Daily Businss Review – Is regulation required for attorney referral services?
Daily Business Review
September 12, 2011
After Kathy Wilson was in a fender bender, her husband recalled a catchy tune in a radio commercial for 411 Pain. She called, hoping to get some medical relief for her back pain.
What the Jacksonville woman didn't expect was to find a lawyer at the clinic where a van loaded with other patients dropped her off.
"I didn't even know I was supposed to meet with a lawyer, but he was waiting for me," said Wilson, an administrative aide for the Jacksonville Urban League. "I wasn't thinking of suing anyone. I was thinking it would be good for my back."
While Wilson was waiting to see a doctor, the lawyer went through a lengthy explanation of what kind of legal case she had and examples of people who had won sizable settlements. She was told she could not see a doctor until she signed his paperwork.
Over the four hours Wilson was at the clinic, she got some X-rays but never saw a doctor. Wilson later canceled her contract with the lawyer but said it took repeated calls.
Wilson's experience, and others like it, have put the spotlight on for-profit lawyer referral services in Florida such as 411 Pain, 1-800-Ask-Gary, Call a Doc First and Who Can I Sue. Consumer complaints have prompted calls for new state legislation, inspired the formation of a Florida Bar committee and even triggered criminal investigations. But The Bar has been historically gun-shy about disciplining attorneys in this area. From 1989 to 2000, The Bar recommended punishing only five attorneys for improper patient solicitation or brokering, a statewide grand jury found.
The initiatives dovetail with efforts to repeal the state's mandatory $10,000 personal injury protection coverage with support from the deep-pockets PIP player, the insurance industry.
With billboards and radio and television commercials, lawyer referral services appeal to people involved in car accidents. In one radio spot, 411 Pain states: "Car accidents happen. Telling everyone on Facebook isn't solving your problems. Calling 1-800-411 Pain could. You may be entitled to up to $100,000. Maybe even more depending on the facts. Remember, after 911, call 411."
The services contract with lawyers, maintain a lawyer database and refer callers to lawyers who match their needs. According to testimony at a Bar hearing in June, lawyers pay up to $5,000 a month to referral services. But the fee could pay off in a big way: one Sarasota lawyer earned a $9 million paycheck off a referral from 1-800-Ask-Gary, according to testimony presented by the service's lawyer, Greg Zitani of St. Petersburg.
The Florida Bar, the state Department of Financial Services, the state CFO, legislators and lawyers have all raised concerns about the explosion in referral services around the state. But if new regulations and other actions are required, what form shall they take?
"We do not object to reasonable regulation with regard to referral as long as it's not burdensome and interfering with our business," said Lester Perling, a Broad and Cassel partner in Fort Lauderdale who represents 411 Pain and the company's founder, Oakland Park chiropractor Robert Lewin. "But I have no reason to believe that illegal activity such as kickbacks and patient brokering is tied to lawyer referral services, or that the services make it more or less likely. No one has offered any evidence of that. If lawyer referral services go away, I think this problem will continue."
Perling said 411 Pain is under investigation by the Florida attorney general's office under Florida's Fair and Deceptive Trade Act for potentially misleading advertising. The ad that consumers complained about shows a picture of a police officer who is not truly an officer. Perling said he expects the 4-week-old investigation to be resolved shortly and noted the ad included a disclaimer explaining that the officer was not a real officer.
The state agency that regulates referral services is the Department of Financial Services, which is investigating several lawyer referral services and lawyers for alleged illegal solicitation, patient brokering and kickbacks, according to Capt. Steve Smith, statewide PIP fraud coordinator for the agency.
No referral services or lawyers have been charged with any wrongdoing. But in June, Smith told a Florida Bar committee hearing on for-profit referral services that his department is taking a look. He did not name any firms or individuals.
"We are investigating several services for illegal solicitation, patient brokering and kickbacks," Smith testified. "We've learned that oftentimes the use of advertising is a cover for illegal activity. It all starts with PIP. That's where the big dollars are. It's become so pervasive that anyone involved in an accident is aware that I can make some money."
Smith said he has seen referral services pay a police department employee or pose as a member of news media to obtain vehicle crash reports. Referral services that solicit accident victims within 60 days of an accident violate state law. Smith said crash victims who have been solicited were told to say they called referral services after seeing their ads on bus benches or billboards. The department also has received reports of services offering money or in-kind services to patients to go to a particular clinic or lawyer.
"We have seen a tremendous spike in the rise of PIP fraud in our state," Smith testified.
Variations range from traditional health care fraud like billing for services not rendered to fraudulent car-crash lawsuits and patient brokering among doctors, diagnostic facilities and lawyers.
"Organized fraud rings continue to steal Floridian's hard-earned dollars and undermine the intent of Florida's PIP laws," Florida's Chief Financial Officer Jeff Atwater said after charges were filed against seven suspects from Miami and Naples this year in an insurance fraud and patient brokering case.
