Sixth Circuit reversed a decision by the trial court to set aside guilty verdicts for health care fraud and making false statements of a federal jury. Opinion.

Dr. Paulus was a successful Kentucky cardiologist and the first in the nation for the total amount billed to Medicare for angiograms.

Government prosecuted Dr. Paulus alleging that he exaggerated the degree of patients’ stenosis or artery blockages and often claimed 70% blockage when in reality there was 40% or lower blockage. If an angiogram shows at least 70% blockage, the accepted standard of medical care allows a doctor to insert a stent with no further testing.

The trial lasted 27 days. The Government presented testimony of nine doctors. The Government’s experts acknowledged that the interpretations of angiograms could vary from one doctor to another.

Regardless, the jury convicted Dr. Paulus of ten counts of false statements and one count of health care fraud and acquitted on five counts of false statements.

The trial court reversed the guilty verdict and ordered a new trial. The trial court found that Dr. Paulus’ interpretations of angiograms – the images that allow doctors to determine whether patient’s artery has become dangerously narrow and in need of a stent – was a “subjective medical opinion, incapable of confirmation or contradiction.”

The Government appealed.

Sixth Circuit sided with the Government and reversed the trial court finding that “a doctor who deliberately inflates the blockage he sees on an angiogram has told a lie; if he does so to bill a more expensive procedure, then he has also committed fraud. Even state-of-the-art scientific measurements may sometimes be imprecise. But in these circumstances, it is up to the jury—not the court—to decide whether the government’s proof is worthy of belief.”

I think the concerns regarding the consequences of this decision are best summarized by the NACDL in its Amicus Brief filed in the case:

Overturning the judgment below would create a precedent allowing the government to obtain criminal convictions against physicians making difficult, highly subjective medical decisions primarily on the basis of the testimony of a single expert with a contrary view. At best, this type of evidence can establish good faith medical error or perhaps negligence, which Congress did not intend tocriminalize and are already appropriately dealt with by other legal means.

NACDL Amicus Brief.


Last week, the California Supreme Court ruled that social media firms like Facebook, Twitter, and Instagram must turn over public posts by users to criminal defendants. This is an important decision that can impact thousands of cases.

For years, social media companies have argued that the Federal Stored Communications Act bars them from sharing electronic communications except in limited cases, such as in response to a search warrant. The social media companies also argued that the defendants had other ways to obtain the information.

The defendants seeking the information were Derrick Hunter and Lee Sullivan. The two men were charged with murder. The information sought was contained on the social media accounts of the state’s star witness and the victim. Hunter and Sullivan argued that their constitutional right to a fair trial entitled them to the information on social media. Hunter and Sullivan explained that there was exculpatory evidence on Instagram, in particular.

The trial judge had found that the defendants’ constitutional rights were at issue and ordered the social media companies to produce the information for the court’s review. The social media companies appealed the ruling and won at the California state appeals court. That ruling prompted defendants to take an appeal to the California Supreme Court.

The California Supreme Court noted that all parties agreed that if a user made a post public, that was consent for it to be shared. However, the court rejected defendants’ view that postings to large groups of friends were public, but also noted that the Federal Stored Communications Act did not permit the social media firms to ignore subpoenas. The state supreme court remanded the case to the trial court to essentially decide what is a public post and what is private. The trial court will also have to decide how to handle posts or tweets that were once public, but later deleted or made private.

Until now, courts have routinely quashed subpoenas to social media firms seeking this type of information. This decision opens the door for criminal defendants, including those fighting health care fraud prosecutions, to mine social media for potentially valuable exculpatory evidence about Government witnesses.

Dr. Jorge Zamora-Quezada was arrested on Monday and charged with leading a $240 million health care fraud and money laundering scheme.  The Indictment charges one count of conspiracy to commit health care fraud, five counts of health care fraud, and one count of conspiracy to commit money laundering.

Dr. Zamora-Quezada is a rheumatology specialist practicing in the South Texas area.  The doctor operates various clinics focused on arthritis and osteoporosis.

The Indictment alleges that Dr. Zamora-Quezada engaged in a wide ranging scheme starting in 2000.  The scheme allegedly involved falsely diagnosing patients with a degenerative diseased and giving patients unneeded treatments.  The Indictment alleges, among other things, that Dr. Zamora-Quezada would falsely diagnosis patients with rheumatoid arthritis and then administer chemotherapy and other toxic medications.  The Indictment also alleges that the doctor and co-conspirators conducted and billed for a battery of fraudulent and repetitive procedures.

