People v. Orzame

• Decision Date: 15 July 1997
• Docket Number: 194566,Docket Nos. 194559
• Parties: PEOPLE of the State of Michigan, Plaintiff-Appellant, v. Gabriel Sagun ORZAME, Defendant-Appellee. PEOPLE of the State of Michigan, Plaintiff-Appellant, v. ORZAME & ORZAME, M.D.S., P.L.L.C., Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 118

570 N.W.2d 118

224 Mich.App. 551

PEOPLE of the State of Michigan, Plaintiff-Appellant, v. Gabriel Sagun ORZAME, Defendant-Appellee.

PEOPLE of the State of Michigan, Plaintiff-Appellant, v. ORZAME & ORZAME, M.D.S., P.L.L.C., Defendant-Appellee.

Docket Nos. 194559, 194566.

Court of Appeals of Michigan.

Submitted Feb. 18, 1997, at Grand Rapids.

Decided July 15, 1997, at 9:25 a.m.

Released for Publication Oct. 8, 1997.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and David G. Edick and Michael J. Fraleigh, Assistant Attorneys General, for People.

Taglia, Fette, Dumke, Passaro & Kahne, P.C. by Paul A. Taglia and L.A. White, St. Joseph, for defendants-appellees.

Before MURPHY, P.J., and MARKEY and A.A. MONTON ^*, JJ.

PER CURIAM.

The prosecution appeals by leave granted the trial court's April 12, 1996, order affirming the district court's refusal to bind over defendants Gabriel Sagun Orzame and Orzame & Orzame, M.D.S, P.L.L.C., on numerous counts of Medicaid and health-care fraud, M.C.L. § 400.607(1); M.S.A. § 16.614(7)(1) (Medicaid False Claim Act), and M.C.L. § 752.1003; M.S.A. § 28.547(103) (Health Care False Claim Act), unlawfully dispensing and delivering controlled substances, M.C.L. § 333.7401(2)(g); M.S.A. § 14.15(7401)(2)(g) (controlled substances act), and conspiracy to deliver controlled substances, M.C.L. § 750.157a; M.S.A. § 28.354(1). We reverse in part, affirm in part, and remand.

Defendant Gabriel S. Orzame, M.D., is a licensed physician who, along with his wife Dilda D. Orzame, M.D., operates two medical facilities in Berrien County for defendant Orzame & Orzame, M.D.S., a professional limited liability company. The charges in these consolidated cases arose from the medical services and drug prescriptions defendant Dr. Orzame provided to six undercover agents working for the Michigan Attorney General's health-care fraud division who were assigned to investigate his walk-in clinic and urgent care facility known as the Napier CliniCare in Benton Harbor.

During the investigation, the agents made numerous visits to defendant Dr. Orzame's walk-in clinic between late 1994 and early 1995, presented themselves as patients under false names, posed as a Medicaid recipient or a Blue Cross/Blue Shield of Michigan (BC/BSM) insurance card holder, and pretended to be suffering from a variety of ailments, including recurring migraine headaches, anxiety, insomnia, strained or pulled muscles, and the common cold. All of the counts filed against defendants arose from the investigation, and, therefore, strictly involved patients with fabricated symptoms. Nonetheless, defendant Dr. Orzame treated the agents and submitted bills to Medicaid or BC/BSM for reimbursement.

As a result of the investigation, both defendants were charged with twenty-seven counts of Medicaid fraud (counts 1-27), thirteen counts of health-care (BC/BSM) fraud (counts 28-40), as well as several counts of conspiracy to violate the Medicaid False Claim Act, conspiracy to violate the Health Care False Claim Act, and conspiracy to deliver controlled substances in violation of the Public Health Code (counts 76-78 in defendant Dr. Orzame's case and counts 41-43 in the case against defendant Orzame & Orzame, M.D.S.). Defendant Dr. Orzame additionally was charged with thirty-five counts of dispensing or delivering controlled substances (counts 41-75).

A preliminary examination was held on four separate days in the district court, where the six undercover agents specifically testified concerning their respective staged visits to defendant Dr. Orzame's clinic. The prosecution also presented the expert testimony of Dr. Giovannino Perri, employed by the Michigan Department of Social Services, who administers the Medicaid program, conducts audits of providers of Medicaid services, and specifically reviews medical records to determine whether providers are in compliance with Medicaid policy, rules, and procedures. After reviewing the defendants' files regarding the special agents' visits to the clinic, Dr. Perri concluded that defendants could not provide sufficient documentation to support the billing codes they used for the agents' visits. Because it was improper to bill Medicaid or BC/BSM without first having adequate documentation in the patient's chart, Dr. Perri concluded that defendants had submitted fraudulent claims to the state for reimbursement and had unnecessarily and in bad faith dispensed controlled substances.

