The Fifth Amendment’s protection against government compulsion to answer official questions when the answers may subject the speaker to future criminal prosecution applies across “any . . . proceeding, civil or criminal, formal or informal.” Lefkowitz v. Turley, 414 U.S. 70, 77 (1973). However, in Baxter v. Palmigiano, 425 U.S. 308 (1976), the U.S. Supreme Court endorsed the “prevailing rule” that an adverse inference may be made by a fact finder in civil cases when the surrounding circumstances would normally compel an innocent person to respond to the allegations brought against him. The inference made by the fact finder is that the withheld information would have been unfavorable to the plaintiff. The holding was consistent with an acknowledgment made by the Court several decades earlier that “silence is often evidence of the most persuasive character.” United States ex rel. Bilokumsky v. Tod, 263 U.S. 149, 153 (1923).
August 30, 2018 Articles
When Silence Isn't Golden: The Use of Adverse Inferences in Healthcare Enforcement Actions
Adverse inferences are not limited to findings in a case; they can also come into play in terms of mitigating factors.
By Alex Alonso
Baxter: Health-Care Regulary Enforcement
The permissibility of adverse inferences in administrative hearings was clear from the facts in Baxter, which involved a prisoner’s administrative hearing in connection with the incitement of a prison riot. The Court noted that, unlike in the criminal context, civil and administrative cases involve important state interests other than criminal conviction. The Baxter rule has clear applicability in the health-care regulatory enforcement context, where the same facts or circumstances that could lead to a criminal action could also lead to a civil suit or administrative sanction under Medicare, Medicaid, or another public health program.
A review of health-care regulatory enforcement case law does not find a plethora of instances where adverse inferences have been sought by either the Department of Justice (DOJ) or Health and Human Services (HHS). However, this should not lead the health-care regulatory attorney to ignore the ever-looming impact of this rule. The sparsity of case law is deceptive in two ways. First, the government may choose not to seek an adverse inference because it believes that it has sufficient evidence without the inference and does not want to introduce grounds for a reversal of the decision. Second, the mere fact that the government has legitimate grounds to request an inference alters both the government’s and regulated parties’ interest in settling a case prior to a hearing and receiving a decision on the merits. The settlement motivation occurs because if the government has sufficient other evidence to trigger the inference, the regulated party is left to choose whether to (1) waive the privilege and fully present its case, (2) continue to assert the privilege and shield the evidence or testimony, or (3) settle the case. The first and second options both have limitations or consequences that would lead the regulated party toward the third and final option, i.e., settlement that does not resolve the question of whether an adverse inference would have been drawn.
Requirements for Seeking an Adverse Inference
Before an adverse inference may be sought, the relevant witness must have a privilege against self-incrimination, and the government must present other incriminating evidence both to create the expectation of a response, the lack of which gives rise to the inference, and to meet the requisite burden of proof. Lefkowitz, 414 U.S. at 77. Lower courts have interpreted this condition to require that the specific fact sought to be proven by the question to the witness must be supported by independent corroborating evidence.
Further, Baxter merely gives courts the discretion to draw an adverse inference; an individual admissibility determination must still be made in each case. In exercising this discretion, courts aim to balance the interests of and possible prejudice to both parties. Common factors considered by courts include “the effect that the claim of privilege has on an opponent’s ability to develop his or her position and the evidentiary significance of the adverse inference in light of other facts in the case.” Richard L. Scheff, Scott A. Coffina & Jill Baisinger, Taking the Fifth in Civil Litigation, 29 Litigation 34, 36 (Fall 2002). Additionally, courts must ensure that the probative value of the inferences is not outweighed by undue prejudice. The standard for precisely how prejudicial the inference would need to be is unclear from the case law. Given the predicate need for other evidence in the record to trigger the inference, courts do not need to explicitly refuse the inference on undue prejudice grounds. Instead, an administrative law judge (ALJ) can find the inference unnecessary because the evidence already in the record meets the burden of proof, or the ALJ can find the inference unwarranted because there is insufficient evidence in the record to trigger it. For example, in John J. Kane Regional Center–Glen Hazel, DAB CR1394 (Jan. 23, 2006), a civil money penalty (CMP) case based on failure to adhere to Medicare conditions of participation, the ALJ found that although one of the nurses did not testify about her failure to call 911 when a patient was in respiratory distress, there was no need for an adverse inference to supplement the volume of evidence already in the record.
