New York Law Review

Tag: Medicaid Fraud

  • People v. Khan, 20 N.Y.3d 536 (2013): Sufficiency of Evidence for Healthcare Fraud Conviction

    People v. Khan, 20 N.Y.3d 536 (2013)

    For a conviction of healthcare fraud, the prosecution must prove that the defendant knowingly and willfully provided materially false information to a healthcare plan to receive unauthorized payments.

    Summary

    The New York Court of Appeals affirmed the defendant’s conviction for healthcare fraud and grand larceny, holding that sufficient evidence existed for a rational jury to conclude that the defendant knowingly and willfully provided materially false information to Medicaid. The case involved an undercover investigation where the defendant, a pharmacist, dispensed pills different from those prescribed and billed Medicaid for the prescribed medications. The Court clarified the standard of proof required for convictions under New York’s health care fraud statute and emphasized the importance of considering the totality of the circumstances in evaluating the sufficiency of evidence.

    Facts

    An undercover officer visited NYC Pharmacy multiple times, posing as a customer. During some visits, the officer requested specific prescription drugs without a valid prescription, and the defendant provided the drugs in exchange for cash. During other visits, the officer presented prescriptions and a Medicaid card under a fictitious name, Ivonne Arroyo, and requested different drugs than those prescribed; the defendant provided the requested drugs and billed Medicaid for the prescribed medications. The pills dispensed were never subjected to lab analysis. Medicaid records showed that NYC Pharmacy billed Medicaid for the prescriptions associated with the fictitious patient, Ivonne Arroyo, and received payments totaling over $3,000.

    Procedural History

    The defendant was charged with healthcare fraud, grand larceny, and criminal diversion of prescription medications. The trial court dismissed the criminal diversion counts but upheld the convictions for healthcare fraud and grand larceny. The Appellate Division affirmed the judgment. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the evidence presented at trial was legally sufficient to support the defendant’s convictions for health care fraud in the fourth degree and grand larceny in the third degree.

    Holding

    Yes, because, viewing the evidence in the light most favorable to the prosecution, a rational jury could have found the essential elements of the crimes beyond a reasonable doubt.

    Court’s Reasoning

    The Court of Appeals reasoned that to establish healthcare fraud in the fourth degree, the prosecution must prove that the defendant, with intent to defraud a health care plan, knowingly and willfully provided materially false information for the purpose of requesting payment from a health plan for a health care item or service, resulting in the defendant or another person receiving payment to which they were not entitled, and that the payment wrongfully received from a single health plan exceeded $3,000 in the aggregate. The Court determined that the jury could reasonably infer that the pills dispensed were not the prescribed medication. The Court emphasized that the jury could consider “the whole course of dealing, in which defendant consistently gave Gomez what Gomez asked for, rather than what was prescribed” in evaluating whether the defendant knowingly provided false information to Medicaid. The Court also rejected the defendant’s speedy trial argument.

    The Court cited Jackson v. Virginia, 443 U.S. 307, 319 (1979), stating that their role is limited to determining whether “after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.”

    The court noted that in this case the People presented sufficient evidence for a jury to conclude that the pills dispensed to Gomez were different from the drugs listed on the prescriptions presented to defendant on February 28, 2008 and April 2, 2008, and that defendant knowingly and willfully provided materially false information to Medicaid.

  • The Park Associates, Inc. v. The New York State Department of Law, Medicaid Fraud Control Unit, 6 N.Y.3d 434 (2006): Federal Law Protects Nursing Home Quality Assurance Records

    6 N.Y.3d 434 (2006)

    Federal law protects nursing home records created or generated for quality assurance purposes from disclosure in response to subpoenas issued by a grand jury conducting a Medicaid fraud investigation, but this protection does not extend to records maintained to comply with other state or federal regulations.

