U.S. v. Greber

• Decision Date: 15 May 1985
• Docket Number: No. 84-1546,84-1546
• Parties: , Medicare&Medicaid Gu 34,596 UNITED STATES of America, Appellee, v. A. Alvin GREBER, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 68

760 F.2d 68

9 Soc.Sec.Rep.Ser. 242, Medicare&Medicaid Gu 34,596

UNITED STATES of America, Appellee, v. A. Alvin GREBER, Appellant.

No. 84-1546.

United States Court of Appeals Third Circuit.

Argued Feb. 25, 1985.

Decided April 30, 1985.

As Amended May 15, 1985.

Thomas B. Rutter (argued), Rutter, Turner & Stein, Philadelphia, Pa., for appellant.

Edward S.G. Dennis, Jr., U.S. Atty., Walter S. Batty, Jr., Asst U.S. Atty., Chief of Appeals, Gregory P. Miller, Asst. U.S. Atty., Chief, Crim. Div., Glenn B. Bronson (argued), Asst. U.S. Atty., Philadelphia, Pa., for appellee.

Before WEIS, BECKER and WISDOM, ^* Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

In this appeal, defendant argues that payments made to a physician for professional services in connection with tests performed by a laboratory cannot be the basis of medicare fraud. We do not agree and hold that if one purpose of the payment was to induce future referrals, the medicare statute has been violated. We also hold that the materiality of utterances charged to be within the false statement statute is an essential element of the crime to be decided by the trial judge as a matter of law. We find the district court's rulings consistent with our determinations and accordingly will affirm.

After a jury trial, defendant was convicted on 20 of 23 counts in an indictment charging violations of the mail fraud, Medicare fraud, and false statement statutes. Post-trial motions were denied, and defendant has appealed.

Defendant is an osteopathic physician who is board certified in cardiology. In addition to hospital staff and teaching positions, he was the president of Cardio-Med, Inc., an organization which he formed. The company provides physicians with diagnostic services, one of which uses a Holter-monitor. This device, worn for approximately 24 hours, records the patient's cardiac activity on a tape. A computer operated by a cardiac technician scans the tape, and the data is later correlated with an activity diary the patient maintains while wearing the monitor.

Cardio-Med billed Medicare for the monitor service and, when payment was received, forwarded a portion to the referring physician. The government charged that the referral fee was 40 percent of the Medicare payment, not to exceed $65 per patient.

Based on Cardio-Med's billing practices, counts 18-23 of the indictment charged defendant with having tendered remuneration or kickbacks to the referring physicians in violation of 42 U.S.C. Sec. 1395nn(b)(2)(B) (1982).

Counts 12 through 17 alleged that defendant made false statements to Medicare in violation of 18 U.S.C. Sec. 1001 (1982). Defendant submitted claim forms representing that the Holter-monitors had been operated for eight hours or more when in fact the devices had been used for a much shorter time. Medicare required at least eight hours of operation to qualify for payment.

Counts 5 to 11 charged mail fraud. According to the indictment, defendant caused Cardio-Med to bill Medicare for monitorings which were medically unnecessary.

Mail fraud was also charged in counts 1 to 4. Defendant allegedly used the mail to bill for hospital visits he never made.

The proof as to the Medicare fraud counts (18-23) was that defendant had paid a Dr. Avallone and other physicians "interpretation fees" for the doctors' initial consultation services, as well as for explaining the test results to the patients. There was evidence that physicians received "interpretation fees" even though defendant had actually evaluated the monitoring data. Moreover, the fixed percentage paid to the referring physician was more than Medicare allowed for such services.

The government also introduced testimony defendant had given in an earlier civil proceeding. In that case, he had testified that "... if the doctor didn't get his consulting fee, he wouldn't be using our service. So the doctor got a consulting fee." In addition, defendant told physicians at a hospital that the Board of Censors of the Philadelphia County Medical Society had said the referral fee was legitimate if the physician shared the responsibility for the report. Actually, the Society had stated that there should be separate bills because "for the monitor company to offer payment to the physicians ... is not considered to be the method of choice."

The evidence as to mail fraud was that defendant repeatedly ordered monitors for his own patients even though use of the device was not medically indicated. As a prerequisite for payment, Medicare requires that the service be medically indicated.