The Government claims that Dr. Zamora-Quezada tried to hide his scheme by dismissing patients that questioned his practices and by the creation of fake medical records.

The Government filed a motion seeking pretrial detention.  The motion requested pretrial detention based on Dr. Zamora-Quezada’s access to wealth, his private jet, his ties to Mexico, and his history of intimidating witnesses.  The motion describes the evidence against Dr. Zamora-Quezada, which includes patients that will testify against him and other doctors in the community that will say Dr. Zamora-Quezada was known for his practice of  falsely diagnosing patients.

The detention hearing was held today.  The court granted the Government’s motion for pretrial detention and remanded the doctor to the custody of the U.S. Marshals.  The final pretrial conference in the case is set for July 2, 2018.  The court further noted that it would announce the scheduled trial date soon.

Dr. Zamora-Quezada’s detention complicates trial preparation for the defense.  In health care fraud cases, it is imperative for doctor defendants to assist in reviewing patient records and participating in the creation of a defense.

I am attending the American Bar Association’s 28th Annual National Institute on Health Care Fraud this week.  Yesterday, I had the opportunity to speak on a panel discussing data mining and other health care fraud enforcement trends with a great group of lawyers – AUSA Carolyn Bell, Kevin Napper, and Andrew Feldman.

The topic of data mining is timely because it has been widely reported that the Government is using real time data analytics to identify potential targets of criminal investigations.  The Government is collecting electronic billing information from health care providers across the country and centralizing the information in one location.  OIG has employed data analytics to constantly review and analyze the data to identify any “spikes” or “outliers.”  The Government refers to this information as “reliable” and “unfiltered.”

We discussed the use of data analytics in the Melgen case.  AUSA Bell was one of three prosecutors that worked on the case.  The Melgen case involved the prosecution of a South Florida ophthalmologist for health care fraud.  Dr. Melgen was reported to be on of the highest individual doctor billers for Medicare.  In the trial, the Government used charts that summarized Dr. Melgen’s billing data and compared it to his peers.   The charts showed huge differences in billings and claims submitted by Dr. Melgen as compared to his “peers.”  For instance, one chart showed that Dr. Melgen collected $57,371,547 for one procedure, while the National median collections for other providers for the same procedure was $3,030,041.

The Government introduced the charts as Rule 1006 evidence.  This was heavily disputed through motions in limine.  The defense argued that the charts should come in through a medical statistician under Rule 702. The Court ultimately ruled that “to the extent the government seeks to present comparison data without laying a proper foundation that the data provides a valid basis for comparison. This, however, does not preclude the government from presenting evidence of the percentages of Defendant’s patients that received various treatments and services based on a review of Defendant’s records, and from inquiring of its expert witnesses what types of percentages would they expect to see in their experience. See United States v. Chibber, 741 F.3d 852, 854-58 (7th Cir. 2017).”

Everyone on the panel was in agreement that defense attorneys will need to hire statisticians to assist in the defense of health care fraud prosecutions.  The statistician will need to review the data to identify flaws in the Government’s analysis and in order to explain why anomalies exist.

More importantly, the statistician will need to attack the Government’s “statistically significant sample” of patients.  Because it would be impossible to review all patient records in these data driven health care fraud prosecutions, the Government picks a “statistically significant sample” of patients to review and present to the jury.  The Government will extrapolate and claim that the sample is representative of all of the provider’s patients. The defense needs the statistician to establish that the Government sample is statistically deficient and not representative of all the patients.

Federal and Florida laws require that translators be used where patient do not have language skills need to understand their care. In most circumstances, the translator does not need to be certified. However, Florida Rule of Judicial Administration 2.560 requires the appointment of a certified translator absent exigent circumstances in cases where a fundamental interest is at stake. As such, in a situation where the hospital is contemplating involuntary commitment, a certified translator is required. See Pullen v. State, 802 So. 2d 1113 (Fla. 2001). If the patient is indigent and not represented by the Public Defender, the Hospital will need to incur these expenses for the convenience of the Court.

