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Overview of Pertinent Criminal and Civil Statutes Relating to Health Care Providers
W. Thomas Dillard and David M. Eldridge

Table of Contents

Criminal Statutes
Health Care Fraud (18 U.S.C. § 1347)
False Statements Relating to Health Care Matters (18 U.S.C. § 1035)
Theft or Bribery Concerning Programs Receiving Federal Funds (18 U.S.C. § 666)
Medicare Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))
Theft or Embezzlement in Connection with Health Care (18 U.S.C. § 669)
Criminal Penalties for Acts Involving Federal Health Care Programs (42 U.S.C. § 1320a-7b(a)(3))
Mail Fraud (18 U.S.C. § 1341)
Wire Fraud (18 U.S.C. § 1343)
False Claims (18 U.S.C. § 287)
Laundering of Monetary Instruments (18 U.S.C. § 1956)
Engaging in Monetary Transaction in Property Derived From Specified Unlawful Activity (18 U.S.C. § 1957)
False Statements (18 U.S.C. § 1001)
Deliberate Ignorance
Sixth Circuit Definition of "Scheme to Defraud"
Civil Statutes
False Claims Act (31 U.S.C. § 3729)
Qui Tam (False Claims Act, 31 U.S.C. § 3730

Criminal Statutes
(PROOF BEYOND A REASONABLE DOUBT)


Health Care Fraud
(18 U.S.C. § 1347)

Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice--
(1) to defraud any health care benefit program; or
(2) to obtain , by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program , in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.


False Statements Relating To Health Care Matters
(18 U.S.C. § 1035)

False statements relating to health care matters
(a) Whoever, in any matter involving a health care benefit program, knowingly and willfully --
(1) falsifies, conceals , or covers up by any trick, scheme, or device a material fact ; or
(2) makes any materially false , fictitious, or fraudulent statements or representations, or makes or uses any materially false writing or document knowing the same to contain any materially false , fictitious, or fraudulent statement or entry, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined her this title or imprisoned not more than 5 years, or both.
(b) As used in this section, the term "health care benefit program" has the meaning given such term in section 24(b) of this title.


Theft Or Bribery Concerning Programs Receiving Federal Funds
(18 U.S.C. § 666)

(a) Whoever, if the circumstance described in subsection (b) of this section exists--
(1) being an agent of an organization, or of a State, local or Indian tribal government, or any agency thereof--
(A) embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that--
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or
(B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; or
(2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; shall be fined under this title, imprisoned not more than 10 years, or both.
(b) The circumstance referred to in subsection (a) of this section is that the organization, government, or agency receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.


Medicare Anti-Kickback Statute
(42 U.S.C. § 1320a-7b(b))

Illegal Remunerations
(1) whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind--
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program , or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program , shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
(2) whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person--
(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program , or
(B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program , shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
. . .
(f) For purposes of this section, the term "Federal health care program" means--
(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of Title 5); or
(2) any State health care program, as defined in section 1320a-7(h) of this title.


Theft Or Embezzlement In Connection With Health Care
(18 U.S.C. § 669)

(a) Whoever knowingly and willfully embezzles , steals, or otherwise without authority converts to the use of any person other than the rightful owner, or intentionally misapplies any of the moneys, funds, securities, premiums, credits, property, or other assets of a health care benefit program , shall be fined under this title or imprisoned not more than 10 years, or both; but if the value of such property does not exceed the sum of $100 the defendant shall be fined under this title or imprisoned not more than one year, or both
(b) As used in this section, the term "health care benefit program: has the meaning given such term in section 24(b) of this title.


Criminal Penalties For Acts Involving Federal Health Care Programs
(SOCIAL SECURITY ACT)
(42 U.S.C. § 1320a-7b(a)(3))

(a) Making or causing to be made false statements or representations
Whoever --
(3) having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized, shall (I) in the case of such a statement, representation, concealment, failure, or conversion by any person in connection with the furnishing (by that person) of items or services for which payment is or may be made under the program, be guilty of a felony and upon conviction thereof fined not more than $25,000 or imprisoned for not more than five years or both, or (ii) in the case of such a statement, representation, concealment, failure, conversion, or provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction thereof fined not more than $10,000 or imprisoned for not more than one year, or both.


