Dateline's Investigation of State Farm's use of Paper Reviews

[Guest guest]

http://www.msnbc.com/news/437401.asp?cp1=1

NBC News

July 25 - " Dateline NBC " had people talking from coast to coast last

month - about car insurance. Maybe you thought your insurance would cover

your medical bills if you were hurt in an accident - until our story about

" paper reviews. " State Farm Insurance company - and others - can use those

reviews to deny medical claims - leaving you uncovered when you need help

most. We heard from more than 1,000 people, most of whom praised our report.

We also heard from some State Farm employees who said that we misrepresented

the fine job their company was doing. We're back with new documents. We've

talked to new sources and we have more to tell you about what State Farm

knew and when it knew it. Correspondent Larson reports the latest on a

" Dateline NBC " investigation.

IN THE NATION'S capitol, reaction to Dateline NBC's investigation of

insurance practices was swift and strong. The chairman of the House Commerce

Committee promised " full investigative powers " to examine the issue.

Rep. Tauzin, who is on the committee, said he will fully

investigate first. " What you've uncovered is probably just the tips of the

iceberg, " says Rep. Tauzin. " But you can bet there will be hearings. "

Within a week of our broadcast, Sen. McCain, who chairs the

Senate Commerce Committee, fired off a letter to the nation's insurance

commissioners, expressing concern over " possible collusion " among insurance

companies and paper review companies.

Nichols: " It will be a massive undertaking. "

State insurance commissioners responded, launching a multi-state

examination of the subject of Dateline's report - State Farm Insurance.

Nichols is the president of their national association.

Nichols: " We feel like 'Dateline' has provided a public

service that has allowed us to recognize a national problem. "

And in Washington state last week, the insurance commissioner said

she'll take the investigation further to include five other major insurers.

Most people buy insurance trusting it will pay off when they need it. And

most of the time, that's exactly what happens. But what happens behind the

scenes when an insurance company decides to challenge your claim?

The " Dateline " story which began it all started in Fairbanks,

Alaska, completely by accident.

In June of 1993, Lecreca Duffey was driving through her neighborhood

when, out of nowhere, a truck ignored a yield sign and broad-sided her car.

Lecreca Duffey: " All I saw was black truck and grill. "

Lecreca was hurt and almost immediately began racking up expensive

doctors' bills. She didn't have health insurance, but she did have auto

insurance which covered injuries caused by accidents. So she called her

insurance agent, who promised to help.

Lecreca: " 'All my medical bills would be taken care of. Don't worry

about a thing.' But that's not what happened. "

If you're like a lot of people, you buy insurance trusting it will

pay off when you need it. And most of the time, that's exactly what happens.

But what happens when it doesn't? What happens behind the scenes when an

insurance company decides to challenge your claim? We're going to tell you

about part of the insurance business you've probably never heard of - a

practice used by nearly every major insurance company in the nation,

involving some people who may not have your best interests at heart.

Our questions into what happened to Lecreca Duffey launched a

15-month " Dateline " investigation into her insurance company, State Farm -

the largest in the nation. We interviewed more than 250 people, reviewed

more than 70,000 pages of documents, and examined two companies that State

Farm did business with. What we found was a disturbing pattern in the way

State Farm handled thousands of accident claims.

Lecreca Duffey, a home daycare operator, had faithfully paid her

premiums for 15 years. But before State Farm paid her bills, it did what a

lot of insurance companies do. It said it wanted the advice of another

doctor - a second opinion to decide which bills to pay.

After all, some injuries like Lecreca's, which involve pain in the

joints and muscles, are easier to fake than most. The auto insurance

industry estimates it loses $5.5 billion to phony claims every year. And

Lecreca was taking an unusual amount of time to heal. Plus, her X-rays

showed a degenerative condition in her joints and she had had polio as a

child.

Lecreca Duffey had faithfully paid her premiums for 15 years. But before

State Farm paid her bills, it did what a lot of insurance companies do. It

said it wanted the advice of another doctor - a second opinion to decide

which bills to pay.

So State Farm shipped Lecreca's paperwork from Alaska to a doctor

in San Diego.

Lecreca Duffey: " I had no idea who this person was. "

Larson: " Didn't you go see him? "

Lecreca: " No. "

Larson: " Didn't he examine you? "

Lecreca: " No. "

But nine months after Lecreca's accident, State Farm got back a

report, signed by a doctor, that surprisingly called her injuries " minor. "

The doctor concluded that her difficulties were most likely not caused by

the accident, but by a pre-existing bone condition.