The Affordable Care Act (“ACA”) has upped the ante. The ACA extends previous mandates and explicitly requires insurers and healthcare institutions to provide written translation and interpreting services for limited English proficiency individuals of qualifying language groups.

The Affordable Care Act mandates that all health insurers and group health plans provide a Summary of Benefits and Coverage (SBC) to all clients and consumers.

The US Government has designed a template for insurance companies to use to disclose benefit and coverage information to maintain consistency across all insurance plans. This template helps people compare insurance plan information.

Probably the biggest impact of the changes that come with the ACA is that minor children, family members, and friends cannot serve as interpreters. Additionally, bilingual staff without formal training as medical interpreters cannot serve as interpreters. Interpreters must be “qualified,” which is defined as:

  • An individual who adheres to interpreter ethics and client confidentiality requirements, and who via a remote interpreting service or in-person appearance and
  • Has demonstrated language proficiency and the ability to interpret effectively, accurately, and impartially including specialized medical terminology.

The truth is that communication is critical to patient care. Slate reported on two examples of life changing consequences as result of poor translation:

  • After staff misunderstood intoxicado (Spanish for “poisoned”) as “drunk,” Florida teen Willie Ramirez received the wrong care and ended up paralyzed.
  • In Oregon, Elidiana Valdez-Lemus died after 911 misinterpreted her address.

Because of the serious consequences of failing to properly communicate with patients, healthcare providers must take note and provide patients with qualified interpreters. The ACA also provides for penalties for failure to follow this mandate, which includes fines, referral to DOJ for legal proceedings, and termination of Federal financial assistance.

Gazelle Craig, a licensed physician, and Shane Faithful, a clinic owner, were charged in a four count indictment.  The Indictment charged four counts – Conspiracy to Unlawfully Distribute and Dispense Controlled Substances and three counts of Unlawfully Distributing and Dispensing Controlled Substances and Aiding and Abetting.  Craig was an employed physician at Gulfton Community Health Center (“Gulfton Clinic”).  Gulfton Clinic was owned and operated by Faithful.  Gulfton Clinic was an unregistered pain clinic, but the Government alleged it was operating as a pain mill.

The government alleged that the scheme involved recruiters that would bring patients to the clinic.  The patients would line up outside the clinic to get prescriptions from Craig.  It was further alleged that Craig would see patients for minutes and in exchange for $300 would prescribe Hydrocodone and Carisoprodol, a muscle relaxer.

At trial, the government introduced surveillance video and video captured by cooperating patient witnesses.  The government also introduced ledgers and practitioner prescribing history data for Craig.

Craig and Faithful were convicted after a nine day trial and Attorney General Jeff Sessions commented on the convictions in a Department of Justice Press Release:

“Our great country is currently in the midst of the deadliest drug crisis in our history,” said Attorney General Sessions. “Sadly, even some trusted medical professionals like doctors, nurses and pharmacists have chosen to violate their oaths and exploit this crisis for cash.  The consequences have been devastating. In this case, tens of thousands of pills flooded our streets because of the defendants’ actions. We will never know for certain the scale of the damage done. We do know that justice has been served, and so I want to thank everyone who helped secure this conviction, including the DEA and Department of Justice Trial Attorneys Scott Armstrong and Devon Helfmeyer. This conviction will not only help stop the diversion of prescription drugs, it will send a message to every would-be fraudster in America.”

Interestingly, the DOJ Press Release did not mention that the conviction came after a hung jury. The initial trial took place a little over thirty days before the second trial.  After multiple notes from the jury that they could not reach a unanimous verdict, the court declared a mistrial and ordered the parties back for a second trial.  The hung trial is an indication that the facts were not as clear cut as presented by the government.

Litigation over release of data in the opioid litigation gives a glimpse at the volumes of information available to the Department of Justice in health care fraud cases.

Judge Dan Aaron Polster of the Northern District of Ohio is presiding over a multidistrict litigation involving more than 400 federal lawsuits brought by cities, counties, and Native American tribes against makers of prescription painkillers, companies that distribute the painkillers, and pharmacy chains that sell the painkillers. Judge Polster was picked to preside over the litigation for several reasons, including that Ohio has been hard hit by the opioid crisis and that Judge Polster has extensive experience with multidistrict litigation.

