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| [1] | UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT |
| [2] | No. 84-1546 |
| [3] | 1985.C03.40763 <http://www.versuslaw.com>;
760 F.2d 68 |
| [4] | decided: April 30, 1985. |
| [5] | UNITED STATES OF AMERICA, APPELLEE, v. A. ALVIN GREBER, APPELLANT |
| [6] | Appeal from the United States District Court for the Eastern District
of Pennsylvania, (D.C. Criminal No. 83-00414). |
| [7] | Thomas B. Rutter, Esq. (argued), Rutter, Turner & Stein, Philadelphia,
Pennsylvania, for Appellant. |
| [8] | Glenn B. Bronson, Esq. (argued), Assistant U.S. Attorney, Philadelphia,
Pennsylvania, for Appellee. |
| [9] | Weis, Becker and Wisdom,*fn*
Circuit Judges. |
| [10] | Author: Weis |
| [11] | WEIS, Circuit Judge. |
| [12] | In this appeal, defendant argues that payments made to a physician for
professional services in connection with tests performed by a laboratory
cannot be the basis of medicare fraud. We do not agree and hold that if
one purpose of the payment was to induce future referrals, the medicare
statute has been violated. We also hold that the materiality of utterances
charged to be within the false statement statute is an essential element
of the crime to be decided by the trial judge as a matter of law. We find
the district court's rulings consistent with our determinations and accordingly
will affirm. |
| [13] | After a jury trial, defendant was convicted on 20 of 23 counts in an indictment
charging violations of the mail fraud, Medicare fraud, and false statement
statutes. Post-trial motions were denied, and defendant has appealed. |
| [14] | Defendant is an osteopathic physician who is board certified in cardiology.
In addition to hospital staff and teaching positions, he was the president
of Cardio-Med, Inc., an organization which he formed. The company provides
physicians with diagnostic services, one of which uses a Holter-monitor.
This device, worn for approximately 24 hours, records the patient's cardiac
activity on a tape. A computer operated by a cardiac technician scans the
tape, and the data is later correlated with an activity diary the patient
maintains while wearing the monitor. |
| [15] | Cardio-Med billed Medicare for the monitor service and, when payment was
received, forwarded a portion to the referring physician. The government
charged that the referral fee was 40 percent of the Medicare payment, not
to exceed $65 per patient. |
| [16] | Based on Cardio-Med's billing practices, counts 18-23 of the indictment
charged defendant with having tendered remuneration or kickbacks to the
referring physicians in violation of 42 U.S.C. § 1395nn(b)(2)(B) (1982). |
| [17] | Counts 12 through 17 alleged that defendant made false statements to Medicare
in violation of 18 U.S.C. § 1001 (1982). Defendant submitted claim forms
representing that the Holter-monitors had been operated for eight hours
or more when in fact the devices had been used for a much shorter time.
Medicare required at least eight hours of operation to qualify for payment. |
| [18] | Counts 5 to 11 charged mail fraud. According to the indictment, defendant
caused Cardio-Med to bill Medicare for monitorings which were medically
unnecessary. |
| [19] | Mail fraud was also charged in counts 1 to 4. Defendant allegedly used
the mail to bill for hospital visits he never made. |
| [20] | The proof as to the Medicare fraud counts (18-23) was that defendant had
paid a Dr. Avallone and other physicians "interpretation fees"
for the doctors' initial consultation services, as well as for explaining
the test results to the patients. There was evidence that physicians received
"interpretation fees" even though defendant had actually evaluated
the monitoring data. Moreover, the fixed percentage paid to the referring
physician was more than Medicare allowed for such services. |
| [21] | The government also introduced testimony defendant had given in an earlier
civil proceeding. 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." In addition, defendant told physicians
at a hospital that the Board of Censors of the Philadelphia County Medical
Society had said the referral fee was legitimate if the physician shared
the responsibility for the report. Actually, the Society had stated that
there should be separate bills because "for the monitor company to
offer payment to the physicians . . . is not considered to be the method
of choice." |
| [22] | The evidence as to mail fraud was that defendant repeatedly ordered monitors
for his own patients even though use of the device was not medically indicated.
