Commentary: On Government Regulation - Medicaid fraud and errant

This is a tale of how bureaucracy gets jabbed into enforcement efforts and how that enforcement can run amok.

On July 16, the Congressional investigatory/audit arm, the General Accounting Office issued a report (GAO-04-707) stating, among other things, that various forms of fraud and abuse have resulted in substantial financial losses to states and the federal governments in the Medicaid program.

The Medicaid program

Medicaid is a program jointly funded by the federal government and the states. Approximately 51 million low-income persons receive health care coverage under Medicaid. Medicaid is administered by the states, with oversight provided by the Centers for Medicare and Medicaid Services (CMS) in the federal Department of Health and Human Services.

The Daily Record, on July 28, reported that $305 billion per year is spent on Medicaid, with the Maryland price tag approaching $5 billion per year, which averages out to $1,000 in taxes for every person in Maryland.

Any program generating such costs deserves and receives scrutiny. Maryland Medicaid surely gets that. Recent examples include a May 2 report in the (Baltimore) Sun that ineligible foreigners cost Medicaid up to $12 million annually. On Aug. 19, the Sun reported that a state government source said the Maryland Attorney General's Office has initiated an investigation of possible Medicaid fraud by certain group homes which Maryland's top health official, Nelson J. Sabatini, had moved to shut down.

Bogus claims itemized

Nationally, the Associated Press reported on Aug. 18 that the GAO detailed several schemes uncovered by state and federal prosecutors. Among the examples were two California schemes; one where laboratories billed more than $20 million for unordered tests, and the other, where over a six-year period, nearly 60,000 eyeglasses were fraudulently billed.

These horrors, naturally, caused demands for better enforcement.

On Aug. 30, just a month and a half after the GAO report was made public, CMS announced expanded efforts to root out fraud, abuse and improper payments.

This month-and-a-half history teaches that governmental agencies respond to GAO audits and adverse publicity. The response, however, was not universally applauded.

For example, a Washington health care defense lawyer commented, as reported in Modern Healthcare on Aug. 30, that the history of the CMS program integrity efforts is a broad sweep which ensnares the innocent as well as the guilty in a costly process to prove innocence. Indeed, the high cost of defending against Medicaid investigations results in a lot of settlements.

But civil settlements are not the only effect of such investigations.

A federal case

Indeed, in the midst of the month and a half between the GAO report and the CMS response, the 8th U.S. Circuit Court of Appeals, on Aug. 11, in U.S. v. Czichray, 378 F.3d 822, overturned a district court's suppression of a chiropractor's written statement taken by FBI agents in a fact situation that surely raised eyebrows, and sparked a strong dissenting opinion.

Dr. Czichray was charged in a 27-count indictment with various crimes relating to an alleged health care billing fraud scheme. In dissent, Judge Arnold addressed how the chiropractor was confronted:

In granting the motion to suppress, the district court made the numerous findings of fact, none of which is clearly erroneous. [Two FBI agents] called Dr. Czichray's home at 4:30 one morning, and when he answered they pretended that they had reached the wrong number. Two hours later, they knocked on his door or rang his doorbell. When Dr. Czichray did not answer, the agents telephoned him and instructed him to open the door. He did so, wearing only a t-shirt and boxer shorts, and the agents informed Dr. Czichray that they wanted to talk to him for a few minutes. After Dr. Czichray let them come into his home, the agent's few minutes turned into nearly seven hours.

During this time, the agents told Dr. Czichray about their investigation into health care fraud and their belief that he was involved. When Dr. Czichray told the agents that he was late for work, they instructed him to call in sick, and when he spoke with his office, the agents further instructed him not to inform his co- workers that the FBI was interviewing him. Dr. Czichray's home and cell phones rang several times during the interview, but the agents admonished him to not answer the calls. When Dr. Czichray wanted to get dressed, Agent Boylan escorted him to the bedroom and did a quick search to ensure that there was no telephone in the room that Dr. Czichray might use to alert others about the FBI's interview. When Dr. Czichray needed to use the bathroom, a similar check was performed.

While the agents informed Dr. Czichray that he was free to end the interview at any time, they also told him if he did not cooperate they would light up his world and tell insurance companies to stop making legitimate payments to his chiropractic practice. After nearly seven hours, one of the agents wrote out a statement outlining what Dr. Czichray had said during the interview, which included an assertion that Dr. Czichray had not been threatened, coerced, or promised ... anything. Dr. Czichray signed the statement but was never informed of his Miranda rights.

In the sharp quillets of the law, the issue before the 8th Circuit was whether the statement could be suppressed under the venerable Miranda rule, which requires law enforcement officers to give Miranda warnings only when a suspect is interrogated in a so-called custodial setting. See, e.g., Oregon v. Elstad, 470 U.S. 298, 309 (1985).

A regrettable ruling

The majority in Czichray found that, because the FBI agents had said the doctor could leave, he was not in custody. Given the other facts of the interrogation, this conclusion is, frankly, laughable, and, surely, regrettable.

Future enforcement efforts, it may be hoped, will proceed in less intimidating fashion.

M. Albert Figinski is a partner and member of the White-Collar Defense Group in the Baltimore office of Saul Ewing LLP, and a former Baltimore City circuit judge.

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