In that litigation, the local governments suing the drug companies sought extensive documentation kept by the United States Drug Enforcement Administration (“DEA”) regarding data on painkiller sales. Status reports filed by the parties revealed that the DEA was worried the release of the information would reveal trade secrets.  The DEA also wanted to limit the amount of information provided and wanted a broad protective order to shield the information from release to the media.  The DEA finally relented and agreed to provide some information.

The New York Times has been covering the story, including outlining what data will be released.  A portion of the NYT article and a link to read more is below.


CLEVELAND — The U.S. Department of Justice has shared some federal data about prescription painkiller sales to help with settlement talks between local governments and drug companies targeted in hundreds of lawsuits over the opioid epidemic.

The department previously agreed to release certain data on the grounds it not be circulated publicly and be returned or destroyed when the litigation is finished. The information includes a year-by-year, state-by-state breakdown of companies that made and distributed most of the opioids in each state between 2006 and 2014. It also includes how many pills were sold annually in each state and each drug company’s market share.

DOJ Will Share Rx Painkiller Data For Opioid Lawsuit Talks – WOUB Digital

Interestingly, it seems that the DEA can track sales of opioids to the smallest detail, including state sold, year sold, and even manufacturer.  The DEA’s concerns regarding the trade secret nature of its data gives insight into the value of this information to the Government. In fact, data mining is steering prosecutions, but this data is not only valuable to the Government.  Defense attorneys may find value in this same data when defending health care fraud prosecutions.  Defense attorneys are well served demanding that the Government turn over all documents reflecting data mining resulting in the prosecution of the defendant, including cost reports.

Last week, I attended the American Bar Association National Institute on White Collar Crime in San Diego. I had the opportunity to speak on a panel with a great group of lawyers, which included Laura B. Angelini, Laura G. Hoey, Joseph G. Petrosinelli, and Gregg Shapiro.

The panel discussed the Government’s recent focus on donations by pharmaceutical companies to charity organizations that subsidize copays on expensive drugs. These charity programs are referred to as Patient Assistance Programs (“PAP”). The Department of Justice, led by a team of prosecutors, primarily out of the U.S. Attorney’s Office in Boston, is investigating whether these donations violate the AKS.

It has been widely reported that more than a dozen companies have received subpoenas, the charity organizations are wondering whether they will need to shut down, and patients are growing concerned about their access to these drugs.

Even though the OIG issued guidance in 2005 on how to structure these PAPs to avoid any issue with the Anti-Kickback Statute, today, the Government seems concerned that the charitable organizations are merely a conduit of the pharmaceutical companies to funnel money to patients. It seems the Government is also concerned that the pharmaceutical companies are simply trying to push their own products.

The panel surmised that the Government is most concerned with PAPs that are sharing extensive data with the pharmaceutical company donors, with PAPs that are asking companies to donate a certain amount, situations where the PAPs are working on behalf of donors, and situations where assistance is only provided for donor drugs and not all drugs.

The panel also discussed how the government versus everyone else views co-pays. It appears that the Government views co-pays as a way to give consumers a cost-effective option. The insurance industry uses co-pays for cost sharing among insurance providers.

Defense attorneys on the panel noted that it will be very difficult for the Government to establish “inducement” as required by the AKS because the pharmaceutical company never touched the patient.

While the panel could not agree on how to resolve the problem of access to drugs for patients without a violation of the AKS, some best practices were discussed, which included: (1) pharmaceutical company should wall off the charity from the rest of the company and definitely no one from the commercial team should be involved; (2) budget donations; (3) know what the pharmaceutical company is getting from the charitable organizations; and (4) get a legal opinion.


The U.S. Attorney’s Office in Eastern District of New York has unsealed an indictment and arrested three New York diagnostic testing facility owners in alleged multi-million dollar health care fraud scheme. The Indictment alleges a kickback scheme and an unnecessary services scheme. The Department of Justice press release states:


