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Criminal Defense Attorney’s Guide to Defending Your First Medical Fraud Case (Part 1)


We often get calls from experienced criminal defense attorneys who are handling their first medical fraud case.  They are very confident in their abilities but need to understand the nuances of a medical fraud case.  Here is a summary of our response.

First, if you are an experienced criminal defense lawyer,  you can do this type of case.  The legal issues in a medical fraud case are “special” on the outside but ultimately no different from any other criminal case.  The biggest difference is the trend toward criminalization of non-criminal conduct under the umbrella of Penal Code section 550.  Any act or series of acts that are deemed deceptive are then labelled as a “false representation” (or misrepresentation) made to collect money – hence a violation of Penal Code 550 and “insurance fraud”.  This means that conduct that is not listed in an part of the Penal Code, Business & Professions Code and not even barred by medical board regulation – can be anointed by a prosecutor as “fraudulent” and made criminal under PC 550.

Now bear in mind that in California there are no common law crimes.  (See: People v. Whipple 100 CA 261 (1929))  If the crime is not listed in a statute – well, it is not a crime.  Penal Code section 550 takes conduct that is not listed in a statute and makes it a crime because it is deemed a “false representation” to an insurance company.  At times this is fair.  If an MD lies about the type of treatment rendered, you are on notice that you are making a “false claim”.  But what about a diagnosis of a medical condition that is not yet established.  For example, some people believe that Alzheimer’s is caused by “type 3” diabetes which effects the metabolism of sugar /insulin in the brain.   It is supported by research and there are protocols for treatment.  If a physician is completely convinced that this is the sole cause of Alzheimer’s and he/she treats all Alzheimer’s patients for type 3 diabetes (even if there are no clinical indications other than cognitive impairment), does this constitute billing fraud IF the diagnosis that accompanies the bills is “Type 3 Diabetes” ?   It might, even though the physician may be acting properly from a medical standpoint.  This is the danger of Penal Code section 550 as they conduct which constitutes fraud is often defined by insurance companies, seminars promoted by prosecutors offices which are funded by insurance donations and by politicians trying to control health care costs.

You may not be a health care fraud specialist, but you are a top defense attorney.  Your skills in the courtroom and your case preparation skills, will carry over to the health care arena.

The Vagueness Barrier and How it may Actually be a Road map to a Defense

The first hurdle is time consuming but intellectually easy to overcome.  There are a large number of vague (and subject to interpretation) medical and billing terms that you need to know.  Different fraud statutes and health care websites will provide definitions.  The basic concepts will be the same but the context (Medicare, Workers Compensation) may make the same “word” mean slightly different things.    These inconsistencies are a type of impenetrable confusion that trip up legitimate medical practices and lead to unfounded fraud charges.  So, as you learn the basic terms of art, look for the areas where an expert might claim that a term has a clear and specific meaning but in reality, the meaning is context based.

The medicaid fraud investigation process is usually carried out by non-medical professionals who are educated and advised by the insurance industry.  They have a body of experience that is often biased in favor of finding criminal intent.  As healthcare fraud involves a culpable mental state, statutory muck is often the legitimate basis of a defense.  Just as law enforcement finds criminal intent in the muck, a good defense shows how even the completely innocent doctor would step over the vaguely drawn lines.

The Scotus Blog has an excellent article on the void for vagueness issue. The blog is written by attorney Kevin Johnson.         ☜ Click

Unbundling as an Example

Under Medicare and other billing guidelines, certain procedures are meant to be bundled together for purposes of billing.  Each task may be individually billable but there is also a way to bill as a package. Just like buying in bulk at Costco, bundled services usually cost less than unbundled. When the billing structure (e.g. Medicare) requires bundled billing, the deliberate, repeated unbundling may be a crime.   How often can an unbundling error be considered “just a mistake” ?  Many medical practices employ outside billing services which charge as their fee, a % of the total amount received from insurers.  If the biller unbundles, is the medical practice or individual physician responsible ?   Again, knowledge, implied knowledge and intent are key.  And you can imagine, informants, disgruntled employees especially, are often key prosecution witnesses.

