Medicare/Medicaid Fraud: Criminal Defense Lawyers Defending Medicare and Medicaid Fraud
Medicare/Medicaid Fraud: Criminal Defense Lawyers Defending Medicare and Medicaid Fraud
Fraud has been woven into the fabric of the federal health care programs,
Medicare and Medicaid, since their inception. Congress in 1977 conducted a
series of hearings to examine the infestation of theft and patient abuse
prevalent in the Medicaid program. See, Medicare and Medicaid Fraud and
Abuse § 6.11 (2007)[Alice G. Gosfield] {hereinafter MedFraud}.
Following these 1977 hearings, Congress created the state Medicaid Fraud
Control Units (MFCU’s) to combat the flagrant criminal abuses in the
nation’s health care delivery system. This congressional enactment was
called the Medicare-Medicaid Anti-Fraud and Abuse Amendments, and they
conferred sweeping authority upon the MFCUs to not only investigate but
prosecute both fraud and abuse in the Medicaid program, including patient
abuse and neglect of health care facilities receiving Medicaid funding. See,
MedFraud § 6.11.
Most state MFCUs embraced the independent authority they enjoyed from
other agencies that administered Medicaid programs. MFCUs are generally
created within the state Attorney General’s office allowing them to be
staffed by attorneys, investigators, and auditors “specially trained in the
complexities of health care fraud.” Id. In addition to congressional
legislation, the federal government created a litany of financial incentives
designed to encourage states not only to set up MFCUs but to provide them
with the support needed to vigilantly police Medicaid program expenditures.
Id.
The state units execute the same investigatory functions on the state
level as the OIG executes on a federal level. In 2003, state MFCUS
collectively employed 1,507 staff members and received $119 million
in federal support. Each state's MFCU varies in size in proportion to
the size of its Medicaid program. The MFCUs have also developed
uniform procedures to coordinate their efforts with those of their
federal counterparts through the National Association of Medicaid
Fraud Control Units (NAMFCU). These procedures have eased the
resolution of Medicaid-related claims against interstate providers, and
more recent cooperative efforts between state and federal investigators
of health care fraud have resulted in large settlements.
The joint investigative and prosecutorial efforts of the federal and state
governments have produced a tremendous volume of prosecutions under the
Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), which prohibits any person
or entity from offering, making or accepting payment to induce or reward
any person for referring, recommending or arranging for federally funded
medical services, including services provided under the Medicare and
Medicaid programs. The pertinent portion of that statute reads as follows:
See, United States v. Rogan, 459 F.Supp.2d 692 (N.D. Ill. 2006).
Participants in the Medicare and Medicaid health care programs must agree
to comply with the provisions of the Anti-Kickback statute as a prerequisite
for payment under those programs. A violation of the statute can not only
bar the offender from participation in the programs but subject the offender
to civil monetary penalties of $50,000 per violation and three times the
amount of remuneration paid. See, 42 U.S.C. § 1320a-7(b)(7) and 42 U.S.C.
§ 1320a-7a(a)(7). Accord: Rogan, supra, at 714,
Violations of the Anti-Kickback Statute can occur when payments for the to
refer a service increase the legitimate costs of the transaction. See, United
States v. Hancock, 604 F.2d 999, 1001-02 (7th Cir. 1979); Rogan, supra, at
714. The appeals court in Hancock found that payments to physicians in
exchange for the physicians’ promises to refer patients to a particular facility
quality as kickbacks. Id., at 1002 [“The defendants were able to open up or
control the payment of federal funds to Chem-Tech by sending Medicaid
patients tissue specimens to Chem-Tech …”]
The Seventh Circuit also found a Anti-Kickback Statute violation in a case
where a druggist paid a monthly fee to nursing home owners for the
opportunity to provide drugs and pharmaceutical services since the statute
strictly prohibits the furnishing of fee, items, or services to an individual
with payments that are made in whole or part out of federal funds under any
plan approved for grants to state medical assistance programs. See, United
States v. Ruttenberg, 625 F.2d 173 (7th Cir. 1980) [Even if payments made
by the druggist had not been paid out of federal funds, but were merely gifts
from druggist's profits, payments would still be "kickbacks" proscribed by
the statute]. See also: United States v. Tapert, 625 F.2d 111 (6th Cir. 1980).
