Understanding the Risks of Jail Time

A colleague of mine recently asked, “what does it take for a doc to get sent to prison?”

I had to confess: I really didn’t know. But as it turns out, there are several ways that could happen.

Let’s start with the differences between civil and criminal fraud. Civil and criminal fraud are essentially the same offense, but they undergo a different legal process. Much, if not most, of healthcare fraud is charged as a civil offense. There’s a range of reasons for this, but the main one is the burden of proof. In a criminal trial, the prosecution must prove guilt beyond a reasonable doubt. In civil cases, the burden of proof is lower – typically a “preponderance of the evidence” standard. This makes earning a conviction easier.

Criminal convictions expose defendants to the possibility of incarceration. This typically results in very aggressive defense. In contrast, civil convictions do not entail incarceration, but expose the defendant to a wide range of financial penalties not permitted in a criminal trial. Convictions of either type carry the risk of a corporate integrity agreement and exclusion from government programs. For these reasons, trials are less common than settlements.

In a settlement, defendants may avoid an explicit admission of wrongdoing while still being held liable for restitution and penalties. Examples of this in recent history include the kyphoplasty and cardiac device settlements.

The good thing is that criminal prosecutions for healthcare fraud are rare. There are several reasons for this. First, it’s hard to reliably identify a responsible executive and prove to a jury the executive’s guilt. Second, the dollar amounts are often so large and the possibility of penalties so great that civil charges result in better financial gains for the government. However, those in physician practices should take no comfort in the rarity of institutional criminal prosecutions.

The U.S. Department of Justice (DOJ) website has a “news” section that makes for fascinating reading.

Eliminating controlled drug charges and diversion, the schemes most popular for prosecution involve the following:

• Home healthcare, durable medical equipment (DME), and compounding pharmacy services;

• Kickbacks and prohibited payments; and

• Falsified billing.

Let’s look at some examples to see what warrants “big time” in the “big house.”

• A Florida-based DME scheme involved $31 million in Medicare claims. The physician defendant was sentenced to 2 years and 8 months. A co-conspirator chiropractor was sentenced to 8 years in prison. An additional co-conspirator pleaded guilty and was sentenced to 20 years in prison.

• A Texas case involved compounding pharmacy owners convicted of a $125 million scheme to defraud worker’s compensation and TRICARE. A physician defendant received 5 years. Three additional defendants received 20 years, 15 years, and 10 years.

These examples differ from institutional cases in that they have readily identifiable culpable individuals. They also allow us to start assessing risk for physicians.

• First, anything that entails recruiting patients or specific prescribing practices is likely illegal.

• Second, business relationships that have potential for kickbacks or Stark violations, especially those involving family members in business relationships, are very high-risk.

Anytime a physician receives payment for something other than the delivery of care through a legal modality, it’s probably illegal.