September
2003 Case Study
United States v. Krizek
The False Claims Act: From American Dream to American Nightmare
Slipping the chains
of tyranny, George Krizek escaped Communist Czechoslovakia in 1966 to
begin a new life in America. Freedom must have tasted sweet to Dr. Krizek,
who had suffered years of Nazi occupation followed by decades of the cold
totalitarian bureaucracy of Communism. When the rest of the family escaped
the following year, the Krizek’s were eager to enjoy the fruits
of liberty in their new home.
Dr. Krizek did not come to America empty handed. Trained in psychiatry
at Charles University School of Medicine in Prague and also in Vienna,
Austria, he was already a well educated medical doctor. After a residency
at Beth Israel Hospital in New York City, Dr. Krizek moved his family
to the Washington, D.C., area in the early 1970s to practice psychiatry
and give back to his new community. Many of Dr. Krizek’s patients
had serious psychological and other medical issues and were poor or homeless.
To defray the costs of treating patients who were elderly or unable to
pay, Dr. Krizek routinely filed for reimbursement from Medicare or Medicaid.
Allowing her husband to dedicate himself to caring for patients, Blanka
Krizek assumed the role of bookkeeper for the one-man psychiatry practice.
She waded through volumes of regulations and forms and definitions and
codes, doing her best to navigate the immense bureaucracy of the Health
Care Financing Administration. Although English was not her native language,
she managed well enough that Dr. Krizek could devote his time to practicing
medicine. The Krizeks were living out their American Dream: working together
to earn a living while serving the needs of their community.
A telephone call on December 12, 1989, was the beginning of the end of
their dream. An unidentified voice asked Mrs. Krizek if she would be at
home to receive a Christmas package. No package arrived, only three federal
agents from the Department of Health and Human Services (HHS) who said
they were “from Medicaid” and “had some questions.”
Although they provided no identification and produced no search warrant,
Mrs. Krizek invited them into her home. “I am still asked why I
let them in.” She explains, “we had nothing to hide and I
believed in the fairness of our adopted country’s system.”
The government agents proceeded to yell, scream, and berate Mrs. Krizek,
accusing her of stealing from Medicaid by double-billing, creating fake
patients, and other corrupt billing procedures. For each patient named,
Mrs. Krizek was able to produce a file with the appropriate records. She
remembers that the agents were dismissive and did not appear to understand
the billing procedures themselves. After three hours of insults and accusations,
even ridiculing Mrs. Krizek’s accent, the agents left. For three
years, the Krizeks heard nothing more from the government. They decided
that there must have been some mistake and put the nasty incident out
of mind.
The Krizeks had good reason to believe the incident was a mistake. The
Medicare Program Integrity Manual requires insurance contractors “to
assist providers” if they are struggling to comply with the complex
“billing and claim rules.” The contractors who process these
claims “must initiate focused provider education when a specific
error is verified.” Mrs. Krizek remembered that both their Medicare
and Medicaid contracts set forth an obligation “to notify a doctor
if any problems with his billing were found and to educate him about proper
billing methods.”
On Christmas Eve 1992, a certified letter was delivered to the Krizeks
from the U.S. Attorney’s Office. The letter announced that the government
was prepared to file a lawsuit against both Dr. and Mrs. Krizek for an
alleged 8,002 fraudulent Medicare and Medicaid reimbursements. Of course,
this could be avoided, the letter offered, “in exchange for an appropriate
cash settlement.” The Krizeks, shocked by the allegations, arranged
to speak with the Assistant U.S. Attorney on the case. The response, according
to Mrs. Krizek, was essentially “We are the Government, we don’t
have to show you anything…. Pay us hundreds of thousands of dollars
and we won’t file suit.”
Instead of rolling over to what they viewed as “official extortion,”
the Krizeks decided to fight the allegations and prove their innocence.
The government reacted by calling a press conference to announce a “major
health care fraud enforcement initiative,” including a lawsuit against
Dr. and Mrs. Krizek for thousands of fraudulent claims. The government
suit against the Krizeks would seek $81 million. The great fanfare and
astronomical dollar figure helped to ensure that the story made the newspapers
and local television and radio. The Krizeks had yet to set foot in court,
much less be found liable for anything, but their reputation was already
seriously injured.
