Robert W. Miller[1]
When teaching the federal anti-kickback statute[2] (the”AKS”),
in a health law survey course or in an advanced course on regulation of
healthcare providers, I believe it is not enough to teach only the
statute, the cases, the safe harbors and the advisory opinions. We
should also teach how to advise clients about the AKS. I have four
reasons for this view.
First, the AKS implicates conduct that is not traditionally or
obviously criminal conduct; and that fact in turn raises the question of
to what extent professional restrictions on advising about criminal laws
apply or are relaxed when counseling a client about the AKS.
Second, the combination of the “a purpose”[3] to induce
referrals element of the AKS and the scienter (“knowingly and
willfully”) requirement for a violation together form almost a
“double intent” requirement for violation. The business of
client advising with respect to a purpose and intent-driven statue is
murky and fraught with danger and traps for the unwary attorney.
Third, the 1998 indictment of two Kansas City healthcare attorneys over
AKS advice provides the teacher with a graphic example of the risks of
advising clients about the AKS or in transactions that might implicate
the AKS.
Fourth, the well-known Thompson memorandum, “Principles of
Federal Prosecution of Business Organizations”[4] concerning the role of
cooperation in the decision to prosecute, when taken together with the
now common practice of an entity’s waiving of the attorney-client
privilege as part of the settlement of a healthcare fraud
investigation[5], should affect not only advice given during an
investigation but also AKS advice given prior to any investigation.
How an attorney advises clients about the AKS in the face of this
rich mixture of factors is something that ought to be taught and that,
because the issues are not obvious from teaching the AKS alone, is
useful to the law students. In the remainder of this note, I describe
the ways in which I try to teach students about AKS client advising; and
I begin with Kansas City to get their attention.
Kansas City. The Kansas City investigation that led to
the conviction of several hospital executives for violation of the AKS
also resulted in the indictment of two attorneys—the
hospital’s in-house counsel and an attorney in a firm that advised
the hospital. The 1998 indictment alleged the two attorneys conspired
with the hospital in its plan to assure patient referrals from two
physicians. The government claimed the attorneys knew of the
hospital’s unlawful intent to pay illegal kickbacks to the
physicians and had counseled the hospital in ways to avoid detection of
the unlawful payments.
There were some notes made by one attorney that arguably supported
the government’s view of things. And, in a related decision, the
Tenth Circuit Court of Appeals determined that the government had made
out a prima facie case that the services of the two attorneys
“…were used both to effectuate the crime of fraud and to
conceal it.” In the course of pretrial motions in the case, the
government claimed that two additional attorneys with an out-of-town law
firm were unindicted co-conspirators in the case. The attorneys’
firm had been retained by the hospital in the later stages of its
dealings with the two physicians. The government alleged the out-of-city
attorneys had facilitated criminal acts by, among other things, marking
incriminating documents as “privileged.”
The hospital had settled with the government prior to the indictments
of individuals and, as likely was required by the government as the
price of settlement, had waived the attorney-client privilege. The two
local attorneys were thus compelled to testify before the grand jury and
to turn over files they had assumed would be protected by the privilege.
They were indicted in some considerable part based on what the files
contained. When they objected to disclosure, the Tenth Circuit Court of
Appeals held that the crime-fraud exception to the attorney-client
privilege applied and required the attorneys to testify and to deliver
up what they considered to be privileged documents.[6]
In the end, the District Court entered a judgment of acquittal of the
two attorneys in 1999 at the close of the government’s case. It
also expunged from the record the reference to the two out-of-town
attorneys as unindicted co-conspirators. Any reputational damage
remained.[7]
Advice Examples. The next step is to talk about giving
AKS advice, and the legal advice problems raised by an intent-driven,
non-traditional criminal law. I use this example: Your hospital client
comes to you for advice and contract drafting skills relating to a
proposed agreement between the hospital and a physician who will provide
services to the hospital and who is also in a position to make patient
referrals to the hospital. The proposed agreement, for some reason, does
not fit the personal services agreement safe harbor.
