News Articles

BY PAUL A. GRANA AND AL W. JOHNSON

Since the early 1990's, immense resources of the U.S. Attorney General have been focused on the prosecution of healthcare fraud.  In 1993, newly appointed Attorney General Janet Reno announced that healthcare fraud would be a major priority of her office.  The U.S.  Attorney offices throughout the country, with extensive support from the Federal Bureau of Investigation and other Federal agencies, have lived up to the promise of aggressive criminal and civil prosecution.  Prosecutions are not limited to high profile national providers, but are directed against healthcare providers at all levels.

This prosecution gained impetus with the 1996 enactment of the Health Insurance Portability Protection Act.  This Act provides enhanced resources for the federal government to combat healthcare fraud.  For example, the FBI increased the number of St.  Louis agents dedicated to prosecuting healthcare fraud from one to five.  The U.S.  Attorneys in Missouri have assigned several seasoned prosecutors to concentrate on nothing but healthcare and Medicare fraud and the prosecution army continues to grow.  Revenues generated by the prosecution of civil and criminal claims, including restitution and fines, are funneled back to the support of additional prosecutions.

The authors of this article do not intend to condone Medicare fraud.  Medicare fraud is, however, a field in which clients incur high risks of both civil and criminal liability simply because they engage in providing services or goods that are paid for through the Medicare system.  For most healthcare providers, refusing to service Medicare beneficiaries is simply not an economically viable option.  Given the fact that healthcare providers, by necessity, are at serious risk, we point out that attorneys can help their healthcare clients practice preventative law by encouraging them to adopt and implement appropriate Medicare compliance plans.

Despite the federal government's expenditure of huge sums of money to investigate and prosecute healthcare fraud, the results have been clearly mixed.  Throughout the country federal prosecutors have experienced poorer conviction records in healthcare compliance cases than in more traditional criminal prosecutions.  For example, in the Southern District of Illinois, four former managers of Healthcare Service Corporation were charged in multiple count indictments with various acts of Medicare fraud.  They all were found not guilty after a 12-week trial in 1999.

The Abbott Ambulance Cases

Our recent successful defense of Philip Salvati, a former Abbott Ambulance Company executive charged with Medicare fraud, was an eye-opener.  Salvati is the former vice president of Abbott and was Abbott's Medicare liaison for approximately 10 years.  He experienced differences with the company's president and resigned in 1995.  A very upstanding individual, Phil Salvati was for many years a volunteer Boy Scout leader and a former Rotary Club president.

In 1997, the government began an investigation of Abbott Ambulance, prompted by a qui tam complaint filed in the Eastern District of Missouri by Bob Goeggel, the president of Abbott's competitor Gateway Ambulance.  The government worked in tandem with Goeggel in the initial stages and subsequently undertook its own investigation and prosecution.  Government investigators targeted Salvati because they believed him to be a disgruntled ex-employee who might be inclined to provide favorable information.

In a qui tam action, an individual files a civil claim against the target defendant or defendants.  The government has the option of becoming involved in the claim.  If that occurs, a significant portion of any recovery is paid to the individual who instigated the case.  The filings of qui tam actions have increased 1,300 percent since 1987.

FBI agents first approached Salvati in 1997.  Convinced by investigators that they had developed extensive evidence against Abbott, Salvati talked to the FBI several times without consulting an attorney.  Salvati believed he would receive significant prosecutorial leniency in exchange for his cooperation.  Unfortunately, his hopes were not realized.  In April of 2000, after a far-reaching, three-year investigation, Mr.  Salvati was charged with Medicare fraud in a 39-count indictment relating to his work at Abbott.  The indictment included allegations that Salvati and other Abbott officials had engaged in wrongful billing through the manipulation of billing codes used in bills submitted to Medicare.  Salvati was found not guilty on all counts.

In this article we seek to provide lawyers defending Medicare fraud prosecutions medical guidance.  Medicare fraud cases often share characteristics that are not present in other more traditional types of criminal prosecutions.  These common characteristics provide an opportunity to use unique strategies for a successful defense.

Understanding Medicare

As in any litigation, it is necessary to understand the substantive field to which the litigation relates.  This rule is especially critical in defending healthcare fraud cases.  Medicare laws are among the most complex.  Rarely will the experienced criminal litigator be conversant with the intricacies of Medicare.  The most effective defense teams require both a criminal litigator and a lawyer whose practice is focused on healthcare law and Medicare compliance.  In our case, this combination proved critical to a successful defense.