The government complaint against Dr. and Mrs. Krizek alleged 8,002 violations
of the False Claims Act as well as conspiracy to defraud the government
and unjust enrichment. The alleged damages were $245,392 from the six
years covered by the suit. The government also wanted the maximum $10,000
fine for each supposed violation, adding up to more than $80 million in
punitive fines. Their theory of the case accused Dr. Krizek of providing
medically unnecessary treatment and systematically overcharging the government
by “up-coding” on Medicare and Medicaid claim forms.
Originally enacted in 1863, the False Claims Act was the Lincoln Administration’s
reaction to “a spate of frauds upon the government” by defense
contractors during the Civil War. In a 1986 revision, Congress increased
the law’s punitive fines and removed the requirement of specific
intent to defraud the government. This revision turned the law into a
sword of Damocles dangling over the heads of so many well-meaning doctors.
For any reimbursement form with a single mistake, a doctor can be forced
to pay a $10,000 fine plus treble damages (three times the actual damages).
The False Claims Act’s penalties are so severe that it is essentially
a de facto criminal law.
Because of the massive scope of the allegations, the Krizek’s case
was tried on the basis of a seven patient sample, representing 200 reimbursements.
After a three-week bench trial, the District Court Judge eviscerated the
charge of providing medically unnecessary treatment, finding the government’s
single witness completely unpersuasive in the face of Dr. Krizek’s
own testimony. The court held that the doctor was “a capable and
competent physician” who cared for many people “afflicted
with horribly severe psychiatric disorders.” The court also noted
that the government’s witness had failed to even “examine
or interview any of the patients, or speak with any other doctors or nurses
who had actually served these patients.”
On the issue of “up-coding,” the court found the government’s
interpretation of the relevant policies to be irrational, unfair, and
not supported by evidence. This part of the government’s case turned
on the Krizeks’ frequent use of “Code 90844,” indicating
“45-50 minutes of individual psychotherapy,” on reimbursement
forms. Both Dr. and Mrs. Krizek believed that the rules meant to include
all the time spent on patient care, in or out of the presence of the patient.
The government claimed that “even if as much as an hour of a physician's
time is devoted to a patient's case, with half that time spent in a face-to-face
psychotherapy session and the rest spent on related services, the doctor
is only permitted reimbursement … for the 30 minutes spent face-to-face.”
The court once again found the defense witnesses “credible and persuasive”
and largely dismissed the government’s evidence. The court pointed
to the testimony of a government witness, who claimed that a doctor could
make the same telephone call to a consulting physician either in the patient’s
presence or in a different room and one scenario would be reimbursable
and the other would not be. The court held that “[t]he system cannot
be so arbitrary, so perverse, as to subject a doctor whose annual income
during the relevant period averaged between $100,000 and $120,000, to
potential liability in excess of 80 million dollars because telephone
calls were made in one room rather than another.”
With the two issues decided in their favor and the government discredited,
it appeared that the Krizeks had prevailed. The court, however, decided
to consider the Krizeks’ billing methods in their totality. With
so many seriously ill patients, Dr. Krizek had largely left the billing
to his wife. Faced with federal regulations more voluminous than the tax
code, Mrs. Krizek did her best to appropriately fill out and submit the
reimbursement forms. The Krizeks acknowledged that their billing methods
were often hurried and lacked formal oversight or auditing like a larger
medical practice might have enjoyed. While mistakes were possible, perhaps
inevitable, the Krizeks maintain that they worked hard to obey the law.
After finding the government’s witnesses unconvincing and their
burden of proof unmet, the court went fishing in six years of Dr. Krizek’s
medical reimbursement forms. The judge held that the Krizeks had demonstrated
a “reckless disregard of the truth or falsity of the information”
in their bills to Medicare and Medicaid. Because the False Claims Act
requires “no specific intent” to defraud, this supposed carelessness
was enough to find the Krizeks in violation of it. The judge announced
that he would hold them liable for any claims submitted in excess of “nine
patient-treatment hours” per day. An article about the case noted
that on the “billing side, Krizek won one battle, but he lost the
war.”
The nine-hour threshold resulted from the testimony of a single psychiatrist
about his normal workload. The court ignored evidence that Dr. Krizek
routinely worked long hours and had occasionally worked around the clock
when filling in for an absent colleague. Instead of examining the evidence
for proof of specific actual errors, the court arbitrarily shifted the
burden of proof to the defendants. For any claim exceeding nine hours
in one day, the Krizeks would have to prove their innocence. The case
was referred to a special master to examine the records and produce a
finding for the court.