The Department of Health and Human Services had promulgated a rule providing that it would pay for Holter-monitoring only if it was in operation for eight hours or more. Defendant routinely certified that the temporal condition had been met, although in fact it had not.

On appeal, defendant raises several alleged trial errors. He presses more strongly, however, his contentions that the evidence was insufficient to support the guilty verdict on the Medicare fraud counts, and that the charge to the jury on that issue was not correct. As to the false statement counts, he argues that the materiality element should have been submitted to the jury rather than being decided as a matter of law by the court.

I. MEDICARE FRAUD

The Medicare fraud statute was amended by P.L. 95-142, 91 Stat. 1183 (1977). Congress, concerned with the growing problem of fraud and abuse in the system, wished to strengthen the penalties to enhance the deterrent effect of the statute. To achieve this purpose, the crime was upgraded from a misdemeanor to a felony.

Another aim of the amendments was to address the complaints of the United States Attorneys who were responsible for prosecuting fraud cases. They informed Congress that the language of the predecessor statute was "unclear and needed clarification." H.Rep. No. 393, PART II, 95 Cong., 1st Sess. 53, reprinted in 1977 U.S.CODE CONG. & AD.NEWS 3039, 3055.

A particular concern was the practice of giving "kickbacks" to encourage the referral of work. Testimony before the Congressional committee was that "physicians often determine which laboratories would do the test work for their medicaid patients by the amount of the kickbacks and rebates offered by the laboratory.... Kickbacks take a number of forms including cash, long-term credit arrangements, gifts, supplies and equipment, and the furnishing of business machines." Id. at 3048-3049.

To remedy the deficiencies in the statute and achieve more certainty, the present version of 42 U.S.C. Sec. 1395nn(b)(2) was enacted. It provides:

"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 induce such person--

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(B) to purchase, lease, order, or arrange for or recommend purchasing ... or ordering any ... service or item for which payment may be made ... under this title, shall be guilty of a felony."

The district judge instructed the jury that the government was required to prove that Cardio-Med paid to Dr. Avallone some part of the amount received from Medicare; that defendant caused Cardio-Med to make the payment; and did so knowingly and willfully as well as with the intent to induce Dr. Avallone to use Cardio-Med's services for patients covered by Medicare. The judge further charged that even if the physician interpreting the test did so as a consultant to Cardio-Med, that fact was immaterial if a purpose of the fee was to induce the ordering of services from Cardio-Med.

Defendant contends that the charge was erroneous. He insists that absent a showing that the only purpose behind the fee was to improperly induce future services, compensating a physician for services actually rendered could not be a violation of the statute.

The government argues that Congress intended to combat financial incentives to physicians for ordering particular services patients did not require.

The language and purpose of the statute support the government's view. Even if the physician performs some service for the money received, the potential for unnecessary drain on the Medicare system remains. The statute is aimed at the inducement factor.

The text refers to "any remuneration." That includes not only sums for which no actual service was performed but also those amounts for which some professional time was expended. "Remunerates" is defined as "to pay an equivalent for service." Webster Third New International Dictionary (1966). By including such items as kickbacks and bribes, the statute expands "remuneration" to cover situations where no service is performed. That a particular payment was a remuneration (which implies that a service was rendered) rather than a kickback, does not foreclose the possibility that a violation nevertheless could exist.

In United States v. Hancock, 604 F.2d 999 (7th Cir.1979), the court applied the term "kickback" found in the predecessor statute to payments made to chiropractors by laboratories which performed blood tests. The chiropractors contended that the amounts they received were legitimate handling fees for their services in obtaining, packaging, and delivering the specimens to the laboratories and then interpreting the results. The court rejected that contention and noted, "The potential for increased costs to the Medicare-Medicaid system and misapplication of federal funds is plain, where payments for the exercise of such judgments are added to the legitimate cost of the transaction ... [T]hese are among the evils Congress sought to prevent by enacting the kickback statutes...." Id. at 1001.

Hancock strongly supports the government's position here, because the statute in that case did not contain the word "remuneration." The court nevertheless held that "kickback" sufficiently described the defendants' criminal activity. By adding "remuneration" to the statute in ...