Bottom line - State Farm took the doctor's recommendation that only a

small fraction of Lecreca's bills were " justified in relation to the

accident, " and paid only $780 of Lecreca's bills.

Larson: " When you got that information, what was your reaction? "

Lecreca Duffey: " Stunned. "

Lecreca may have been stunned, but medical reviews like the one she

got are written all the time. State Farm says it uses them for claims that

seem questionable - about one out of every 20 percent. That's at least

35,000 claims a year. And what better way for State Farm to get an honest,

independent opinion than from a doctor who doesn't work for State Farm? It's

called a " paper review, " because the patients are never actually examined,

only their medical files and accident reports. And doctors tell us you can

learn a lot from paper work, even find fraud. But consider what happened in

Lecreca's case.

Larson: " The bills were $500, a $1000? "

Lecreca: " Oh, they were thousands. "

Larson: " Thousands of dollars? "

Lecreca: " They were over $10,000 probably by that time. "

Larson: " Could you pay them? "

Lecreca: " No. "

It seemed to come down to one doctor's opinion versus another's. At least

that's what it looked like, until we discovered who was really writing some

of the doctor's reports sent to State Farm.

It seemed to come down to one doctor's opinion versus another's. At

least that's what it looked like, until we discovered who was really writing

some of the doctor's reports sent to State Farm.

Edwin Newton: " I did over 30. I completed over 30 cases myself. "

We found this man, Edwin Newton, who told us he created medical

opinions for the same San Diego company as the doctor who did Lecreca's

paper review - Comprehensive Medical Review or CMR. But Newton wasn't

exactly a doctor.

Larson: " What kind of training do you have? "

Edwin Newton: " I'm a writer. "

Larson: " A writer? What was your college degree in?

Newton: " News editing. "

Larson: " Journalism? "

Newton: " Journalism. "

Larson: " No medical training at all? "

Newton: " None. "

Newton, who now works for a small newspaper, told us in the CMR

Vancouver office where he worked that he, along with a paralegal, a former

teacher and a nurse, created doctors' opinions, deciding whether accident

victims like Lecreca had received appropriate treatment.

Newton: " And of course with my great medical ability, I could really

make the determination, now couldn't I? "

Newton says CMR provided him with a computer containing stock

paragraphs of medical opinions - opinions that were put into reports and

sent to State Farm.

Larson: " These are pre-programmed bits of information? "

Newton: " Right. "

Larson: " That you just slide in. "

Newton: " Right. "

Larson: " Makes you sound like a doctor. "

Newton: " It sounds pretty impressive. "

Newton told us that he, along with a paralegal, a former teacher and a

nurse, created doctors' opinions, deciding whether accident victims like

Lecreca had received appropriate treatment.

Newton worked at CMR for three months until he was let go shortly

before the branch office closed. Remember, this is the same company whose

doctor produced Lecreca's report - the report State Farm used to justify not

paying her bills.

Unable to afford more treatment, Lecreca says her pain became too

much to handle.

Lecretia: " So you start planning ways of killing yourself. You plan

how you're going to do it. "

Did State Farm know that people with no medical training were writing

what were supposed to be doctors' reports? And what would the paper review

company, CMR, say when we confronted its president?

Bill Marvin: " I've been hearing rumors of this for six months, so you

may as well fire away. "

Bill Marvin: " I think on one occasion we even employed a journalist. "

Bill Marvin is CMR's president. He told us that CMR has written

27,000 reports for some of the nation's leading insurance companies. He says

in the mid-1990s, non-medical people often did research and write medical

reports, but that doctors always checked them to make sure the reports were

accurate.

Marvin: " The reports when they were issued were the opinions of the

doctors who signed them. "

But were they? " Dateline " found a number of confidential sources who

told us otherwise.

CMR Insider: " There was really not much of a review going on from the

physician's point of view. "

This CMR insider was so afraid of reprisals he would only speak if we

disguised him. He told us he saw doctors at CMR sign stacks of reports while

barely reviewing the records.