The special master was faced with a daunting task. Only two of the seven
codes used by psychiatrists actually had specified time dimensions. Even
for these two codes, the time windows were clearly estimates. The 90844
code was described by American Medical Association guidelines as 45 to
50 minutes of care, but had been construed by the Inspector General of
HHS to range from 37 minutes to one hour. The special master determined
that he would charge Dr. Krizek 45 minutes for each code 90844. Adopting
the formula invented by a single HHS junior investigator, the special
master assigned time values to each of the seven codes.
After several months, the special master informed the court that he had
found 264 days where the bills indicated that Dr. Krizek spent more than
nine hours providing patient care. This could be viewed as further proof
of the court’s earlier finding “that Dr. Krizek worked long
hours on behalf of his patients.” This should not have been a surprise
since most doctors normally commit very long hours to their practices.
Instead, the court ordered the Krizeks to reimburse the government $47,105.39
in damages. Because the court had never determined that any particular
reimbursement was invalid, the only basis for the amount of damages was
the special master’s arbitrary selection of which claims might represent
the patient care that was provided after the court’s nine-hour limit.
The court backpedaled when it came to assessing punitive fines. For these
purposes the court changed their standard and assumed liability only for
claims in excess of 24 hours in one day. The calculations, however, continued
to rely on the special master’s questionable methodology. If the
special master had used the HHS 37 minute minimum instead of the AMA 45
minute minimum, the court would have allowed Dr. Krizek to care for six
more patients in a 24 hour period. In the six years examined, there were
three days where the formula suggested more than 24 hours of patient care.
While the Krizeks concede that errors were possible, they also showed
that on at least one of these occasions Dr. Krizek had actually worked
around the clock. Nevertheless, the court ordered the Krizeks to pay the
maximum $10,000 fine for each of eleven reimbursements from the three
days, plus $11,000 in court fees. In all, the court required Dr. and Mrs.
Krizek to pay almost $170,000 in damages, fines and fees.
Even after destroying Dr. Krizek’s practice and crippling the couple
financially, the government remained unsatisfied and appealed the trial
court’s decision. The Krizek’s also appealed, and the D.C.
Circuit Court of Appeals remanded the case with a new definition of “claims”
which reduced the Krizek’s fines from $110,000 to $30,000. They
allowed the government to present limited new evidence, although the lower
court later accused the government of attempting a “fishing expedition.”
The lower court noted that Dr. Krizek had retired and was suffering from
cancer. Almost begging the government to let the case end, the court chastised
the government for continuing “to relentlessly pursue Dr. Krizek,
who is at this point a broken and sick man.” Despite the District
Court’s plea, the government again appealed and was successful in
ratcheting the judgment back up to more than a quarter of a million dollars.
The Krizeks tried to challenge the decision, but were turned down on appeals
to the DC Circuit and the U.S. Supreme Court.
The Krizek’s case illustrates the grave danger of blurring the line
between criminal and civil law. While the government suggested that the
Krizeks were guilty of criminal acts, they declined criminal prosecution
in favor of civil action pursuant to the False Claims Act. This meant
that government attorneys were not required to prove that Dr. or Mrs.
Krisek ever intended to commit a wrongful act. Instead, allegations of
carelessness became the basis for destroying Dr. Krizek’s medical
practice. By selecting the False Claims Act the government also dramatically
lowered their burden of proof from the high standard (beyond a reasonable
doubt) necessary for criminal convictions to the lower standard (preponderance
of the evidence) required in civil court.
Dr. and Mrs. Krizek still live in the capitol city of their adopted homeland.
Dr. Krizek, his medical practice destroyed, can no longer use his international
training and decades of experience in psychiatry to care for some of the
District of Columbia’s most needy residents. Testifying about the
case before the U.S. House of Representatives Judiciary Committee, Mrs.
Krizek recalled that “we have both been intensely patriotic in our
new country, [but] we must now step back and question whether what we
have experienced at the hands of Government investigators and prosecutors
meets any possible definition of democracy or due process.”
For more information, see the following cases:
- United States v. Krizek, 192 F.3d 1024 (D.C. Cir. 1999)
- United States v. Krizek, 7 F.Supp.2d 56 (D.D.C. 1998)
- United States v. Krizek, 111 F.3d 934 (D.C. Cir. 1997)
- United States v. Krizek, 909 F.Supp. 32 (D.D.C. 1995)
- United States
v. Krizek,
859 F.Supp. 5 (D.D.C. 1994)
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