Defendants also presented their expert, Dr. Norberto S. Portugal, a physician qualified as an expert with respect to the standard of practice for walk-in, urgent care clinics. Dr. Portugal testified that the standard of practice was lower for a walk-in clinic because these clinics typically treated many patients seeking immediate symptomatic relief and treatment rather than detailed or long-term treatment as regular or established patients. Dr. Portugal concluded that defendant Dr. Orzame acted within the required standard of care regarding each agent, with respect to both the services provided and the medications prescribed.

After the preliminary examination, the prosecution voluntarily dismissed without prejudice counts 49-50, 55, 56, 63, 64, 70, and 75 regarding the issuance of prescription medications. The district court then opined from the bench that although defendants may have been careless and negligent when documenting and billing for the services they rendered, contrary to the applicable coding manuals, defendants' behavior fell short of intentionally defrauding BC/BSM and Medicaid. Of the forty counts of alleged fraud, the district court bound defendants over on only three counts: count 19, involving a December 1994 Medicaid billing for an injection that the agent never received, count 28, for a December 1994 BC/BSM billing when the agent had previously paid cash for the services rendered, and count 31, for the January 1995 BC/BSM billing for services rendered to one agent when she in fact never visited the clinic but had another agent pick up her prescription. The district court found that these three counts alone involved sufficient evidence for a jury to find an intent to defraud. The court also bound defendants over on the conspiracy counts involving the intent to violate the Medicaid False Claim Act and the Health Care False Claim Act, including counts 41 and 42 against defendant Orzame & Orzame, and counts 76 and 77 against defendant Dr. Orzame.

Finally, the district court opined that a violation of the controlled substances act required more than the carelessness and bad judgment that was evident in the present case. Because there was no evidence of an intent to traffic in drugs or distribute them in bad faith for a nonmedical purpose, with one exception in count 66 where defendant Dr. Orzame delivered a prescription for Fiorinal and Ambien to one agent on another agent's behalf, the district court refused to bind defendants over on any of the remaining drug counts, including the conspiracy charge.

The prosecution appealed to the circuit court, which, after hearing oral arguments, affirmed the district court's decision. The prosecution now appeals by leave granted to this Court. We reverse in part and affirm in part.

I

A

The prosecution first argues that the district court abused its discretion by failing to bind over defendants on the Medicaid and health-care fraud counts. We agree in part. A magistrate's ruling that alleged conduct falls within the scope of a criminal statute is a question of law reviewed for error, and a decision to bind over a defendant is reviewed for abuse of discretion. People v. Thomas, 438 Mich. 448, 452, 475 N.W.2d 288 (1991). In reviewing the district court's decision to bind over a defendant for trial, a circuit court must consider the entire record of the preliminary examination, and it may not substitute its judgment for that of the magistrate. Reversal is appropriate only if it appears on the record that the district court abused its discretion. People v. Cotton, 191 Mich.App. 377, 384, 478 N.W.2d 681 (1991); People v. Hammond, 161 Mich.App. 719, 721, 411 N.W.2d 837 (1987). An abuse of discretion is found only where an unprejudiced person, considering the facts upon which the court acted, would say there was no justification or excuse for the ruling. People v. McAlister, 203 Mich.App. 495, 505, 513 N.W.2d 431 (1994). Similarly, this Court reviews the district court's decision de novo to determine whether the court abused its discretion. People v. Flowers, 191 Mich.App. 169, 174, 477 N.W.2d 473 (1991).

The district court must bind the defendant over for trial if, at the conclusion of the preliminary examination, the district court finds "probable cause" to believe that the defendant committed the crime. Probable cause exists where the court finds a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious person to believe that the accused is guilty of the offense charged. M.C.L. § 766.13; M.S.A. § 28.931; MCR 6.110(E); People v. Woods, 200 Mich.App. 283, 288, 504 N.W.2d 24 (1993); People v. Fiedler, 194 Mich.App. 682, 689, 487 N.W.2d 831 (1992).

One of the statutes under which defendants were charged, § 7 of the Medicaid False Claim Act, M.C.L. § 400.607; M.S.A. § 16.614(7), provides as follows:

(1) A person shall not make or present or cause to be made or presented to an employee or officer of this state a claim under the social welfare act, Act No. 280 of the Public Acts of 1939, as amended, being sections 400.1 to 400.121 of the Michigan Compiled Laws, upon or against the state, knowing the claim to be false.

To establish a violation of the act, the prosecution must prove (1) the existence of a claim, (2) that the accused makes, presents, or causes to be made or presented to the state or its agent, (3) the claim is made under the Social Welfare Act, 1939 PA 280, ...