The jury rendered guilty verdicts with respect to 10 of 16 criminal counts (healthcare fraud and making false statements in connection with a healthcare benefit) against Dr. Paulus. Yet, after filing post-trial motions sharply contending that the evidence was insufficient for any reasonable juror to convict Dr. Paulus, the district court, in a rare move, acquitted Dr. Paulus on the 10 remaining counts.5 The court then went one step further by granting Dr. Paulus’ conditional motion for a new trial pursuant to Federal Rule of Criminal Procedure 33 -- in the event that the government prevailed on an appeal to the U.S. Court of Appeals for the Sixth Circuit -- reasoning that the jury verdicts were against the manifest weight of the evidence.6
A. Evidence of Falsity
1. Recording of Stenosis Percentage - Medical Judgment or Objectively False Opinion?
In deciding whether to enter an acquittal for Dr. Paulus, the court evaluated the evidence that Dr. Paulus made any false statements. According to the government, the false statement was “the percent of stenosis… that is the lie.”7
To prove falsity, the court concluded that the government must demonstrate that the degree of stenosis in angiograms is an objective fact subject to contradiction or confirmation which can be false as opposed to a subjective opinion which is not subject to proof or disproof8 and highlighted the differences between assertions of fact and expressions of opinion:
Merriam-Webster defines a fact as “a piece of information presented as having objective reality.” On the other hand, an opinion is defined as “a view, judgment, or appraisal formed in the mind about a particular matter” or “a formal expression of judgment or advice by an expert.” While these concepts are elementary, they are essential when examining falsity in a criminal case such as this one, where the defendant claims he was exercising his medical judgment. The importance of the distinction between fact and opinion is highlighted by the legislative history of § 1347. The health care fraud statute is “not intended to penalize a person who exercises a health care treatment choice or makes a medical or health care judgment in good faith simply because there is a difference of opinion regarding the form of diagnosis or treatment.” H.R. REP. NO. 104-736, at 258 (August 21, 1996), reprinted in 1996 U.S.C.C.A.N. 1990, 2071. Therefore, the statutes targeting health care fraud do not criminalize subjective medical opinions where there is room for disagreement between doctors.9
After considering the evidence at trial, the court concluded that a cardiologist’s statement concerning the degree of stenosis is a subjective medical opinion incapable of contradiction or confirmation, and therefore, no reasonable juror could find beyond a reasonable doubt that Dr. Paulus made a false statement.10 Critical to the court’s conclusion were the following observations:
- Testimony at trial illustrated that interpreting the degree of blockage based on a review of an angiogram results in a level of variability among cardiologists and that, contrary to the government’s assertions, “inter-observer variability” may exceed 10-20 percent.
- The government’s own experts opined differently with respect to the degree of stenosis. In particular, in one case, Dr. Paulus had estimated that stenosis was 75-80 percent whereas two of the Government’s experts maintained that blockage for that same patient was 40-50 percent and 26 percent, respectively.
- Another expert testified that estimating the percentage of stenosis was an imprecise exercise.
- The government did not introduce more than one disagreeing expert per procedure and therefore the evidence did not show disagreement beyond one government expert and Dr. Paulus with respect to the percentage of stenosis.
