After she announced the largest “nationwide sweep” of individuals charged with allegations of Medicare fraud, U.S. Attorney General Loretta Lynch announced “…the Department of Justice will continue our focus on preventing wrongdoing and prosecuting those whose criminal activity drives up medical costs and jeopardizes a system that our citizens trust with their lives.”


Announcement of Sweeping Investigations Cause Concern


The nationwide crackdown was a coordinated effort by the Medicare Fraud Strike Force in 17 districts across the country and was the largest in terms of both the number of defendants charged and loss amounts alleged.


As criminal defense attorneys experienced in responding to government investigations, we often cringe at the chest beating and battle cries that inevitably follow these large scale PR roundups.


Why?  Because far too often individuals and business caught up in these raids are exonerated, but not before they spend vast resources defending themselves and suffer damage to their professional and business reputations.


Power of Federal Prosecutors


Federal prosecutors enjoy tremendous, if not unlimited, discretion in deciding who to investigate, what charges to bring, and how to prosecute a case before a jury. They enter this decision-making process with the knowledge that even if they engage in the most egregious forms of misconduct, they enjoy immunity from civil liability and very little, if any, ethical accountability. They can pretty much do what they please.


Doctor Acquitted After Spending $1.4 Million for Defense


This was the case in 2005 when federal prosecutors sought, and secured, the indictment of Dr. M.C., an otorhinolaryngologist (a physician trained in the medical and surgical treatment of ear, nose and throat disorders). The grand jury indicted Dr. M.C. on 38 counts of health care fraud; 13 counts of mail fraud; and one count of making false statements.


Government Using Criminal Charges to Advance Civil Case


Attorneys for the doctor charged that the indictments were baseless and oppressive, and, more to the point, that the prosecution of the doctor was tainted with prosecutorial misconduct. The attorneys from the outset said the government’s case was a “civil dispute masquerading as a federal criminal prosecution.”


The government’s case rested on the flimsy, not properly investigated accusations that Dr. M.C. billed Medicare for surgeries that were either unnecessary, never performed or “upcoded” for billing purposes.


The lengthy investigation of the doctor’s billing practices began after a health insurance company reported to state authorities a pattern of excessive surgeries.


Flawed Government Experts, Hired Guns


Central to the government’s case was an expert introduced into the investigation to review Dr. M.C.’s files, pathology reports, and computed tomography scans. He informed authorities that he believed many of the procedures were unnecessary. At trial, the government’s expert flatly told the jury that Dr. M.C. did not perform the surgeries charged in the indictments because: First, he said the surgeries could not have been performed in the short time reported in the Medicare claims; and, second, while the surgeries required breaking bones, the pathology reports did not reveal any bone fragments.


Dr. M.C.’s attorneys presented a battery of witnesses who effectively rebutted the conclusions drawn by the government’s expert. Neither the court nor the jury was impressed with the government’s expert, much less its remaining circumstantial evidence. The court threw out half of the charges because there was not enough evidence to even present them to a jury and the jury that eventually heard Dr. M.C’s case acquitted him on the remaining charges.


The trial judge’s and jury’s actions in Dr. M.C’s case clearly show that federal prosecutors should not have brought a case against the doctor.


USDOJ Guidance in Charging Decisions


The Department of Justice Manual: Principles of Federal Prosecution requires only that a federal prosecutor have “probable cause” (the same standard as required to secure a search warrant) to believe that an individual has committed a federal offense before bringing charges.


Writing in the Fordham Law Journal, Lynn R. Singband said this “broad discretion given to federal prosecutors in making the charging decision can result in innocent people losing their freedom. While conviction and sentencing to prison or death is certainly the worst result of prosecutorial abuse of power, the effect of a grand jury subpoena alone can be devastating. Federal prosecutors’ exercise of broad discretion in the charging decisions has led to convictions and death sentences for defendants despite the existence of evidence demonstrating their innocence. This broad discretion also has allowed prosecutors to pursue investigations relentlessly despite lacking cause to do so and has even permitted them to press charges [that were] subsequently dismissed.”


Dr. M.C.’s case is a classic example of the prosecutorial abuse of discretion described by Ms. Singband. Whatever irregularities there were in Dr. M.C.’s billing practices, it was, as his attorneys said, a “civil dispute,” not a criminal matter. While Dr. M.C. avoided conviction and imprisonment, he suffered tremendously because of the government’s misconduct in its investigation and prosecution of him. Not only was his professional reputation severely tarnished and his medical practice disrupted, the doctor incurred $1.4 million in attorney fees and other expenses in defending himself against the false charges brought by the government.


Attempts to Collect Attorney’s Fees Fail


It is cases like these that compelled Congress in 1997 to enact what is now known in the judicial process as the “Hyde Amendment” in an effort to curb abuses by federal prosecutors. The amendment provides wrongfully charged individuals with a financial remedy for those abuses. To be precise, the Hyde Amendment permits defendants, represented by private counsel, to collect “a reasonable attorney’s fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith.”


The trial court agreed that Dr. M.C. was entitled to relief, but only in a limited way. The judge awarded him just 20 percent of his $1.4 million loss. And as if that wasn’t bad enough, the Ninth Circuit Court of Appeals ultimately reversed the judge’s 20 percent award and concluded the doctor was not entitled to any relief under the Hyde Amendment.


Most federal circuits, like the Ninth, are simply loathe to find a federal prosecutor has acted in a vexatious, frivolous, or bad faith manner. To draw such a conclusion would be a quasi-indictment of the prosecutor for misconduct.


A Regrettable Mistake


So instead of finding misconduct, the Ninth Circuit labeled the government’s failure to properly investigate Dr. M.C.’s case “a regrettable mistake—a clear failure to do its homework.” Having said that, the appeals court then added that the Hyde Amendment is targeted at prosecutorial misconduct, not a prosecutorial mistake.


The Dr. M.C. case serves as a tragic reminder that physicians wrongly targeted for investigation and prosecution in health care fraud cases will typically have little recourse against the government under the Hyde Amendment.   Proving that a particular prosecution was either vexatious, frivolous or in bad is extremely difficult.


Physicians, Health Care Providers Feel Scrutiny


So where do physicians stand in this dilemma? Both federal and state prosecutors are feeling their prosecutorial oats with an increasing number of health care fraud-related convictions. They are responding to a widespread public misperception that the Medicare and Medicaid programs are rife with fraud and abuse. They are beating the proverbial bushes for the slightest hint of fraud or abuse—anything to create probable cause for an investigation and prosecution. This reality has many physicians feeling like they are under constant suspicion or threat of audit and investigation for even minor irregularities in their billing practices.


This is, sadly, an example of the all too common story of bureaucrats with budgets needing to prove the value of their existence.  We remained convinced that many health care providers, making good faith efforts to comply with ever changing rules, regulations and technology, will be wrongly targeted for criminal investigation and eventually prosecuted.


It is with this premise in mind that we advise health care providers, including physicians, to contact a qualified defense attorney at the first whisper of an investigation of any health care related irregularity.  The stakes are extremely high and the good faith intentions of investigator’s can no longer be assumed