Larson: " How many reports would a doctor look at and sign in

maybe an hour? "

CMR Insider: " Anywhere between 30 to 50. "

Larson: " Fifty reports in one hour? "

CMR Insider: " In one hour. "

Larson: " So it was more like an autograph session? "

CMR Insider: " That's exactly what it was. "

Sources told us some doctors did diligently review reports. Yet, this

man and others told us frequently the reports were then changed without the

doctors' knowledge and then sent on to insurance companies like State Farm.

CMR Insider: " Bill Marvin would feel free to go in and just make a

change to the report. We witnessed it every day. "

Larson: " Did you ever change reports after a doctor had signed

them? "

Bill Marvin: " No, I don't believe so. "

Larson: " Think about that. Never? "

Marvin: " Not to my recollection. "

The review showed Marvin had changed the doctor's report - more than 30

changes in his handwriting. Most were stylistic, but some made things better

for State Farm and worse for the accident victim.

But what Marvin didn't know was that we had tracked down someone

else who had boxes of documents nearly forgotten in a garage. In the boxes,

we found rough drafts of medical reviews - reviews sent to Bill Marvin after

doctors had already signed them, in this case a Dr. Viglotti.

Larson: " Why would they send you a report that Viglotti has already

reviewed and signed? "

Marvin: " I don't know. If you know the answer, please, please

enlighten me. I don't know. "

We did know the answer.

Larson: " This is the same case. "

Because we had a later draft of the same review. It showed Marvin had

changed the doctor's report - more than 30 changes in his handwriting. Most

were stylistic, but some made things better for State Farm and worse for the

accident victim. For example, the doctor had written about the

" unlikelihood " of a back injury. Marvin had crossed that out and changed it

to " extremely unlikely. "

Larson: " Why would you be saying this after a doctor has already

signed off on it? "

Marvin: (sighs, pause)

Larson: " By the way, did you go to medical school? "

Marvin: " No. "

So we asked him again. Why did he change the doctor's report?

Marvin: " Because I was probably the most experienced person in the

company at that point in time, in terms of looking at the wide assortment of

types of cases that would come in from the insurance companies. "

Marvin, who at first had said he never changed doctors' reports, then

said that if he did, he would always run the changes by the doctor. But did

he?

" Dateline " found the doctor and showed him the changes.

Larson: " All these changes, are these your notes?

Dr. ph Viglotti: " No, they're not. "

Dr. ph Viglotti, a well-respected, Harvard-educated doctor worked

for CMR in 1993 and 1994.

Larson: " If that happened, that happened without your knowledge? "

Viglotti: " Absolutely. I did not authorize it. When I finish a report

and my signature was on it, that was it. No more changes were to be made. "

Larson: " We showed this to Dr. Viglotti. And he said it's

obvious to him that somebody is changing his medical opinion after he signed

it and he didn't like it. "

Bill Marvin: " I guess it depends on your perspective. "

Larson: " Under what perspective would this be the right thing to do? "

Marvin: " Well, show me in there what was changed medically, please. "

So, we showed him his changes again.

Marvin: " You know, the process was not entirely paint by the numbers.

Maybe the president of the company shouldn't be involved in, in the report

writing process at all - which I am not anymore. "

Larson: " Maybe the president of the company, who's not a doctor,

should not be rewriting reports after the doctor has already signed them. "

Marvin: " Or maybe the president of the company and doctors need to be

spending a little bit more time together? "

So, why would Marvin change reports - reports insurance companies

like State Farm were using to help analyze medical costs? The answer may lie

in what was usually in the reports - what they said.

Edwin Newton: " We were not in the process or business of healing. We

were in the process of limiting. "

" We were never told exactly, 'deny care, you're paid to deny care.' ... But

the information we had to work with, to come up with a conclusion, was

slanted in that way. "

- EDWIN NEWTON

Claims reviewer Remember Edwin Newton, the journalist who wrote

so-called doctors' reports for CMR? He told us the reports were not at all

what State Farm was saying they were, fair and objective, but in fact, were

secretly biased, written to favor the insurance companies.

Newton: " We were never told exactly, 'deny care, you're paid to deny

care.' We were never told that. But the information we had to work with, to

come up with a conclusion, was slanted in that way. "

" Dateline " obtained copies of the 160 stock computer paragraphs given

to CMR case writers like Newton. And we were surprised to discover almost

every single paragraph cut or limited medical care.