The Seventh Circuit in United States v. Polin, 194 F.3d 863 (7th Cir. 1999)
elaborated that the term “refer” in the Anti-Kickback Statute may apply to
physicians or others who refer, recommend, turn over, select, or give
business to a particular recipient. Id., at 866-67; Rogan, supra, at 714-15.
But the federal appellate courts have held that a mere hope, expectation, or
belief that referrals may derive from “legitimate services” is not a violation
of the Anti-Kickback Statute. See, United States v. McClatchey, 217 F.3d
823, 834-35 (10th Cir. 2000). The federal district courts have likewise been
cautious to make sure that the Anti-Kickback Statute is not egregiously
applied. A district court in Illinois held that while the statute regulates
referrals between physicians and hospitals who participate in federal health
care programs, it does not prohibit hospitals from acquiring medical
practices, nor does it preclude seller-physician from making future referrals
to buyer-hospital, provided there are no economic inducements for those
referrals. Compliance with the Act is satisfied when the hospital simply pays
fair market value for practice's assets. See, United States ex rel. Obert-Hong
v. Advocate Health Care, 211 F.Supp.2d 1045 (N.D. Ill. 2002).
In United States ex rel. Conner v. Salina Regional Health Center, Inc. the
district court found that a hospital’s requirement that an ophthalmologist
provide his own operating room staff in order to continue to receive
privileges with hospital, including right to receive patient referrals from
hospital's emergency room, did not constitute "kickback," for purposes of
Medicare anti-kickback statute. The court noted that the manner of providing
surgical support did not affect Medicare payments and that the agreement
was permissible under state law. Id., 459 F.Supp.2d 1081 (D.Kan. 2006).
See also: United States ex rel. Perales v. St. Margaret’s Hosp., 243
F.Supp.2d 843 (C.D.Ill. 2003) [Referrals made to hospital by nurse, who
worked for physician who was under services agreement with hospital, were
not in violation of Anti-Kickback Statute, since physician, as person who
allegedly received inducement, was the person who would be prohibited
from making referral to entity that offered remuneration, nurse was not
contractually obligated to refer patients to hospital, and the two were not in
collusion]; Polk County v. Peters, 800 F.Supp. 1451 (E.D. Tex. 1992) [AKS
violation found where a doctor, as part of a recruitment agreement, referred
patients to a hospital in exchange for the hospital providing him with free
office space, rent and utilities subsidies, a limited–time guaranteed income,
reimbursement for moving expenses and malpractice insurance].
In November 1999 the Safe Harbor regulations were amended to add the
seven requirements set forth below:
(1) The agency agreement is set out in writing and signed by the
parties.
(2) The agency agreement covers all of the services the agent provides
to the principal for the term of the agreement and specifies the
services to be provided by the agent.
(3) If the agency agreement is intended to provide for the services of
the agent on a periodic, sporadic or part-time basis, rather than on a
full-time basis for the term of the agreement, the agreement specifies
exactly the schedule of such intervals, their precise length, and the
exact charge for such intervals.
(4) The term of the agreement is for not less than one year.
(5) The aggregate compensation paid to the agent over the term of the
agreement is set in advance, is consistent with fair market value in
arms-length transactions and is not determined in a manner that takes
into account the volume or value of any referrals or business
otherwise generated between the parties for which payment may be
made in whole or in part under Medicare or a State health care
program.
(6) The services performed under the agreement do not involve the
counseling or promotion of a business arrangement or other activity
that violates any State or Federal law.
(7) The aggregate services contracted for do not exceed those which
are reasonably necessary to accomplish the commercially reasonable
business purpose of the services. 42 C.F.R. § 1001.952(d) (2000).
The district court in Polk County, supra, discussed at length the history of
the Anti-Kickback Statute which has been protracted:
In United States v. Porter, 591 F.2d 1048 (5th Cir.1979), a case of first
impression, the Fifth Circuit Court of Appeals reversed a conviction
for violation of the 1972 version of § 1395nn(b)(1). The Fifth Circuit's
conclusion that the original version of § 1395nn(b) did not prohibit
the alleged acts of the defendant was “strengthened, if not absolutely
compelled” by subsequent events, which led to the enactment of the
version of § 1395nn(b) that was in effect in 1985.