    Summary

    The New York Attorney General’s Medicaid Fraud Control Unit (MFCU) issued subpoenas to nursing homes as part of a resident care investigation. The Park Associates, a consultant for the homes, moved to quash the subpoenas, arguing that certain records were privileged under federal law (the Federal Nursing Home Reform Act). The dispute centered on whether certain reports (incident, skin condition, weight, infection control) were protected as quality assurance committee work product. The court held that records specifically created for quality assurance are protected, but routine records maintained to comply with state or federal regulations are not, even if reviewed by the quality assurance committee. This promotes candid self-review without hindering regulatory oversight.

    Facts

    The Medicaid Fraud Control Unit (MFCU) of the Attorney General’s office initiated an investigation into resident care at three nursing home facilities. As part of the investigation, an Erie County grand jury issued subpoenas seeking 59 categories of documents and reports. The Park Associates, Inc., a consultant for the facilities, moved to quash portions of the subpoenas, arguing that certain records were protected under New York State Public Health Law and the Federal Nursing Home Reform Act. The contested documents included incident/accident reports, monthly skin condition and pressure sore reports, monthly weight reports, infection control reports, and lists of facility-acquired infections.

    Procedural History

    The Supreme Court denied the motion to quash, finding the records were maintained per state regulations, not solely for quality assurance. The Appellate Division affirmed, rejecting the Public Health Law privilege claim and concluding the records weren’t within the scope of the federal quality assurance committee privilege. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether federal law (42 USC § 1396r(b)(1)(B)(ii)) protects from disclosure nursing home records, specifically incident/accident reports, monthly skin condition and pressure sore reports, monthly weight reports, infection control reports, and lists of any facility-acquired infections, subpoenaed by a grand jury conducting a Medicaid fraud investigation, when the nursing homes argue that these records were generated by the facilities’ quality assurance committees.

    Holding

    1. No, because where facilities are compelled by a statutory or regulatory dictate to maintain a particular record or report that is not expressly related to quality assurance, the fact that a quality assurance committee reviews such information for quality assurance purposes does not change the essential purpose of the document.

    2. Yes, because compilations, studies or comparisons of clinical data derived from multiple records, created by or at the request of committee personnel for committee use, are “records of such committee” and are entitled to protection from disclosure pursuant to federal law.

    Court’s Reasoning

    The Court reasoned that the Federal Nursing Home Reform Act (FNHRA) aims to improve nursing home care quality. It mandates quality assessment and assurance committees (42 USC § 1396r(b)(1)(B)), and a 1990 amendment protects the “records of such committee” from disclosure (42 USC § 1396r(b)(1)(B)(ii)). The Court distinguished between records maintained to comply with regulations and those generated specifically for quality assurance. Following this logic, incident/accident and infection control reports are required by regulations (42 CFR 483.65(a)(3); 10 NYCRR 415.30(f)) and must be disclosed, even if reviewed by the committee. The Court distinguished this from the State Education Law privilege which attaches to the proceedings and work product of hospital quality assurance committees which “ ‘enhance the objectivity of the review process’ ” and ensure that the committees “ ‘may frankly and objectively analyze the quality of health services rendered’ ” (Logue v Velez, 92 NY2d 13, 17 [1998]). However, monthly skin condition, weight reports, and lists of facility-acquired infections, not being mandated by other regulations and created for quality assurance, are protected.

    The Court declined to adopt the narrow standard articulated by the Supreme Court of Missouri in State ex rel. Boone Retirement Ctr., Inc. v Hamilton, 946 SW2d 740 (Mo 1997) because the federal statute does not restrict quality assurance records to only those reports created by quality assurance committee members themselves. The Court defined “records of such committee” as including “any reports generated by or at the behest of a quality assurance committee for quality assurance purposes.” The Court emphasized that a privilege log should be compiled to specify the nature of the contents of the documents, who prepared the records and the basis for the claimed privilege.

  • People v. Rubin, 97 N.Y.2d 505 (2002): Vagueness Challenge to Medicaid Reimbursement Regulation

    97 N.Y.2d 505 (2002)

    A regulatory vagueness challenge must be addressed to the specific facts of the case, and a regulation is not impermissibly vague as applied if the defendant understood the regulation and intended to violate it.

