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Sunday, May 1, 2011


When a practitioner faces a criminal charge related to health care fraud, it is important to keep in mind not only the potential direct consequences of a conviction – term of imprisonment, fines, restitution, probation, etc., it is also important to be aware of collateral and administrative consequences that will, or may, flow from a criminal conviction. Often times in a criminal case the most important decision any defendant will have to make is whether to accept a plea offer made by the prosecutor, or proceed to defend oneself in trial. Knowing the indirect consequences to a physician - such as impact on licensure and credentialing - that may result from a conviction is imperative in making that decision.

In regard to New Jersey’s Health Care Claims Fraud Statute, found at N.J.S.A. 2C:21-3, there are two degrees of crime listed: the most serious is a second degree crime for violating the statute “knowingly”, and the other is a third degree crime for violating the statute “recklessly”. In conjunction with a separate statute entitled License Suspension or Forfeiture for Health Care Claims Fraud, found at N.J.S.A. 2C:51-5, the second degree crime (knowing violation) would result in a mandatory lifetime forfeiture of a physician’s medical license to be imposed by the court, unless the court finds that such license forfeiture would be a serious injustice which overrides the need to deter such conduct. As one would expect from the wording, this exception (serious injustice) would be difficult to establish. The third degree crime (reckless violation) would result in court-imposed loss of license for “at least one year”. As the language suggests, the loss of license could be more than one year. A second or subsequent conviction of the third degree crime would result in a lifetime ban.

The New Jersey Board of Medical Examiners (the Board) must be notified of any health care claims fraud conviction within 10 days of sentence. N.J.S.A.2C:51-5b. Under the New Jersey Licensed Professionals Uniform Enforcement Act, N.J.S.A. 45:1-1, et seq., administrative action can be taken against a practitioner for a violation of New Jersey statutes pertaining to the practitioner’s licensed profession and also for violations of the regulations of the licensing board or agency. A health care related insurance fraud conviction could constitute summary proof of a violation of several sections of the statute that allows for a suspension or revocation of a physician’s license for proscribed conduct, N.J.S.A. 45:1-21, such as subsections: (b) fraud, (e) professional misconduct, (f) crime of moral turpitude or crime relating adversely to activity regulated by the licensing board, (h) violation of regulation administered by the licensing board, and (k) violation of any insurance fraud prevention law. Any of these violations could not only constitute grounds for the Board to revoke or suspend a practitioner’s license, they could also result in the imposition of alternative administrative penalties found in N.J.S.A. 45:1-22, including but not limited to civil penalties, restitution and payment of the Enforcement Bureau’s costs attributed to the licensing investigation and enforcement procedure. Of course, it bears remembering that even if there is no criminal conviction to form the basis of a Board action, the Board only need prove misconduct by a preponderance of the evidence, thus making it possible to impose professional discipline on a licensee for the same conduct under the same set of circumstances, and using the same evidentiary predicates as a prosecutor would use in a criminal case.

Disciplinary action will almost always be taken against a practitioner once the Board is notified or otherwise learns of a criminal conviction of the practitioner, particularly when the conviction is directly related to the practitioner’s profession. In this regard it is important to note that licensing authorities such as the Board act independently of the court. Thus the Board is not limited to the statutory period of license suspension imposed by the court for the criminal conviction and may seek a license suspension greater than any suspension imposed by the court, as well as the other administrative penalties it is authorized to impose. There simply is no double jeopardy protection against administrative penalties in addition to penalties imposed by a sentencing court.

Expungements of convictions for health care fraud also receive special treatment in New Jersey. N.J.S.A. 2C:52-27.1 specifically provides that if an order of expungement of a record of conviction is granted to a person convicted of health care claims fraud, that part of the sentence forfeiting the professional license is not rescinded in the expungement unless the court is satisfied the petitioner “is sufficiently rehabilitated.” If the court then rescinded such an order, the physician would still have to apply to the Board for reinstatement of license.

Even if a license suspension imposed by a court and/or the Board is avoided, or the physician’s license is reinstated, program exclusions resulting from a criminal conviction will severely impact a physician’s ability to practice. Under federal law, the U.S. Department of Health and Human Services (hereinafter “HHS”) has the authority to exclude providers from Medicare, 42 U.S.C. 1320a-7. Exclusions are either mandatory or permissive. A conviction of a criminal offense related to Medicare, or related to health care fraud, results in a mandatory exclusion from Medicare of at least five years. 42 U.S.C. 1320a-7(c)(3)(B). The only exception to this mandatory five year exclusion is if the program administrator finds that the exclusion would impose a hardship on beneficiaries of the program, and requests the Secretary of HHS to waive the exclusion. After consulting with the Inspector General of HHS, the Secretary may waive the exclusion, and the Secretary's decision whether to waive the exclusion is not reviewable.

In regard to the State Medicaid program, a criminal conviction could constitute permissive grounds for debarment or disqualification from the program. The New Jersey Division of Medical Assistance and Health Services, through its Director, “may suspend, debar and disqualify persons from participation in the state program when deemed necessary to protect the interests of the program”. N.J.A.C. 10:49-11. Under this same regulation the commission of a criminal offense as incident to performing a Medicaid contract, or violations of regulations pertaining to the governing of the medical profession, or conviction of any crime involving moral turpitude, are grounds for debarment. N.J.A.C. 10:49-11.1(d). The decision to debar rests within the discretion of the Director, and the length of debarment generally should not be more than five years. N.J.A.C. 10:49-11.1(g). Thus Medicaid debarment could exceed five years if warranted.

In addition, under executive order, the federal government prohibits an individual who is excluded from participation in one federal program from participating in any federal program. Exec. Order No. 12,549 (51 F.R. 6370, February 18, 1986), 5 C.F.R. 919 (1986). Therefore, an exclusion from Medicare and/or New Jersey Medicaid will result in subsequent exclusion from all federal health care programs.

Exclusion from Medicare or debarment from Medicaid will also adversely impact a physician’s ability to obtain or maintain hospital credentials. Under federal regulations, any provider or supplier who employs or works with a physician excluded from Medicare, Medicaid, or any other Federal health care program, cannot bill for Medicare services. 42 C.F.R. § 424.535(a)(2)(i). Furthermore, accreditation by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) (Standard MS.03.01.01) is another requirement of Medicare reimbursement eligibility. 42 C.F.R. § 488.5. Therefore it is the uniform policy of hospitals to prevent physicians who are excluded from participation in Medicare or Medicaid from practicing on the medical staff. Further evidence of this limitation is found in most medical staff bylaws, which require Medicare and Medicaid eligibility as a precondition to being granted and maintaining privileges. Finally, it also goes without saying that a conviction would result in private insurers taking contractual action to exclude physicians from their programs. Most managed care program contracts contain provisions which authorize exclusion of providers for criminal convictions, or for professional discipline of any type, including reprimands.

Thus, when facing state criminal charges for health care related fraud in the state of New Jersey, defendants must be mindful of the statutory requirements of license suspension resulting from a conviction. Furthermore, a defendant must also keep in mind that the Board can, and most likely will, seek to impose additional penalties, and may seek a license suspension for a period greater than that imposed by a court. Finally, program exclusion and loss of credentials, with health care entities and private carriers, is also a realistic consequence of a criminal conviction.

Although the direct or penal consequences of a conviction must always be the primary consideration, a physician-defendant cannot afford to lose sight of the indirect or collateral consequences in determining whether to accept a plea agreement. Defendants and their counsel must consider the total picture, and the possibility of a “global resolution” when charting a course through the legal minefield inherent in defending against health care fraud criminal charges.




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