A federal judge recently exposed weaknesses in the U.S. Department of Justice's (DOJ) criminal healthcare fraud enforcement efforts by vacating a jury's conviction of a prominent Maryland doctor.

On Aug. 4, 2023, a federal jury in Maryland convicted physician Ron Elfenbein on five counts of healthcare fraud for submitting alleged false and fraudulent claims to Medicare and other insurers for patients who received COVID-19 tests at sites he operated. In a lengthy ruling, Chief Judge James K. Bredar of the U.S. District Court for the District of Maryland held that the government did not satisfy its burden of proof to convict and vacated the doctor's conviction. The DOJ alleged that the defendant executed a scheme to defraud by "upcoding" or billing for a higher level of service when some lower level of service was actually provided. As the district court explained, the conviction depended on whether billing COVID-19 testing visits as level 4 visits complied with the 2021 CPT Manual and other guidance in effect at the time. In light of the ambiguous nature of the CPT Manual and COVID-19 Coding Guidance, the court held that the government did not present sufficient evidence for a reasonable jury to conclude beyond a reasonable doubt that billing these visits as level 4 visits was false.

The decision deals a blow to the DOJ's efforts to hold healthcare providers criminally liable for alleged false and fraudulent billing practices. Moving forward, the government may think twice before relying on a "common-sense reading" of complex and ambiguous medical coding guidance to prosecute fraud. Instead, civil enforcement under the False Claims Act (FCA), which holds the government to a lower evidentiary burden, may be more likely. Notably, however, civil enforcement under the FCA is also hindered by similar precedent relating to vague or ambiguous underlying guidance and regulations.

Background

Healthcare providers use CPT codes to submit reimbursement claims to insurers. Evaluation and management (E/M) services are billed using codes designed to reflect the complexity of a visit, ranging from level 1 (least complex) to level 5 (most complex). In this case, U.S. v. Elfenbein, the defendant was the medical director of urgent care centers that submitted thousands of claims to insurers for patient encounters involving COVID-19 testing. The majority of these claims were billed at level 4 at the direction of the defendant. The government alleged that these patient encounters did not qualify as level 4 visits and thus the defendant improperly engaged in "upcoding" that resulted in the submission of false and fraudulent claims to federal healthcare programs in violation of 18 U.S.C. § 1347.

To convict Elfenbein of criminal fraud, the government was required to prove beyond a reasonable doubt that the level 4 coding was objectively unreasonable and therefore false – separate and apart from the defendant's intent. This differs from the standard used in civil FCA cases. The Supreme Court recently ruled in U.S. ex rel. Schutte v. SuperValu Inc. that in terms of the FCA, a defendant's own subjective belief is relevant to intent and not what an "objectively reasonable" person may have concluded. (Additional details are provided in a previous Holland & Knight alert, "U.S. Supreme Court Unanimously Rules on False Claims Act Subjective vs. Objective Standard" June 2, 2023.) The district court acknowledged the distinction, noting that "proof of the Defendant's subjective intent cannot stand in for proof of falsity." As the court summarized, satisfying the burden of proof in this case requires "proving beyond a reasonable doubt both the Defendant's specific intent to defraud and the existence of a scheme to obtain money by means of materially false or fraudulent pretenses."

Ultimately, the court determined that the government did not meet this burden, finding instead that the evidence was insufficient to establish, beyond a reasonable doubt, that the level 4 codes used to describe the encounters that served as the basis for the indictment were false or fraudulent. As a preliminary matter, the court found that the CPT Manual and COVID-19 Coding Guidance were ambiguous as to the appropriate CPT code for the patient encounters at issue. Thus, the question presented became "where the guidance is ambiguous, what does it mean for a statement to be 'false' or 'fraudulent' beyond a reasonable doubt?” The government argued whether the level 4 billing was false should be dictated by common sense. The court disagreed, finding the case was not simply about common sense but "a complex set of rules—and the extent to which the Defendant complied with those rules." Within the framework of complex and ambiguous guidance, the court concluded that the jury did not have sufficient evidence to determine that the level 4 billing was objectively false as required to convict the defendant. "Citizens, including healthcare providers, cannot be held to criminal account for doing only what a technical regulation is reasonably read to permit, even if to do so would seem to benefit them excessively."

Conclusion

This decision is likely to give the DOJ pause before pursuing similar criminal fraud prosecutions against healthcare providers that rely on ambiguous regulations and coding guidance. Because the subjective standard under the FCA is a lower bar, the DOJ may increasingly opt for civil enforcement. However, actions under the FCA are subject to similar defenses. Therefore, even if the government pivots away from criminal prosecution in cases such as this one, it may encounter similar issues in the civil context.