Importantly, the court relied on False Claims Act cases holding that the expert testimony of one disagreeing doctor, or differences in opinion or medical judgments, where reasonable minds might disagree, are insufficient to prove falsity.11 Applying this reasoning to the Paulus prosecution, the court highlighted that the government had only relied on one expert per procedure to rebut Dr. Paulus’ interpretations of the degree of stenosis, which was insufficient to prove falsity.12 The district court also rejected the government’s attempt to distinguish False Claims Act cases based on the mere fact that they were civil, not criminal cases:
[T]he court has a difficult time imagining a scenario where Dr. Paulus is held criminally responsible but the evidence is insufficient to support civil liability…the standard for falsity under Section 1347 and Section 1035 must be at least as demanding as it is in the False Claims Act context.13
2. Circumstantial Evidence of Falsity
In addition to the evidence that Dr. Paulus intentionally inflated the degree of stenosis in various patients, the court reviewed the government’s circumstantial evidence which consisted of the following:
- Volume of procedures performed by Dr. Paulus compared to his peers, cardiologists in Kentucky and cardiologists nationwide. The court found that the Fourth Circuit had already declined to hold that “pattern evidence showing that a physician placed more unnecessary stents than the national average necessarily would be probative of fraud, for such a pattern might only suggest negligence.14
- Testimony from cardiologists and physicians working with Dr. Paulus. Numerous cardiologists and employees testified that they had seen patients or angiograms which showed that Dr. Paulus had placed unnecessary stents in those patients, or where there was “no significant blockage that would have required stenting by most practicing cardiologists.”15 Yet the court found that this testimony was not “sufficiently specific” because it did not relate to a specific patient or procedure in the Indictment and, at best, illustrated a type of “vague disagreement” with Dr. Paulus’ medical decisions..16
- Patient testimony regarding statements by Dr. Paulus. The court concluded that the patient statements introduced by the government were irrelevant – one statement involved Dr. Paulus informing a patient he needed another stent but the “new Obama law would not permit it” and the other statement involved Dr. Paulus telling a patient that he would have to place a stent in his “heart valve” even though stents are placed in arteries, not valves.17 Another patient testified that Dr. Paulus informed him that he had placed an emergency stent in his artery which was only 20-25 percent blocked because he thought the patient would need it “down the line.”18 The court found that such a statement amounts to circumstantial evidence of falsity but underscored that the “Government places more weight on this testimony than it can bear” reasoning that “[a] single, isolated statement by Dr. Paulus does not prove falsity.”19
- Wealth or income evidence. While the court noted that income and/or wealth evidence may permit jurors to infer a motive to profit, the evidence showed that Dr. Paulus was not dependent on the income he received from performing these alleged fraudulent procedures since the majority of his income and salary were unrelated to performance of these procedures.20
- Post-investigation conduct of Dr. Paulus. The district court did not directly address this issue.
- Alleged false entries made by Dr. Paulus concerning a patient’s symptoms of chest pain. The government introduced a patient at trial to demonstrate that Dr. Paulus had falsely recorded chest pain as a symptom in medical records to justify stenting. However, when the patient testified on cross examination the patient admitted suffering from chest pain.21
B. Evidence of an Intent to Defraud
The court also addressed whether or not the government had proved that Dr. Paulus acted with the intent to defraud, an element the government was required to prove to convict Dr. Paulus under either of the Section 1035 and 1347 charges. A scheme to defraud requires “deception intentionally practiced to induce another to part with property or to surrender some legal right, and which accomplishes the end designed.”22
The court found that there was insufficient evidence of an intent to defraud based on the government’s theory that Dr. Paulus made a misrepresentation regarding the extent of his patients’ blockages, concealed that misrepresentation by recording at least a 70 percent blockage in his patients’ medical records, and profited from each procedure because “without a proven false statement, this house of cards falls apart.”23
In so finding, the court also reviewed the circumstantial evidence discussed above. The court noted that the type of evidence that was proven in two other cardiologist fraud prosecutions, McLean or Patel,24 and which permitted the jurors to infer an intent to defraud and falsity was “glaringly absent” in Paulus.25 In McLean and Patel, among other things, the evidence revealed:
- Existence of incriminating statements.
- Financial motives for stenting.
- Cardiologists revised existing patient medical records.
- Cardiologists falsified patient records and patient symptoms.
- Cardiologist in McLean destroyed evidence by shredding documents.
- Proven false statements.
