Recent legislation enacted both in Congress and in the Kansas legislature bear out this prosecutorial trend. Not only has Congress created new crimes specifically concerning health care fraud in the new Kennedy-Kassebaum sponsored legislation, but the State of Kansas has recently enacted the Kansas Medicaid Fraud Control Act. These acts increase the already numerous avenues for criminal actions against health care providers.
The punishment for a conviction under the False Claims Act is up to five years imprisonment and a fine of $250,000.00 for an individual and $500,000.00 for a corporation for a felony conviction; or $100,000.00 for an individual and $200,000.00 for a misdemeanor conviction. It should be noted that this penalty is per occurrence. Thus, liability for numerous false claims is very heavy. In light of the new specific provisions concerning false statements in connection with health care fraud found in the recently enacted Health Insurance Portability Act, it is questionable whether this section is applicable to actions that would be covered by the new legislation.
In order to show a violation of this act, the government must prove that the health care provider willfully submitted the false statement or representation to the government, knowing it to be false, and that the statement was material i.e. that the statement was of the type that has the natural tendency to influence the agency's action. See United States V. Greber, 760 F.2d 68, 72-73 (3rd Cir. 1985).
The penalty for a conviction under the False Statement Act is a fine of not more than $10,000.00 or imprisonment of more than 5 years, or both. As with the False Claims Act, this penalty can be assessed for every violation.
42 U.S.C. §1320a-7b(a)(1) states that whoever knowingly and willfully makes or causes to be made any false statement or representation of material fact in any application for any benefit or payment under a Federal Health Care Program shall be guilty of a felony. In order to convict a health care provider under this section, the Government must prove that the statement or representation was knowingly made, that the statement or representation was false, and that the provider knew the statement or representation to be false when made.
42 U.S.C. 1320a-7b(a)(2) concerns false statements or representations made in determining rights to a benefit or payment under the Medicaid Act. The elements that the government must prove are the same as those in (a)(1) discussed above.
42 U.S.C. 1320a-7b(a)(3) concerns the covering up of an event which affects the providers right to a benefit or payment or the person on whose behalf the provider has applied for or is receiving payment. In order to obtain a conviction under this section, the Government must show that the provider concealed or failed to disclose the information with the intent of securing payment or benefit when none was authorized, or of securing payment in an amount greater than authorized.
42 U.S.C. S1320a-7b(a)(4) proscribes presenting a claim for a physician's service under the Medicaid Act or a State Health Care Program knowing that the person furnishing the service was not licensed as a physician. Hopefully, this will not be a big problem in Kansas.
The penalty for any violation of 42 U.S.C. §§1320a-7b(a) through (h) is a fine of not more than $25,000.00 or imprisonment of not more than 5 years, or both.
However, the provision exempts some legitimate business transactions from its application. The anti-kickback provision states that it does not apply to: 1) Discounts or other price reductions obtained by health care providers if the reduction is properly disclosed and reflected in costs claimed or charges made; 2) an amount paid by an employer to an employee in a bona fide employment relationship; 3) an amount paid by a vendor of goods or services to a person authorized to act as a purchasing agent for entities furnishing services reimbursed under the Medicaid Act, so long as the amount is established by written contract and fully disclosed; waivers of coinsurance payments under Medicare Part B; and any arrangement covered by the so-called "safe harbor" regulations promulgated by the Secretary pursuant to section 14(a) of the Medicare and Medicaid Patient and Program Protection Act of 1987.
The "safe harbor" regulations are provisions of federal law which protect physicians from criminal prosecutions or civil liability for practices that would otherwise be covered by the anti-kickback laws. These practices include certain investments in health care entities; space and equipment rental; personal services and management contracts; the sale of a practice; legitimate referral services; warranties; discounts; bona fide payments made to employees; payments to a group purchasing organizations; waiver of beneficiary coinsurance and deductible amount; formation of health plans which offer nondiscriminatory incentives to enrollees; providers who offer reduced prices to health plans in compliance with certain specified standards, and some risk sharing arrangements.
Violations of the anti-kickback provision can result in a fine of not more than $25,000.00 or imprisonment for not more than 5 years, or both.