As a prerequisite for payment, Medicare requires that the service be medically
indicated. |
| [23] | The Department of Health and Human Services had promulgated a rule providing
that it would pay for Holter-monitoring only if it was in operation for
eight hours or more. Defendant routinely certified that the temporal condition
had been met, although in fact it had not. |
| [24] | On appeal, defendant raises several alleged trial errors. He presses more
strongly, however, his contentions that the evidence was insufficient to
support the guilty verdict on the Medicare fraud counts, and that the charge
to the jury on that issue was not correct. As to the false statement counts,
he argues that the materiality element should have been submitted to the
jury rather than being decided as a matter of law by the court. |
| [25] | I. MEDICARE FRAUD |
| [26] | The Medicare fraud statute was amended by P.L. 95-142, 91 Stat. 1183 (1977).
Congress, concerned with the growing problem of fraud and abuse in the system,
wished to strengthen the penalties to enhance the deterrent effect of the
statute. To achieve this purpose, the crime was upgraded from a misdemeanor
to a felony. |
| [27] | Another aim of the amendments was to address the complaints of the United
States Attorneys who were responsible for prosecuting fraud cases. They
informed Congress that the language of the predecessor statute was "unclear
and needed clarification." H. Rep. No. 393, PART II, 95 Cong., 1st
Sess. 53, reprinted in 1977 U.S. CODE CONG. & AD. NEWS 3039, 3055. |
| [28] | A particular concern was the practice of giving "kickbacks"
to encourage the referral of work. Testimony before the Congressional committee
was that "physicians often determine which laboratories would do the
test work for their medicaid patients by the amount of the kickbacks and
rebates offered by the laboratory . . . . Kickbacks take a number of forms
including cash, long-term credit arrangements, gifts, supplies and equipment,
and the furnishing of business machines." Id. at 3048-3049. |
| [29] | To remedy the deficiencies in the statute and achieve more certainty,
the present version of 42 U.S.C. § 1395nn(b) (2) was enacted. It provides: |
| [30] | "whoever knowingly and willfully offers or pays any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly
or covertly in cash or in kind to induce such person -- |
| [31] | (B) to purchase, lease, order, or arrange for or recommend purchasing
. . . or ordering any . . . service or item for which payment may be made
. . . under this title, shall be guilty of a felony." |
| [32] | The district judge instructed the jury that the government was required
to prove that Cardio-Med paid to Dr. Avallone some part of the amount received
from Medicare; that defendant caused Cardio-Med to make the payment; and
did so knowingly and willfully as well as with the intent to induce Dr.
Avallone to use Cardio-Med's services for patients covered by Medicare.
The judge further charged that even if the physician interpreting the test
did so as a consultant to Cardio-Med, that fact was immaterial if a purpose
of the fee was to induce the ordering of services from Cardio-Med. |
| [33] | Defendant contends that the charge was erroneous. He insists that absent
a showing that the only purpose behind the fee was to improperly induce
future services, compensating a physician for services actually rendered
could not be a violation of the statute. |
| [34] | The government argues that Congress intended to combat financial incentives
to physicians for ordering particular services patients did not require. |
| [35] | The language and purpose of the statute support the government's view.
Even if the physician performs some service for the money received, the
potential for unnecessary drain on the Medicare system remains. The statute
is aimed at the inducement factor. |
| [36] | The text refers to "any remuneration." That includes not only
sums for which no actual service was performed but also those amounts for
which some professional time was expended. "Remunerates" is defined
as "to pay an equivalent for service." Webster Third New International
Dictionary (1966). By including such items as kickbacks and bribes, the
statute expands "remuneration" to cover situations where no service
is performed. That a particular payment was a remuneration (which implies
that a service was rendered) rather than a kickback, does not foreclose
the possibility that a violation nevertheless could exist. |
| [37] | In United States v. Hancock,
604 F.2d 999
(7th Cir. 1979), the court applied the term "kickback" found in
the predecessor statute to payments made to chiropractors by laboratories
which performed blood tests. The chiropractors contended that the amounts
they received were legitimate handling fees for their services in obtaining,
packaging, and delivering the specimens to the laboratories and then interpreting
the results. The court rejected that contention and noted, "The potential
for increased costs to the Medicare-Medicaid system and misapplication of
federal funds is plain, where payments for the exercise of such judgments
are added to the legitimate cost of the transaction . . . There are among
the evils Congress sought to prevent by enacting the kickback statutes.