    Summary

    Rubin, the owner of a home care services agency, was convicted of grand larceny and offering a false instrument for filing for overcharging Medicaid. He argued that the Medicaid reimbursement regulation (the “public charge” provision) was unconstitutionally vague as applied to him. The New York Court of Appeals held that because Rubin understood the regulation and created schemes to violate it, the regulation was not impermissibly vague as applied to him. The Court reinstated Rubin’s convictions on counts that had been reversed by the Appellate Division, finding sufficient evidence of his intent to defraud.

    Facts

    Rubin owned Allstate Home Care, Inc., a home care services agency. He was charged with defrauding New York State by billing Medicaid at rates exceeding the rate charged to the general public, violating a Department of Social Services regulation (the “public charge” provision). Evidence showed Rubin created two price schedules: one accurate and another hidden, designed to defraud Medicaid. He also instructed staff to misrepresent the public rate for services to Medicaid officials.

    Procedural History

    Rubin was convicted of grand larceny and multiple counts of offering a false instrument for filing in the trial court. The Appellate Division reversed some convictions based on a related case (later reversed) finding the regulation facially unconstitutional. The People and Rubin cross-appealed to the New York Court of Appeals. The Court of Appeals reversed the Appellate Division’s decision regarding the vagueness challenge.

    Issue(s)

    Whether the public charge provision of the Medicaid reimbursement regulation (18 NYCRR 505.14 [h] [7] [ii] [a] [1]) is unconstitutionally vague as applied to Rubin, given his knowledge and actions.

    Holding

    No, the public charge provision is not unconstitutionally vague as applied to Rubin because there was sufficient evidence presented at trial to prove that the defendant understood the regulation and knowingly attempted to violate it.

    Court’s Reasoning

    The Court of Appeals emphasized that a vagueness challenge must be addressed to the facts before the court. The court found that Rubin understood the public charge regulation, as evidenced by his creation of separate price schedules and instructions to staff to misrepresent rates to Medicaid officials. The Court noted that Rubin had received letters from the Department of Social Services explaining the regulation. Despite understanding the regulation, Rubin attested that his health care facility complied with all applicable state regulations. The court reasoned that because the evidence at trial showed the defendant understood the regulation, the regulation was not impermissibly vague as applied to him. The court stated, “When a person’s conduct falls within the proscriptions of a regulation, ‘a vagueness challenge must be addressed to the facts before the court’ (People v Nelson, 69 NY2d 302, 308).”

  • People v. McDonald, 88 N.Y.2d 281 (1996): Establishing Larceny Through Medicaid Fraud with Unambiguous Billing Codes

    People v. McDonald, 88 N.Y.2d 281 (1996)

    When a professional billing code has a clear, technically defined meaning within a specific profession, using alternative methods not meeting that definition to obtain reimbursement constitutes larceny.

    Summary

    Defendants McDonald and Strogov, podiatrists, were convicted of grand larceny for submitting Medicaid claims under a billing code (90473) for custom-made orthotics. The prosecution argued that the code required a three-dimensional cast of the patient’s feet, while the defendants used less accurate two-dimensional methods. The Court of Appeals affirmed the convictions, holding that the term “casting” had a universally recognized meaning within podiatry, requiring a three-dimensional mold. Submitting claims without meeting this standard, therefore, demonstrated larcenous intent, especially given additional evidence of intentional misrepresentation.

    Facts

    McDonald and Strogov, participating podiatrists in the New York Medical Assistance Program, submitted claims under billing code 90473 for “Foot mold, balance inlay support (casting and fabrication).” Instead of creating three-dimensional casts of patients’ feet, as the prosecution contended the code required, they used tracings or pressure imprints. These methods involved sending a two-dimensional outline or footprint to a laboratory that supplied prefabricated stock orthotics, rather than custom-made devices based on a three-dimensional mold. The maximum reimbursement under the code was $46.