In order to obtain a conviction under these statutes, it must be shown that the health care provider was involved in a scheme to defraud with the intent to defraud, and that the provider used the mail or other form of communication in furtherance of that scheme. It is important to remember that each use of the mails or other communication constitutes a separate offense, and that these offenses are in addition to any charges that may be brought in connection with the fraudulent scheme itself under any of the statutes addressed above. Each conviction for mail or wire fraud is punishable by a fine of up to $1,000.00, a prison term of up to five years, or both.
An interesting provision of this statute covers schemes which result in the bodily injury or death of another. In the case of bodily injury, imprisonment of up to 20 years is allowed, while in the case of death, imprisonment for any term of years, or for life, is authorized.
Another new crime created by Congress in connection with the health care field is Theft Or Embezzlement in connection with health care, 18 U.S.C. §669. Under this section, anyone knowingly and willfully converting or intentionally misapplying the assets of a health care benefit program is liable for a fine or imprisonment of not more than 10 years, or both.
42 U.S.C. §1035 is another new statute governing False Statements relating to health care matters. Under this provision, whoever knowingly and willfully falsifies, conceals or covers up by any trick scheme or device a material fact or makes any materially false, fictitious or fraudulent statements or representations, or uses any materially false writing or document with knowledge of the falsity, in connection with the delivery of or payment for health care benefits, items or services is liable for a fine, imprisonment of not more than 5 years, or both. It is arguable that the existence of this more specific section prohibits prosecution under the False Statements Act, 18 U.S.C. §1001 for the same conduct.
The Kansas Medicaid Fraud Control Act also prohibits the making or presenting any wholly or partially false or fraudulent book, record, document, data or instrument to a law enforcement officer, employee or representative of the attorney general, or employee or agent of SRS in connection with any audit or investigation regarding claims for payment under the Medicaid program; and any false or fraudulent statement made with intent to influence any acts or decision of any federal or state employee of an agency having regulatory or administrative authority over the Kansas medicaid program. This activity is a severity level 9, nonperson felony.
Another section of the Kansas Medicaid Fraud Control Act covers the same activity prohibited by the federal anti-kickback legislation, 42 U.S.C. §1320a-7b(b). It incorporates the same exemptions as those in the federal statute, as well as many of the safe harbor provisions found in 42 C.F.R. §1001.952. Any safe harbor provisions in 42 C.F.R. §1001.952 that are not expressly included in the Kansas Medicaid Fraud Control Act are also probably exempted.
An interesting provision in the Act is a section which provides that the negligent failure to maintain adequate records which disclose fully the nature of the goods, services, items, facilities or accommodations for which a claim is submitted or payment received, or the income or expenditures upon which rates of payment were based is a class A nonperson misdemeanor. This section also requires that, upon submitting a claim or receiving payment under the Medicaid Act, the provider must maintain adequate records of the transaction for five years after payment was received, or five years after the claim was submitted if payment was not received.
Yet another section of the new Act governs the intentional destruction or concealment of records. It provides that any destruction or concealment of records necessary to document a transaction under the Medicaid Act within the five year period previously described is a severity level 9 nonperson felony.
The Act specifically provides that offers of repayment or repayment itself, if occurring after the filing of criminal charges do not constitute a defense against such charges. In addition to the criminal penalties specified, the Act also provides for payment of full restitution, with interest, and payment of reasonable expenses in the enforcement of the action, including reasonable attorney fees.
To provide enforcement, the Act creates a medicaid fraud and abuse division within the Attorney General's office. The Act further provides that the Attorney General shall be allowed access to all records in the hands of the provider relating to the transaction under investigation, and that no provider may refuse to provide access to the records on the grounds that such access would violate any recipient's right of privacy or privilege against disclosure or any other privilege or right. The Act does absolve the provider from liability for any breach of confidential relationship between provider and patient as the result of the production of those records.
An often cited recent example of the huge potential liability exposure under the Federal Civil False Claims Act is United States V. Krizek, 859 F. Supp. 5 (D.C. 1994). In that case, the government filed suit against a psychiatrist and his wife for submitting and conspiring to submit false claims to Medicare and Medicaid. The government alleged that Dr. Krizek billed for 45-50 minute psychotherapy sessions when, based on the time spent, he should have billed for 20-30 minute sessions. Because this alleged billing practice took place over a six year period and involved 8,000 claims, the potential liability for Dr. Krizek under the Federal Civil False Claims Act was in excess of 80 million dollars. Although the court eventually found that the alleged damages were unreasonable and submitted the case to a master for calculation of damages, this case is a good example of the lengths to which the government may be allowed to go under the statute, and the lengths to which the government may in fact go to force a plea.
