In 2010, Georgia nursing home owner and operator, George Houser, was charged in a federal indictment with conspiracy to commit healthcare fraud on the theory that he had billed Medicare and Medicaid for services that were so inadequate or deficient that they were essentially “worthless.” Aside from its disturbing and sensational facts – such as evidence of “barbaric” and “uncivilized” conditions at the three facilities, including leaking roofs, insect infestations, and food shortages – Houser was notable for several reasons, but principally because prosecutors in the case had relied on a civil theory of liability, the so-called “worthless services” theory, as the basis for criminal fraud charges. While the federal False Claims Act (FCA) has been construed broadly to accommodate shifting and expanding theories of liability like worthless services and implied certification, federal criminal statutes like the healthcare fraud statute are to be, and historically have been, interpreted narrowly.
Addressing that concern, Houser had argued on appeal from his conviction and 20-year sentence that engrafting a “worthless services” concept onto the federal healthcare fraud statute rendered the statute unconstitutionally vague because “determining at what point healthcare services have crossed the line from merely bad to criminally worthless would leave many men of common intelligence guessing.” Because Houser’s convictions could be upheld on other grounds, the Eleventh Circuit declined to articulate a bright line rule for determining when clearly substandard services become “worthless,” and left open the question of whether the provision of “worthless” services, versus the failure to provide services at all, can provide a basis for prosecuting a provider under the federal healthcare fraud statute.
Like worthless services, lack of medical necessity is being used more frequently and aggressively to support criminal healthcare fraud prosecutions, thus broadening the scope of the healthcare fraud statute. Because the Medicare and Medicaid programs will reimburse only for those healthcare services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,” providers must certify when they submit claims for payment that the healthcare items or services for which reimbursement is sought are medically reasonable and necessary. For there to be criminal liability based on lack of medical necessity, the government must prove not only that the item or service was unnecessary, but that the provider knew it was unnecessary.
The Social Security Act does not, however, define “reasonable and necessary,” thus leaving considerable room for debate surrounding the meaning of these nebulous terms as they relate to healthcare services. Whether a service is medically necessary in any particular case often involves subjective clinical judgment on which medical experts may reasonably disagree, making these cases among the most difficult to prosecute. These cases are rendered more difficult by the deference traditionally given to physicians and the reluctance of courts to second-guess the medical community.
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