For these reasons, the court noted that the circumstantial evidence in Paulus was “far less compelling” and that Patel and Mclean were significantly distinguishable from Dr. Paulus.26
C. Dr. Paulus in Limbo
The government has decided to appeal the court’s acquittal to the U.S. Court of Appeals for the Sixth Circuit, and therefore Dr. Paulus’ future hangs in the balance.27 In addition, the government is actively pursuing a civil False Claims Act prosecution against Dr. Paulus based on the exact same theory of fraud.28
D. Lessons from Dr. Paulus’ Prosecution
Cardiologists Beware. The Paulus prosecution is a strong reminder that the Department of Justice is committed to prosecuting cardiologists whom it believes perform lucrative, invasive cardiac procedures in order to line their pockets and steal from federal healthcare programs. Indeed, prior to the Paulus prosecution, the government had prosecuted and obtained convictions against at least three cardiologists in McLean, Patel, and Persaud for improper heart stenting. Further, given the government’s increasing reliance on data mining to detect abnormal billing patterns, it is reasonably foreseeable that the government will initiate additional stenting investigations and prosecutions based on data mining.29
Subjective Medical Opinion vs. Lies. A central takeaway from the Paulus prosecution is that subjective medical judgments or opinions will rarely, if ever, form the basis for fraud because the healthcare fraud statute is “not intended to penalize a person who exercises a health care treatment choice or makes a medical or health care judgment in good faith simply because there is a difference of opinion regarding the form of diagnosis or treatment.”30 Physicians cannot “hide behind the guise of subjective medical judgment” but there must be evidence sufficient to prove that a physician’s stated opinion is objectively false.31
Weak Circumstantial Evidence and Prosecutorial Discretion. False statements and false patient records were completely missing in this case, there was no clear financial motive to stent, the patient statements conflicted with one another, expert witnesses contradicted one another with respect to stenosis percentages, and the hospital employees with whom Dr. Paulus worked were not able to provide anything greater than unparticularized, vague disagreements with some of Dr. Paulus’ stenting procedures. Given this anemic body of evidence, the prosecution was left with the theory that stenting arteries lacking 70 percent stenosis was fraud, a theory which is arguably better suited for a plaintiff’s medical malpractice action.
In light of Paulus, should the Department of Justice reevaluate what criterion, if any, the prosecutors must satisfy before bringing a serious criminal charge against a physician in a cardiologist stenting prosecution? Should the absence of any (or all) of the above factors -- which were all present in McLean, Patel, and Persaud -- have led to a prosecution Memorandum highlighting the clear evidentiary hurdles with surviving a Rule 28 Motion for a Judgment of Acquittal,32 and potentially, a recommendation for a declination?
False Claims Act. Paulus illustrates that district courts may rely on False Claims Act decisions in determining whether the government has adduced sufficient evidence to prove falsity, a required element of both Sections 1035 and 1347. As the court reinforced in Paulus, if the government could not prove the scienter required to meet the standard for demonstrating a “knowingly” false claim under the False Claims Act, it is unimaginable that the government might satisfy the heightened mens rea requirement required to prove falsity under Sections 1035 or 1347.33
E. Conclusion
The failed Paulus prosecution is a cautionary tale for physicians and their attorneys because it sharply demonstrates that federal prosecutors will contemplate – and even pursue -- indictments against physicians for performing a high volume of a particular medical procedure if they are able to identify an expert (or group of experts) that disagree with the medical necessity of that particular procedure. That said, the decision is invaluable to defense attorneys representing physicians against the prospect of a medical necessity34 (or cardiologist stenting) prosecution since it delineates the quantity and quality of the evidence that the government must introduce at trial to avoid an acquittal. In fact, defense attorneys citing Paulus might demand that prosecutors point to objectively false representations – opposed to opinions – coupled with reliable circumstantial evidence probative of fraud when defending physicians against future investigations or prosecutions which appear entirely based on disagreements between experts about the propriety or utility of a particular medical procedure.
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| 1 |
Stenosis occurs when a heart valve does not open properly or is blocked, making it harder for the heart to pump blood throughout the rest of the body.
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| 2 |
Typically there must be 70% blockage or stenosis to justify stenting, according to the American Medical Association.
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| 3 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA (Indictment). A violation of 18 U.S.C. Section 1347 (the federal health care fraud statute) is punishable by up to 10 years in prison. Section 1347 states in pertinent part:|
(a)Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—
(1)to defraud any health care benefit program; or
(2)to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program,
in connection with the delivery of or payment for health care benefits, items, or services.
