary treatment or getting overcharged, ensures access to medical care and legal representation, and strengthens safety measures."
The bill’s author, Sen. Tom Umberg, D–Santa Ana, said it “is a testament to the fact that the best public policy is often built through negotiation.”
Uber has taken aggressive steps to fight what it considers to be abusive and fraudulent lawyer practices. Last year, it sued attorneys Igor Fradkin and Jacob Emrani, accusing them of engaging in a kickback scheme with lien-based medical providers. The lawyers deny the charges and have moved to dismiss the case.
The suit was part of a campaign against personal injury lawyers and doctors who Uber says are engaged in schemes to use a pattern of alleged kickbacks and fraudulent or exaggerated diagnoses to inflate claims, often worth hundreds of thousands of dollars, against Uber's $1 million insurance policies.
These lawsuits accuse doctors and lawyers of allegedly conspiring in violation of the federal Racketeering Influence Corrupt Organizations (RICO) Act. In Los Angeles County, for instance, Uber said about 45% of the cost paid by Uber riders is for insurance mandated by the state.
Uber had earlier filed such lawsuits against others in New York and Florida. Its lawsuit against a Pennsylvania lawyer recently received the go-ahead from a federal judge, and the company and FedEx have also gone to court in New York to allege staged auto accidents.
