Computers and Health Care Fraud

This post deals with a recent New York case involving Saleem Khan’s prosecution for health care fraud in violation of New York Penal Law Article 177. People v. Khan, __ N.Y.S.2d __, 2011 WL 166725 (New York Supreme Court – Appellate Division 2011).

Specifically, Khan was charged with health care fraud in the fourth degree under New York Penal Law § 177.10. People v. Khan, supra. Section 177.10 provides as follows:

A person is guilty of health care fraud in the fourth degree when such person, on one or more occasions, commits the crime of health care fraud in the fifth degree and the payment or portion of the payment wrongfully received, as the case may be, from a single health plan, in a period of not more than one year, exceeds three thousand dollars in the aggregate.

Section 177.05 of the Penal Law says one commits health care fraud in the fifth degree when “with intent to defraud a health plan, he . . . knowingly and willfully provides false information or omits material information for the purpose of requesting payment from a health plan for a health care item”. That brings us back to Mr. Khan, who was charged as the result of an undercover investigation by New York police.

On November 15, 2007, undercover officer Pedro Gomez entered the NYC Pharmacy and asked the clerk, Marvin Portillo, for 40 pills each of the prescription medications Amitriptyline and Clonidine. . . . Portillo said that was too many pills to dispense without a prescription, and would have to ask his `boss.’ Portillo . . . spoke to [Khan]. Although [Khan] told Gomez it was a federal crime to sell those pills without a prescription, and he could lose his job if he did so, he eventually agreed to sell Gomez the Amitriptyline and Clonidine. . . . Portillo gave the detective two orange bottles containing pills . . . and the detective gave him two $20 bills. . . .

People v. Khan, supra. Gomez repeated the purchases two more times, once in November and the second time in February, 2008. People v. Khan, supra. Then, in “the second phase of the investigation,” Gomez presented prescriptions to Khan and asked

for medications not specified in the prescriptions. To pay for [them], Gomez used a New York State Benefit card (prepared by HRA to be used in this investigation) in the name of Ivonne Arroyo, a fictitious woman, whom Gomez said was his wife. . . . [W]hen a Medicaid recipient presents a prescription to a participating pharmacy, the pharmacy dispenses the medication and then bills Medicaid for reimbursement.

On February 28, 2008, Gomez presented defendant with a Zyprexa prescription (an antipsychotic drug), stating that it was for his girlfriend/wife. He also told [Khan] that `[t]hey gave [his wife] this because she's crazy,’ adding, `I don't want that, my wife is not crazy. Rather, he wanted Amitriptyline and Clonidine. . . . He told Portillo earlier that he wanted the pills so that he could make money.

[Khan] took the prescription to the back of the pharmacy, returned and had Gomez sign a book on the counter and the back of the Zyprexa prescription. Gomez signed `Ivonne Arroyo.’ [Khan] told Gomez he could give him 30 pills, but Gomez asked for . . . urging, `Come on I need to make a little money.’ After more negotiation, [Khan] agreed to give Gomez 40 pills. . . .

People v. Khan, supra.

Gomez came back on March 6 and got more Amitriptyline, and again on April with prescriptions for two “antiviral mediations” and Advair, saying he got them from his “`girl.’” People v. Khan, supra. He also asked for Percocet, a painkiller, for his cousin, but Khan said he could not give Gomez anything containing a controlled substance. People v. Khan, supra. Gomez them complained about

being hassled despite their past dealings. [Khan] explained that detectives might ask who provided the prescriptions. . . . Gomez signed the prescriptions, reassuring [Khan] that he was familiar with Arroyo's signature and would sign the way he had before. Defendant went to the back of the pharmacy, but returned and explained that he could not dispense the painkillers because they were not registered in the computer. [Khan] . . . told him to return on Saturday for the painkillers.

People v. Khan, supra. Gomez came back a final time on May 21, for Amitriptyline and Clonidine. Khan at first resisted, saying the prescriptions were “`not properly registered in the computer’” and a prescription had to be “`in the computer by the doctor in order to be dispensed, ”’otherwise he could not bill Medicaid for the prescriptions.” People v. Khan, supra. Khan eventually sold Gomez the pills. People v. Khan, supra.

Khan was charged with and convicted of several offenses, one of which was health care fraud in the fourth degree. People v. Khan, supra. He appealed, thereby bringing the first appeal of a conviction under Penal Law § 177.10. People v. Khan, supra. In ruling on his appeal, the New York appellate court addressed “the nature of proof required for a conviction.” People v. Khan, supra.