Mail Fraud
(18 U.S.C § 1341)

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than five years, or both. If violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.


Wire Fraud
(18 U.S.C. § 1343)

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.


False Claims
(18 U.S.C. § 287)

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.


Laundering Of Monetary Instruments
(18 U.S.C. § 1956)

(a)
(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--
(A) (I) with the intent to promote the carrying on of specified unlawful activity; or
(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or
(B) knowing that the transaction is designed in whole or in part--
(I) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $ 500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.
(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States--
(A) with the intent to promote the carrying on of specified unlawful activity; or
(B) knowing that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part--
(I) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $ 500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B), the defendant's knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant's subsequent statements or actions indicate that the defendant believed such representations to be true.
(3) Whoever, with the intent--
(A) to promote the carrying on of specified unlawful activity;
(B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or
(C) to avoid a transaction reporting requirement under State or Federal law,
conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term "represented" means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section.
(b) Whoever conducts or attempts to conduct a transaction described in subsection (a)(1) or (a)(3), or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of--
(1) the value of the property, funds, or monetary instruments involved in the transaction; or
(2) $ 10,000.


Engaging In Monetary Transaction In Property Derived From Specified Unlawful Activity
(18 U.S.C. § 1957)

(a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $ 10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b).
(b) (1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. (2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction.
(c) In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.
(d) The circumstances referred to in subsection (a) are--
(1) that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States; or
(2) that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section).


False Statements
(18 U.S.C. § 1001)

Statements or entries generally
(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully -
(1) falsifies, conceals , or covers up by any trick, scheme, or device a material fact ;
(2) makes any materially false , fictitious, or fraudulent statement or representation ; or
(3) makes or uses any false writing or document knowing the same to contain any materially false , fictitious, or fraudulent statement or entry ; shall be fined under this title or imprisoned not more than 5 years, or both. 18 U.S.C. § 1001.


Deliberate Ignorance
Under circumstances dealing with the failure to disclose information known by an agency, the standard for knowledge and willfulness embedded in these statutes would be a definition of "deliberate ignorance." Essentially deliberate ignorance means:
No one can avoid responsibility for a crime by deliberately ignoring the obvious . . .
The defendant was aware of a high probability that [there was a violation of criminal laws] and that the defendant deliberately closed his eyes to what was obvious. Carelessness, or negligence, or foolishness on his part is not the same as knowledge, and is not enough to convict.
Pattern Criminal Jury Instructions, United States Court of Appeals for the Sixth Circuit, ¶2.09 (Deliberate Ignorance).


Sixth Circuit Definition Of " Scheme To Defraud"
In the case of the mail fraud statute, judicial construction has made the problem of vagueness even worse. This is illustrated most clearly by the "definition" of "scheme to defraud" which has been used in this circuit:
[T]he scheme to defraud element required under § 1341 is not defined according to a technical standard. The standard is a "reflection of moral uprightness, of fundamental honesty' fair play and right dealing in the general and business life of members of society." United States v. Bruce , 448 F.2d 1224, 1229 (5th Cir. 1973), quoting ,Gregory v. United States , 253 F.2d 104, 109 (5th Cir. 1958).
United States v. Van Dyke , 605 F.2d 220, 225 (6th Cir. 1979).

In this case, the jury was given the Van Dyke instruction over objection.

Civil Statutes
(PROOF BY THE PREPONDERANCE OF THE EVIDENCE)


False Claims Act
(31 U.S.C. § 3729)

The False Claims Act (FCA) is a civil remedy used by the government to obtain the proceeds of fraud in benefits programs, including the health care field. This act essentially mirrors the criminal statutes for fraudulent claims, except the standard of proof is lower (by the preponderance of the evidence) and the knowledge element is more less strict.

