General Practice, Solo & Small Firm DivisionMagazine

Volume 17, Number 2
March 2000




This article focuses on the current fraud and abuse climate and the possible dangers of lawyer indictment for federal criminal penalties for counseling clients on fraud and abuse issues. In particular, it describes the increasing federal presence on the health care fraud and abuse front, addresses the indictment of two Kansas City, Missouri, lawyers (which may put to rest any doubts about the severity of federal fraud and abuse enforcement), and closes with a discussion about ways lawyers in health care law can limit their personal liability when counseling clients on health care fraud and abuse.

Health Care Fraud and Abuse Today. The three basic health care fraud and abuse laws are the federal Anti-Kickback Statute, the Stark Anti-Referral Law, and the federal False Claims Act. Under these laws, creative accounting or even innocent billing errors can result in massive penalties to a health care provider. Due to broad wording of the anti-kickback and Stark laws, agreements or transactions that in any way involve referral of patients among health care providers can raise potential anti-kickback or anti-referral issues.

Indeed, fraud and abuse enforcement against health care providers in the United States has been a resounding success. Because health care fraud and abuse may be the "crime of the 90s," more and more health care institutions agree that every health care provider needs a health lawyer to conduct everyday business. Lawyers should be aware that the next step towards health law fraud and abuse enforcement might be against lawyers counseling their health care clients.

The Kansas City Attorney Indictments for Health Care Fraud. The fraud and abuse enforcement dragnet includes recent developments in health law designed to increase the breadth of criminal and civil penalties. For example, the False Claims Act was recently ruled to encompass anti-kickback and anti-referral acts, opening the door to broader enforcement powers for the federal government.

But for health care attorneys, perhaps the most significant development in health care fraud and abuse law has been the Kansas City criminal indictment of two health law attorneys in the case of U.S. v. Anderson. In Anderson, a grand jury returned an indictment against seven defendants, including Kansas City, Missouri, health care attorneys Ruth Lehr and Mark Thompson. Other defendants named in the indictment included executives of Baptist Medical Center (BMC) in Kansas City, and two osteopathic physician brothers, Robert C. LaHue and Ronald H. LaHue, who owned the now-defunct physician practice Blue Valley Medical Group (BVMG).

The indictment covered a time period from 1984 to 1995 wherein BVMG created "sham consulting agreements" with the BMC hospital with the legal counseling of lawyers Lehr and Thompson. The indictment alleged that the LaHue brothers received kickbacks from various hospitals under the sham agreements in return for referrals of their nursing home patients to the hospitals. The sham agreements allegedly intentionally omitted language that the LaHue brothers would refer their geriatric patients from several area nursing homes to the hospital, "making it appear that [the hospital] paid the defendants for performing certain specified services" when the services were not actually performed for the hospital.

The indictment claimed the lawyers who created the sham agreements violated the federal anti-kickback laws, as well as prohibitions against criminal aiding and abetting, a crime under Title 18, Section 2 of the United States Code. Before their eventual acquittal, they faced up to five years in prison without a chance for parole. The indictment showed the full effect of the federal government's arsenal in battling fraud and abuse, extending its provision to lawyers for the health care providers.

In addition to revealing the broad enforcement powers of the federal government in health care fraud and abuse, the indictment reveals two significant considerations for health care attorneys. First, merely drafting language for clients to avoid health care fraud and abuse is not enough to remove a transaction from being subject to fraud and abuse violations. In the indictment, lawyer Lehr allegedly included a provision disclaiming any intent to create a referral system under the belief that the disclaimer would protect her and her clients from investigation. However, the indictment quoted the opinion letter written by Lehr to fuel its prosecution. The lesson may be obvious for seasoned health care attorneys: Mere legal disclaimers are not enough to protect lawyers and clients from fraud and abuse penalties.

Second, the indictment reveals that health care attorneys may not hide behind the attorney-client privilege to protect themselves and their clients. Lawyers must be aware that they may be called to testify against their health care clients under the "crime fraud" exception to the attorney-client privilege. The Tenth Circuit, in a precursor to the indictments, compelled the two hospital attorneys to testify before a grand jury regarding Medicare fraud of their clients. The court ruled that the attorney-client privilege does not shield communications made for the purpose of receiving advice for the commission of a crime. This ruling effectively turns the health care lawyer into a potential witness against his or her own client for counseling on health care fraud and abuse compliance issues. The Kansas City indictments also reveal the federal government's successful new tactic of issuing subpoenas to health care attorneys to uncover fraud and abuse of the lawyers and their clients.

How Attorneys Can Reduce the Risk of Health Care Fraud Indictments. Despite the acquittal of the lawyers, the message to health care attorneys is to beware of how you counsel your clients on fraud and abuse issues. Lawyers may have to question more thoroughly their client transactions, becoming fraud and abuse investigators themselves. While the Kansas City indictments undoubtedly will have the nationwide effect of chilling the fundamental attorney-client relationship, health care attorneys must continue to scrutinize their clients' transactions. Failure to do so may subject the unsuspecting health care attorney to criminal prosecution and even jail.

In addition to being more skeptical and aware of client activities, health care attorneys can take proactive measures to avoid criminal prosecution. For example, lawyers should sit down with their client before providing advice and reach an understanding that the client would agree to remedy situations of fraud and abuse violations should the lawyer find noncompliance. This would help eliminate any intent on the part of the lawyer in aiding and abetting fraud on the government.

Perhaps the most elementary method for health care lawyers to limit their criminal exposure is through increased use of advisory opinions from the Department of Health and Human Services (DHHS) Office of Inspector General (OIG). The advisory opinion procedures provide a method for health care providers to test the legality of proposed transactions through seeking advisory opinions on fraud and abuse issues. Advisory opinions help take the guesswork out of health care fraud and abuse by offering important insight into the circumstances in which federal prosecutors will take action to enforce anti-kickback laws.

However, seeking an advisory opinion has its drawbacks and should be used cautiously. Advisory opinions are only useful for clients who have time to wait for the DHHS bureaucracy, which often does not respond to repeated inquiries regarding an expedited opinion. Further, many providers have been reluctant to request advisory opinions for fear that the OIG will use information submitted as a basis for a full investigation of the provider. However, in a recent final rule clarifying procedures for advisory opinions, the OIG stated that the fact that an arrangement does not qualify for a safe harbor or a favorable advisory opinion does not mean that the anti-kickback statute has been violated or that enforcement is appropriate. There-fore, while it is not always appropriate to seek advisory opinions, especially when implications of the law are clear, lawyers may find advisory opinions to be the safer route to avoid potential criminal liability

Conclusion. Despite the ac-quittal of the lawyers, the Kansas City indictments are a reminder to health care clients and lawyers of the severity of health care fraud and abuse law enforcement. In addition to malpractice, smart health care attorneys must guard against the increasing specter of attorney criminal sanctions. Health care attorneys must use their lawyerly instincts to facilitae their client's transactional needs without running afoul of fraud and abuse laws.

Neville M. Bilimoria practices law in the Healthcare Practice Group with the Chicago office of Duane, Morris & Heckscher LLP.

For more Information About the health law section

  • This article is an abridged and edited version of one that originally appeared on page 8 of The Health Lawyer, May 1999 (11:4).
  • For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
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  • Periodicals: The Health Lawyer, published six times a year; Membership Directory, published biannually; Monographs, published once or twice a year.

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