Federal prosecutors now have a new anti-fraud weapon in their arsenal following last week's U.S. Supreme Court ruling that anyone who bribes officials of an organization that accepts federal healthcare funds can be prosecuted under federal law.
The high court ruling is the first test of the bribery regulations of the Health Insurance Portability and Accountability Act of 1996, which expanded existing criminal statutes to cover healthcare fraud. Federal prosecutors now have new tools, such as asset forfeiture, injunctive relief, new subpoena powers and stiffer penalties than state laws allow.
The court affirmed by a 7-to-2 vote an Orlando, Fla., federal court's 1996 conviction of Jeffrey Allan Fischer, former president of Quality Medical Consultants, a now-defunct company that performed billing audits for healthcare providers.
In 1993 Fischer secured a $1.2 million loan from the West Volusia Hospital Authority, a county agency operating two hospitals in Volusia County. Fischer repaid debts with the loan and raised salaries of QMC's five owner/employees, according to court documents.
A routine 1994 audit revealed that Fischer paid $10,000 to the mother of the hospital authority's chief financial officer; the CFO negotiated that loan. Fischer was convicted of 13 counts of defrauding an organization receiving federal benefits and paying a kickback. He was sentenced to five years and five months in prison, three years of probation and had to pay $1.2 million in restitution.
Fischer appealed, saying the government failed to prove that the West Volusia Hospital Authority received Medicare benefits in excess of $10,000, the threshold for invoking the kickback law.
In 1998 a three-judge panel affirmed his conviction, but the Supreme Court agreed to hear the case in November 1999.
Writing for the majority to support the expansion of the definition of Medicare benefits to include Medicare payments to healthcare providers, Justice Anthony Kennedy said:
"The government has a legitimate and significant interest in prohibiting financial fraud or acts of bribery being perpetrated upon Medicare providers. Fraudulent acts threaten the program's integrity. They raise the risk participating organizations will lack the resources requisite to provide the level and quality of care envisioned by the program."
Healthcare lawyer Thomas Crane, a former official with HHS' inspector general's office now with the Boston firm of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, said the ruling may have broad implications for doctor-hospital managed-care risk-sharing arrangements.
He said hospital-physician risk-sharing arrangements that meet the legal test under the anti-kickback statute may be subject to scrutiny under the broader-encompassing bribery statute.
The Supreme Court ruling resolved a split among federal appellate courts. Edward Richards, executive director for the Center for Public Health Law at the University of Missouri-Kansas City, doubted that the Supreme Court ruling would have had an impact on the highly publicized Baptist Medical Center kickback and bribery case. In that case, two Kansas osteopaths were convicted of receiving kickbacks from Baptist Medical Center in Kansas City, Mo.
The original 1997 indictment under which they were charged was tossed out by the 10th Circuit Court of Appeals, on the technical issue of who the "beneficiaries" of the bribes were, Medicare patients or the providers. The osteopaths were later convicted under a second indictment.