According to the indictment, beginning in approximately January 2014 and continuing through at least December 2016, Kaganovich, Mitaishvili and Iskanderova executed a scheme in which they submitted fraudulent claims to Medicare, Medicaid managed care plans and other health care benefit programs for diagnostic testing services.  As part of the scheme, the defendants allegedly paid kickbacks for the referral of beneficiaries who submitted themselves to diagnostic testing and other purported medical services.  The indictment also alleges that the beneficiaries themselves received kickbacks as part of the scheme.  The defendants allegedly submitted and caused to be submitted claims to Medicare, Medicaid managed care plans and other health care benefit programs for services that misrepresented which diagnostic testing company purportedly performed the services.  The indictment further alleges that the defendants disguised their illicit payments by moving the proceeds of this illegal activity through shell companies and engaged in financial transactions greater than $10,000 involving the proceeds of unlawful activity.  Kaganovich and Mitaishviliare are alleged to have falsely reported to the IRS that the illegal payments made to co-conspirators were legitimate business expenses, which caused relevant tax forms to falsely under-report business income and claim deductions.  In addition, the indictment alleges that Iskanderova, on two separate occasions, lied to federal agents about her role in the alleged fraud scheme. Here is the entire story. DOJ Press Release.


Given this prosecution, it seems like the Government’s interest in prosecuting diagnostic companies has not waned.

Experts are key in defending the recent wave of prosecutions alleging the fraudulent provision of medically unnecessary services. However, the defense must first survive the Daubert challenge.

Dr. Rajashakher P. Reddy was able to convince the Eleventh Circuit that his defense expert survived Daubert.

Dr. Reddy was named in a thirty-seven count Indictment alleging wire fraud, mail fraud, health care fraud, and falsifying records in a federal investigation. Dr. Reddy was a licensed and board-certified radiologist and the owner of Reddy Solutions, Inc. (“RSI”). RSI was a teleradiology business in Atlanta, Georgia. The charges stem from Dr. Reddy’s operation of RSI.

The Indictment alleged that Dr. Reddy perpetuated an eighteen-month health care fraud scheme, whereby Dr. Reddy fraudulently signed and submitted radiology reports electronically and through the U.S. Mail for “tens of thousands of patients … in cases where neither he nor any other RSI physician had ever reviewed or analyzed the film.”

The jury convicted Dr. Reddy of all offenses, except for five wire fraud counts. Dr. Reddy appealed arguing that the trial court committed reversible error by excluding the proposed defense expert testimony of Dr. Benjamin Sacks pursuant to Daubert.

The defense theory at trial was that Dr. Reddy performed the services as represented, but that remote access and other indicia that he did the work were not adequately reflected by RSI systems and records. Dr. Reddy’s proposed expert, Dr. Benjamin Sacks, was to provide testimony summarizing his “peer review” of a sampling of images which Dr. Reddy had purportedly examined and diagnosed. Dr. Sacks’s substantive findings were that Dr. Reddy’s work as a radiologist was “spot on” and Dr. Sacks concurred with Dr. Reddy’s conclusions in 1053 out of the original 1060 reports reviewed.

The Government moved to exclude the testimony of Dr. Sacks based upon its claim that the entire peer review study was unreliable for various reasons, and that the testimony would not assist the jury. The district court agreed that the proposed peer review testimony failed all three aspects of the Daubert analysis.

The Eleventh Circuit determined that the exclusion of the defense expert was an abuse of discretion and vacated Dr. Reddy’s convictions and remanded for further proceedings on the issue. Particularly, the court found that Dr. Reddy’s defense was that he “did the work”. The court further found that the purpose of the peer review performed by Dr. Sacks was to give the jury some sense of the accuracy of the work that was being generated by Dr. Reddy as indicative of the actual attention he must have paid to the images on which he reported. The court stated that the jury could infer from Dr. Sacks’s peer review and attendant results that a radiologist and not a lesser trained staff member had undertaken a review of the image. The court agreed that this was a “powerful defense evidence.”

The Eleventh Circuit appeared impressed that the defense expert had hired a statistical expert to identify how to conduct the peer review. Additionally, the statistical expert had suggested that Dr. Sacks review a minimum of 287 images to achieve a greater level of confidence with the peer review. Dr. Sacks exceeded this number in reviewing 1060 images. The court also noted that Dr. Sacks had the proper credentials. He was a graduate of Cornell University, obtained his medical degree from UCLA, had completed a four-year residency in diagnostic radiology at Emory University, and was board-certified.

The takeaways from this case are:

  • Pick an expert with solid credentials and highlight these at the hearing;
  • Confirm all the information in your expert’s CV before the hearing;
  • Conduct a thorough review of all authoritative literature;
  • Ensure your expert has done more than the minimum in reaching his opinion;
  • Illustrate the reliability of your expert’s testimony; and
  • Ensure the review or analysis is independent.