The Government’s Creative Use of the Travel Act in Healthcare Fraud Prosecutions

Morgan Lewis
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Morgan Lewis

The US government continues its focus on healthcare fraud through criminal actions. It has demonstrated its willingness to pursue physicians and investors alike and to take creative approaches in order to secure convictions. When it comes to alleged healthcare fraud, the government not only focuses on fraud in connection with government payers, but also uses the statutes in its arsenal to target purported fraud against private payers.

One recent example is the conviction of seven people involved in a purported bribery scheme in Dallas. In 2016, the government indicted several hospital executives, surgeons, hospital employees, marketing executives, and an attorney associated with Forest Park Medical Center (FPMC), a physician-owned surgical center. The government alleged that these individuals were involved in a bribery scheme through which FPMC would cater to high-paying privately insured or self-funded patients as “out of network” patients, but would transfer beneficiaries of lower-paying Federal Health Care Programs to other hospitals for a cost. The government secured 10 guilty pleas and, after trial, secured the conviction of seven defendants.

Although some of the claims related to beneficiaries of TRICARE and patients covered under the Federal Employee Compensation Act (FECA), most of the indictment focused on conduct related to private insurance plans. The defendants would ensure that beneficiaries of private insurance companies would select FPMC, in part by waiving co-pay requirements. As a result, patients were guaranteed that their own payments would be no greater than at an “in network” facility, but defendants billed the insurance companies at “out of network” costs. For patients using lower-paying insurance programs like Medicare and Medicaid, some of the co-conspirators referred those patients to other facilities in exchange for cash.

Pursuant to 18 USC § 1347, the federal government can prosecute anyone who obtains money or property from a healthcare benefit program, including private insurance programs, by false or fraudulent pretenses. However, this statute is typically used when insurance companies are defrauded because services are either not rendered or are substandard. In this case, the government used the Travel Act, 18 USC § 1952, as the primary vehicle for prosecution. In relevant part for these purposes, the Travel Act prohibits a person from traveling in interstate commerce with the intent to distribute the proceeds of an “unlawful activity” or to “otherwise promote, manage, establish or carry on . . . any unlawful activity.” “Unlawful activity” is defined to include bribery as defined by the law in the state in which the activity is conducted. At least 36 states currently have some form of anti-kickback or bribery statute. As a result, the federal government is able to rely on each of those states’ anti-kickback or bribery laws to drive a prosecution. Some of these state anti-kickback laws, unlike the federal anti-kickback statute, are directed toward all commercial activity, regardless of whether the payer is public or private.

The FPMC case is not the first time the government has pursued such a path, and it likely will not be the last. Therefore, when considering any avenue of marketing in connection with healthcare, regardless of whether a Federal Health Care Program may be involved in payment, it is important to consider not only the relevant federal laws, but also the state laws that may be used as a basis for federal criminal conviction, with a particular emphasis on the state where the healthcare practice is providing services.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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