Because a proceeding under the CMPL is administrative in nature, the provider does not have the right to a jury trial. Instead, the determination of liability is made by an administrative law judge. Because the penalties under the CMPL are per occurrence, the total amount can be quite large. It should be noted, however, that the recent Kennedy-Kassebaum bill changes the burden of proof under this section. Where before a health care provider could be subject to liability where the provider simply should have known that the information submitted was false, now the government is required to prove at least deliberate indifference.
One of the most potent weapons in the prosecutor's arsenal, however, is the power to suspend and withhold a provider's payments under Medicare upon indictment or other reliable evidence of fraud. Under 42 C.F.R. §405.370 and 42 C.F.R. §405.370 such payments can be suspended without a hearing once the prosecutor has obtained an indictment. As a result, the government is able to exert tremendous pressure on health providers it has targeted.
Investigations into Medicare and Medicaid Fraud begin with the Office of the Inspector General. OIG investigators have the power to execute search warrants and serve subpoenas in connection with their investigation. In cases involving suspected Medicaid Fraud, the OIG has delegated most of its investigative activities to Medicaid Fraud Control Units established by individual states with federal funding. Kansas's new Medicaid Fraud Control Act establishes a MFCU through the state Attorney General's Office. This agency has the power to issue subpoenas, serve and execute search warrants, and take sworn statements.
Once the investigators have determined that there is reason to believe a law has been broken, the situation is reported to the United States Attorney General and the FBI. The Attorney General's Office coordinates further investigation and determines whether to submit the case to a grand jury. If the investigation is conducted by a Medicaid Fraud Control Unit, the MFCU has the authority to prosecute criminally, or refer the matter to the applicable district or county attorney for prosecution. The MFCU may also coordinate its activities with federal investigators.
The Fourth Amendment's search warrant provisions require
Under the provisions of Rule 41 of the Federal Rules of Criminal Procedure, a warrant may be issued to search for and/or seize:
The term "property" as used in the rule includes documents, books, papers, and any other tangible objects that a business may have on its premises. United States V. New York Telephone Co., 434 U.S. 159 (1977).
In the event that you are confronted with a "surprise" federal or state search there are a number of procedures or steps that can be taken in order to minimize the disruption to your practice and to protect the interests of the provider and its employees. Once the law enforcement officers have presented themselves on the property to be searched the following should be adhered to:
(a) That a search warrant is being executed by whatever law enforcement agency is conducting the same;
(b) Your understanding of what crime or alleged crime is being investigated;
(c) That the health care provider will furnish attorneys to advise all employees with regard to statements and how to conduct themselves; (d) That all employees have a right to decline to be interviewed without an attorney being present;
(e) That the supervisors should advise each employee under their supervision of the information set out in (a) - (d) above.
Being confronted with a "surprise" federal investigation can be a very disturbing and frightening experience, yet the fact remains that these type of medical fraud investigations are increasing. Anticipatory training and education of employees and management can neutralize the element of surprise and enhance the provider's ability to safeguard its rights and the rights of its employees while at the same time enabling it to better defend against whatever criminal charges are brought against it.
"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury. . "
and Rule 6 of the Federal Rules of Criminal Procedure sets forth the method by which the requirements of the Fifth Amendment are to be implemented. Paragraph (d) of Rule 6 deals with who may be present in the grand jury room and provides:
"Who May Be Present. Attorneys for the government, the witness under examination, interpreters when needed and, for the purpose of taking the evidence, a stenographer or operator of a recording device may be present while the grand jury is in session, but no person other than the jurors may be present while the grand jury is deliberating or voting."
It is the grand jury, which, after considering evidence offered by the government, determines what individual or company should be charged with a criminal offense and further, what crime should be charged. The evidence upon which the grand jury makes its ultimate decision is only that evidence which the prosecutor chooses to share with the grand jury. The defendant or potential defendant is not allowed to be present nor to have his attorney present during the proceedings, is not allowed to cross examine the government's witnesses, is not allowed to present evidence on his or her own behalf and is not allowed to address the members of the grand jury or argue the case.
Furthermore, although an individual or corporation may be the target of the investigation and may be subpoenaed to testify before the grand jury, that individual or corporation is not entitled to have an attorney present in the grand jury room during questioning.
