U.S. v. Nazon, 90-2109

• Decision Date: 15 August 1991
• Docket Number: No. 90-2109,90-2109
• Citation: 940 F.2d 255
• Parties: Medicare&Medicaid Gu 39,543 UNITED STATES of America, Plaintiff-Appellee, v. Yvon NAZON, M.D., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 255

940 F.2d 255

Medicare&Medicaid Gu 39,543

UNITED STATES of America, Plaintiff-Appellee, v. Yvon NAZON, M.D., Defendant-Appellant.

No. 90-2109.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 19, 1991.

Decided Aug. 15, 1991.

Andrew B. Baker, Jr. (argued), Philip P. Simon, Asst. U.S. Attys., Dyer, Ind., for plaintiff-appellee.

Allan A. Ackerman, Joelle Hollander (argued), Matthias A. Lydon, Jayne Carr Thompson, Lydon & Griffin, Chicago, Ill., for defendant-appellant.

Before WOOD, Jr., POSNER, and MANION, Circuit Judges.

MANION, Circuit Judge.

Dr. Yvon Nazon was indicted and convicted by a jury of 17 counts of fraud for his submission of false claims to Medicaid seeking payment for services not performed. Dr. Nazon appeals the decision claiming (a) that the district court erroneously gave the jury a "conscious avoidance" instruction which thereby permitted the jury to convict him on an impermissible basis, and (b) that the trial court failed to instruct the jury with a definition of "intent to defraud," the omission of which gave the jury a distorted and thus prejudicial understanding of the crime's degree of culpability.

We have reviewed the law applicable to this case and affirm the district court.

A. Facts

Dr. Yvon Nazon had been a Medicaid provider for the State of Indiana since 1971. He had offices in both Gary, Indiana, and Chicago, Illinois. Dr. Nazon participated in the Medicaid program as an obstetrician/gynecologist utilizing Methodist Hospital in Gary, Indiana as a surgery base. Medicaid is, of course, funded substantially by the federal government and is administered in Indiana by the Indiana Department of Public Welfare and Blue Cross/Blue Shield of Indiana. Dr. Nazon was accused and convicted of filing false claims against the Medicaid system, charging Medicaid thousands of dollars for unperformed services. To better understand the nature of his offenses and how his fraudulent activities were detected, some background information concerning the Medicaid system may be helpful.

Doctors who wish to provide services to patients whose care is covered by Medicaid must first sign a provider agreement. Dr. Nazon signed such an agreement where he certified that all information contained in his submitted billings to Medicaid would be "true, accurate and complete."

As is customary for all new enrollees to the Medicaid program, Dr. Nazon was issued a health care provider manual which lists the type of services that can be billed to Medicaid. In addition to listing the services Medicaid will cover, the manual informs the doctor on how to bill the Medicaid program and how to fill out claim forms. This manual is periodically updated via bulletins alerting Medicaid providers to changes in the scope of Medicaid coverage and billing procedures. Doctors who participate in the Medicaid program can get particularized help with questions concerning what and whom Medicaid covers, and answers relating to billing questions, by calling a toll-free "800" number. Doctors may also write to Medicaid for specific guidance. Trial evidence revealed that Dr. Nazon's staff occasionally used these services.

Blue Cross/Blue Shield administers the Medicaid program within Indiana. When a Medicaid claim form is submitted by a doctor for payment, the form is checked to verify that the patient is eligible for Medicaid, and that the doctor is a qualified Medicaid provider. The claim is also checked to establish the proper price for the procedure. Medicaid depends heavily on the medical provider's honesty and integrity in filling out claim forms. However, Medicaid does have some limited ability to detect provider billing practices inconsistent with Medicaid requirements.

In 1980, the Indiana Department of Public Welfare conducted a desk audit of some Medicaid claims filed by Dr. Nazon, which suggested that he was engaged in a continuous practice of irregular billing. The matter was referred to Blue Cross/Blue Shield's post-payment investigation group which conducted a full-fledged audit of Dr. Nazon's billing practices. The audit revealed that Dr. Nazon was billing Medicaid for patients' prenatal care, prenatal office visits and gonorrhea cultures contrary to Medicaid's prescribed policies. Medicaid does not permit the doctor to charge for any individual patient visit for prenatal care--rather, the attending doctor is awarded one lump sum for his services after the patient has completed delivery of her baby. Dr. Nazon was charging Medicaid for each pregnant patient's visit (often disguising the visit's prenatal purpose on the claim form) and collecting the lump sum fee after delivery. The cumulative payments by Medicaid were clearly more than Dr. Nazon was due under Medicaid rules. In addition, Dr. Nazon was billing Medicaid for gonorrhea cultures which were actually collected and analyzed for Dr. Nazon free of charge by a clinic funded by the State of Indiana. On five occasions prior to the 1980 audit, Medicaid alerted Dr. Nazon as to proper billing procedures concerning prenatal office visits. During the course of the two-day audit in 1980, Medicaid again criticized these specific unpermitted billing practices, but Dr. Nazon did not follow the auditors' admonitions. He continued to bill for individual visits as before.

