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Lawsuit takes aim at Edina-based firm, alleges kickbacks to chiropractors

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A new federal lawsuit alleges that a metro-area diagnostic company ran a kickback scheme in concert with 46 Minnesota chiropractors as part of an insurance fraud operation, the Star Tribune reports.

The lawsuit filed Monday by Illinois Farmers Insurance Co., seeking $1.9 million, claims that Edina-based Mobile Diagnostic Imaging Inc., paid the chiropractors a total of $221,800 in kickbacks when they ordered unnecessary MRI tests conducted by MDI, which were ultimately for paid by the insurer, the newspaper reports.

The lawsuit is emblematic of a broader problem of insurance fraud in Minnesota, insurance representatives say. There are a growing number of kickback schemes, as well as staged accidents that take advantage of Minnesota's 1974 "no-fault" law, which requires insurers to pay up to $20,000 regardless of who is deemed at fault in accident cases, the Star Tribune reports. Minnesota is one of nine no-fault states, WCCO reported.

The suit is further evidence that insurance fraud is "rampant" in Minnesota, one industry spokesman said.

“Insurance fraud is a problem everywhere. We have a particular problem in Minnesota because we are a no-fault state,” Insurance Federation of Minnesota Mark Kulda told WCCO.

Fraud in the state is the reason the average Minnesota family pays roughly $1,000 a year more in premiums, according to the insurance federation.

Insurance fraud was the focus of a Minnesota Senate hearing earlier this year.

The no-fault clauses are "very deficient and don't contain any modern medical cost controls," Bob Johnson, with the Insurance Federation of Minnesota, told senators. "It's an invitation to perpetrators of fraud."

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