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From Health Law Daily, October 19, 2015

Court refuses to throw out health care fraud indictment

By Mary Damitio, J.D.

Laboratory owners and a physician who were indicted for conspiring to commit health care fraud and violating the Anti-Kickback Statute (AKS) (42 U.S.C. § 1320-7b) through an alleged scheme to bill federal health care programs for medically unnecessary drug screenings, must continue to defend the case against them after a district court refused to dismiss their indictment. The court concluded that the indictment was sufficiently specific and that the government did not mislead the grand jury by failing to inform it of the parties’ affirmative defense relating to the AKS safe harbor provision because the government is not required to present affirmative defenses to a grand jury (U.S. v. Palin, October 16, 2015, Jones, J.).

Background. In 2009, an anesthesiologist opened a practice in Virginia to treat patients with drug addiction. The practice only accepted cash payments and did not accept Medicare, Medicaid, or private insurance. The practice did, however, collect patient insurance information and submitted preauthorization forms for the patients to obtain coverage for their prescription drugs.

Patients visited the practice each week to obtain prescriptions for a week’s worth of medications used to treat their drug addictions. The physician required all patients to undergo weekly urine drug screen tests. All of the patients’ urine samples were sent to Bristol Laboratories, LLC (Bristol Labs), a Medicare and Medicaid participant and a participating provider for a number of private insurance companies. The practice closed in 2012 and the anesthesiologist died a year later.

Second clinic. In 2010, the owners of Bristol Labs opened an addiction treatment clinic, Mountain Empire Medical Care, LLC (MEMC). The owners entered into a contract with an otolaryngologist to provide physician services at the clinic. Under the agreement the physician was paid $1400 each day that she worked at the clinic. She did not accept insurance, but the clinic obtained the patients’ insurance information and submitted preauthorization forms to the Bristol Labs. The otolaryngologist also required every patient to take a weekly urine drug screening in order to obtain their prescriptions.

Drug tests. All of the urine samples from both clinics were sent to Bristol Labs, which then billed Medicare, Medicaid, and private insurances for the tests that it performed on the samples. Both clinics required the insured patients to undergo both qualitative and a quantitative drugs test each week. However, uninsured patients were only required to undergo a cheaper, “quick cup test.” The cheaper tests detected the presence of drugs, but did not measure quantities. Uninsured patients were not given the option of the more expensive tests, and insured patients were not given the option of taking the cheaper tests. The type of drug screen was unrelated to the patients’ treatments because the results did not alter the treatment plans. If a patient was found to be abusing other drugs or not taking the prescribed drugs, the physicians did not change the patient’s prescription or require the patient to attend any counseling or end the treatment.

Indictment. The lab owners and the otolaryngologist were indicted for allegedly conspiring to defraud Medicare, TennCare (Tennessee’s Medicaid program), and Virginia Medicaid by ordering and billing for unnecessary drug screening tests and for receiving illegal remunerations (18 U.S.C. § 1347; 42 U.S.C. § 1320a-7b(b)(1)(A),(b)(2)(A)). The government alleged that the owners of Bristol Labs required physicians to order unnecessary and medically unnecessary drug screenings that were processed by the lab. Additionally, the government alleged that the MEMC physician was paid an amount that exceeded the fair market value of her services and that such payments were unlawful remunerations. The parties moved to dismiss the indictment.

Delay. The physicians and the lab owners were not prejudiced by the timing of the indictment, which was brought after the death of the anesthesiologist. The parties argued that they could have obtained evidence from the anesthesiologist, who was the actual focus of the government’s investigation. The court rejected this argument and noted that the parties were indicted within the statute of limitations and did not prove that the delay caused them actual prejudice or that the delay was in bad faith. The fact that the anesthesiologist died prior to the indictment did not prejudice the defendants because the parties were aware of the government’s investigation into the lab and the clinics and could have sought information from him prior to his death.

Vague indictment. The indictment was sufficiently specific so as not to be dismissed. The requirements for an indictment is not “onerous,” and only must contain the elements of the offenses charged and fairly inform the defendants of the charges.

Safe harbor. The government did not mislead the grand jury by failing to inform it that a safe harbor provision existed under the AKS that excluded certain services from being considered unlawful remunerations. The safe harbor provision is an affirmative defense and the government was not required to present it to the grand jury.

Expert. The government was not required to present an expert on the issue of fair market value of the physician’s services because the issue related to an affirmative defense, which the defendants bore the burden of proving. Whether the payments to the physician exceeded the fair market value of the services is not an element of the crime charged; it is an element of an affirmative defense, and the government was not required to prove that the payments exceeded the fair market value of the physician’s services.

The case is No. 1:14CR00023.

Attorneys: Daniel B. Moskowitz (Khouri Law Firm) for Beth Palin. Nancy Combs Dickenson, Federal Public Defenders Office, for Joseph D. Webb. Edward Gaines Stout, Jr. (Curcio & Stout, PC) for Mary Elizabeth Curtiss. Janine Marie Myatt, U.S. Attorneys Office, for United States of America.

Companies: Bristol Laboratories, LLC; Mountain Empire Medical Care, LLC

MainStory: TopStory AntikickbackNews FraudNews LaboratoryNews MedicaidNews PartBNews

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