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| 4 |
Id. A violation of 18 U.S.C. Section 1035 is punishable by up to five years in prison. Section 1035 states in pertinent part:
(a)Whoever, in any matter involving a health care benefit program, knowingly and willfully—
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; or
(2) makes any materially false, fictitious, or fraudulent statements or representations, or makes or uses any materially false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry,
in connection with the delivery of or payment for health care benefits, items, or services.
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| 5 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA (E.D. Ky. March 7, 2017) (Memorandum Opinion).
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| 6 |
Id. at 48-50.
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| 7 |
Id. at 10.
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| 8 |
Id. at 12-13.
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| 9 |
Id. at 14.
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| 10 |
Id. at 20.
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| 11 |
Id. at 19, citing United States v. Aseracare Inc., 176 F. Supp. 3d 1282 (N.D. Ala. 2016) (finding that the difference of opinion among experts regarding the patients’ hospice eligibility alone is insufficient to prove falsity); see also United States ex rel. Morton vs. A Plus Benefits, Inc., 139 F. App’x 980, 983 (10th Cir. 2005) (“expressions of opinion, scientific judgments, or statements as to a conclusion about which reasonable minds might differ cannot be false.”) (other citations omitted); United States v. St Mark’s Hospital, 2017 WL 237615 (D. Utah Jan. 19, 2017) (finding that a cardiologist’s procedures at the hospital could not form the basis for an objectively false claim when the standard was inherently ambiguous).
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| 12 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA at *18 (E.D. Ky. March 7, 2017) (Memorandum Opinion).
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| 13 |
Id. at 20, n.19.
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| 14 |
Id. at 22, citing United States vs. McLean, 715 F.3d 129, 139 (4th Cir. 2013).
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| 15 |
Id. at 22, n. 23.
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| 16 |
Id. at 23-24.
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| 17 |
Id. at 24.
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| 18 |
Id.
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| 19 |
Id. at 25.
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| 20 |
Id. at 26. Trial evidence demonstrated that Dr. Paulus received less than $1,000 for the alleged fraudulent procedures. Evidence at trial also revealed that Dr. Paulus did not live a fancy or luxurious lifestyle.
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| 21 |
Id. at 25.
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| 22 |
Id. at 31.
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| 23 |
Id. at 32.
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| 24 |
United States v. Patel, 485 F. App’x 702 (5th Cir. 2012); see also United States v. Harold Persaud, 14-CR-00276-PAG (N.D. Ohio Aug. 20, 2014) (indictment against cardiologist for improper heart stenting resulting in a 20-year sentence following jury verdicts of guilty at trial). In Persaud, there was clear evidence that Dr. Persaud falsified records and patient symptoms and possessed a motive to falsify records to increase his wealth.
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| 25 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA at *33 (E.D. Ky. March 7, 2017) (Memorandum Opinion).
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| 26 |
Id.
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| 27 |
United States v. Richard Paulus, M.D., No. 17-005410 (6th Cir. 2017). No briefs have been filed by the parties as of this date.
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| 28 |
United States vs. Richard Paulus, M.D., 15-cv-00067-DLB (Sept. 14, 2015) (Complaint). In addition, there was no relator/whistleblower in the False Claims Act case which is extraordinarily atypical of False Claims Act cases. Also, David L. Bunning, the district judge who presided over the trial and entered the acquittal, is the district judge presiding over the False Claims Act case.
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| 29 |
It is this author’s understanding that numerous healthcare fraud prosecutions in various districts throughout the United States, including in the Middle District of Florida, were based on pure data mining. The Department of Health and Human Services’ Office of Inspector General (OIG) has devoted significant resources to data mining to detect fraud and abnormal billing patterns and has implemented data mining within the Medicaid Fraud Control Units (MFCU). https://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/data-mining.asp. The Centers for Medicare & Medicaid Services (CMS) also implemented a Fraud Prevention System (FPS) which screens claims data before payment is made and generates a prioritized list of leads for Zone Program Integrity Contractors (ZPICs) to review and investigate. FPS also compiles details regarding a provider’s behavior in a consolidated view. Northrop Grumman is the first FPS Development Contractor. See Report to Congress, Fraud Prevention System First Implementation Year, (December 2012), available at http://www.stopmedicarefraud.gov/fraud-rtc12142012.pdf.
