Criminal and Civil Forfeiture

In our July 10, 2017 post, Concierge Medicine – Is it for you?, we cautioned that Medicare compliance concerns do not fall away when moving to a concierge or direct-pay model.  HHS has determined that concierge-style agreements are permitted as long as Medicare requirements are not violated.  Unless a physician has opted out of Medicare, the predominant requirement is that an access or membership fee cannot be charged to a Medicare patient for services that are already covered by Medicare.  But how does a concierge physician know where to draw the line?  The relevant authorities have issued very limited guidance in this area.

In March 2004, an OIG Alert was issued reminding Medicare participating providers that they may not charge Medicare patients fees for services already covered by Medicare.  OIG used, as an example, a case involving physician’s charge of $600 for a “Personal Health Care Medical Care Contract” that covered, among other things, coordination of care with other providers, a comprehensive assessment and plan for optimum health, and extra time spent on patient care.  Because some of these services were already reimbursable by Medicare, the physician was found to be in violation of his assignment agreement and was subjected to civil money penalties.  The physician entered into a settlement with OIG and was required to stop offering these contracts.

In 2007, OIG settled another case involving a physician engaged in a concierge-style practice.  There, the physician, who also had not opted out of Medicar, asked his patients to enter into a contract under which the patients paid an annual fee. Under the contract, the patient was to be provided with an annual comprehensive physical examination, coordination of referrals and expedited referrals, if medically necessary, and other service amenities.  The physician was similarly found to have violated the Civil Monetary Penalties Law by receiving additional payment for Medicare-covered services and agreed to pay $106,600 to resolve his liability.

As demonstrated by these settlements, violations of a physician’s assignment agreement results in substantial penalties and exclusion from Medicare and other Federal health care programs.  It would behoove a concierge physician to tailor contracts offered to Medicare patients.  Fees charged under such contracts should relate only to noncovered services and amenities.  For example, fees could relate to additional screenings by the concierge physician that are not covered by Medicare or amenities such as private waiting rooms.

According to the GAO’s 2005 Report on Concierge Care Characteristics and Considerations for Medicare, HHS OIG has not issued more detailed guidance on concierge care because its role is to carry out enforcement, not to make policy.  However, physicians with specific concerns regarding the structure of their concierge care agreements or practices may request an advisory opinion from HHS addressing their concerns.  Advisory opinions are legally binding on HHS and the party so long as the arrangement is consistent with the facts provided when seeking the opinion.

Next week, look for the release of Medical Marijuana 105, the fifth post in a series of posts discussing the current state of law in New York regarding medical marijuana.  To read the latest post in the series, Medical Marijuana 104:  Responsibilities of Health Insurers, click here.

Health care fraud prosecutions in the Second Circuit and throughout the country have typically sought forfeiture money judgments against all defendants for the proceeds of the fraud obtained by all members of a health care fraud conspiracy.  The Supreme Court recently curtailed these efforts in Honeycutt v. United States.  In Honeycutt, the Court held that the forfeiture statute only permits a forfeiture money judgment for property a defendant actually acquired as part of the crime, not all proceeds of the conspiracy.

In Honeycutt, defendant Terry Honeycutt managed sales and inventory at his brother’s hardware store.  The brothers were prosecuted for conspiring to sell iodine with the knowledge that it was being used to manufacture methamphetamine.  The government sought a forfeiture money judgment of $269,751.98, constituting the hardware store’s profits.  The defendant’s brother pled guilty and agreed to forfeit $200,000.  The government sought and obtained a forfeiture money judgment against defendant Terry Honeycutt for $69,751.98, even though he did not personally benefit from the hardware store’s profits.  The Sixth Circuit held that the conspiring brothers were “jointly and severally liable for any proceeds of the conspiracy,” joining several circuits, including the Second Circuit, in an expansive view of criminal forfeiture.

Justice Sotomayor’s decision in Honeycutt strictly followed the language of the statute, 21 U.S.C. § 853, which mandates forfeiture of “any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of” certain crimes.  The Court concluded that the provisions of the statute limit forfeiture to property the defendant himself actually acquired, not property obtained by other conspirators.  The Court held that the plain text of the statute and the limitation of forfeiture to property acquired or used by the defendant “foreclose joint and several liability for co-conspirators.”

Prosecutors have routinely sought to forfeit all proceeds of health care fraud and other conspiracies from all co-conspirators.  Thus, minor players in a conspiracy with significant assets could find themselves liable for a forfeiture money judgment well in excess of the proceeds they actually received from their crime.  In Honeycutt, the Supreme Court refused to apply the tort concept of joint and several liability to the forfeiture statutes, and has taken a sweeping tool away from the government.