. . ." Id. at 1001. |
| [38] | Hancock strongly supports the government's position here, because the
statute in that case did not contain the word "remuneration."
The court nevertheless held that "kickback" sufficiently described
the defendants' criminal activity. By adding "remuneration" to
the statute in the 1977 amendment, Congress sought to make it clear that
even if the transaction was not considered to be a "kickback"
for which no service had been rendered, payment nevertheless violated the
Act. |
| [39] | We are aware that in United States v. Porter,
591 F.2d 1048
(5th Cir. 1979), the Court of Appeals for the Fifth Circuit took a more
narrow view of "kickback" than did the court in Hancock. Porter
's interpretation of the predecessor statute which did not include "remuneration"
is neither binding nor persuasive. We agree with the Court of Appeals for
the Sixth Circuit, which adopted the interpretation of "kickback"
used in Hancock and rejected that of the Porter case. United States v. Tapert,
625 F.2d 111
(6th Cir. 1980).*fn1
See also United States v. Duz-Mor Diagnostic Laboratory, Inc.,
650 F.2d 223,
227 (9th Cir. 1981). |
| [40] | We conclude that the more expansive reading is consistent with the impetus
for the 1977 amendments and therefore hold that the district court correctly
instructed the jury. 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. |
| [41] | A review of the record also convinces us that there was sufficient evidence
to sustain the jury's verdict. |
| [42] | II. FALSE STATEMENTS |
| [43] | Defendant also argues vigorously that he is entitled to a new trial on
the false statement counts because the issue of materiality was not submitted
to the jury. The government produced evidence showing that on certain occasions
the Holter-monitor was used for less than eight hours, but defendant certified
that it had been operated for at least that length of time. As noted earlier,
that certification was a prerequisite for payment by Medicare and thus the
issue of materiality must be addressed. |
| [44] | 18 U.S.C. § 1001 provides that a person who "in any matter within
the jurisdiction of any department or agency of the United States knowingly
and willfully falsifies . . . a material fact, or makes any false, fictitious
statements or representations" shall be guilty of a crime. |
| [45] | Defendant's contention is divided into two parts: first, that materiality
is an essential element; second, that the issue is to be decided by the
jury. We consider the two points in that order. |
| [46] | Most of the Courts of Appeals, with the exception of the Second Circuit,
have held that materiality is an essential element. See, e.g., United States
v. Irwin,
654 F.2d 671
(10th Cir. 1981); United States v. Valdez,
594 F.2d 725
(9th Cir. 1979); but see United States v. Elkin,
731 F.2d 1005
(2d Cir. 1984). |
| [47] | In United States v. Clearfield,
358 F. Supp. 564
(E.D. Pa. 1973), Judge Becker, now of this court, included materiality as
one element of the offense. In the context of 18 U.S.C. § 1014, which prohibits
false statements in loan applications, we had stated that materiality requires
that the statements must have the capacity to influence; actual use of the
representations in the decision-making is not necessary. United States v.
Goberman,
458 F.2d 226
(3d Cir. 1972). Adopting that rationale, Judge Becker phrased "the
test for materiality [under § 1001 as] whether the statement has a natural
tendency to influence or be capable of influencing the agency, not whether
it, in fact, did so influence it."
358 F. Supp. at 574
n.23. |
| [48] | In United States v. Slawik,
548 F.2d 75,
79 (3d Cir. 1977), we held that materiality is an essential element of the
perjury statute. 18 U.S.C. § 1625. We see no reason why the same burden
should not be imposed on the prosecution in a false statement case as well.