The Medicare laws cover a wide range of potential criminal conduct.  Many prosecutions relate to false claims or billing practices.  However, there are many other areas in which Medicare providers face criminal prosecution for activities that may appear perfectly legal.  For instance, it is illegal to pay or receive compensation of any type for referring patients to providers paid by Medicare even if the services are medically necessary (commonly referred to as "kick-back violations").  Many seemingly innocuous situations constitute receipt of compensation.  It is also illegal, under many circumstances, for a provider to refer a patient to a facility in which the provider holds any financial interest (commonly referred to as "Stark" violations).  However, there are many instances in which the Medicare laws provide exceptions and safe harbors for activities that would otherwise be illegal and even criminal.  The only way to use the complexities to your benefit is to be familiar with the thousands of pages of regulations that underlie the Medicare statues - hence the need for the criminal defense lawyer to team up with the healthcare lawyer.

The complexities of Medicare provide defense lawyers two important advantages.  First, the government agents and prosecutors often learn the intricacies of the relevant area of Medicare law as they prosecute the case.  This can result in errors in the prosecution, dropped counts of the indictment and amended indictments.  Second, explaining the complexities of the laws to the jurors can convince them that criminal intent is not proven because the defendant could have in good faith gone afoul of a hopelessly complex system.  Of course, you cannot use these advantages unless your defense team understands the laws and the complexities they entail.

Pre-Indictment Negotiation

Prosecutors often treat Medicare fraud cases like any other criminal prosecution.  Attorneys representing targets in the pre-indictment stage, however, must be aware of the potential for acquittal because of the lack of jury appeal in Medicare fraud prosecutions.  Even in instances where defendants are convicted at trial, judges are inclined to consider probation when guidelines permit.  The government frequently experiences difficulty in proving substantial amounts of theft, because most cases involve relatively low monetary submissions.

In our case, for example, the 17 counts that were submitted to the jury involved individual ambulance trips with charges in the range $150-$200 per trip totaling approximately $2,500.  Numbers like this normally scale out in the 11-13 sentencing range guidelines, providing the court discretion to give probation.  Even when the number of submissions is high, the government faces the daunting task of proving fraud as to each of the submissions.

For these reasons defense attorneys should, under most circumstances, demand immunity before offering the pre-indictment client's testimony against co-defendants.  Government attorneys tend to offer better deals as trial of the case or related cases approach.  In our experience, for example, the government's pre-indictment negotiations began with an offer that involved Salvati's agreement to testify against his co-defendant in both a civil and criminal case.  Had he done so, it would have been with the understanding that he would still probably receive a jail sentence of 18 to 24 months.  By the time the co-defendants related case was going to trial, the government had modified its position and was offering nearly guaranteed probation in exchange for testimony.  Our client wisely decided to decline the offer and go to trial.

In negotiating any Medicare plea bargain be aware that the government's strategy is often to charge multiple defendants and then divide and conquer.  Any employees of a provider participating in Medicare-related operations can be prosecuted.  Defendants are often people who, like Salvati, never faced criminal prosecution and never even considered that their lifestyles and occupations could expose them to a risk of a jail sentence.  When that threat becomes real there can be an understandable reaction to take whatever disposition will keep the client out of jail.  There is a risk that a client may be so anxious to avoid jail that he or she pleads guilty to a crime that was not committed.  The client and attorney must carefully evaluate what testimony the client will be able to honestly offer the government.

Pre-Trial Discovery

One defense advantage in criminal Medicare fraud cases is that the government frequently initiates criminal Medicare cases either contemporaneously with or after a civil recoupment action.  This provides defense attorneys an opportunity to engage in significant pre-trial discovery, including depositions.  That discovery is a tremendous advantage because Federal Rules of Criminal Procedure are very restrictive in the types of discovery that can be conducted by a criminal defendant.  In our case, we were the beneficiaries of the discovery available through the related civil case against Abbott.  Approximately 12 pre-trial depositions of key prosecution witnesses were available.

It is critically important to conduct a thorough review of each and every document related to any Medicare case.  Medicare cases tend to be document-intensive with hundreds, and sometimes thousands, of documents introduced as exhibits.  It is critically important that the document review include not just the documents the government intends to introduce but any and all other documents that are available.  Many times, the most useful documents are among those discarded by the government.

Careful attention should also be paid to Rule 16 of the Federal Rules of Criminal Procedure.  This rule allows a defendant to subpoena and obtain documents prior to trial pursuant to court order.  In our case, we carefully reviewed all the documents that were provided by the government and then organized and cross-referenced them chronologically and by exhibit number.  While compiling this information we noticed a telltale gap in the chain of documents.  The government had produced documents from Abbott Ambulance for every year from 1986-1994.  There, however, the document trail stopped.  We found this ironic since all 17 counts with which our client was charged allegedly occurred in 1995!

At that point we utilized Rule 16 to subpoena Abbott Ambulance's meeting minutes and other internal documents from 1995.  We instantly saw why the government did not want to utilize these documents.  They revealed that our client had been completely out of the management loop in 1995, the year our client was allegedly participating in a scheme to defraud Medicare.

