There are several kinds of healthcare fraud charges that the government may bring in Federal court.
The most common charges are healthcare fraud in violation 18 U.S.C. § 1347 and conspiracy to commit healthcare fraud in violation of 18 U.S.C. § 1349.
Healthcare fraud itself is defined as defrauding a healthcare benefits program or obtaining money, or other property, in the custody or care of healthcare benefits program by false or fraudulent pretenses or promises. A representation is false if it is known to be untrue or is made with reckless indifference as to whether it is true or not. The falsehood also has to be “material,” that is it has the natural tendency to influence someone’s decision.
A health care benefits program is defined in 18 U.S.C. § 24(b). It includes any public or private plan or contract under which any medical benefit, item or service is provided to any individual.
In order to prove conspiracy, the government must prove that two or more people reached an agreement to commit healthcare fraud. In addition, the government must prove that the defendant knew that he or show was doing something unlawful and willfully joined the agreement. The agreement need not be formal, and a person can enter such an agreement even if their role was minor.
Another common allegation is a violation of 42 U.S.C. §1320a-7b(b)(2), known as the anti-kickback statute. It criminalizes the payment of any funds or benefits designed to encourage an individual to refer another party to Federal benefits program healthcare provider.
However, the statute contains a “safe-harbor provision,” under which “the statute’s criminal prohibition does not apply to ‘any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.'” Id. (quoting § 1320a–7b(b)(3)(B)). Relevant factors in determining whether an individual qualifies as an “employee” under the safe-harbor provision include, “the method of payment, whether the work is part of the regular business of the hiring party, and the hiring party’s control over work hours.”
It is important to note that a violation of this offense does not require knowledge of the statute or the specific intent to violate. Knowingly compensating someone for a referral to a Federal healthcare benefits program provider, such as Medicare or Medicaid benefits program, constitutes a criminal violation.
Recently there have been cases where the Federal government has prosecuted remuneration schemes for non-Federal health care benefits program. For example, the government has prosecuted surgeons who were compensated by hospitals for agreeing to operate at the given facility even when the patients had private insurance.
The government has done this by relying on State statutes that prohibit commercial bribery and prosecuting these arrangements under the Travel act. The Travel Act prohibits interstate travel with the intent to ‘promote, manage, establish, carry on, or facilitate’ illegal activity. The legislative history of the Act is limited but reveals that it was aimed primarily at organized crime, and more specifically, at persons who reside in one State while operating or managing illegal activities located in another. Nevertheless, the government has successfully prosecuted healthcare providers who pay or were paid kickbacks for medical referrals for cases involving exclusively private insurance. Consequently, practitioners should be wary of ever compensating someone for a referral.
Often healthcare providers are charged with illegal drug distribution. Section 841(a)(1) makes it “unlawful for any person knowingly or intentionally … to manufacture, distribute, or dispense … a controlled substance.” Although medical professionals who are registered with the Attorney General are generally permitted to dispense controlled substances, they “can be prosecuted under § 841 when their activities fall outside the usual course of professional practice.” Notably, in Federal court in Texas, (subject to the decisions of the US Court of Appeals of the Fifth Circuit), the Government need not show the distribution by a healthcare profession had no legitimate medical purpose. It is sufficient for the government to simply argue the prescription is “bad medicine” (outside the usual course of professional practice.
In addition to charges that specifically relate to healthcare fraud and improper prescriptions, the government also charges many healthcare providers with money laundering and conspiracy to launder money. Although it is unusual for healthcare providers to engage in money laundering as understood in common parlance, legally it is extremely easy for the government to prove money laundering. 18 U.S.C. § 1956 only requires that the defendant engage in a financial transaction involving the proceeds of the specified illegal activity (namely the healthcare fraud or improper distribution) and that the defendant knew the transaction was designed, at least in part, to conceal or disguise something about the transaction. 18 U.S.C. § 1957, which has less severe penalties than 1956, does not require that the purpose of the transaction was to conceal, all the government need to prove to show a 1957 violation is the defendant engaged in a transaction knowing that it involved the proceeds of a crime.
The government has even made use of the statute criminalizing identity theft in healthcare fraud prosecutions. 18 U.S.C. § 1028(a) provides for a mandatory two-year consecutive sentence for a defendant that uses someone’s means of identification without lawful authority during the commission of healthcare fraud. A common sense reading of this statute would envision this provision to apply to those cases in which the defendant steals someone’s identity and, for example, falsely claims the stolen identity was a Medicare beneficiary for whom the defendant provided service. In Federal court in Texas, the courts have upheld the application of this law in cases in which the healthcare provider simply engaged in fraud in relation to a patient, reasoning, that because the patient did not agree to the defendant’s overbilling Medicare for the care provided, the patient’s identification was used without “lawful authority.”
In addition to the offense discussed above, there are some interesting legal issues that arise in relation to sentencing in Federal healthcare fraud cases.
In all Federal criminal cases, the United States Sentencing Guidelines are applicable. The Federal sentencing guidelines were primarily intended to reduce sentencing disparities in Federal court when they were created. They are a complex system for evaluating the severity of a given crime by means of a point system. The more severe the crime the more points and final “offense level” determination. Once the offense level of a given crime is determined, a guideline sentencing range is derived by cross-referencing the offense level with the defendant’s criminal history category (which itself is derived by an analysis of the defendant’s criminal convictions and sentences and how recent they are). Although a Federal judge is not required to impose a sentence within the guideline sentencing range, they are required by law to calculate the guideline range and give “consideration” to them when imposing sentence. As a practical matter, the vast majority of Federal judges impose sentences within the guideline range, and if they elect to “depart” or “vary” from the guideline range, they do so by reducing or increasing the offense level or criminal history for some reason not taken into account in the initial offense level or criminal history determination.
In healthcare fraud cases the single most important factor in determining the recommended range in the Federal sentencing guidelines is the loss amount. As a practical matter the term “loss” in this context has had varying interpretations. Some courts have held that because Medicare refuses to pay the provider if there is any fraud in relation to the claim, the entire billed amount constitutes “intended loss.” This is particularly absurd when the amount the provider bills is much larger than what the contracted amount for the service is by the payor. In other words, it is common for providers to charge, $10,000 for a procedure knowing that Medicare only pays $2500 for it. In some cases, the provider did a valid procedure for $2200 but falsely billed for a more expensive $2500 procedure. Usually the courts have held in cases such as this that the guideline loss is the $300 difference, not the full $2500 that was paid, or even, the $10,000 that the provider invoices for the procedure.
In cases involving improper prescriptions of controlled substances, the guidelines are calculated in the same manner as if the prescriber were selling the substance to addicts on the street and often increase the penalties by claiming that the healthcare professional abused “a position of trust.” Given that the Federal penalties for drug distribution are extremely harsh, a healthcare provider who is convicted of improper prescribing in Federal court may be confronted with a draconian sentence.
Given the unique and complex issues that arise in Federal healthcare prosecutions, if you find that you under investigation for a Federal healthcare offense, you need to retain a criminal defense lawyer who not only has extensive experience defending Federal cases, but an attorney such as Clint Broden or Mick Mickelsen who have extensive experience successfully representing people charge with Federal health care crimes.