An Ohio cardiologist who was convicted by a jury of engaging in a $29 million dollar healthcare fraud scheme was sentenced on December 18, 2015 to 20 years in prison. Harold Persaud, M.D. had run his own medical practice and also had hospital privileges at three Ohio hospitals. The government alleged and presented evidence that over approximately six years, from 2006 to 2012, Persaud not only used erroneous, more expensive billing codes to bilk insurers into overcompensating his practice, but also subjected his patients to unnecessary diagnostic tests and procedures.
The Government’s case emphasized the fact that Persaud’s scheme was both well-calculated to lead to overpayment, and placed the health of his patients in jeopardy. For example, in some instances, Persaud reported false test results in order to justify the placement of cardiac stents in patients, resulting in medically unnecessary invasive procedures. Persaud also referred patients for unnecessary coronary bypass surgeries, which allowed him to then perform expensive follow-up testing. While the government placed the intended loss of Persaud’s scheme at $29 million, the evidence indicated that Persaud personally realized approximately $5.7 million.
The FBI started its investigation in 2012. The three hospitals where Persaud provided care and performed procedures started their own investigations into the propriety and necessity of Persaud’s procedures. The government’s investigation resulted in a multi-count indictment, to which Dr. Persaud maintained his innocence through trial.
Following a four week jury trial, Persaud was found guilty of one count of health care fraud, one count of engaging in monetary transactions with property derived from criminal activity, and 13 counts of making false statements. At his sentencing hearing Persaud did not embrace contrition. Rather, in an over 30 minute dialogue, Persaud asserted that he could explain why he performed each of the procedures. A restitution hearing is scheduled for January 2016. Persaud also faces civil suits arising from his fraudulent scheme.
U.S. District Judge Donald Nugent’s twenty year sentence demonstrates the significant consequences for health care practitioners who cannot appropriately and adequately demonstrate the medical necessity for medical procedures, particularly where the fraudulent conduct does not simply result in higher reimbursement, but unnecessarily jeopardizes the health and safety of patients.
Posted On Wednesday, December 16, 2015
Influential Court Defines “Identified” as Known or Should Have Known
Under the Patient Protection and Affordable Care Act (“ACA”), a healthcare services provider who receives an overpayment of Medicare or Medicaid funds must “report and return” the excess funds to the government within sixty days of the “date on which the overpayment was “identified.” 42 U.S.C. § 1320a-7k(d)(1), (2). Failure to do so can subject the provider to liability – in the form of treble damages and statutory fines – under the False Claims Act (“FCA”). Id. § 1320a-7k(d)(3).
The statute does not define “identified,” and that silence has created uncertainty for providers and the government about when the 60-day clock begins to run. In August, the U.S. District Court for the Southern District of New York became the first court to attempt to resolve the uncertainty, but in doing so it placed a heavy burden on providers.[1] In Kane ex rel. U.S. v. Healthfirst, Inc., the court rejected the provider’s argument that an overpayment is “identified” when the payment is “classified with certainty,” or conclusively established. Such an interpretation, according to the court, would allow providers to avoid FCA liability by “putting [their] head[s] in the sand” and declining to investigate potential overpayments. Thus, the court adopted the government’s definition: an overpayment is “identified” when the provider has determined, or “should have determined through the exercise of reasonable diligence,” that it has received a potential overpayment. Once the provider learns that an overpayment may have occurred, it has sixty days to investigate, report, and return any excess funds to the government.
The Kane court recognized that its definition of “identified” would leave providers with often impossibly little time to investigate potential overpayments before being subjected to FCA liability. However, the court insisted that the FCA’s scienter requirement mitigates the burden: one needs to act knowingly or recklessly in order to violate the FCA. “Therefore, prosecutorial discretion would counsel against the institution of enforcement actions aimed at well-intentioned healthcare providers working with reasonable haste to address erroneous overpayments.” In Kane, the government alleges that the provider failed to investigate potential overpayments that were first identified by an employee until months later when the State of New York raised the issue, and then took two years to complete its investigation and return all of the excess funds. According to the government, then, the provider neither exercised “reasonable haste,” nor demonstrated good intentions.
Definition Misconstrues the Nature of FCA Cases
Numerous shortcomings befall the court’s reasoning. The faith it puts in prosecutorial discretion is undermined by the fact that private citizens file the vast majority of FCA actions. Unburdened by the professional obligation to further the interests of justice and motivated by the prospect of a lucrative recovery, these private actors have far less incentive to evaluate whether defendants met the FCA’s scienter requirements before filing suit. And, compared to the U.S. government, they likely have few resources to devote to such an evaluation. Moreover, even if the “well-intentioned” health care provider can demonstrate, to the satisfaction of a court or a jury, that it was working with reasonable haste to remedy overpayments and thus did not knowingly violate the FCA, it may have to expend significant resources in litigation before that issue becomes ripe for disposition.
Limits on Kane’s Impact
The U.S. District Court for the Southern District of New York is just one court, influential though it may be. No other court has defined “identified,” as that term is used in § 1320a-7k, and given the lack of textual guidance as to its meaning, another court could interpret the term differently. Kane itself recognizes that the rules of statutory construction do not unanimously counsel in favor of the definition it adopts.
Moreover, the Center for Medicare and Medicaid Services (“CMS”) has proposed a rule that serves as a compromise between the positions taken by the litigants in Kane. Under that proposed rule, an overpayment would be “identified” when a provider has “actual knowledge of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.”[2] If adopted, the rule would seem to dissuade providers faced with potential overpayments from “sticking their heads in the sand,” while at the same time providing them with the opportunity to investigate the matter before the 60-day clock begins to run.
Responding to Kane
Unless and until the proposed rule is adopted or other courts disagree with the Kane court, Kane stands as the only interpretation of “identified,” as the term is used in § 1320a-7k. Accordingly, it gives providers the best guidance as to how courts – and, perhaps more importantly, the government – will apply the 60-day rule regarding overpayments. To act as quickly as Kane requires, providers should consider implementing effective post-payment review plans and/or ensuring rigorous adherence to such plans that are already in place. By doing so, the provider can demonstrate that it is “well-intentioned” and acting with “reasonable haste” to remedy erroneous overpayments, even where strict compliance with the 60-day rule proves impossible.
[1] Kane v. Healthfirst, Inc., Case No. 1:11-cv-02325-ER, 2015 WL 4619686 (S.D.N.Y. Aug. 3, 2015).
[2] 77 Fed. Reg. 9179-9187 (Feb. 16, 2012).