Finally, in pre-trial discovery one should not ignore the simplest yet potentially most effective discovery tool.  That is, informal interviews with government witnesses.  Some of them will not talk to you, but an amazing number of lay witnesses will speak to an attorney or investigator for a criminal defendant.

Trial Strategy

Practitioners trying Medicare cases need to be aware of the intense public sentiment against Medicare.  While we should not go so far as to expect the jury to forgive theft, there is a widespread belief that Medicare is an unwieldy bureaucracy fraught with confusion, ambiguity and inept bureaucrats.  As explained elsewhere in the article there are many opportunities to reinforce this perception among the jurors.  Because Medicare is a government program, political conservatives tend to be among those most easily offended by the Medicare bureaucrat.  Political conservatives usually make ideal jurors for the prosecution.  In our case, the jury looked like a prosecutor's dream come true.  It was a predominantly conservative older male jury.  We chose not to strike a former St.  Louis City Police Officer from the panel because we felt that he may not view our client as a real criminal.

Most Medicare payment programs are overseen by third-party administrators.  Typically, they are large insurance companies.  Much of the prosecution's evidence originates or has been processed through those insurance company administrators.  The insurance company's administrative personnel, while usually called as government witnesses, may themselves be frustrated in their dealings with Medicare.  These witnesses typically provide fertile ground for cross-examination.  It is important to emphasize, on cross-examination, that the bureaucrats who determine whether claims are valid typically have little or no medical training.  Often they are high school graduates.  Because many Medicare cases revolve on whether the service being billed was "medically necessary," cross-examination should pin down government witnesses on their credentials, and question their ability to second guess physicians and other medical professionals.  Pushed aggressively on cross-examinations, most Medicare bureaucrats will claim that they believe their opinions regarding medical necessity are better than opinions of treating physicians.  Obviously, this is a ludicrous position that should be punctuated frequently during the course of the trial.

Medicare and its administrators each publish rules and newsletters interpreting Medicare regulations and procedures.  Medicare regulations are confusing.  Proposed regulations are often not finalized for years.  There is an added layer of confusion through scholarly articles in which experts cannot agree on the proper interpretation of Medicare's regulations.  Proof of criminal intent can be attacked in this morass of confusing regulations, rules and interpretations.

The prosecution will call expert witnesses.  The defense must seriously consider retaining experts, particularly medical experts.  Since the government experts tend to be non-practicing physicians and bureaucrats, the defense has an excellent opportunity to obtain expert testimony through a local private practice physician.  Given the significant anti-Medicare sentiment that exists in the medical community, it should not be difficult to find a local physician willing to review your case, and possibly offer favorable testimony.  Doctors do not like being second-guessed and they do not like seeing their healthcare colleagues second-guessed.

If you are dealing with a medical necessity case, you need to invest whatever investigative resources are available in attempting to locate (a) patients; (b) relatives of deceased patients; or (c) treating physicians or other medical personal who treated the patient.  The government's case will frequently be a paper case.  Medical records are utilized to establish lack of medical necessity.  Although defense experts may be able to refute this, who can better refute it than the patients (or families) themselves? If the government claims that the patient's treatment was not medically necessary, bring in the patient, a family member of the patient or treating healthcare professionals with first hand knowledge of the patient's needs.  Once you have used such witnesses to cast doubt on the conclusions the government draws from its document case involving one patient that doubt casts a shadow on all of the government's document based conclusions.

Most of the patients involved in our case had been elderly individuals who were deceased at the time of the trial.  We were successful, however, in locating several surviving family members willing to come to court to provide clear and unequivocal testimony supporting the medical necessity of the ambulance transports.  We also were fortunate enough to locate a treating physician of one of the patients who actually ordered the ambulance for his patient.  He provided solid, virtually irrefutable evidence to substantiate medical necessity in direct contradiction of the government's document based conclusion.

Finally, consideration should be given to using character witnesses, particularly if you have a client who is an upstanding citizen like Salvati.  We utilized fellow Boy Scout leaders, as well as members of Salvati's church and Rotary Club, to develop evidence of his extraordinary character, reputation and integrity.  This is permitted under Rule 405 of the Federal Rules of Evidence.  In Medicare cases you are likely to find, as was the case with Salvati, that the defendant is an upstanding individual.

Conclusion

We hope this article provides you insightful tools to deploy in the defense of Medicare fraud criminal prosecutions.  You will note a common thread throughout our suggestions.  Medicare fraud is a complex area with many characteristics that are different than other criminal cases.  Therefore, Medicare fraud cases offer defense attorneys unique opportunities to utilize creative and effective defense strategies.