    Procedural History

    McDonald was convicted in a jury trial of grand larceny and offering a false instrument for filing. Strogov was convicted of grand larceny in a bench trial. Both defendants appealed their convictions. The Appellate Division affirmed the convictions, finding the billing code unambiguous. The defendants then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the Medicaid billing code 90473, using the phrase “casting and fabrication,” unambiguously requires the creation of a three-dimensional cast or mold of the patient’s feet.

    2. Whether there was legally sufficient evidence to prove that the defendants submitted claims under code 90473 with larcenous intent.

    Holding

    1. Yes, because the term “casting” has a universally recognized meaning within the podiatric profession to require a three-dimensional cast or mold.

    2. Yes, because the act of submitting claims under code 90473 without creating a cast or mold constitutes circumstantial evidence of larcenous intent, and additional evidence of intentional misrepresentation existed in both cases.

    Court’s Reasoning

    The Court found that the term “casting” has a well-established meaning within the podiatric profession, referring to the creation of a three-dimensional cast or mold. Expert testimony confirmed this understanding. The court reasoned that billing codes intended for professional use can rely on technical terms understood within the relevant profession. “As the podiatry fee schedule is intended for use by members of the podiatric profession, the use of technical terms recognized by the profession to describe the scope of permissible work that can be billed under code 90473 provides an explicit and nonarbitrary standard for enforcement of proper Medicaid billing practices and imposing criminal responsibility for flagrant violations thereof.” Because the defendants used methods that did not meet the definition of “casting,” their actions constituted circumstantial evidence of intent to defraud. In McDonald’s case, a former partner testified they knowingly billed for custom-made orthotics when they provided prefabricated devices. In Strogov’s case, an intern was instructed to falsify patient charts to indicate that casts were made. This additional evidence further supported the conclusion of larcenous intent. The court stated, “in each case, the evidence was legally sufficient to support the fact finder’s conclusion that defendants’ improper billing was done with criminal intent.”

  • Medicon Diagnostic Laboratories, Inc. v. Perales, 74 N.Y.2d 539 (1989): Upholding Medicaid Payment Withholds Pending Fraud Investigation

    74 N.Y.2d 539 (1989)

    Regulations authorizing the withholding of Medicaid payments to providers based on reliable information of fraud do not violate due process rights if they provide adequate procedural safeguards, balancing the provider’s interests with the government’s interest in protecting public funds.

    Summary

    Medicon and FYM, clinical medical laboratories participating in the New York Medicaid program, challenged the constitutionality of regulations allowing the state to withhold Medicaid payments pending investigations into potential fraud or abuse. The New York Court of Appeals held that the regulations did not violate the laboratories’ due process rights. The court reasoned that while providers may have a property interest in Medicaid payments, the regulations provided sufficient procedural safeguards, including notice and an opportunity to respond, balancing the providers’ interests with the state’s compelling interest in safeguarding public funds from fraud and abuse within the Medicaid system. The court emphasized that prompt action was necessary to prevent the potential misuse of taxpayer money.

    Facts

    Medicon and FYM, enrolled Medicaid providers, experienced a significant increase in billings in 1988, prompting an investigation by the Department of Social Services (DSS). DSS auditors found discrepancies, including physicians denying ordering tests claimed by the laboratories. Based on this information, DSS initiated withholding payments to Medicon and FYM pending further review, citing regulatory authority to safeguard public funds and verify claims. Medicon’s billings rose dramatically, and FYM had similar increases.

    Procedural History

    Both Medicon and FYM filed Article 78 proceedings challenging the constitutionality of the payment withholding regulations (18 NYCRR 518.7). Medicon’s proceeding was converted to a declaratory judgment action, and the Supreme Court initially declared the regulation unconstitutional. The Appellate Division reversed, upholding the regulation’s constitutionality. FYM’s petition was initially dismissed, but the Appellate Division modified the judgment, declared the regulation constitutional and validly promulgated. Both cases reached the New York Court of Appeals as a matter of right.

