Defining "willful" remuneration: how Bryan v. United States affects the scienter requirement of the medicare/medicaid anti-kickback statute.

• Author: DeGraw, Robb

1. INTRODUCTION

   The General Accounting Office and the Department of Health and Human Services (the "DHHS") recently estimated that Medicare pays $23 billion a year in fraudulent medical claims. (1) Not surprisingly, many health care professionals consider Medicare fraud and abuse the leading health care issue in 1999. (2) To combat the fraud abuse in the system, Congress has recently enacted several new laws and given life to some old ones. For example, Congress recently passed the Stark laws (3) the 1981 Civil Monetary Penalties Law, (4) and the Health Insurance Portability and Accountability Act. (5) In addition, the False Claims Act, originally enacted in 1863 with a qui tam provision, has become a major force in assisting the government in discovering and prosecuting fraudulent claims. (6) Considerable emphasis has also been placed on prosecuting fraud and abuse under the federal Medicare and Medicaid anti-kickback statute. (7) This Note examines the recent split in federal courts' interpretation of the scienter requirement of the anti-kickback statute and how the Supreme Court's recent definition of "willfully" in Bryan v. United States, (8) will impact the mens rea requirement for conviction under the anti-kickback statute.

   State and federal anti-kickback laws aim to prohibit the exchange of remuneration for referrals of patients, goods, or services under publicly funded health care programs. The premise of these laws is if a medical professional has a financial incentive for referring patients, he is more likely to increase the number of services performed. This incentive, in turn, will lead to an overutilization of services, the unnecessarily depletion of program funds, and a waste of taxpayer dollars. (9) Although many state laws contain similar provisions, this Note focuses solely on the federal Medicare and Medicaid anti-kickback statute. (10)

   The anti-kickback statute has been the source of much controversy. Supporters of the law argue that it is necessary to punish providers who would contribute to the nation's spiraling health care costs by placing profit over the best interests of their patients. On the other hand, medical providers fear that the anti-kickback laws will punish "innocent" referral arrangements used throughout the industry. Furthermore, it has been argued that these arrangements may ultimately save taxpayers dollars because of the efficiencies which they create. (11) For example, if a hospital owns a management service organization (MSO) that furnishes support services to a physician practice, the hospital may be in violation of the anti-kickback statute if it charges less than the fair market value for the services it provides to the MSO on the theory that such savings are "remuneration" to induce referrals. (12)

   At the forefront of the debate over the anti-kickback statute, and the topic of this Note, is the mens rea, or mental state, that is required for a violation of the law. According to the statute, an individual must "knowingly and willfully" solicit or receive, or offer or pay, remuneration in order to induce business reimbursed under any federal health care program. (13) The interpretation of these terms by the federal courts has varied wildly, as have the underlying Supreme Court cases cited as precedent for such interpretations. However, in June of 1998, the Supreme Court defined the meaning of "willfully" under a federal criminal statute in Bryan v. United States. (14) Although the criminal statute in Bryan was unrelated to health care fraud, the Eleventh Circuit has adopted the Bryan Court's definition of "willfully" in a case involving the anti-kickback statute. (15) Whether Bryan will resolve the split between the circuit courts is unclear; however, this case is certain to significantly influence the debate.

   The following Section of this Note briefly summarizes the legislative development of the federal anti-kickback statute including the 1980 amendment adding the mens rea requirement. Section II also summarizes the 1996 amendment requiring that the Secretary of the DHHS (Department of Health and Human Services) issue advisory opinions in response to requests for guidance about whether specific business arrangements are within the limits of the anti-kickback statute. Section III examines the various federal court interpretations of the mens rea requirement of the statute. As described in this Section, there is a split of authority as to the meaning of the word "willfully" under the statute. Because the Supreme Court has not interpreted the meaning of the mens rea requirement of the anti-kickback statute, this Section also examines the principal cases that have defined "willfully" in the context of other federal criminal statutes, that have been relied upon in interpreting the anti-kickback statute. Section IV analyzes Bryan v. United States, where the Supreme Court defined "willfully" under the Firearms Owners' Protection Act, as acting with a "bad purpose" or with the intent to do something which the law forbids. (16) Section V analyzes United States v. Starks, the first, and to date only, circuit court decision to interpret the mens rea standard of the statute in light of the Bryan decision. Section VI analyzes the alternative interpretations of the mens rea standard of the anti-kickback statute, and the reasons that federal courts will likely adopt the Bryan court's definition of "willfully." Finally, this Note concludes, that, despite its factual distinction from health care fraud and abuse litigation, the Supreme Court's recent decision in Bryan will greatly impact the current debate about the proper interpretation of "willfully" under the anti-kickback statute.