Strength of an Adverse Inference
The evidentiary value of an adverse inference has been referred to as either “a thumb on the scale,” SEC v. Prater, 289 F. Supp. 2d 39, 50 (D. Conn. 2003), or “circumstantial evidence,” FTC v. Kitco of Nevada, Inc., 612 F. Supp. 1282, 1291 (D. Minn. 1985). An inference is clearly, by itself, insufficient to meet the proponent’s burden of proof. See Harrson v. Wille, 132 F.3d 679, 683 (11th Cir. 1998). However, in the context of a health regulatory administrative action, where the burden of proof is preponderance of the evidence, 42 C.F.R. § 1005.15(d), even the slightest slant in favor of the government may hold the day.
Sample Health-Related Adverse Inference Cases
The court performs a balancing act in Sriram. The case of United States v. Sriram, 147 F. Supp. 2d 914 (N.D. Ill. 2001), provides an example of the balancing performed by a court in a health-care fraud case. In Sriram, the DOJ sought a preliminary injunction preventing a physician from submitting false claims to Medicare, requiring him to retain certain business records related to alleged false claims, and freezing a portion of his assets that were allegedly the fruit of prior false claims. The DOJ presented testimony from a series of witnesses, including an FBI agent and an IRS agent that had interviewed the defendant as well as representatives of the Medicare payment contractor and the defendant’s physician colleagues. Dr. Sriram, the defendant, was called to testify in response to the testimony of the government witnesses but asserted his Fifth Amendment privilege in response to all questions. The court explained that it would draw an adverse inference when Sriram was confronted with prior statements or other evidence and remained silent, but would not draw an adverse inference when he failed to respond to questions that lacked a foundation in other evidence presented by the DOJ.
Specifically, the court drew an adverse inference that Sriram had not seen all the patients for which he filed home visit claims, relying on testimony from the defendant’s colleagues regarding his regular working hours along with statements made to the FBI agent indicating that he never saw more than 20 or 25 patients in a day and that he always was home before 3:00 p.m. Sriram refused to respond to this evidence, citing his privilege against self-incrimination. The DOJ presented evidence that 84 claims were submitted listing Sriram’s home address as the patient’s address. Further evidence was submitted indicating that the motive was to prevent patients from receiving documentation from Medicare, which might prompt them to call the Centers for Medicare and Medicaid Services (CMS) and report fraud. From Sriram’s failure to respond to this evidence, the court drew the adverse inference that he had intentionally placed the incorrect address on the claim forms.
The evidence also showed that Sriram had taken Medicare billing training and had billing manuals in his office but lied to the FBI agent on both of these points. When confronted with this evidence, Sriram again invoked his Fifth Amendment privilege, and the court drew an adverse inference. In this instance, the court did not specify the inference, but it could be understood generally as a conclusion that truthful testimony in response to the evidence would have been unfavorable.
In contrast, the court found that the charges of unnecessary services were based solely on the testimony of one of Sriram’s colleagues and that this evidence did not rise to the level necessary to substantiate an adverse inference from Sriram’s failure to respond. The court also noted that claim error alone could not be the sole basis for an inference of fraud.
A doctor’s lack of cooperation leads to an adverse inference. An early Departmental Appeals Board (DAB) case presented similar claims in the administrative context. In Khurana, M.D., DAB CR6 (Mar. 14, 1986), the Office of Inspector General (OIG) sought CMPs and exclusion based on allegations that the physician had submitted false Medicare claims. The OIG presented testimonials from beneficiaries indicating that the signatures found on claim forms were not their own. The ALJ drew the adverse inference, from the physician’s refusal to provide a handwriting sample or to respond to questioning based on his self-incrimination privilege, that he had forged the signatures.