The Seventh Circuit took a broader view of the original statute and
reached a different result in United States v. Hancock, 604 F.2d 999
(7th Cir.), cert. denied, 444 U.S. 991, 100 S.Ct. 521, 62 L.Ed.2d 420
(1979). Chiropractors who had received fees from labs that performed
blood tests argued that amounts paid were legitimate handling fees for
obtaining and delivering specimens and then interpreting the test
result, but, although the phrase “any remuneration” had not yet been
added to the statute, the fees were found to be “kickbacks.”
Affirming the conviction, the Third Circuit held that “if one purpose
of the payment was to induce future referrals, the Medicare statute has
been violated.” Id. at 69. Even if the referring physician does perform
a service for the money received, the statute is aimed at the
inducement factor. The court agreed with the Government's argument
that Congress intended to combat financial incentives to physicians
for ordering particular services patients did not require because such
incentives present the potential for unnecessary drain on the system.
“If the payments were intended to induce the physician to use Cardio-
Med's services, the statute was violated, even if the payments were
also intended to compensate for professional services.” Id. at 72.
Greber was followed in United States v. Kats, 871 F.2d 105 (9th
Cir.1989), which upheld a conviction in which the jury instruction had
allowed the jury to convict even if it found that the referral of services
was not a material purpose for making kickback payments. The court
held that conviction under the statute was proper unless payments are
“wholly and not incidentally attributable to delivery of goods and
services.”
The Polk County court noted that while the case before it was one of “first
impression” because it involved a physician recruitment by a hospital and
the physician’s referral of surgical patients to that hospital rather than a
classic monetary “kickback,” the court was nonetheless convinced a
violation of the KSA had occurred. See: Harvey L. Timkin, Medicare Fraud
and Abuse, 62 Wis.L.J. 13 (1989 [Incentive programs directly or indirectly
aimed at inducing doctors to refer patients to a hospital violate the anti-
kickback statute since the hospital provides a benefit to the doctor, therefore
satisfying the remuneration requirement, in return for inducing referrals];
Francis J. Hearn, Curing the Health Care Industry: Government Response to
Medicare Fraud and Abuse, 5 J.Contemp.Health L. & Policy 175 (1989) [“If
any form or remuneration is given to the recruited physician, then
technically the recruitment program has violated the medicare anti-kickback
provision.”]. Id., at 1455. The court then applied these principles to the
physician’s recruitment agreement:
While the hospital may well have been motivated to a greater or lesser
degree by a legitimate desire to make better medical services available
in the community, there can be no doubt that the benefits extended to
Defendant were, in part, an inducement for him to refer patients to the
hospital. The Court must, therefore, find that the Agreement made the
basis of this action violates 42 U.S.C. § 1395nn(b).
Being part of the MFCU program, the State of Texas generally prosecutes an
individual who perpetrates a Medicaid fraud under the Human Resources
Code § 36.002 which provide:
On appeal the defendant argued that the trial erred by denying his motion to
have the State elect to try him for either theft or medicaid fraud. The
defendant argued on appeal that Section 36.131(c) of the Human Resources
Code provides for prosecution of either theft or medicaid fraud but not for
both offenses. See, Tex.Hum.Res.Code Ann. § 36.131(c), repealed by Act of
May 23, 2005, 79th Leg., R.S. ch. 807, § 19, Tex. Gen. Laws 2789. In a
footnote, the appeals court noted that while Section 36.131 was repealed,
conduct that occurred “before the effective date of [the] Act is governed by
the law in effect at the time the conduct occurred, and that law is continued
in effect for that purpose.” See, WL at 2.
The defendant on appeal argued that the evidence was insufficient to support
his conviction because the State failed to show the offense occurred within
the period of limitations. Id., Lexis at 8. The appeals rejected the argument,
interestingly pointed out that the defense had not properly raised the defense
before the jury:
Tita is particularly significant for two reasons: first, the state will frequently
pursue a Medicaid fraud case under the state’s theft statute because its
elements are more efficiently established; and, second, a criminal defense
attorney must always raise every available defense before a jury, not for the
first time on appeal.