Some people harbor romantic notions of the grand jury as a fair, independent tribunal. The sad fact is, however, that the modern grand jury is firmly under the government's control. The prosecutor decides what casesto present, who to call as witnesses, who should receive immunity and who should be targeted for prosecution. The prosecutor draws up the charge and presents it to the grand jury, which routinely votes to return an indictment. If the prosecutor wants an indictment of a particular individual or corporation for a particular charge, he can generally manipulate the evidence and the grand jury to reach his goal.
In such a world, every person subpoenaed to appear before a grand jury - without exception - needs competent representation. That representation has two aspects:
When an officer or employee of a health care provider receives a grand jury subpoena, it should first be determined what the government wants. A grand jury subpoena may only call for testimony, or it may require the production of specified documents.
Documentary subpoenas fall into two categories: those that require testimony from the witness and those that do not. Where the government only wants the documents, the subpoena will call for their production before the grand jury on a particular date and will further state that furnishing them to a particular government agency will make an actual appearance unnecessary. When the government also has questions for the witness about the documents, the subpoena will require the witness to testify and to bring the documents with him.
While documentary subpoenas can be important in the overall scheme of a potential prosecution, the more troublesome event in most grand jury representations is dealing with the testimonial subpoena. When you are confronted with a testimonial subpoena, the first step is a thorough interview of the witness/provider by the attorney. The attorney must learn as much as possible about the provider's view and knowledge of the matter being investigated as soon as possible. The provider should have exercised his rights and decline to make any statement whatsoever. If the provider or any of his or her associates or employees have made statements that information should be immediately provided to your counsel in as much detail as possible. If a written or recorded statement has been given, you should request that you be provided with a copy and you should provide your attorney with a copy.
Furthermore, one interview area merits special emphasis. The government may attempt to interview the provider long before any charges are considered or filed, such as at the time they served a search warrant, seized records or served a grand jury subpoena. The agents that normally serve grand jury subpoenas are often the same agents (FBI or otherwise) who are conducting the criminal investigation itself and when they serve the subpoena they have a habit and practice of being very pleasant while they have a nice chat with the provider or its employees about that person's knowledge of the event that is under investigation while that individual is unwary, unsettled, frightened and unrepresented. This is not 3ust civility; it is a calculated attempt by the investigator to obtain useful statements and damaging admissions. While the witness may think the discussions were insignificant, they are not. Your attorney must know everything that was said. Statements made to government representatives in a criminal case never lack significance.
Once you have provided all the information that you can to your attorney, it is then time for your attorney to talk to the prosecutor to see what he can find out regarding the focus of the investigation and what the government's interest is in the provider that you represent. Only after it is determined what the government's interest is in the provider can the attorney intelligently determine how to proceed and what to advise the provider. Is the provider a "target" of the investigation, a "subject" of the investigation, or just a "witness." These terms pretty much mean just what they seem to mean. A "target" is someone the government intends to indict using its influence over the grand jury to do so. A prosecutor knows that a person identified as a target, if actually required to appear before the grand jury, will in most, if not all cases, invoke his or her privilege against self-incrimination. Since the government knows it will not get testimony from such a witness, his or her grand jury appearance will most likely be excused if requested. "Targets" do not talk their way out of indictments and they should not testify under any circumstances.
What if the prosecutor says the provider is not a target but is a "subject" of the investigation? The U.S. Attorney's Manual and other Justice Department statements draw a distinction which is mostly technical, between "targets" and "subjects." Whereas a "target" is someone the government expects to indict, a "subject" is a person the prosecutor thinks may be indicted, but against whom sufficient evidence may not exist at that time.
Since the decision to indict a "subject" has not been finally made, there is a greater chance that a "subject" will actually be called before the grand jury. In these situations where the provider is deemed to be a "subject", that provider must consider himself as if he is a "target" and conduct himself accordingly. If the only thing between the provider and an indictment is more evidence, the last thing the provider wants to do is to provide that evidence. A "subject" who testifies can rarely, if ever, do anything but harm himself, by creating a trail of testimony that may return to haunt him or her, possibly in the form of a perjury or obstruction of justice indictment.
The normal practice for an attorney representing a "target" or a "subject" is to advise the prosecutor that the witness does not wish to appear and if an appearance is required it is his or her intention to invoke the Fifth Amendment privilege against self-incrimination. If the appearance is not excused, then the witness, with his attorney's guidance, should assert the privilege.