Does or should the lawyer’s advice go like this? “As a
technical matter, if your heart is pure and you accordingly do not
‘knowingly and willfully’ have a purpose to induce referrals
when paying remuneration, then this contract will not violate the
anti-kickback statute. Incidentally, I am using ‘induce’ in
the Hanlester sense of the term. It means ‘an intent to
exercise influence over the reason or judgment of another in an effort
to cause the referral of program-related business.’ On the other
hand, if your heart is not pure, then it makes no difference how many
times the contract recites the remuneration is not being paid to induce
referrals or how fairly priced are the services to be provided by the
physician. Impure heart, crime committed.”
What further advice can or should the attorney give? Can the attorney
say, “I cannot determine whether or not your heart is pure,
therefore I cannot advise you concerning whether or not a purpose and
intent-driven statute would be violated by your proposed
agreement.” OR “Although I cannot advise you about whether
your heart is pure, I can advise you that, IF the remuneration is
reasonable for services actually rendered, and IF reasonable mechanisms
are contained in the contract for monitoring the services, and IF
(citing U. S. v. McClatchey[8]) the hospital actually
has a need for the services, THEN the arrangement has the indicia of
something that does not violate the law and will not be prosecuted in
the absence of evidence of an impure purpose.” And a prudent
counsel would add, “Of course, I should mention that, even if the
government concludes it cannot prove beyond a reasonable doubt that this
arrangement violates the anti-kickback statute, it can still, in an
administrative proceeding with a preponderance of the evidence standard
applying, attempt to impose civil monetary penalties and/or exclusion of
the hospital—and you, Mister (or Madam) Executive, for that
matter—from the Medicare and Medicaid programs.”
Permitted Scope of Advice. In addition to sample pieces
of advice, I also like to use an analytical approach based on Stephen
Pepper, Counseling at the Limits of the Law: An Exercise in the
Jurisprudence and Ethics of Lawyering, 104 Yale L. J. 1545 (1995).
It is obvious the lawyer can advise about what the law is. In
healthcare, the clients know the basics of the AKS almost as well as the
lawyers do, so they will always expect more than just that
advice. Thus, AKS advice is useful (and firing by the client can be
avoided) only if it goes beyond “what the law is” into some
form of advising and counseling: (i) draft the contract so that within
its four corners it not only does not violate the AKS but also contains
provisions that indicate it does not violate AKS; (ii) advise on
enforcement prospects, including both with what frequency the law is
enforced and whether OIG or the Department of Justice would attempt to
enforce it in this situation.
Pepper, I think correctly, makes a distinction between obvious and
non-obvious or non-traditional crimes and pretty much concludes the
range of appropriate, permitted legal advice and counseling is greater
for non-traditional crimes. This notion comes out of the civil/criminal
distinction and permitted advice with respect to the two. Advice that
might result in violation of a civil law or trigger contract or tort
damages is permitted and is not immoral or unethical because it is about
the cost of a breach that to society is not all that serious. Similar
counseling, beyond saying “what the law is”, for conduct
that is traditionally prohibited with criminal sanctions is much
less—if ever—appropriate or permitted. [Compare “the
sign says do not double park your trucks, but the administrative fine is
only $40 and does not increase for multiple violations” with
“in my experience in defending these cases and watching how the
police work, your chances of being caught after the convenience store
robbery will be reduced if you escape through the back door.”]
Pepper writes about making the civil/criminal distinction the basis
for how creative and extensive legal counseling can be, with more
extensive counseling permitted for civil matters than for criminal
matters, and how this distinction may not work for non-traditional
crimes:
“The intuitive appeal of the criminal/civil distinction as
applied to limiting lawyer advice about the law is substantially weaker
when the examples come from…nonobvious or nontraditional
crimes….to the extent that conduct is criminalized when it is not
intuitively obvious that the conduct involves a serious moral wrong, the
justification for the criminal/civil distinction becomes obscure. The
criminal sanction is supposed to announce that we are particularly
serious about a legal rule, that we really mean a particular act
is prohibited. But when applied to conduct that in no obvious way
involves serious moral wrongdoing, the question irresistibly pushes up:
why are we so serious about this?” 104 Yale L.J. 1545, 1561
(1995).
I am not able to resolve the question of how broad advice can
ethically and legally be when advising a client about a nonobvious
crime, but I think health law students need to consider the issue when
studying the AKS. This topic is followed by a discussion of what a
lawyer can or should say when the client wants to know about enforcement
prospects—and, in the case of a nonobvious crime, they almost
always expect the lawyer to advise about enforcement prospects.