Larson: " It's almost like you were, your job was to come up with

the excuse. "

Newton: " The excuse. We were the excuse. "

" Dateline " also found documents that suggest CMR case writers were

taught to downplay injuries, even going so far as to avoid the word. " Watch

the word 'injury' because it's inflammatory. " On another document, " use

'discomfort' as a substitute for 'pain'. "

And here, an employee suggests leaving out medical information that

could be helpful to the accident victim - " her bones were possibly more

brittle and we don't want to point this out. "

Larson: " 'And we don't want to point this out' - should that be

on here? "

Bill Marvin: " No. "

Larson: " Would that be objective if anybody in your company was

thinking like that? "

Marvin: " As I indicated, , I've never seen that note. I've never

been asked about that note. "

Larson: " Because the way this appears, is somebody had a bias here.

Somebody said 'let's not point out a medical reality. Let's not mention

that.' That's what it looks like. "

Marvin: " That's what it looks like to me too. "

And there was more. " Dateline " legally followed a trail of electronic

footprints. We learned that CMR computer files had been erased. But we found

backups. We collected 39 computer disks from a number of sources. Some were

encrypted, electronically locked so no one could read them. But " Dateline "

cracked the codes and opened the files. Altogether we examined thousands of

memos and documents and something caught our attention.

It was a reference to a sophisticated, computer database. CMR claimed

it could predict the likelihood of an injury in a specific accident by

comparing it to thousands of other accidents. CMR called it CRASHdata. We

were told it was used to recommend cutting care on up to 100 cases sent to

State Farm. Sounds impressive. But there's just one problem. CRASHdata never

really existed.

CMR Insider: " It was a big joke down the hallways of CMR. "

Larson: " A joke? "

CMR Insider: " A joke. We laughed. We couldn't believe that people

were buying a false piece of paper. "

Bill Marvin told us he wasn't sure if CRASHdata had ever been cited

in a CMR report.

Bill Marvin: " I don't know. "

So we took what we had learned to State Farm, to see if it had any idea

that thousands of paper reviews it used to settle accident claims included

reports supposed to be written by doctors, but really written by non-medical

people

But it was. " Dateline " found these CMR reports, purchased by State

Farm, quoting CRASHdata as a reason to deny coverage.

In fact, " Dateline " found a State Farm letter, sent to managers in

the Northwest, promoting CMR's " new review service. " The letter trumpets

CRASHdata's fast turnaround time and low cost. It even included order forms.

So we took what we had learned to State Farm, which was by far CMR's

biggest customer, to see if it had any idea that thousands of paper reviews

it used to settle accident claims included reports supposed to be written by

doctors, but really written by non-medical people - reports slanted against

accident victims, and some which included a bogus database.

Jack North: " The story you're telling is one that I'm not very happy

with and is not State Farm and is not the way we do business. "

Senior Vice president Jack North told us State Farm, too, was shocked

by CMR's behavior. This was the first time State Farm acknowledged publicly

it knew there were problems at CMR.

North: " We've learned some things about CMR that disappoint us and

when we learned about that, we quit doing business with them. "

So if what happened at CMR was just a case of one small paper review

company deceiving the nation's largest insurance carrier, then our story

would likely end here. But it doesn't.

In 1992, of Boise, Idaho, was driving on a highway

when suddenly her entire back wheel fell off. Her axel hit the pavement

hard.

: " It was like thunk, thunk, thunk, thunk down the

road. "

Larson: " You were getting bounced around pretty good. "

: " Right " .

was hurt, eventually, requiring surgery for a herniated disk in

her back. Her insurance company was State Farm.

Now what you're about to hear may sound familiar. Because just like

in Lecreca Duffey's case, State Farm got a paper review that called 's

injuries " minor, " blaming her medical problems on something else - " work

related activities. " And State Farm refused to pay most of her medical

bills.

Larson: " In the common slang, they're basically saying to you, 'we

don't believe you.' "

: " Right. "

Larson: " We think you're lying to us. "

: " Right. "

We learned that just like at CMR, doctors didn't write many of the reports

it sent to State Farm and other insurance companies. In fact, they often

didn't even sign them. Other people in the office did that for them.

But this time State Farm used a different paper review company. It

sent 's file from Boise, Idaho, to Bethesda, land, to a company

called Medical Claims Review Services or MCRS.

So we tracked down the company's founder and former medical director,

Dr. Gots. Right away, we learned that just like at CMR, doctors didn'

t write many of the reports it sent to State Farm and other insurance

companies. In fact, they often didn't even sign them. Other people in the

office did that for them.

