On May 15, 2000, the Supreme Court created a new weapon for federal prosecutors to utilize in their continuing efforts to combat healthcare fraud. In Fischer v. United States, 2000 U.S. Lexis 3136, the Court interpreted the federal bribery statute, 18 U.S.C. Section 666, to apply to improper payments made to entities participating in Medicare, regardless of whether those payments relate in any way to services or items reimbursable by Medicare.
Fischer involved the following facts. Fischer's company received a loan from a municipal hospital authority based on various misrepresentations, and, in addition, paid a kickback to the authority's chief financial officer for arranging the loan. The trial court held that Fischer, who was the president and part owner of the company, violated the federal bribery statute by fraudulently obtaining funds from an organization (the hospital authority) by receiving "benefits" under a federal program in excess of $10,000.
On appeal, Fischer argued that he could not have violated the statute, because the hospital authority was not an organization receiving "benefits" under the Medicare program, a jurisdictional prerequisite to his conviction.
To the contrary, he claimed that the benefits created under Medicare flow to the Medicare beneficiaries, not the Medicare providers. The Supreme Court disagreed, and after a lengthy analysis of hospital reimbursement under Medicare, concluded that "[h]ealth care organizations participating in the Medicare program satisfy this standard", and, thus, are organizations receiving federal benefits subject to the bribery statute.
Impact on the Health Care Industry
Fischer expands the basis on which future federal prosecutions might be brought for healthcare fraud.
The federal bribery statute (18 U.S.C. Section 666), as now interpreted under Fischer, makes criminal (a) the demand or solicitation of anything of value to influence a representative of a healthcare organization participating in Medicare, or
(b) the payment or agreement to pay anything of value to influence a representative of such organization, when the effect of the payment in either case is to influence a transaction or series of transactions with an economic value of $5,000 or more. Penalties for conviction include a fine and imprisonment for up to 10 years.
This statute potentially is broader than either Stark or the anti-kickback statute for at least three reasons:
First, unlike the numerous Stark exceptions or fraud and abuse "safe harbors," Section 666 exempts only two types of payments from the reach of the statute—salary payments or other payments in the "usual course of business."
Second, unlike the Stark statute, which is aimed exclusively at hospital-physician relationships, the Supreme Court's expansion of the statute to "health care organizations participating in Medicare" could wrap in additional types of providers, as well as suppliers, and, potentially, physician practices, as long as the entity receives at least $10,000 in Medicare payments annually.
Third, and unlike the anti-kickback statute's linkage of remuneration to either patient "referrals" or the "purchasing, leasing" etc. of goods and services reimbursable by Medicare and other Federal health care programs, the bribery statute requires only that the payment be designed "to influence or reward" the payee. Put another way, such payment could be designed to influence the payee's behavior in matters completely unrelated to the referral of Medicare patients and still be criminal.
The logic of this approach, as articulated in earlier, non-Medicare cases dealing with Section 666, is that in order to protect the integrity of federal funds, the statute requires that federal program participants ensure that all of their business dealings are above board, even those unrelated to the federal programs in which they participate.
The following example illustrates the breadth of this approach. Suppose a drug manufacturer were to offer improper gratuities to a Medicare participating physician (with $10,000 or more of Part B revenues) in an attempt to influence the physician to prescribe that company's products for non-Medicare patients. Assume further that the value of these prescriptions exceeds $5,000. Although not now reachable under the anti-kickback or Stark statute, that course of conduct, after Fischer, is now within the reach of Section 666.
It remains to be seen whether prosecutors will actively utilize this new weapon, or reserve it only for egregious cases. Alternatively, it is possible they may elect to use it only as a "gap filler" to reach transactions not susceptible to current prosecutions.
In the meantime, health care organizations would be well advised to ensure that future transactions pass muster under this new statute (in addition to the anti-kickback and Stark statute), as well as take steps to include this statute in their list of compliance activities and due diligence examinations.