Penal Code 550

 CALIFORNIA’S FRAUD STATUTE – PENAL CODE 550

 

California Penal Code Section 550 allows almost any conduct to be deemed felony billing fraud.   Honest medical doctors can be charged with this crime when they don’t effectively police their own patients or make referrals for testing, physical therapy or other outside services to dishonest practitioners.

Penal Code section 550 walks a line where gross or continued mistakes can be deemed fraudulent.   “Willful blindness” can be deemed “criminal intent”.   For example, if  a doctor makes a referral of a patient for testing at a facility that routinely overcharges,  the physician could be guilty of fraud.    This is particularly dangerous when the doctor gets reports from that entity and bills for reviewing the reports or gets referrals from that entity or facility.   If you are an orthopedist and you refer a patient to a physical therapist who routinely upcodes, the “negligent” referral label may be attached and your overall relationship with that entity will be under scrutiny.

With 100% legitimacy you may argue that “they are expensive but they are the best”.  However, that type of defense is often an after arrest assertion and does NOT lead to the dismissal of charges at the early stages.  It is ultimately a TRIAL defense which may lead (eventually) to dismissal or may need to be asserted at trial.

Stark Violations & Other Physician Self Referral Charges

Stark violations and other self-referral criminal charges against physicians are easier to see (in advance).

For example, Urology groups that prescribe catheters and then fulfill the orders themselves via unrelated third parties are at risk.  Fancy “medical lawyers” will fashion medical DME groups that on the surface survive scrutiny but in our view, mostly fail when objectively analyzed.  If you undertake a DME  project, you should weigh the benefits ($) vs. the risks (your license).

DME & GENETIC TESTING

Locums companies are now referring files to MD’s for DME or Genetic Testing review.   The files are often partial and the genuine need for the devices or testing, dubious.  They pay $ 10-$20 per file.  The companies that hire the locums referrer are often fly by night marketing firms.  There is a major federal push to prosecute these companies and the physicians who review the files.  The pivotal question is often this, “Doctor, did you really think that an 85 year old patient needed a genetic test because her cousin had breast cancer 20 years ago?”   Or, weren’t you concerned that the same patient needed 4 DME devices ?”   “Did you ever call a patient?”   “Did you wonder why the treating doctor didn’t make the assessment ?”  “Do they have a PCP ?”

Physician Insurance Fraud Charges

To prove Insurance Fraud in California under Penal Code section 550   the prosecution has to establish knowledge by the defendant doctor. The knowledge element requires at least some understanding that the conduct that the doctor engaged in was wrong.  But “wrong” is defined as any conduct leading to an unwarranted insurance claim.  Think about the number of disagreements the average physician has with insurance companies over appropriate treatment.  If a physician engages in a PATTERN of TREATMENT that conflicts with established insurance reimbursement policies the PROFIT MOTIVE in that medical choice will (often) be scrutinized.    If the published literature does not strongly support a treatment choice, a fraud investigation is possible.

 Insurance Fraud requires a Criminal Mental State

The mental state element  for Worker’s Compensation fraud (which is a subset of Insurance Fraud) is that the person made the claim or presented some documentation separate from the insurance claim itself with the intention of supporting a false claim. See: People v. Scofield (1971) 17 Cal.App.3d 1018, 1025–1026

This means that medical records, a report, a document taking a person off work for a month, an inaccurate bill – can all support an insurance fraud claim. This is true even if the documents are sent to an attorney for an injured person rather than to the insurance company itself.   In a recent case a doctor certified a patient as disabled.  When the patient appeared to be more physically able than the doctor realized, both the patient and doctor were charged with insurance fraud and worker’s compensation fraud.  (We represented the doctor and charges were dismissed as he did not have a “culpable mental state”.  In other words, the doctor did not commit fraud.  However, fraud charges expose the innocent medical doctor to millions of dollars in fines and penalties.  (Read U.S. government Press Release Here)

The cases are often hard to understand in terms of what is being charged. A count of insurance fraud might have a date range of many years. If that is the case, the defense should ask the court to instruct the jury that there must either be one, unbroken and continuing course of conduct or they must unanimously agree on at least one single wrongful act. (See People v. Dieguez (2001) 89 Cal.App.4th 266, 274–275 In other words, there might have been thousands of documents submitted to an insurance company but the jury has to find one document that was fraudulent, transmitted for the purpose of promoting a fraud and that this transmission was done by the defendant (or someone working with the defendant) and on purpose.

The prosecution usually focuses on the physician/chiropractor but staff are often drawn in on a conspiracy theory. Pressure is then applied to staff by law enforcement. “Cooperate against the doctor” and no charges will be filed.

The physician/chiropractor who is charged may escape liability by providing information against other medical practitioners. In those cases a corporation plea is often negotiated. This means that the medical corporation pleads guilty and pays a huge fine but the practitioner him/her self gets off.

We endorse the website ADJUSTER.COM as a good source of up to date information on the universe of insurance fraud and worker’s compensation fraud prosecutions.

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10.0Daniel Horowitz
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