Dr. Gots: " It was our report, but someone else did the calligraphy. "

But Dr. Gots assured us, just like the president of CMR had, that

doctors always, always read and checked them all.

Gots: " A doctor looked at every one. "

Larson: " You read all the reports? "

Gots: " That's right " .

But listen to what happened next when we told him a former MCRS

doctor had told us just the opposite.

Larson: " He said it was standard practice at MCRS for reports to go

out without a doctor ever looking at them. "

Gots: " It was not standard practice. "

Larson: " You're actually saying it never happened. "

Gots: " It was certainly not standard practice. It may, I can't say

that it, excuse me, never happened. But it was certainly not standard

practice. "

We kept asking and Dr. Gots eventually admitted that 10 to 15 percent

of MCRS's reports, hundreds, were never looked at by doctors at all.

Gots: " I mean, there are, there is, there were some small percent of

cases that probably went out. "

Larson: " 10-15 percent? "

Dr. Gots eventually admitted that 10 to 15 percent of MCRS's reports,

hundreds, were never looked at by doctors at all.

Gots: " That would be my best guess. And it's a guess at this point,

that went out under our medical director's signature, that had been reviewed

by the nurse. "

Larson: " If that's the case, why didn't the nurses just sign them? "

Gots: " Well, because these represent the view of the corporate

medical director. Because the nurses. "

Larson: " Doctor, with all due respect, how do you know it represented

your view if you never even looked at it? "

Gots: " Because the nurses were very well-trained. They were very well

supervised. It was only on the very simple, straight-forward issues. "

But remember, State Farm used those reviews as doctors' opinions.

" Dateline " obtained copies of 79 MCRS reports done for State Farm. Although

too small a number to draw any definitive conclusions, we were surprised to

find every single medical review - 79 out of 79 - favored State Farm,

recommended cutting back or denying care to accident victims. Dr. Gots told

us that's because State Farm only sent him problematic cases. But we asked

State Farm's Jack North.

Larson: " What does that suggest to you when this independent

medical review company sends back 79 cases and all 79 recommend cutting

medical reimbursement? Doesn't that seem strange? "

Jack North: " Looking back, if we had been able to look broader, at

the time we may have seen that trend earlier. And it is not a trend I'm

happy about or supportive of. "

But some State Farm employees told us from where they sat, that trend

was hard to miss.

Jim Mathis: " It is a company-wide program, and it is decisively and

deliberately orchestrated. "

Jim Mathis is a former State Farm superintendent who had one of the

bigger jobs at State Farm in Washington state. He told us State Farm

management not only knew there was pattern of negative opinions, but wanted

it that way.

Mathis: " There's only one motivation for using a paper review. And

that's to increase profits by reducing costs. "

Take a look at this - a page from a State Farm manual - sent to

hundreds of employees. It says if adjusters want to deny a claim, they

should hire a paper review company " who will support your position. "

Mathis: " We knew that it was a tool to reduce costs, and if we all,

all of the management wanted to promote or move forward in our careers, we

would use these tools. "

'We knew that it was a tool to reduce costs, and if we all, all of the

management wanted to promote or move forward in our careers, we would use

these tools.'

- JIM MATHIS

Former State Farm employee Mathis says he resisted using paper

reviews, especially CMR's, because he didn't think they were fair. He says

he shared his concerns with his supervisors - concerns which should have

gone up the ladder to Deputy Regional Vice President Ralph Householder, a

top official at State Farm.

Mathis says he hoped the well-respected State Farm veteran would set

things right, but instead, rather than doing less business with CMR, Mathis

says Householder pushed employees to do more business with CMR.

Larson: " You got in trouble because you were trying to be a good

neighbor? "

Mathis: " I believe so. "

Larson: " And where did it get you? "

Mathis: " Well, I was terminated from State Farm, yes. "

Larson: " Are you smiling because it's funny or because it's sad? "

Mathis: " Because it's the only emotion I have left over the issue. "

Mathis says he was fired because he wouldn't go along, and in 1997,

filed suit against State Farm, accusing it of conspiring with CMR to defraud

its policyholders. State Farm disputes the charges and says Mathis was fired

for " misconduct and abuse of his position. " A judge dismissed Mathis's suit,

saying he couldn't prove his allegations. Mathis is appealing.

