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Constitutionality of the Fraud and Abuse Statute

Statutes are not the law when the courts find them unconstitutional or otherwise invalid. Currently there were three federal appeals court decisions involving criminal prosecutions under the fraud and abuse laws. The first dealt with a physician, Greber, who ran a laboratory service that provided Holter monitors.[33] These monitors were ordered by cardiologists. Greber's business fitted them to the patient, collected the data, and prepared the data for reading by the ordering cardiologist. The ordering cardiologist was paid a consultant's fee for analyzing a patient's Holter monitor data. In the defendant's criminal prosecution for fraud, the government asserted that this fee was an illegal inducement to persuade physicians to use Greber's services.

Greber argued that these were not illegal inducements to refer patients but legitimate fees for evaluating the Holter monitor data. The court's record does not indicate that these consultants' fees were higher than the fee that would have been paid to a cardiologist who was retained to analyze the data but who had not ordered a Holter monitor. There was evidence, however, that some physicians received consulting fees when Greber had already evaluated the Holter monitor data. Perhaps most telling for the government's case was Greber's own testimony in a related civil case: "In that case, he had testified that '... if the doctor didn't get his consulting fee, he wouldn't be using our service. So the doctor got a consulting fee'."[34]

The Court found that "if the payments were intended to induce the physician to use Cardio-Med's services, the statute was violated, even if the payments were also intended to compensate for professional services."[35] This interpretation was upheld in a subsequent case in which the Court found that "the jury could convict unless it found the payment 'wholly and not incidentally attributable to the delivery of goods or services'.[36] This ruling made it clear that the prohibited conduct was any payment that accompanied a referral, irrespective of whether the physician receiving the payment provided some goods or services in return.

A case involving payments allegedly intended to influence a decision to award an ambulance contract approved of the Greber decision and extended it to cover subsequent modifications that had been made in the law.[37] This case directly considered the constitutionality of the Medicare fraud and abuse law: "Defendants next claim that, if we read the Medicare Fraud statute to criminalize, under certain circumstances, reasonable payment for services rendered, the statute becomes unconstitutionally vague."[38] The Court rejected this reasoning, finding that Congress's broad power to regulate commerce included the power to prohibit practices that might induce referrals, even if they had other, proper, motives.[39]

[33]U.S. v. Greber, 760 F2d 68 (3d Cir), Apr 30, 1985).

[34]U.S. v. Greber, 760 F2d 68 (3d Cir), Apr 30, 1985), p. 70.

[35]U.S. v. Greber, 760 F2d 68 (3d Cir), Apr 30, 1985), p. 72.

[36]U.S. v. Kats, 871 F2d 105 (9th Cir), Apr 3, 1989).

[37]U.S. v. Bay State Ambulance and Hospital Rental Service, Inc., 874 F2d 20 (1st Cir), May 02, 1989).

[38]*U.S. v. Bay State Ambulance and Hospital Rental Service, Inc., 874 F2d 20 (1st Cir), May 02, 1989).

[39]Holthaus D: Courts broadly interpret antikickback laws. Hospitals 1989; 63(19):44.

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