    Issue(s)

    Whether the withholding of Medicaid payments to medical providers, without prior notice and a hearing, based on reliable information of fraud or program abuse, violates the providers’ due process rights under the Fourteenth Amendment?

    Holding

    No, because the regulations authorizing the withholding of Medicaid payments provide sufficient procedural safeguards that adequately balance the providers’ private interest in receiving payments with the government’s compelling interest in protecting the integrity of the Medicaid program and preventing the misuse of public funds.

    Court’s Reasoning

    The Court of Appeals applied the balancing test from Mathews v. Eldridge to determine if the procedures for withholding payments satisfied due process requirements. This test considers (1) the private interest affected, (2) the risk of erroneous deprivation and the value of additional safeguards, and (3) the government’s interest, including administrative burdens. The court found that the regulations in question adequately addressed these factors. While providers have a property interest in receiving Medicaid payments for services rendered, this interest is not absolute and is subject to the State’s regulatory authority to ensure proper use of public funds.

    The court emphasized that the regulations require “reliable information” of fraud or abuse before withholding payments, mandate prompt notice to the provider (within five days) explaining the reasons for the withholding, and provide an opportunity for the provider to submit written arguments. The withholding is temporary, not exceeding 90 days unless further action is taken, at which point the provider is entitled to a hearing. The court stated, “due process is a flexible constitutional concept calling for such procedural protections as a particular situation may demand”.

    The court rejected the argument that pre-withholding notice and a hearing were required, finding that the State’s interest in preventing fraud and quickly recovering public funds outweighed the burden of providing such procedures. The Court stated that the state must be assured “that the funds which have been set aside (for providing medical services to the needy) will not be fraudulently diverted into the hands of an untrustworthy provider of services”.

    The court also dismissed the petitioners’ claim that the withholding was arbitrary and capricious, noting that the decision was based on “reliable information” from physicians who denied ordering the tests for which the laboratories sought reimbursement.

  • People v. Montesano, 54 N.Y.2d 736 (1981): Preserving Issues for Appeal

    People v. Montesano, 54 N.Y.2d 736 (1981)

    To preserve an issue for appellate review, a party must make a timely and specific objection on the record during the trial court proceedings.

    Summary

    Montesano was convicted of grand larceny and offering a false instrument for filing related to Medicaid fraud. The Appellate Division reversed, citing the erroneous admission of an auditor’s testimony. The Court of Appeals dismissed the People’s appeal because the Appellate Division’s reversal was based on grounds for which no timely objection had been made at trial, thus failing to satisfy the jurisdictional requirements for appeal to the Court of Appeals. The Court emphasized that its dismissal did not endorse the Appellate Division’s legal rulings.

    Facts

    The defendant was indicted for grand larceny and multiple counts of offering a false instrument for filing. The prosecution alleged that the defendant stole over $250 by filing false Medicaid claim forms that overstated patient visits. The defendant was convicted after a jury trial.

    Procedural History

    The trial court convicted Montesano. The Appellate Division reversed the conviction and granted a new trial, holding that the testimony of an auditor from the Medicaid Fraud Unit was erroneously admitted. The People appealed to the New York Court of Appeals.

    Issue(s)

    Whether the Appellate Division’s reversal was based solely on questions of law for which proper objections were made at trial, thereby establishing the jurisdictional predicate for an appeal to the Court of Appeals under CPL 450.90(2).

    Holding

    No, because the Appellate Division’s reversal was based, in part, on grounds for which timely objections were not made at trial. Therefore, the appeal was dismissed due to the absence of a jurisdictional predicate.

    Court’s Reasoning

    The Court of Appeals found that the Appellate Division’s reversal was based on three grounds: (1) the subject matter of the auditor’s testimony did not require expertise; (2) the testimony impermissibly bolstered the credibility of other witnesses; and (3) the testimony invaded the province of the jury. However, the record showed that the defense only objected to the auditor’s testimony at trial on the grounds that it was an “improper intrusion of the province of this jury.” Because objections on the first two grounds were not timely raised at trial, the Appellate Division’s decision was not based solely on questions of law properly preserved. The Court of Appeals emphasized that its jurisdiction is limited to appeals where the reversal below is based on the law alone or on the law and such facts that would not have led to the reversal absent the legal error. Because the Appellate Division relied, in part, on unpreserved errors, the Court of Appeals lacked jurisdiction and dismissed the appeal. The court cited People v. Dercole, 52 N.Y.2d 956, stating that because the court had not reached the merits, its disposition did not endorse the rulings in the opinion below.