But you may be interested in what happened to Mathis's superior,

Ralph Householder. Well, he got a new job as senior vice president of CMR -

a position " Dateline " has learned he negotiated four months before State

Farm says he left his job. We asked Householder to explain, but he declined.

His lawyer sent us a letter, saying Householder " did nothing improper " and

did not direct employees to use CMR or any other paper review companies.

And if all this sounds like an inappropriate relationship between

companies that were supposed to be independent, it was even more surprising

when we learned what some people inside State Farm were doing.

We reviewed a CMR memo about a meeting with two State Farm employees.

One is quoted as advising CMR to change its medical opinions to give the

insurance company more " room for negotiation " - room to get an accident

victim to settle for less money.

Larson: " It looks like these two State Farm employees are

telling CMR what to say, what to put in their medical reports. "

Jack North: " That's a document I have not seen before. "

North says if anything like that was going on, it was not widespread.

But " Dateline " found out more about the two State Farm employees quoted.

They weren't just any employees. They were, in fact, trainers, responsible

for teaching hundreds of State Farm claim representatives in the Northwest

how to use paper reviews.

One of the trainers is quoted as saying, " If you don't want to pay a claim,

send it to CMR. They'll reduce the amount and provide a strong foundation

for doing so. "

One of the trainers is quoted as saying, " If you don't want to pay

a claim, send it to CMR. They'll reduce the amount and provide a strong

foundation for doing so.' "

North: " That's going too far. I can't support or approve that and if

that was going on, to my knowledge, I'd deal with it very decisively. "

And there was something else about that memo that indicated CMR was

willing to change its reports the way State Farm wanted. Next to each

statement someone had written " Concur. " We recognized the handwriting as

that of CMR president Bill Marvin.

Larson: " It appears as though you and State Farm are working

together to come up with medical opinions that will help them negotiate

settlements. "

Bill Marvin: " Well if that's the way it appears, then I'm glad we've

evolved away from this type of scenario. The concept of what we were doing

was evolving over time. And you go through, it's almost like going through a

rite of passage. "

Larson: " At any point in this journey that you describe, would it

have been proper for State Farm to tell you to start approving or

disapproving more medical tests? "

Marvin: " No, no. "

But according to a CMR source, with some State Farm adjusters, it

happened repeatedly.

CMR Insider: " The claim adjuster would call us and say, you know, I

do not approve of this, we need to adjust it, change the dollar amounts. If

they wanted some money taken away from these reports, we would take away

from the reports. "

Larson: " So they were helping author the reports. "

CMR Insider: " That's exactly what they were doing, yes. "

State Farm says that behavior would have been unacceptable and doesn'

t believe it ever happened.

Larson: " It appears as though employees of the biggest insurance

company in the United States are secretly conspiring to cheat the very

people who are trusting them. "

Jack North: " Well, your word is 'appears,' and I can't argue with

what your perspective is. That just isn't the way we do business. I'm even

bothered with the notion that you may be thinking or suggesting that it is. "

State Farm insists paper reviews do not ultimately cut that many claims. It

cites its own internal study of 65,000 accident claims in Arizona, which

showed only one of every five claims sent out for review resulted in a final

reduction or denial of payment.

State Farm insists paper reviews do not ultimately cut that many

claims. It cites its own internal study of 65,000 accident claims in

Arizona, which showed only one of every five claims sent out for review

resulted in a final reduction or denial of payment.

And remember the 79 MCRS cases in which all the paper reviews were

negative? State Farm says it eventually paid most of those claims in full.

But take a look at this. An economist hired by someone suing State

Farm analyzed nearly 100 claims State Farm sent to CMR. This is the first

public look at how paper reviews profit State Farm.

He found the accident victims on average had about $7,400 in medical

bills. CMR's paper review recommended slashing those claims. In the end,

State Farm paid on average only $4,400, saving State Farm about $3,000 in

medical bills every time it used a paper review. State Farm argues that the

sample is not statistically valid.

: " If State Farm were my neighbor, I'd sell my house

and move. "

As for , she began an uphill battle against the

resources of the insurance giant. State Farm said they didn't think 's

injuries were caused by the accident. It had the MCRS reports, and the

opinions of two neurologists who examined her and said her injuries were

" not compatible with her accident. "

All had were the opinions of her own doctors and the feeling

that all this wasn't fair. So she sued State Farm for bad faith. But then

something happened. State Farm hired yet another doctor to do another paper

review and that doctor sided with , saying her injuries were likely

caused by the accident. State Farm finally paid all her medical bills.

