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Unexpected Prosecution with Unexpected Convictions – Could the Texas “Forest Park” Convictions Happen to Doctors in Arizona?

On April 11, 2019, in a federal court, a Dallas jury returned verdicts of guilty against seven of the defendants in the criminal case styled “United States v. Beauchamp” [i] and commonly known as “Forest Park.” Of the original twenty-one defendants:  seven were convicted after a jury trial. Ten (including Dr. Beauchamp) pled guilty, one was tried separately, one was acquitted, for one defendant the jury deadlocked, and I have found no information on the last defendant. One of the convicted doctors, Michael Rimlawi, M.D., is asking for a new trial on the basis that the law under which he was convicted is so vague that it is unconstitutional. Those convicted include four physicians.

The Verdict

The guilty verdicts were for bribery and both paying and accepting kickbacks. In essence, the government charged that:

(a) If a federal healthcare program had been billed for the health services involved, the defendants were guilty of violating or conspiring to violate the Anti-Kickback Statute, a federal criminal law.

(b) If a federal healthcare program had not been billed (that is, if the billing for services was made to an ordinary employee healthcare plan or a commercial insurance plan), then 

    • the defendants were guilty of violating a Texas law that makes it a state crime to accept anything of value in return for making a referral for any medical services, and
    • that violation of the Texas law itself violated a federal statute (the “Travel Act” [ii]) that makes it a federal crime to use the “instrumentalities” of international or interstate commerce—meaning the telephone, internet, mail, or car, boat, or air travel across international or state lines—to commit the crimes of “extortion, bribery, or arson” under any state or federal law.

The crimes identified in quotes above are listed among several other crimes in the Travel Act such as trafficking in narcotics or engaging in gambling or prostitution. The Travel Act is entitled “Interstate and foreign travel or transportation in aid of racketeering enterprises,” and to the best knowledge of this author has never before been used in connection with medical referrals.

The passage of the Affordable Care Act added two subsections to the Anti-Kickback Statute [iii] which have had the effect of lessening the burden on the Government to prove that (a) the defendant had sufficient criminal intent to be convicted of a felony and (b) a violation of the Anti-Kickback Statute also produced a violation of the False Claims Act. Consequently, convictions under the Anti-Kickback Statute are now much easier to win, have become much more common, and carry much more severe penalties. Accordingly, it is no surprise that a physician might be convicted for violation of the Anti-Kickback Statute if:

(a) he or she accepted money or anything else of value in exchange for referring a patient

(b) for procedures billed to Medicare or some other federal healthcare program, and

(c) his or her referral did not fit within at least one of the “Safe Harbors” to the Anti-Kickback Statute provided either in that Statute or by regulation.

What has shocked the healthcare legal, medical, and business communities was the government’s use of a Texas anti-kickback statute to trigger violation of a federal statute – the Travel Act – with the result that it now appears to be a federal crime to use “instrumentalities” of interstate or foreign commerce in order to violate this Texas anti-kickback statute.

Unlike the federal Anti-Kickback Statute, the Texas anti-kickback statute

(a) covers procedures billed to employee benefit plans and commercial insurance plans and

(b) has no safe harbors. Further, it was argued in the Forest Park case, and not contested by the Government, that Texas has never enforced this state anti-kickback statute.

Many thousands of healthcare businesses have been told by counsel that the federal Stark Laws and the Anti-Kickback Statute do not apply unless a federal health care program is being billed for the referred services. Possibly an equal number in Texas have been advised that the Texas anti-kickback statute is never enforced [iv]. But under the trial court ruling in Forest Park a referral that would be permitted under the federal Anti-Kickback Statute – either as outside the scope of that Statute because there was no billing to a federal healthcare plan or because the referral was within a safe harbor – could still be a criminal violation of the Travel Act [v]  if the payment for the referral violates the Texas anti-kickback statute or the equivalent law of another state.

What does all this mean for healthcare businesses operating in Arizona?

In the Forest Park case, for procedures not billed to federal healthcare programs, the trigger for the government’s criminal charge was violation of the Texas anti-kickback statute, which the Government successfully argued was a bribery statute within the scope of that term as used in the Travel Act. Arizona does not have any similar statute. Instead, Arizona has a “commercial bribery statute” [vi] prohibiting payments to any employee in order to influence any contract undertaken by his/her employer and a separate statute [vii] prohibiting kickbacks in billings to either AHCCCS or an Arizona state or county hospital. Neither of these statutes, which Arizona does enforce, can serve as a basis for a “Forest Grove” conviction.

However, before Arizona healthcare businesses heave a sigh of relief and go back to business as usual, consider this: the Forest Park case shows a level of effort and ingenuity not often shown by federal prosecutors and was directed against otherwise reputable doctors in the absence of any claim in the indictment that unnecessary medical procedures were being performed. Also, the payment mechanisms used to get money from Forest Park to its referring physicians were not obviously bribes or even kickbacks; rather, they were payments under co-marketing agreements and “on call” service arrangements that a jury could have considered, although this jury did not, to be fair market payments for services rendered. A lesson here, I think, is that payments under such agreements must have a legitimate business purpose and a realistic—and provable—determination of fair market value payment for services rendered.

Caution should be exercised. Have experienced legal counsel check any medical co-marketing contracts or service contracts that involve any payments (or provision of anything of value) to referral sources. Theoretically, the Travel Act could be used to convert any violation of any state law that is construed as prohibiting bribery in any form into a federal crime when the “instrumentalities” of interstate or foreign commerce are used.

It’s a hard time for providers in the healthcare industry. Let’s be careful out there.

[i]  United States v. Beauchamp, Criminal No. 3:16-CR-516-D (1) (N.D. Tex. Apr. 4, 2017). Jury findings are taken from a press release by the Northern District of Texas U.S. Attorney’s Office (Apr. 10, 2019)
[ii]   18 U.S.C. § 1952
[iii]  (42 U.S.C. §§ 1320(a)-7(g) and (h))
[iv]  I have had discussions on that point with a Texas lawyer who allowed that the situation was “odd” but asserted the Texas anti-kickback statute was no cause for concern for anyone doing business in Texas because the state never authorized any funds to enforce this statute and it was “understood” that it would not be enforced.
[v]   If instrumentalities of interstate or international commerce were involved.
[vi]   A.R.S. 13-2605
[vii]  A.R.S. 13-3713

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