See United States v. Protch,
481 F.2d 647
(3d Cir. 1973). Cf. United States v. Silver,
235 F.2d 375,
377 (2d Cir. 1956) (materiality not an element of false statements but is
for concealment offense). We hold, therefore, that materiality is an essential
element of a § 1001 offense and join the majority of courts which have so
held. |
| [49] | The record here contains enough evidence to support the district judge's
ruling that the certifications to Medicare were material. It is not questioned
that the statements that the monitors were being used for more than eight
hours led to payment by the agency. If the elapsed time had been accurately
reported, Medicare would not have allowed the claims. The element of materiality,
therefore, is satisfied. The question remains, however, whether judge or
jury was to make the determination. Our court has not yet specifically taken
a position on the question, but in United States v. Slawik we held that
in a perjury prosecution materiality is "a question of law, decision
upon which is reserved to the court."
548 F.2d at 79.
|
| [50] | Building upon the Supreme Court's holding in Sinclair v. United States,
279 U.S. 263,
73 L. Ed. 692,
49 S. Ct. 268
(1929), the majority of the Courts of Appeals have adopted the same position
in false statement cases under § 1001. In Sinclair, the Court reviewed a
judgment against a defendant for refusing to answer the questions of a Congressional
committee. The Court ruled that "pertinency" under the applicable
statute "was rightly decided . . . as one of law. . . . That question
. . . is not essentially different from the question as to materiality of
false testimony charged as perjury in prosecution for that crime . . . .
The materiality of what is falsely sworn, when an element in the crime of
perjury is one for the court." Id. at 298. |
| [51] | Cases applying the same rule to § 1001 prosecutions have been decided
by the courts in the Second, Fourth, Fifth, Seventh, Eighth, and D.C. Circuits.*fn2
We join that majority and accordingly reject the defendant's contention
that the issue of materiality should have been submitted to the jury. |
| [52] | Defendant also contends that the district court erred in failing to conduct
hearings into an off-the-record commend allegedly made by a witness to the
jury. We are persuaded that the trial judge promptly and properly acted
on the matter and no further hearing was necessary. We also find no merit
in the defendant's complaint that an F.B.I. agent interviewed a potential
expert witness for the defense before trial. The witness was not called,
and defendant has demonstrated neither impropriety nor injury, nor necessity
for a hearing. |
| [53] | Having carefully reviewed all of the defendant's allegations, we find
no reversible error. Accordingly, the judgment of the district court will
be affirmed. |
|
|
|
| Judges Footnotes | |
|
|
|
| [54] | *fn* The Honorable
John Minor Wisdom, Circuit Judge, United States Court of Appeals for the
Fifth Circuit, sitting by designation. |
|
|
|
| Opinion Footnotes | |
|
|
|
| [55] | *fn1 Although the Hancock
case is based on the Medicaid fraud provision found in 42 U.S.C. § 1396h(b)(1),
the Medicare fraud section pertinent in this case shares common language
and purposes. See Tapert,
625 F.2d at 113
n.1. Indeed, the title of the 1977 amendments was "Medicare-Medicaid
Antifraud and Abuse Amendments." |
| [56] | *fn2 United States
v. Bernard,
384 F.2d 915
(2d Cir. 1967); United States v. Ivey,
322 F.2d 523
(4th Cir. 1963); United States v. Hausmann,
711 F.2d 615
(5th Cir. 1983); United States v. Clancy,
276 F.2d 617
(7th Cir. 1960); United States v. Hicks,
619 F.2d 752
(8th Cir. 1980); Weinstock v. United States, 97 U.S. App. D.C. 365,
231 F.2d 699
(D.C. Cir. 1956). Contra United States v. Irwin,
654 F.2d 671,
677 n.8 (10th Cir. 1981); United States v. Valdez,
594 F.2d 725,
729 (9th Cir. 1979). |
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