: " My feeling was too little too late. "

So pursued her lawsuit, two years ago, she finally had her day

in court. The jury awarded nearly $10 million in damages.

State Farm asked for a new trial, but the judge said " no " and issued

this scathing opinion. He called the paper review company, MCRS, a

" completely bogus operation, " which prepared " cookie cutter reports. " And he

said State Farm knew the paper reviews " were not objective, but slanted to

favor the denial or reduction of claims. "

As for State Farm's neurologist, it was discovered during the trial

that before writing his supposedly independent medical opinion, he first

talked to a State Farm claim adjuster and consulted with a State Farm

lawyer - something the judge obviously did not like. The judge found the

doctor who claimed 's injuries were not caused by the accident, could

not be considered objective. State Farm is appealing.

MCRS went out of business in 1995, one year after filed her

lawsuit. But Dr. Gots insists MCRS was unfairly portrayed at the trial and

that its medical reports were good.

Dr. Gots: " In fact, we were above standards in the industry by far. "

Larson: " So you're saying other medical review companies

probably looked at even less? "

Gots: " Oh, yeah. They don't even have doctors. They have all nurses

or clerical people who do reviews. "

In Alaska, a year and a half after Lecreca's accident, State Farm had

her examined by two doctors and offered to pay more of her medical bills.

But Lecreca filed suit against State Farm and the paper review company, CMR.

And when her lawyer tried to interview the doctor who supposedly wrote

Lecreca's paper review, State Farm went to court and blocked all efforts to

question him.

So we went looking for the doctor ourselves, and guess what? It was

Dr. Viglotti - the same doctor whose reports had apparently been altered at

CMR. He says he didn't know State Farm blocked his testimony and he was even

more surprised when we showed him a copy of Lecreca's report.

Right away, he noticed something odd about the signature.

Dr. Viglotti: " There's a little kind of a circle underneath it that

doesn't look right to me. "

Larson: " Is there any way that could be your signature? "

Viglotti: " Highly unlikely. "

And after reading it, Dr. Viglotti felt sure he had neither written

nor approved it.

Viglotti: " I don't think I've seen this report. "

This so-called independent medical review, which devastated Lecreca, which

State Farm not only used to deny her claim but also blocked all questions

about, apparently, was forged.

This so-called independent medical review, which devastated

Lecreca, which State Farm not only used to deny her claim but also blocked

all questions about, apparently, was forged.

Bill Marvin: " This is the only incident to my knowledge where

something like this has happened. And as captain of the ship. "

Larson: " So, we just, out of 27,000 cases, we just happened to

be holding this one? "

Marvin: " I think that is probably right on the mark. "

Lecretia Duffey: " They don't have the right to do this to people. It

destroys their lives and they have no right to do that. They are not gods. "

And that's where our original broadcast ended. But in the weeks to

come, we found out more about forgery, about other paper review companies,

and about what State Farm knew and when.

State Farm is the largest insurance company in the nation. It says it

handles about 750,000 medical accident claims a year. They've been in

business for 75 years and say they have millions of satisfied customers.

We want you to remember that the claims discussed in our report,

those involving paper reviews, represent only 5 percent of all those claims.

But 5 percent still adds up to about 35,000 cases every year. And if yours

happens to be one of them, it is critical the reviews be fair.

Jack North: " We admit something's not right with MCRS and CMR. We

readily admit that. "

State Farm has always suggested that what happened with CMR and MCRS

was an unfortunate exception which misrepresents their record with paper

reviews.

North: " We've learned some things along the way rather painfully

about dealing with those two companies. "

But was it just two companies? Since our original broadcast, we

checked records regarding other review companies. In Indiana, the Insurance

Commission there found in 1994 that State Farm committed " unfair claim

settlement practices " using another paper review company in Illinois. Paper

reviews by Professional Evaluation Services helped State Farm slash

chiropractic bills on average 58 percent.

In Pennsylvania, State Farm was sued and it was discovered State

Farm, in the mid-1980s, was paying Worldwide Auditing a piece of the action:

10 to 15 percent of the cuts Worldwide recommended in its paper reviews.

State Farm denied it was doing anything wrong, but agreed it would no longer

pay a percentage of savings.