The court found that the evidence supported a conviction for health care fraud in the fourth degree “on the theory that the Medicaid claims misidentified the recipient of the medications.” People v. Khan, supra. Khan had argued that “under this theory, a customer who goes to a pharmacy to obtain medication for a spouse would be guilty of health care fraud merely because the insurance claim or Medicare claim is made in the spouse’s name.” People v. Khan, supra. The appellate court disagreed, pointing out that the definition of a “`person’ for purposes of prosecution under this statute excludes a recipient of a health care item . . .unless such person was an accessory to the fraud.” People v. Khan, supra.

Thus, absent evidence that a spouse under [Khan’s] hypothetical is involved in a scheme to defraud a health care plan, there would be no prosecution for health care fraud. Nor would a pharmacist who dispenses medications to someone other than the one for whom medications are prescribed commit fraud in the absence of evidence that the person picking up the medications is involved in an illegal scheme and the pharmacist is also aware of what is going on.

People v. Khan, supra.

The appellate court also rejected Khan’s other argument challenging his conviction on health care fraud in the fourth degree:

An additional element of a health care fraud prosecution is evidence that the defendant `provided’ the materially false information. Although the statute does not expressly specify to whom the information is provided, nor does it limit the method by which the information is provided, it must be for the purpose of requesting payment from a health plan for a health care item or service. . . .

According to [Khan],, there is no evidence that [he] was the person who actually misled Medicaid. The statute, however, does not require that the People establish that [Khan] personally provided the false information to Medicaid. It is enough that he relayed that information to someone for the purpose of requesting payment from a health care plan. Whether the bookkeeper or a secretary actually entered the information via computer is irrelevant in prosecuting [Khan].

People v. Khan, supra.

The court noted that various evidence, such as the time-lines involved in the billings for the medications dispensed to Gomez, inferentially indicated Khan “provided” the false information to Medicaid. People v. Khan, supra. And it also pointed out that “on two different occasions,” Khan told Gomez he could not “dispense . . . certain medications because they were `not properly registered on the computer.’” People v. Khan, supra.

The majority of the Supreme Court – Appellate Division upheld Khan’s conviction for health care fraud and for the other offenses with which he was charged. People v. Khan, supra. One justice – Justice Catterson – dissented. People v. Khan, supra.

Justice Catterson argued that the evidence was flawed in various respects, one of which was that there was

no evidence that [Khan] suspected or knew Arroyo did not exist. Only Gomez and the investigators knew Arroyo was a fictitious individual. Further, based on the explanations [Khan] made to Gomez as to why he could not dispense Percocet, it is evident that the pharmacy used a system where legitimate prescriptions are entered by doctors into a computer database in order that they can be billed to Medicaid. Since Arroyo's prescriptions evidently were entered in the computer, there was no basis for [Khan] to believe Arroyo was not a real patient; or that Gomez, who had never identified himself by name, or shown [Khan] any identification, was not indeed her husband or boyfriend.

Consequently, the majority's position that [Khan] knowingly misidentified the recipient because `[he] knew Ivonne Arroyo was not the recipient of the medications, but rather Gomez, who wanted the drugs to sell for a profit’ is not supported by the evidence as to the March 6, 2008 incident. Such conclusion requires evidence that, on March 6, 2008 [Khan] gave Gomez the pills he asked for instead of dispensing the prescribed medication. This however, as the majority clearly holds, is precisely the evidence that was not proferred. Hence, the element of `knowingly and willfully provid[ing] materially false information’ was not proved beyond a reasonable doubt.

People v. Khan, supra. (In the March 6, 2008 transaction, Khan gave Gomez a bottle labeled as containing the medication for which Gomez submitted a prescription, but Gomez later said the pills in the bottle were the Amitriptyline he had gotten before; according the dissent, these pills were not introduced into evidence or analyzed.) People v. Khan, supra.

Justice Catterson found that the prosecution’s failure “to prove beyond a reasonable doubt” that Khan “materially misinformed Medicaid as to the drugs dispensed or as to the recipient of the medication” impacted “the value elements” of the health care fraud conviction. People v. Khan, supra. The dissenting judge would, therefore, have reduced the charge to a conviction for health care fraud in the fifth degree and remanded the case for resentencing, i.e., for a reduced sentence. People v. Khan, supra.