Two cases interpret administrative cases under Baxter. Signaling the viability of the Baxter rule in the administrative context, the DAB Appellate Division, having sparsely addressed adverse inferences in the more than two decades since it gained appeal authority over administrative sanction cases, issued two decisions in the month of December 2010, noting the applicability of the rule to such cases. Del Rosa Villa, DAB No. 2011-2 (Dec. 2, 2010); Woodland Oaks Healthcare Facility, DAB No. 2355 (Dec. 30, 2010).
In the Del Rosa Villa case, the appellate division issued a decision on an interlocutory appeal wherein the nursing home wanted to halt the CMS’s administrative action while state authorities considered criminal charges. However, even though the CMS disclaimed any intention of seeking adverse inferences, the appellate division chose to explicate its standing on the Baxter rule and the ability of the government to move forward in its administrative case even while the possibility of state criminal charges associated with the same facts loomed.
In Woodland Oaks, the ALJ had not drawn an adverse inference (at least, she did not expressly invoke the Baxter rule) but instead addressed a nurse’s invocation of her Fifth Amendment rights as part of a credibility analysis. The appellate division decided to interpret the ALJ’s actions through a Baxter rule lens, affirmed her decision, and reinforced the availability of adverse inferences in DAB cases.
Consistent with these cases, the DAB’s Appellate Division Practice Manual states that the board “may draw an [adverse] inference . . . regarding the expected testimony of” a material witness that a party was expected to produce for hearing but did not.
Lack of adverse inference does not preclude a backdoor approach. Other DAB cases show that even when an adverse inference is not granted, it can still play a role in the ALJ’s decision in the case because, at a minimum, it places those facts before the ALJ for analysis. The ALJ never truly segregates information when making admissibility rulings, and the ultimate rulings on the facts—even information that was ruled inadmissible—can linger and weigh on the margins of a discretionary credibility analysis or the weight assigned to other admitted evidence.
For example, in Newton Presbyterian Manor, DAB CR1205 (Aug. 27, 2004), the ALJ refused to grant the CMS the adverse inference it was requesting based on the nursing home’s refusal to provide information but nonetheless upheld the imposition of a CMP after thoroughly analyzing the CMS’s allegations, which included facts surrounding the nondisclosure of information. Also, there is a credibility analysis back-door method of taking an adverse inference. This clearly came into play in Woodland Oaks.
Another example is Hazel Hawkins Memorial Hospital, DAB CR1753 (Mar. 18, 2008), where the ALJ explicitly said that he was not taking an adverse inference based on the skilled nursing facility’s nonproduction of an incident report, but he noted that it played into his credibility analysis of a witness. This backdoor method removed one grounds for appeal and reversal of the ALJ decision, based on a petitioner assertion of an improper adverse inference, while still giving a tip of the hat to the government’s request.
Notably, the need to use a backdoor method has lessened since the very clear endorsement of the Baxter rule in Del Rosa Villa and the DAB’s Appellate Division Practice Manual.
Adverse inferences apply with mitigating factors, too. Finally, practitioners should note that adverse inferences are not limited to findings on the central elements of a case; they can also come into play in terms of mitigating factors. For example, in TMJ Implants, Inc., DAB No. 2163 (Mar. 24, 2008), in which the ALJ found that not disclosing all financial records “gives rise to an adverse inference that a full disclosure would not support the assertions of an inability to pay,” a CMP was upheld by the DAB Appellate Division.
Conclusion
In summary, as demonstrated by this brief review of the Baxter rule and its use in the health-care regulatory enforcement context, once the government has collected enough evidence to even consider bringing a case, it has likely already collected enough evidence to also substantiate at least a request for an adverse inference if the regulated party does not provide requested witnesses and documents or witnesses do not answer questions presented to them. Further, the mere request may be enough to influence the decision even if the inference itself is not granted. All of this leads to the conclusion highlighted in the first section of this article—that the Baxter rule acts as a substantial weight mitigating in favor of negotiated settlement in many cases.
Alex Alonso, J.D., M.P.H., M.A., is an associate general counsel and policy adviser for the D.C. Health Benefit Exchange Authority (DCHBX).
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