The Lexicon

The core vocabulary  will vary from case to case but ultimately you can compile it.  The main sources of the lexicon of your case, will be.

  1. The Indictment including phrases used and the statutes.
  2. Have your client go through his/her view of the charges.
  3. Internet searches for companies that handle the kind of work relevant to your complaint (e.g. medical billing)
  4. Hire an expert.

The key point is that unlike a standard criminal case, medical fraud cases deal with lots of government regulations and the interpretation of those regulations.  Disagreements as to interpretation of rules are often the genesis of a criminal prosecution.  Understand early whether your client has invented a deliberate scheme or has fallen into legislative quicksand.  For examples of deliberate healthcare abuse, the ACFE (American Certified Fraud Examiners) website lists <<Common Health Fraud Schemes>>

The first scheme they describe is having patients at a facility watch the movie “Forrest Gump” for the “upteemth” time being billed as group therapy.  There is not much defense to a charge such as that.  A mitigation approach would make sense.  Other areas in the article include “Billing for a non-covered service as a covered service.”  This is not necessary so black and white.  It can be, but not necessarily so.  If your client bills for “Acupuncture”, a covered service, but also provides a complimentary massage, is that billing fraud ?  Web MD describes massage/pressure techniques related to accupuncture.  Even if the billing rules don’t allow a substitution, is this FRAUD ?  Or just a civil/financial matter ?

Understand the Politics

The “big picture” is often the “small picture”.  On July 13, 2017, the New York Times headline figuratively screamed !

“U.S. Charges 412, Including Doctors, in $1.3 Billion Health Fraud”.

For those who work in this area, the nature of the charges drew our attention.  About 1/3 of the charges were narcotics related.

There is a lot of abuse in this area but “pain medicine” has a lot of built in defenses as well.  You may have a moral dilemma here because people who are guilty of being drug dealers with an “M.D.” behind their name, can get off on technical defenses because the area of pain medicine has a great deal of “judgment” involved.   Another areas involved “kickbacks” where even legitimate referrals to the “best” diagnostic centers became a crime when a kickback was involved.  A cash kickback is hard to defend but cross referrals, advertising sharing and gifts (e.g. paid vacations), are not necessarily “kickbacks”, although they are often charged that way.

If you are in the cross hairs of a politically popular type of offense, the chances of an excellent negotiated resolution drop like a rock in a pond.

Understand THEIR Investigative Process

The Inspector General for Health and Human Services, is the go to place for Medicare fraud investigations.  They are a “tip” based operation and a lot of cases start with a phone call to the Centers for Medicare and Medicaid Services (CMS). Look here for more information.  <<OIG Fraud Reporting Site>>

Competitors, employees and potential civil litigants (Qui Tam litigators) will often make the call.   A CMS screener reviews the initial accusation/claim and they have access to a database of prior claims.  If the claim seems valid, and especially if the claim is one of many (of the same type), the case will be escalated.  The FBI will often take over the investigation at this point.  The National Law Journal has published an good article by attorney Jonathan Tycko, titled “Top 10 Tips for Qui Tam Whistleblowers”.  If you are defending a medical practice, the article is worth reading.   Click DOJ Emblem ☞ 

Tracking the investigation requires some push on your part.  In a federal (Medicare) case, there is less disclosure of the investigative process than in a state case.  And yet, that very process may reveal bias on the part of witnesses since the initial complainants may in fact be witnesses in the criminal fraud case.

To understand financial motivations for reporting alleged fraud, there is an excellent primer on the False Claims Act published by the Department of Justice <<Click for Primer>>

But There Must Be A Single Reliable Source ??

There is no clear, comprehensive guide to the laws for medical billing and coding.  There are experts and interpretive guides but nothing as clear as a statute with spelled out elements.  This vagueness in medical billing laws in an opening for an effective defense.  Void for vagueness motions (not as the statute is written but as applied), are often a solid defense strategy.

There is a tendency for medical professionals to err on the side of caution in billing and practice procedures.  That way, a vague law will not be accidentally violated.  Medical fraud cases often focus on practitioners who are less cautious but they may not (necessarily) be criminals.

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