The knowledge element under the False Claims Act is:
(b) Knowing and knowingly defined. -For purposes of this section, the terms "knowing" and "knowingly" mean that a person, with respect to information-
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information,
and no proof of specific intent to defraud is required.
31 U.S.C. § 3729 (b) (emphasis added).

The government can recover from $5000 to $10,000 per false claim, plus three (3) times the amount of damages sustained by the government.


Qui Tam
(False Claims Act, 31 U.S.C. § 3730)

Another potential area of civil liability is a Qui Tam action. A Qui Tam action is embedded within the False Claims Act at 31 U.S.C. § 3730.

A Qui Tam action is filed under seal with a federal district court by a "relator," on behalf of himself and the government. The government then, after investigation, elects to proceed with the action or declines to proceed (although it may intervene later if it declines). If the government elects to proceed, the relator can receive as much as 15% to 25% of the proceeds of the action or settlement. If the government declines, the relator can receive as much as 25% to 30% of the proceeds or settlement, including reasonable expenses and costs.

Although the 1986 amendments to the False Claims Act liberalized qui tam actions, they can still be barred jurisdictionally under a variety of conditions. These conditions are found at 31 U.S.C. § 3730(3)(e), which provides:
(e) Certain actions barred.--. . .
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, " original source " means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.
31 U.S.C. § 3730(3)(e)(4)(A) and (B).

To detail further, a public disclosure occurs when information forms the basis for a Qui Tam suit is disseminated from:
1. A criminal hearing
2. A civil hearing
3. An administrative hearing
4. A congressional report
5. A congressional hearing
6. A congressional audit
7. A congressional investigation
8. An administrative report
9. An administrative hearing
10. An administrative audit
11. An administrative investigation
12. An GAO report
13. An GAO hearing
14. An GAO audit
15. An GAO investigation

From the news media (press release?)

Any documents that have been filed with a court in a civil proceeding such as discovery documents and a plaintiff's complaint. See United States v. McKenzie , 123 F.3d 935, 938 (6th Cir. 1997). 1

If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.
31 U.S.C. § 3730(d)(3).

Safe Harbor Regulations
Payments that will not be considered criminal offenses under the Medicare Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, are as follows:
1. Investment Interests
2. Space Rental
3. Equipment Rental
4. Personal Services and Management Contracts
5. Sale of Practice
6. Referral Services
7. Warranties
8. Discounts
9. Employee Compensation
10. Group Purchasing Organizations
11. Waiver of Beneficiary Coinsurance and Deductible Amounts
12. Health Plans: Increased Coverage, Reduced Cost-Sharing, or Reduced Premiums
13. Price Reductions Offered to Health Plans
14. Expenses Related to Practitioner Recruitment in Underserved Areas
15. Obstetrical Malpractice Insurance Subsidies for Underserved Areas
16. Investments in Group Practices Comprised of Active Investors
17. Cooperative Hospital Service Organizations
18. Investments in Ambulatory Surgical Centers
19. Referral Agreements for Specialty Services in Underserved Areas
20. Price Reductions to Eligible Managed Care Organizations
21. Price Reductions Offered by Contractors with Substantial Financial Risk to Managed Care Organizations The safe harbors listed above are codified at 42 C.F.R. § 1001.952.

 

1. In Federal Recovery Services, Inc. v. United States, 72 F.3d 447, 450 (5th Cir. 1995, the Fifth Circuit held that there was a jurisdictional bar on documents based upon the public disclosure provision when: Any information disclosed through civil litigation and on file with the clerk's office should be considered a public disclosure of allegations in a civil hearing for the purposes of § 3730(e)(4)(A). (Quoting United States, ex rel. Siller v. Becton, Dickson and Co., 21 F.3 1339, 1350 (4th Cir.), cert. denied 513 U.S. 928 (1994).