  • Camperlengo v. Blum, 56 N.Y.2d 254 (1982): Physician-Patient Privilege and Medicaid Fraud Investigations

    Camperlengo v. Blum, 56 N.Y.2d 254 (1982)

    The physician-patient privilege does not provide absolute protection to a doctor’s treatment records of Medicaid patients when those records are subpoenaed by the State Department of Social Services during a billing practices investigation.

    Summary

    This case addresses the conflict between physician-patient privilege and the state’s need to investigate potential Medicaid fraud. A psychiatrist, Camperlengo, faced a subpoena for patient records due to unusual billing patterns. He argued the records were protected by physician-patient privilege. The court held that while the privilege exists, it is abrogated to the extent necessary for effective Medicaid oversight. This exception is narrowly tailored to ensure funds are properly used and patient confidentiality is maintained as much as possible. The ruling balances patient privacy with the public interest in preventing Medicaid fraud, allowing access to records directly relevant to administering the program.

    Facts

    A psychiatrist, Camperlengo, treated Medicaid recipients. The State Department of Social Services noticed consecutive billing dates for some patients, which they considered unusual. The Department requested access to the psychiatrist’s records to check for unnecessary treatment or fraudulent billing. The psychiatrist’s initial cooperation was insufficient, leading the Department to issue a subpoena duces tecum for records of 35 Medicaid patients. The subpoena sought treatment plans, evaluations, diagnostic records, and payment records from third parties.

    Procedural History

    The psychiatrist moved to quash the subpoena in the Supreme Court. The Supreme Court denied the motion. The Appellate Division affirmed the Supreme Court’s decision.

    Issue(s)

    Whether the physician-patient privilege under CPLR 4504(a) protects a psychiatrist’s treatment records of Medicaid patients from a subpoena issued by the State Department of Social Services during an investigation of billing practices.

    Holding

    No, because the Federal and State record-keeping and reporting requirements of the Medicaid program demonstrate a clear intention to abrogate the physician-patient privilege to the extent necessary to ensure proper application of Medicaid funds.

    Court’s Reasoning

    The court acknowledged the physician-patient privilege, a statutory creation designed to protect patient confidentiality and encourage open communication with doctors. The court stated, “to protect those who are required to consult physicians from the disclosure of secrets imparted to them; to protect the relationship of patient and physician and to prevent physicians from disclosing information which might result in humiliation, embarrassment, or disgrace to patients”. However, the court also noted that the legislature has, in some instances, abrogated this privilege to effectuate other public policies, such as preventing child abuse or treating narcotic addiction.

    The court then examined the Medicaid program, which uses public funds and requires accountability. Federal regulations (42 U.S.C. § 1396a(a)(27)) mandate that states participating in Medicaid have agreements with service providers to keep records fully disclosing the services provided and to furnish the state agency with information regarding payments claimed. New York regulations (18 NYCRR 540.7(a)(8)) also require providers to keep such information available for at least six years after payment.

    While there is no explicit statutory exception to the physician-patient privilege for Medicaid records, the court found that the federal and state record-keeping requirements demonstrate a clear intention to abrogate the privilege to the extent necessary for effective Medicaid oversight. The court emphasized that this exception is limited to ensuring Medicaid funds are properly applied. Confidentiality is maintained through restrictions on the use of the information, limiting its use to purposes directly connected with administering the Medicaid program. As the court explained, “the public must be assured that the funds which have been set aside for this worthy purpose will not be fraudulently diverted into the hands of an untrustworthy provider of services”.