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| 30 |
See H.R. REP. NO. 104-736, at 258 (August 21, 1996), reprinted in 1996 U.S.C.C.A.N. 1990, 2071.
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| 31 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA at *34 (E.D. Ky. March 7, 2017) (Memorandum Opinion).
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| 32 |
The Department of Justice Manual instructs federal prosecutors to employ this standard when deciding whether to charge individuals with a federal crime. See Department of Justice Manual, Principles of Federal Prosecution, 9-27.220 (“USAM 9-27.220 expresses the principle that the attorney for the government should commence or recommend federal prosecution only if he/she believes that the person's conduct constitutes a federal offense and that the admissible evidence will probably be sufficient to obtain and sustain a conviction. Evidence sufficient to sustain a conviction is required under Rule 29(a) of the Federal Rules of Criminal Procedure, to avoid a judgment of acquittal.”)
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| 33 |
United States v. Richard Paulus, M.D., 15-CR-00015-DLB-EBA at *20, n.19 (E.D. Ky. March 7, 2017) (Memorandum Opinion).
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| 34 |
There are other pending medical necessity prosecutions throughout the country against physicians other than cardiologists, see United States v. Basil Hantash, 17-cr-00128 (E.D. Ca. May 7, 2017) (indictment alleges that dermatologist performed unnecessary surgical procedures to treat acne in order to bill government and private insurers). However, this theory is more commonly used in False Claims Act prosecutions. See https://www.justice.gov/opa/pr/healthcare-service-provider-pay-60-million-settle-medicare-and-medicaid-false-claims-act (settlement against Genoa Health for purported unnecessary rehab therapy services); https://www.justice.gov/opa/pr/life-care-centers-america-inc-agrees-pay-145-million-resolve-false-claims-act-allegations (settlement against Life Care centers for alleged unnecessary rehab services); https://www.justice.gov/usao-ma/pr/millennium-laboratories-pay-256-million-resolve-false-billing-and-kickback-claims (settlement against Millennium Health for alleged unnecessary lab tests); United States and the State of Florida ex rel. Schiff, M.D vs. Gary Marder, D.O, 13-cv-24503 (S.D. Fla) (settlement in case involving allegations of unnecessary radiation services and biopsies performed by dermatologist); https://www.justice.gov/usao-mdfl/pr/fort-myers-urologist-agrees-pay-more-38-million-ordering-unnecessary-medical-tests (settlement in case involving allegations of unnecessary tests performed by urologist); United States ex rel v. Aseracare, et al. No. 16-130004 (11th Cir. 2016) (appeal by government of district court’s finding of summary judgment in favor of defendant after jury verdict finding in favor of government relating to allegations that defendant submitted claims for unnecessary hospice services); see also https://www.justice.gov/usao-mdfl/pr/federal-jury-finds-doctor-guilty-20-counts-health-care-fraud (a jury convicted Dr. David Pon, an ophthalmologist, of fraud based on the allegations that he submitted false claims to the government for laser treatments for glaucoma and macular degeneration that were unnecessary); but compare with United States v. Amir Bajoghli, 14-CR-00278-GBL (N.D. Va. Aug. 12, 2014) (a case during which the jury acquitted defendant, a renowned dermatologist, of healthcare fraud and Section 1035 violations in connection with his practice of purported unnecessary Mohs surgeries). Notably, the evidence of fraud in Paulus appeared to be much less compelling than even Bajoghli. See also http://feldmanpllc.com/medical-necessity-health-care-fraud-prosecutions-analysis-past-present-future-prosecutions/.
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