2. LEGISLATIVE DEVELOPMENT OF THE ANTI-KICKBACK STATUTE

   1. Background

      The federal anti-kickback statute was first enacted as part of the Social Security Amendments of 1972, (17) and was primarily concerned with outlawing health care referrals that were considered unethical or inappropriate. Specifically, the statute made it a misdemeanor for any individual to furnish, solicit, offer or receive any kickback, bribe or rebate in connection with any item or service for which payment could be made under the Medicare and Medicaid programs. A violation of the statute was punishable by a fine of up to $10,000, a maximum term of imprisonment of one year, or both. (18)

      Shortly after its enactment, several key issues arose regarding the statute's interpretation. (19) First, it did not appear that a mens rea, or mental culpability, was required for a violation of the statute. (20) Second, it was unclear what types of business arrangements--particularly joint venture arrangements that were beginning to develop in the health care industry--were precluded by the statute. (21) Finally, terms such as "kickback," "bribe" and "rebate" were not defined in the statute. These uncertainties led to conflicting court interpretations of the statute. Consequently, government prosecutors were unsure what arrangements would be construed as a kickback and health care providers had little assurance that their commercial arrangements were properly structured.

      In response to these issues, Congress enacted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977 (MMAAA). (22) The amendments both expanded and narrowed the reach of the statute. Congress expanded the reach of the statute by substituting the phrase "any remuneration" for the terms "rebates," "bribes" and "kickbacks." (23) In addition, a violation of the statute was increased to felony status, and the penalties were raised to a maximum fine of up to $25,000 per violation and/or five years' imprisonment. (24) The legislative history of the MMAAA indicates that these amendments were intended to be read broadly in favor of the government. (25) On the other hand, concern that the provisions of the statute could be construed to punish innocent business transactions likely motivated the adoption of two exceptions to the statute. First, the scope of the statute was narrowed to exclude the practice of discounts or other price reductions. (26) Second, payments made to employees under a bona fide employment relationship were also excluded from the reach of the anti-kickback statute. (27)

      Instead of resolving the controversy over the interpretation and application of the anti-kickback statute, the 1977 amendments caused considerable worry among the health care industry due to their potential breadth. Again, it was argued that a broad construction of the provisions of the statute (especially the undefined phrase "any remuneration") would result in punishing not only those who had engaged in wrongful conduct, but also those providers whose conduct was innocent and socially beneficial. (28)

   2. The "Willfully" Mens Rea Requirement

      In 1980, Congress amended the anti-kickback statute by adding a mens rea element. Specifically, the amendment added the requirement that an individual must engage in the proscribed conduct "knowingly and willfully" to be Convicted under the statute. (29) The House Budget Committee Report pointed out that the purpose of the revision was to ensure that those whose conduct may have been improper would nonetheless not be prosecuted unless they specifically intended to engage in the proscribed conduct. (30) This same mens rea element exists in the anti-kickback statute today.

      The mens rea requirement was added to quiet fears of unwarranted prosecution under the statute. However, as discussed below, the interpretation and application of the requirement has been the source of considerable debate and controversy.

      The 1980 amendment adding the mens rea requirement was the last amendment to the prohibitive provisions of the anti-kickback statute. Thus, the statute currently provides:

      (1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash...