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‘Too big to fail’ poses compelling questions in today’s health care environment
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Physicians understandably worry about allegations of medical malpractice and subsequent liability for such. For most lawyers, the prosecution of civil torts, such as medical malpractice, is a relatively straightforward matter. In contrast, criminal law, or more specifically, crime and punishment are much more complex from a legal and philosophical view. Whether reading Dostoevsky or Professor George P. Fletcher’s “Rethinking Criminal Law,” the issue of what constitutes criminal conduct is often bewildering and can challenge even the sharpest mind.
The understanding of criminal law can be yet more complicated when our federal government attempts to criminalize business conduct that, at first glance, seems (pardon the pun) business as usual. For example, should price-fixing be a crime? Are the anti-trust laws obsolete? Which profit-based decisions are legitimate business enterprises? More pointedly, after the debates of the last presidential election, does the egregious pursuit of corporate profits invoke at least some wrongful conduct? Defining criminal business behavior has often eluded our country’s most astute legal scholars and thinkers.
Criminalizing business behavior in the health care industry is more difficult to define and understand. For example, when does a financial incentive become an illegal kickback? Why are drug companies and device manufacturers considered criminals when they entertain their doctor clients, while other corporations routinely do so without any criminal consequences? Are business dealings with industry that are financially rewarding for gifted physicians necessarily criminal?
A particularly complex and controversial area of health care criminal law is the prosecution of those who commit Medicare fraud. This is especially true in cases that involve billing the government for services premised upon medical necessity. One would think that the easiest health care crime to identify would be billing for services not provided or deliberately overbilling patients; but this is not always the case, as the follow example illustrates.
WakeMed case
A recent federal indictment illustrates that health care criminal law, as it relates to Medicare fraud, may be fraught with confusing, competing and inequitable standards. This new twist of uncertainty and complexity of federal health care business prosecutions emerged in the recent case of WakeMed Health and Hospitals, a large corporation based in Raleigh, N.C. A federal investigation was launched in 2007 when auditors found that WakeMed had the highest level in the state of “0-stay days,” when the hospital billed for expensive overnight stays for patients who were treated and discharged the same day, in WakeMed’s profitable cardiac center. WakeMed was found to have engaged in overbilling cardiac patients, many of whom were Medicare beneficiaries. The federal government entered into an agreement with WakeMed that provided for deferred prosecution, compliance monitoring, a fine and the ultimate dismissal of the case. WakeMed agreed that the statement of facts set forth by the federal government in its allegations was true, and that the wrongdoing that it was accused of did, in fact, occur.
B. Sonny Bal
While it has been routine for federal district court judges to ratify prosecutorial agreements, the federal judge in this case, Justice Terrence Boyle (U.S. District Court judge for the Eastern District of North Carolina) was reluctant to ratify this particular settlement. Justice Boyle stated his concerns about the potential unfairness of allowing the institutional misconduct to go unpunished insofar as the prosecution focused solely on middle managers as the blameworthy or culpable defendants, rather than the hospital executives or governing board. He also expressed serious concerns about the failure to have provisions for restitution and the settlement’s failure to send a message to other providers that would deter similar future misconduct.
Federal sentencing guidelines
To understand Justice Boyle’s concerns, it is worthwhile to understand the criteria for imposing federal sentences. These criteria are captured in federal statute 18 U.S.C. § 3553(a) and are designed, in part, to ensure impartiality in punishing criminal conduct. While not explicitly stating all of his concerns, Judge Boyle may have been concerned that the deferred prosecution with dismissal for crimes well in excess of $8 million violated the four essential criteria (known as “3553(a) Factors”) that are used to determine the length of incarceration. These factors, to be considered by federal judges during sentencing for crimes similar to those committed by WakeMed are:
- the nature and circumstances of the offense;
- the need to protect the public, deter future conduct, rehabilitate the defendant, and promote respect for the law;
- the need to provide restitution; and
- the need for consistency among sentences imposed for similar crimes.
Ultimately, Judge Boyle overcame his reluctance and ratified the agreement. He stated as part of his rationale that patients in Raleigh would lose their Medicare providers if WakeMed was convicted of a felony because the facility would lose its Medicare eligibility (as well as its Medicaid eligibility). This, in turn, would lead to WakeMed closing its facilities. Judge Boyle also stated his concern that such a closure would cause massive job losses. WakeMed employs approximately 8,000 people in its service area.
Ultimately, it appears that Judge Boyle’s reasoning was consistent with the Justice Department’s choosing deferred prosecution and dismissal over conviction and incarceration. It may be that the Justice Department’s actions constituted favorable treatment for WakeMed because of what is now commonly referred to as, “too big to fail.”
‘Too big to fail’ doctrine
The issue of “too big to fail” has produced heated debate in a non-criminal context, notably during the recent recession. When the federal government considered whether to hand over monetary bail-outs to failing large corporations, there were those who argued that in a free market, the government should not interfere to prevent the demise of failed institutions solely because institutional failure might result in economic catastrophe. On the other hand, there were those who, while finding the support of banks and other large institutions distasteful, felt that economic support had to be provided to avoid inflicting mass economic pain on most Americans (and quite possibly the rest of the world). Whether “too big to fail” within the context of a non-criminal, free-market setting is a good thing remains controversial.
Lawrence H. Brenner
What is unique about the WakeMed case is that it raises “too big to fail” within the context of criminal conduct. This case raises the question of whether we can (or should) discriminate among those who commit criminal acts, treating one group less harshly than another, simply because they are “too big to fail?”
Aftermath of WakeMed
The WakeMed prosecution agreement raises difficult questions that illustrate the tensions and ambiguity in understanding criminal law and its attendant penalties. Is there a place in the criminal justice system to treat defendants differently solely because the conviction of some defendants will result in adverse consequences to a large community of people? As a policy matter, can the Justice Department suspend the prohibition on Medicare/Medicaid eligibility for health care institutional criminals because that prohibition protects the economic stability or the access to health care available to a large number of people? These questions are compelling in today’s health care delivery environment where the health care industry is rapidly consolidating.
Consolidation has been driven by economic factors such as purchasing and bargaining leverage. If the Justice Department treats large health care organizations differently and less harshly because they are “too big to fail,” will that not become another incentive for consolidation? What do you say to the individual practitioner who is prosecuted for Medicare fraud on a much smaller scale than WakeMed who loses his medical license and is incarcerated for years? Is it equitable to treat the individual practitioner differently than the large corporation? In a democracy, is not it mandatory that we treat all of our citizens equally when it comes to the criminal justice system, no matter the consequences to society in general?
Health care fraud
While health care fraud prosecutions must be vigorous, they also need to be fair, just and equitable. The goals of these prosecutions cannot be achieved when the Justice Department creates different standards among defendants. In a narrow context, the WakeMed case can be understood as an attempt to preserve the heath and employment of those people who would be affected by the loss of Medicare/Medicaid funding to Wake Medical Center and its affiliated institutions. In the broader sense; however, the greater societal harm may be in the implied immunity, which is granted to large health care organizations under the “too big to fail” principle.
If we permit large organizations to avoid the harsh consequences of their illegal activity then the results of their actions could lead to Medicare/Medicaid losses so great that the entire system that supports the health of seniors and the poor collapses. In the final analysis, in our democracy, the image of the Lady of Justice is blindfolded. She does not distinguish between the rich and the poor, or between large corporations and individual practitioners. She demands that in our system of justice, all defendants be treated equally and fairly. Sadly, in the WakeMed case, the Justice Department may have removed her blindfold and undermined the principles that make our justice system the cornerstone of our democracy.
What do you think?
- Is there a place for “too big to fail” in our criminal justice system?
- Will “too big to fail” lead to the targeting of individual practitioners whose prosecution and incarceration pose no threat to the economy?
- Should we create an oversight commission to provide monitor all Justice Department health care fraud prosecutions (or lack thereof)?
Discuss with your colleagues at www.OrthoMind.com.