And since our broadcast, we've learned more about what State Farm

knew about its paper reviews and how high that knowledge went.

Remember, State Farm claims it never knew there was a pattern of

negative reviews from paper review companies - in this case, MCRS.

Jack North: " Looking back, if we had been able to look broader at the

time we may have seen that trend earlier. And it is not a trend I'm happy

about or supportive of. "

But we found a letter from as far back as 11 years ago sent by MCRS

to State Farm's own point person for paper reviews nationwide -

Wallace, who worked right at State Farm headquarters.

The MCRS letter brags they were saving State Farm almost $2,000 per

claim, making its case that it was profitable for State Farm to do business

with MCRS.

And why were those numbers being sent to State Farm? The letter says

to follow up on a " conversation " MCRS had with Wallace.

What does Wallace, who's now retired, say about that? He told

" Dateline " he got stacks of letters like that one, but that he didn't even

read them.

In fact he even wrote a letter to one paper review company saying,

" it is not State Farm's intent to save money, but to clarify claims. "

While Wallace said he never looked at the reports - he says he threw

them right in the trash - he did write about them in a letter in 1993 to

MCRS warning it " not to send reports of this type to any of the field

offices " of State Farm because they have " caused difficulty (with) .

litigation. "

In fact, plaintiff's attorneys have used numbers like this to try to

prove that privately, State Farm knew paper reviews were used to cut costs,

while publicly saying they were objective opinions.

As for CMR and Bill Marvin, remember Marvin's claim that Lecreca

Duffey's apparently forged paper review was one of a kind?

Larson: " So, we just, out of 27,000 cases, we just happened to

be holding the one? "

Bill Marvin: " I think that is probably right on the mark. "

Well, guess what? So far, we've found what appear to be two more

forgeries - CMR paper reviews two doctors tell us they never signed.

As for State Farm, following our interview with its vice president,

State Farm told us it checked thousands of CMR reviews, and they found that

they'd already paid most of them in full. Most, but not all. Just before our

original broadcast, State Farm sent us this videotaped statement:

Jack North: " We found about 500 where CMR's work may, and I really

want to stress the word may, have been the reason a medical bill wasn't

paid. "

State Farm has now paid those customers their medical bills plus

interest - more than $1 million. But others remain unhappy with State Farm

and say they're taking State Farm to court.

: " I just wanted to get well and be on my way. "

In 1993, was injured in an accident in Oregon and was treated

for five months for back pain. State Farm refused to pay $774 of 's

claim - about a 1/4 of her bills, repeatedly citing a CMR paper review as

the reason. The review called 's accident " extremely minor, " and said

she did not have any " serious consequential injuries. "

: " That's a lie. I was in a lot of pain. "

We played our broadcast for because there was something about

one CMR report that she didn't know.

Larson: " And here, an employee suggests leaving out medical

information that could be helpful to the accident victim. Her bones were

possibly more brittle and we don't want to point this out. 'And we don't

want to point this out' - should that be on here'?

Bill Marvin: " No. "

Larson: " That particular report was yours. You're the accident

victim that they're talking about. "

: " I'm just really angry. I'm really angry at them

because I just wanted to get on my feet and get well. I didn't want to take

money that didn't belong to me. And then they do this to me. They made me

feel like I wasn't in pain when I was in pain. And it brings a lot of that

back. "

could only pay her bills after a different insurance

company representing the woman who hit her paid a settlement two years

later.

As for Lecreca Duffey, the woman whose story launched our

investigation, she settled her lawsuit with State Farm for an undisclosed

amount of money, never learning what we had about her report and its

apparently forged signature until she watched our broadcast along with the

rest of the country.

Lecreca Duffey: " People have no right to lie and mess up somebody

else's lives. Where does the buck stop? "

State Farm says because it's a mutual company owned by its

policyholders, it has no motive to cheat them and it's in the policyholders'

best interests to keep insurance costs down.

In a letter to " Dateline, " company president Trosino said

that our report was fundamentally unfair and a gross distortion and it's

simply not an accurate reflection of the way State Farm does business. And

before our original broadcast, we received a statement from State Farm's

Jack North, who apologized for any problems the CMR reviews may have caused.

He says if any policyholders have concerns about how their medical claims

were handled, they should contact their agent or him personally at the

company's Bloomington, Illinois, headquarters.