What Type of Conduct Can Lead to Medical Fraud Criminal Charges?

In this blog we cite the facts of two cases involving medical fraud charges brought against medical practitioners.

People v. Pierce

Consider the case of People v. Pierce (2019) 38 Cal.App.5th 321 which involved a chiropractor and a physician who were prosecuted for conspiring to defraud workers' compensation insurance carriers by engaging in practices that involved  minimal to no necessary medical evaluations, but resulted in the submission of claims for unprovided services.

The Court of Appeal described the facts in Pierce this way:

“Operating under their company, P & R Med-Legal Medical Corporation (P & R), Dolphus Dwayne Pierce II, a chiropractor, and Tomas Ballesteros Rios, a physician, conspired with others to defraud various workers' compensation insurance carriers. P & R contracted with physicians to perform cursory (if any) examinations of workers' compensation patients at chiropractic clinics, and then dispense prepackaged medications to these patients with little or no regard for medical need. Pierce and Rios contracted with a company to prepare and submit canned medical reports and bills to workers' compensation insurance carriers. These bills sought payment for the medications dispensed, and for services relating to the dispensing of medications—some of which were not performed, and some costlier than the services actually performed by the physician. Eventually, a search warrant was executed on businesses and homes associated with P & R. After P & R shut down, Pierce and Rios contracted with another company to rebill the insurance carriers for services initially billed by P & R, seeking to collect on existing unpaid bills for medications previously dispensed.

In June 2012, Pierce and six codefendants (Rios, John Brent Arakelian, Maria Cecilia Rios Cabangangan, Charles Orlando Lewis, M.D., Cathy Aguilar Pierce, and Chi Hong Yang, M.D.) were charged by grand jury indictment, in count 1, with conspiracy to commit insurance fraud (Pen. Code,1 §§ 182, subd. (a)(1), 550, subd. (a)(1), (2), (5), (7), (8); Ins. Code, § 1871.4, subd. (a)(2))2; 127 overt acts were alleged.”

How Directly Involved Must the Practitioner Be?

But what if a physician, chiropractor, or other care provider did not directly profit from someone else’s conduct? Can they potentially be prosecuted for a Penal Code Section 550 violation?

Any healthcare provider who knowingly engages in, or is associated with, contracts obtained through violations of Section 550 of the Penal Code can face legal consequences, including the voiding of such contracts and recovery of fees as penalties.

Specifically, health care providers involved in presenting fraudulent claims, even if they do not directly submit the claims themselves, can still be deemed to have caused the filing of such claims, hence becoming liable. This is supported by cases where providers were found guilty of fraud for causing the submission of fraudulent claims indirectly.

Physicians, chiropractors, or other care providers who prepare false documents for a fraudulent insurance claim may be prosecuted under Penal Code section 550(a)(1) for “causing the presentation of a fraudulent claim,” even if another person actually presents the claim. (People v. Singh (1995) 37 Cal.App.4th 1343, 1369–1370  Alternatively, the care provider may be prosecuted under Penal Code section 550(a)(5). This crime focuses on the claim presented, not on who signed the claim form.

In the case of People v. Gregory, a doctor was convicted of Medi-Cal fraud by knowingly submitting false information to obtain greater compensation (People v. Gregory, 217 Cal.App.3d 665 (1990)) The court described the facts this way:

“From January 1986 through June 1987, defendant developed a thriving medical practice in Stockton. On an average day, defendant saw an average of 60 patients and sometimes as many as 110 patients. Sometimes several patients were seen at once.
Most of his patients were Southeast Asians and required interpreters, provided by defendant. Most patients were Medi–Cal beneficiaries. Half of his patients were new patients. Defendant paid independent contractors *670 (“contract drivers”) to transport patients to his office. Patients generally spent five minutes in the examination room before being sent to the adjoining pharmacy or to defendant's laboratory for testing.

In the summer of 1986, defendant's office manager told him that Medi–Cal would not approve of the way he conducted his practice. Shortly thereafter the employment relationship ended, and defendant learned the office manager had complained to the County Health Department.
In December 1986, Ken Baumgarten, then Senior Investigator for the Department of Justice Bureau of Medi–Cal Fraud, pretending to be a financial investor in medical practices, met with defendant to discuss a possible partnership in defendant's clinic. Defendant stated he was in California to make enough money to take back to Utah, because Utah did not have a comparable Medi–Cal program, and defendant could make more money here in one month than he could in an entire year in Utah.

On January 6 and 7, 1987, Baumgarten returned to defendant's office and observed defendant as he treated 14 patients. Defendant's convictions resulted from Medi–Cal claims submitted for treatment of the patients observed by Baumgarten. The examinations (and consequent diagnoses) of patients involved in the seven counts of which defendant was convicted were described by Baumgarten and Dr. David Schneider, a physician and auditor for the Audits and Investigations Division of the State of California Department of Health, as follows:

Patient Samnang T. (count II) was in the examining room simultaneously with three other patients. Defendant looked at Samnang's throat for 30 seconds but did not touch Samnang's body. Defendant spent a total of four to five minutes examining all four of the patients in the room. Defendant diagnosed Samnang as having “dermatitis.” Such a diagnosis requires an examination of the patient's entire body and would take the average doctor a minimum of 20 minutes to perform; the examination could not be performed in 30 seconds.

Patients Keo T. (count V), Siem K. (count VI), and Khean K. (count VII) were in the examining room simultaneously with one other patient. Defendant remained approximately six feet away from Keo, observed Siem's mouth for approximately three seconds, and observed Khean's throat for approximately two seconds. Defendant did not touch any of the patients' bodies. He spent less than four minutes examining all four patients.

What are some Medical Fraud Defenses?

Mistaken Belief or Ignorance of Law: In certain contexts, a mistaken belief that an action was legal can serve as a defense. For instance, a defendant's mistaken belief that it was legal to refer insureds to lawyers and doctors was recognized as a defense to a charge of conspiracy, although not to other specific charges of unlawful referral or assisting in preparing false insurance claims (People v. Meneses, 165 Cal.App.4th 1648 (2008))

Knowledge and Intent: Defenses can also focus on the knowledge and intent required for fraud convictions. For example, the prosecution must prove that the defendant knew the information submitted was false and that they submitted it with intent to defraud (People v. Gregory, 217 Cal.App.3d 665 (1990)) If a defendant can show a lack of such knowledge or intent, it may serve as a defense. In one case, a defendant argued that he did not instruct his employees to use certain procedure codes, suggesting a lack of fraudulent intent, although this argument was not sufficient at the appellate level (People v. Guzman, 201 Cal.App.4th 1090 (2011))

Good Faith: A claim of good faith in the efficacy of the medical services provided, even if mistaken, has been recognized as a defense in some cases. This is particularly relevant where the defendant did not intend to deceive or was acting under a belief that their actions were legitimate.
Entrapment and Police Conduct: In cases where defendants can demonstrate that they were unduly persuaded or entrapped by law enforcement into committing fraud, this can potentially be a defense. However, it was noted that there was no outrageous conduct by police in one instance, which would have supported an entrapment defense.

Other defenses include vagueness, fair notice and other challenges to the loose and overly broad language of many fraud statutes as applied to the medical profession.

Hire an Expert Defense Lawyer

If you are facing medical fraud charges or are subject to an investigation, our expert criminal defense lawyers can assist you.