As a result of the 1980 audit, a demand-for-refund letter was sent to Dr. Nazon by the Indiana Department of Public Welfare (IDPW) requesting a $13,000 refund. In response, Dr. Nazon requested a meeting with Blue Cross/Blue Shield and IDPW investigators to review the disputed charges. A meeting was arranged, but Dr. Nazon failed to attend. The record is devoid of any resolution to this demand or any indication concerning whether any further collection efforts were pursued.

Six years later in 1986, Dr. Nazon was again the subject of an audit by Blue Cross/Blue Shield of Indiana. The focus of this audit was Dr. Nazon's practice of billing Medicaid for assistant surgeon fees where no assistant was present during the surgery. The audit also explored Dr. Nazon's habit of billing lab fees for services not provided by his office.

During the audit, investigators discovered that Dr. Nazon was routinely billing Medicaid for assistant surgeon fees where documentation suggested that no assistant surgeons were present during Dr. Nazon's operations. Apparently, sometime in 1985 Dr. Nazon discovered that he could bill Medicaid for an assistant surgeon when the operation involved the opening of the abdomen. This discovery prompted Dr. Nazon to order his staff to go back and pull records from the preceding three years and search for surgeries where the abdomen was opened and then bill Medicaid for an assistant surgeon in those cases. Former employees of Dr. Nazon testified that the doctor instructed them to alter operation reports to reflect the presence of an assistant when one was not there. Dr. Nazon also instructed them to modify operation reports to reflect that Dr. Nazon was principal surgeon assisted by an assistant when in fact the surgery was performed by the "assistant" unassisted. He instructed the staff to retroactively bill for assistant surgeon fees relating to surgeries up to three years old (Medicaid generally will not pay for unclaimed surgical expenses or fees older than one year--Dr. Nazon was alerted to this restriction but instructed his billing staff to ignore it). Dr. Nazon would also bill Medicaid for the services of an assisting resident who was fully paid by the hospital, not by Dr. Nazon. This resulted in Medicaid being billed twice for the assistant's work: once legitimately by the hospital as proper reimbursement, and once illegitimately by Dr. Nazon. Testimony at trial revealed that Dr. Nazon would review and sign the false claims for assistant surgeon fees prior to submitting them to Medicaid.

The 1986 audit also revealed that in 1985 Dr. Nazon began using Clinical Diagnostic, Inc. as his outside laboratory to conduct tests and analyze patient specimens. Dr. Nazon would submit patients' specimens from his office to Clinical Diagnostics without the patients' Medicaid numbers, thereby preventing the laboratory from charging Medicaid directly for the tests as required by the Medicaid manual. Clinical Diagnostics would have no choice but to charge Dr. Nazon (usually around $12 to $20 per test). In order to attract Dr. Nazon's considerable business, Clinical Diagnostics discounted the lab fee charges. Dr. Nazon would then pay Clinical Diagnostics directly but turn around and bill Medicaid as if he had done the required test in his office (usually charging Medicaid $95 to $120 a test). This way, Dr. Nazon was impermissibly billing Medicaid at inflated rates for work he did not perform.

At the conclusion of this 1986 audit of his billing practices, Medicaid apprised Dr. Nazon of the auditors' findings and instructed that these billing practices were abusive, unpermitted and must be discontinued. Dr. Nazon was told that he could not bill Medicaid for an assistant surgeon when no one assisted, and that work performed by an independent lab had to be billed by the lab directly. (See Sec. M 2320.11 of Indiana Medicaid Provider Manual.) The discussions were to no avail. Later, in October 1987, an agent from the Federal Bureau of Investigation confronted Dr. Nazon, during yet another investigation of his Medicaid billing methods, with evidence of further improper billings for laboratory tests which he and his office did not perform--billings submitted well after the 1986 audit and its consequential warnings.

Dr. Nazon continually explained to investigators (and at trial) that he had not read the Medicaid provider's manual instructing doctors as to what Medicaid covers and at what price. He claimed that he simply billed Medicaid what he thought he deserved for his services. His justification for submitting Medicaid claims relating to laboratory analyses he never performed was...