One practical consideration for an attorney to keep in mind here, is that if his client is the health care provider who may also be a "target" of the investigation and at the same time he is requested by that same provider to represent one or more of the provider's officers who have been subpoenaed to testify before the grand jury the attorney may be in an irreconcilable conflict since the government may offer one immunity in return for testimony against the other. Thus, if it is anticipated that the provider is or may be a criminal target or defendant, the attorney for that provider should decline to also represent a potential witness, e.g., the chief financial officer for the provider.
In representing a provider, the most important way for an attorney to protect that client is to insist on immunity as a price for his or her testimony. For me, the rule is absolute - Before allowing a witness/provider to testify, I insist that he or she be granted immunity or a letter of non-prosecution. If the government is unwilling to do that, then I advise the witness/ provider to invoke the Fifth Amendment. While law abiding people believe that their innocence will protect them, this confidence is unjustified. Even innocent people often appear guilty to the government. Prosecutors also make mistakes, and most witnesses aren't sufficiently detached or informed to decide whether particular conduct on their part has crossed the line into criminality.
If you get immunity, what form should it take? The federal immunity statute, 18 U.S.C. S 6002, confers only "use plus fruits" immunity and not the broader "transactional" immunity recognized by many of the states. See Hastiqar V. United States, 406 U.S. 441 (1972). Use immunity, which leaves a witness subject to prosecution for the matter under investigation - may seem inadequate. In practice, however, the government rarely prosecutes those to whom it extends use immunity. This is because, where it does, the prosecution bears the substantial burden of showing that the case is untainted by prior immunized testimony.
Should such immunity be formal, or will informal letter immunity suffice? Formal immunity has the advantage of clarity; its protection is exactly that defined in the immunity statute. However, if it tracks the statute, informal letter immunity is usually satisfactory. An undertaking by letter not to use the testimony or its fruits will bind the prosecution. However, if the client/provider is exposed to prosecution in other federal districts or jurisdictions - which would not be bound by letter immunity - the prudent course is to insist on formal statutory immunity.
Once a decision has been made that a client/provider will appear and testify before the grand jury, he or she must be thoroughly prepared and that preparation will differ from preparing a witness for deposition or trial. The reason for the difference is that the provider/witness' attorney, will not be able to attend the grand jury proceeding. This places a greater burden on the witness, and thus, a more careful and detailed preparation is required. Areas of known inquiry and anticipated questions should be fully discussed. The witness should be repeatedly and forcefully reminded to:
Since the witness/provider's attorney cannot be in the grand jury room during the testimony, it is absolutely crucial that each of these caveats is drilled into and understood by the witness/ provider before his or her grand jury appearance.
While the attorney may not be in the grand jury room during the testimony, he or she may be present just outside the room and the client should be aware of this. If, during the testimony, the provider/witness is uncertain about the meaning or propriety of a question, what the answer should be, whether or not it should be answered or whether or not the Fifth Amendment privilege should be asserted, the witness has the right to request that he or she be excused to consult with counsel, and should do so. Prosecutors don't like this, but it must be done if the provider/witness is to be properly represented, such a request is almost always granted.
Additionally, in preparation of the witness for the grand jury appearance, the need to be absolutely 100% truthful must be emphasized. Immunity does not protect against a prosecution for perjury.
Despite all the preappearance work, there may well be instances where the Fifth Amendment privilege must be asserted before the grand jury. A witness who might face this necessity should be instructed on and understand when and how to assert the privilege. As a general rule, absent immunity, the privilege should be claimed in response to all questions other than those relating to the witness' name, age and address. The witness should not attempt to pick and choose among the questions. This is a disastrous approach that inevitably leads to waiver problems and can result in the complete loss of the privilege with no compensating immunity. If any doubt exists, the witness should request an opportunity to consult with counsel about invoking the privilege and do so after every question if need be.
Because of the new federal focus on Health Care fraud, it is imperative that health care providers, their officers and employees and counsel representing health care providers be aware of the potential exposure to a variety of criminal charges and be prepared to respond or react carefully and appropriately when that exposure is manifested through either the service of a search warrant or a grand jury subpoena. I hope that this presentation has aided you to some degree in this regard.
Mark L. Bennett, Jr.
BENNETT & DILLON, L.L.P.
1605 SW 37th Street
Topeka, KS 66611
(913-267-2652 - Fax)