Medicare kickback case unsettles attorneys
Medicare kickback case unsettles attorneys
Lawyers acquitted of conspiracy charges, but experts worry it’s become too easy to subvert privilege
Recent developments in a Kansas City hospital kickback case are sending chills through many health care attorneys, who wonder if they’ll become the next target of federal investigators eager to sidestep the attorney-client privilege.
In the case, two administrators at Baptist Medical Center in Kansas City and two doctors were convicted of participating in a 10-year-long kickback and bribery scheme. According to prosecutors, the physicians received more than $2 million in thinly disguised "consulting fees" in exchange for referring Medicare and Medicaid patients to five local hospitals, including Baptist.
What’s interesting about the case, however, is the fact that two health care attorneys who represented Baptist were also indicted. Attorneys Ruth Lehr and Mark R. Thompson were charged with being part of the conspiracy when they resisted subpoenas to testify in the case, claiming attorney-client privilege. The government attempted to short-circuit the claim of privilege by arguing the lawyers were part of the conspiracy. Based on a limited showing, U.S. District Judge John Lungstrum ordered the lawyers to testify.
Although the judge threw out the indictment against the attorneys after the government had concluded its case, several legal observers who watched this case closely say no transactional lawyer should be breathing too easy.
Health care attorney Tom Crane of Mintz Levin in Boston considers the government’s aggressive move to indict the attorneys "very troubling." He says the court’s decision that the crime fraud exception applied demonstrates the minimal showing a U.S. attorney needs to destroy the attorney/client privilege. He also predicted that the guilty verdicts against the executives will likely rejuvenate the government’s interest in taking cases under the anti-kickback statute.
"This is the first case that I am aware of in the health care industry where a lawyer has been indicted along with his client under the anti-kickback statute," says Houston-based criminal defense attorney Lee Hamel. But whether it signals a new trend in Department of Justice prosecutions is yet to be seen, he adds.
Even so, the possibility of a crackdown on health care lawyers has many attorneys on edge. "The jury is still out over how much of a chilling effect this case will have on the role of in-house counsel advising health care institutions," says Henry Fernandez, managing director of KPMG’s Litigation and Forensic Services in Atlanta.
In any event, the Kansas City trial shouldn’t be considered merely an aberration, Hamel says. "Hospitals, physicians and lawyers can all expect that when similar circumstances exist, they will all be looked at very carefully." He points to the savings and loan crises of the 1980s when a number of lawyers were prosecuted for their role in advising financial institutions.
"There are many cases where someone is likely to claim the defense of advice of counsel where the prosecution’s theory is to haul them before the grand jury," Hamel explains. "What they try to do is undercut the advice defense." According to Hamel, the bottomline is that both the Department of Justice and HCFA will continue to scrutinize the role of health care attorneys in drafting agreements in which a patient referral relationship exists.
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