A primary issue on the regulatory front is whether referral services pressure their lawyers to refer clients back to them. Other concerns are that lawyers may be engaged in improper solicitation by being at clinics when new patients arrive, referral services may be illegally buying or acquiring accident information from police departments for future solicitation, and the services were set up expressly to quickly exhaust PIP benefits.
Bar officials, lawyers and some legislators fear referral services constitute a loophole allowing lawyers to skirt strict advertising rules. For example, one referral service ad depicts a police officer, something lawyers are barred from doing in their ads.
"We've heard complaints about how these services communicate with people, the way people were hustled in for medical treatment," said Grier Wells, chair of The Florida Bar committee created in January to study lawyer referral services. "We've been trying to look into this to see if the lawyer referral services comply with rules regulating The Bar."
While The Bar has received anecdotal evidence of wrongdoing by some referral services, Wells noted, The Bar is somewhat stymied because its authority to regulate the services is limited to regulating the lawyers who may participate.
"We're trying to get more evidence of people who have been affected by some of the practices that have been occurring," said Wells, a Jacksonville-based GrayRobinson attorney. "Unless people come forward there's not much we can do about it."
It was his committee that conducted the all-day public hearing during The Bar's annual conference in June. It will hold another one Sept. 22 at the midyear Bar conference in Orlando.
Concerns center on services as opposed to nonprofit services run by virtually every county bar association and The Florida Bar, which vet lawyers to ensure they have no disciplinary action and carry $100,000 in malpractice insurance.
For example, the Broward County Bar Association maintains a lawyer referral list, charging lawyers $75 a year to be included and requiring them to be in good standing with The Bar and carry malpractice insurance. The association gets 12,000 calls a year from people seeking lawyers, executive director Art Goldberg said.
The for-profit referral services are controversial among the trial bar members, too.
"I have never used them," said Walter "Skip" Campbell, a prominent Fort Lauderdale personal injury lawyer and former state senator. "I think it's ambulance chasing at its worst. I think it's a black eye on the profession. I think lawyers should use the old method of getting clients — from referrals, friends and other lawyers."
Campbell said he is solicited by lawyer referral services every week and tells them all, "no thanks, I can get my own clients."
Some referral services and the lawyers who use them maintain the services are already regulated by The Bar and must submit all their ads to The Bar.
In The Legislature
An effort to pull the plug on PIP benefits altogether could eliminate perceived problems with referral services. The insurance industry has pushed PIP repeal for years and succeeded for six months in 2006 before it was reimposed.
"For the first time in maybe 10 years, we don't think the Legislature will be spending all its time on property insurance since it passed a massive property insurance bill last year," said Sam Miller, executive vice president of the Florida Insurance Council, which represents 50 insurance companies. "We've been told that auto insurance and PIP will be the big issue this time."
The Senate banking and insurance committee and the House Economic Development & Community Affairs Policy Council are studying the issue.
About 10 states require mandatory PIP coverage, which allows for direct billing of insurance companies for up to $10,000 by doctors as well as compensation for lost wages. Florida's no-fault PIP law was implemented in 1972 but came under fire in recent years, with studies showing the frequency of vehicle accidents declined from 2004 to 2009 while the cost of PIP claims jumped from $1.43 billion in 2008 to $2.37 billion in 2010, state Insurance Commissioner Kevin McCarty said at a recent Cabinet meeting.
"If the Legislature cannot fix PIP, they may repeal it," Miller said.
State Rep. Rick Kriseman, D-St. Petersburg, is more interested in regulating lawyer referral services. He introduced a bill last year that did not make it out of committee but has refiled the bill for the next session and lined up a Republican Senate sponsor whom he declined to name.
The measure echoes some Bar restrictions by banning false, misleading and deceptive communication and requiring all ads to be approved by The Bar. But his bill also would require referral services to disclose their financial relationship with any lawyers or health care providers, prohibit services from requiring a lawyer to recommend a particular clinic or doctor and bar services from making referrals only to clinic and doctors with ownership stakes in the referral service.
The bill also would require referral services to send a letter to prospective clients informing them of the financial interest of the referral service in a clinic, mandate forfeiture for violations and set civil penalties of $1,000 for a first offense and $5,000 for each subsequent offense.
Kriseman, a Clearwater personal injury lawyer with Lucas Green & Magazine, said his bill was prompted by lawyer colleagues — both plaintiff and defense — insurance carriers and doctors.
"It's kind of an interesting issue because you don't often see so many diverse groups behind a bill," he said. "This is a completely nonpartisan issue."
He said he doesn't buy the argument that lawyer referral services make it possible for tiny personal injury shops to compete against the big boys, which can afford to do their own advertising. He notes Morgan & Morgan, one of the largest personal injury firms in the state, uses 411 Pain.
"I find that argument laughable," he said. "If you look at the lists of attorneys who use these, it's a lot of the big firms. Actually, the small, one-man, two-man firms are the ones who are being hurt more than anybody. They don't have the financial resources to compete."
Julie Kay can be reached at (305) 347-6685.
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