Enforcement Prediction Advice. A past president of the
American Health Lawyers Association has an interesting approach to AKS
advice when what the client is asking him to do is to predict what law
enforcement officials would do if they were to become aware of the
transaction in question. The approach tries to measure the
client’s level of risk aversion. He asks,
“Which of the following are you willing to risk if you do a
proposed transaction:
- 1. The U.S. Attorney learns about the transaction but exercises his
or her discretion not to pursue the matter.
- 2. The transaction is investigated, but the investigation is
terminated without turning it over to a grand jury.
- 3. The transaction is investigated by the U.S. grand jury, subpoenas
are served and perhaps a search warrant, but the grand jury does not
indict.
- 4. The grand jury returns an indictment but the judge dismisses the
indictment prior to trial.
- 5. The judge refuses to dismiss the indictment before trial, but the
judge orders an acquittal at the close of the government’s
case.
- 6. The judge refuses to order an acquittal at the close of the
government’s case, but the jury acquits the defendant.
- 7. The jury convicts the defendant, but the conviction is overturned
on appeal. (And, we think we have a fair shot at keeping you out of
federal prison while the appeal is pending.)?”
The conversation continues only after the lawyer knows the
client’s level of risk aversion and can thus decide how aggressive
the advice should be, given that client’s level of risk aversion.
(And, indeed, at some point a client’s willingness to assume risk
means the lawyer cannot give any advice without running the risk of
counseling a crime.) All this is prefaced by a statement that what the
client is asking for is not legal advice in the traditional sense of the
term. It is instead legal process crystal ball gazing.
Thompson Memorandum. As the last part of the primer on
how to advise clients about the AKS, I comment on the Thompson
memorandum, a 15-page memorandum on the principles that should be
applied by federal prosecutors in deciding whether or not to prosecute a
corporation. The memorandum combines previously existing principles with
knowledge gained in the major corporate prosecutions in the wake of
Enron and similar corporate imbroglios.
A lawyer who advises a client in the area of healthcare criminal laws
must be conversant with this memorandum. In advising a client prior to
an investigation, the executives of an institutional provider need to
understand that, when and if an investigation arises, the provider will
almost surely decide to cooperate. Few officers of a corporation have
any real knowledge of the role played by cooperation during an
investigation in the decision to prosecute or not to prosecute. They
certainly do not understand that, under the Thompson memorandum,
“cooperation” requires meaningful cooperation, not
protection of executives and employees and ironclad reliance on the
attorney-client privilege. A Thompson memorandum discussion usually has
the effect of making executives and employees of institutional providers
much more risk averse when dealing with the AKS.
There are some real teaching rewards, for student and professor
alike, from spending time on how to advise clients about the AKS.
[1] Bob Miller (A.B., Georgia, 1964; LL. B., Yale,
1967) is an adjunct professor
of health law at Emory University School of Law and is a retired
healthcare partner of King & Spalding, Atlanta, Georgia. Bob is a
past president of one of AHLA’s two predecessors, the American
Academy of Healthcare Attorneys.
[2] 42
U.S.C. §1320a-7b(b).
[3] U.S.
v. Greber, 760 F. 2d 68 (3d. Cir. 1985), and its progeny.
[4]
Memorandum by Larry D. Thompson, Deputy Attorney General, dated January
20, 2003. The memorandum is available at www.usdoj.gov. Go to FOIA
reading room, frequently requested documents, and click on “Deputy
Attorney General”.
[5] In the
Kansas City matter, for example, Baptist Medical Center settled for
$17.5 million and waived the privilege. Note, “Surgery without
a Meat Cleaver: The Criminal Indictment of Health Care Attorneys in
U.S. v. Anderson”, 43 St. Louis U. L. J. 1215, 1239
(1999).
[6] In re
Grand Jury Subpoenas, 144 F. 3d 653 (10th Cir. 1998).
[7] Much of
Kansas City is based on Best Practices Handbook in Advising
Clients on Fraud & Abuse Issues, American Health Lawyers
Association (1999).
[8] 217 F.
3d 823 (10th Cir. 2000), cert. denied, 531 U.S. 1015,
121 S. Ct. 574, 148 L. Ed. 2d 492 (2000).