Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05455/USCOURTS-caDC-98-05455-0/pdf.json

Nature of Suit Code: 150
Nature of Suit: Overpayments &amp; Enforcement of Judgments
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 1999 Decided October 5, 1999

No. 98-5455

United States of America,

Appellant/Cross-Appellee

v.

George O. Krizek, M.D. and Blanka H. Krizek,

Appellees/Cross-Appellants

Consolidated with

No. 98-5456

Appeals from the United States District

Court for the District of Columbia

(No. 93cv00054)

---------

Mark E. Nagle, Assistant U.S. Attorney, argued the cause

for appellant/cross-appellee. Wilma A. Lewis, U.S. Attorney,

R. Craig Lawrence and Dara A. Corrigan, Assistant U.S.

Attorneys, were on the briefs.

Jeffrey Bossert Clark argued the cause for appellees/crossappellants. With him on the briefs was Karen N. Walker.

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Before: Wald, Silberman and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: After a three-week bench trial, the

district court found that defendants, a psychiatrist and his

wife/secretary, submitted claims for reimbursement for services performed for Medicare/Medicaid patients in violation of

the False Claims Act. Because it was impossible to identify

precisely which claims were fraudulent, the district court held

defendants liable only for claims submitted on days they

billed for more than twenty-four hours of work, and then only

for those patient sessions that exceeded the twenty-fourth

hour. Following an appeal to this court, we remanded to the

district court to consider additional evidence from the Government and to recalculate the number of false claims based

on a new definition of "claim." Finding the district court's

actions on remand inconsistent with our mandate, we again

remand for further proceedings.

I

Dr. George Krizek practiced psychiatry in Washington,

D.C. His wife Blanka functioned as his secretary and was

responsible for his billing. In 1993, the Government filed a

civil complaint alleging that for six years the Krizeks had

submitted claims for reimbursement for services provided to

Medicare/Medicaid patients in violation of the False Claims

Act, 31 U.S.C. ss 3729-31. After a three-week bench trial,

the district court found that the Krizeks had submitted claims

for reimbursement "when Dr. Krizek could not have spent the

requisite time providing services...." United States v. Krizek, 859 F. Supp. 5, 12 (D.D.C. 1994). Ruling that the

Krizeks would be "presumed liable" under the False Claims

Act for all claims they submitted in excess of nine hours per

day, the district court referred the case to a Special Master to

determine the number of false claims in excess of the ninehour benchmark and to calculate the precise amount of the

Krizeks' liability.

In the proceedings before the Special Master, the Government introduced into evidence all "HCFA 1500" forms that

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the Krizeks had submitted to the Government for reimbursement. HCFA 1500 forms serve as invoices for billing Medicare and Medicaid: they must contain the doctor's name, the

patient's name, the dates services were provided, and a fivedigit code identifying each service provided to a particular

patient, called a "CPT code." For example, the CPT code

90844, which Dr. Krizek used frequently, indicates an individual psychotherapy session lasting approximately forty-five to

fifty minutes. While a single HCFA form includes services

for only one patient, it may include services rendered to that

patient on multiple days.

HCFA 1500 forms contain only the CPT codes that Dr.

Krizek billed, not the actual time he spent with each patient.

As a result, the Special Master had to fashion a methodology

to convert the codes into time periods in order to determine

the number of hours the doctor actually billed each day.

Because of the large number of claims (some days Dr. Krizek

saw upwards of fifty patients), changing the assumptions of

how much time each code represented would materially affect

the total time billed for the entire day. Largely accepting the

Government's proposed methodology for translating CPT

codes into time periods, the Special Master attributed to each

code the amount of time at the low end of its stated range

(unless the doctor had indicated a different time period on the

form). For the frequently used CPT code 90844, for example,

the Special Master assumed a forty-five-minute session, the

low end of the forty-five to fifty-minute range. For CPT code

90843, another frequently used code, this one having a twenty

to thirty-minute range, the Special Master assumed twenty

minutes. Using this methodology and determining that each

CPT code represented a "claim" under the False Claims Act,

the Special Master identified 264 days on which the Krizeks

billed for more than nine hours, amounting to 1,149 false

claims. Multiplying by $5,000, the minimum fine per claim

under the False Claims Act, the Special Master calculated a

total fine of $5.7 million.

The district court accepted the Special Master's findings of

fact. United States v. Krizek, 909 F. Supp. 32, 33 (D.D.C.

1995) ("Krizek II"). Seemingly moved by the enormity of the

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$5.7 million fine, however, the district court abandoned the

nine-hour presumption, ruling instead that defendants could

only be liable under the False Claims Act for claims submitted on days on which they billed for more than twenty-four

hours of work, and then only for those patient sessions

exceeding the twenty-fourth hour. Id. at 34. Applying this

new benchmark, the Special Master identified three days on

which the Krizeks billed more than twenty-four hours; on

those days, he found a total of eleven false claims. The

district court, assessing the $10,000 maximum fine under the

False Claims Act for each violation, entered judgment against

the Krizeks for $110,000, plus unjust enrichment damages of

$47,100. Id. Both parties appealed.

In United States v. Krizek, 111 F.3d 934 (D.C. Cir. 1997)

("Krizek III"), this court affirmed the Krizeks' liability under

the False Claims Act but remanded for further proceedings

with respect to the calculation of the number of violations and

the penalties to be assessed. In so doing, Krizek III resolved

two issues central to the current appeal. First, it held that

"the District Court's use of a twenty-four hour presumption,

having earlier announced its intent to use nine hours as the

benchmark, prejudiced [the Government's] prosecution of the

claim." Id. at 938. In this regard, the court noted that the

Government, in reliance on the district court's nine-hour

benchmark, had adopted conservative estimates regarding the

time attributable to each CPT code and declined to pursue

discovery of Dr. Krizek's billings for non-Medicare/Medicaid

patients. Id. Second, Krizek III rejected the conclusion of

both the Special Master and the district court that each

individual CPT code on a HCFA 1500 form represents a

"claim" under the False Claims Act, holding instead that each

HCFA 1500 form is a claim. Id. at 939-40. For example, if a

particular HCFA 1500 form identifies five services performed

by Dr. Krizek for a single patient on five separate days, the

form could constitute at most one false claim.

On remand, the district court ordered the Krizeks to give

the Government their records of private pay patients seen on

the ten "worst" days--those days the Government identified

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as reflecting the Krizeks' most egregious billing practices.

Citing the "meager fruit" to be expected from further discovery when the ten worst days plus fifteen additional days

voluntarily provided by the Krizeks yielded only two additional days on which the Krizeks had billed more than twentyfour hours, the district court rejected the Government's request for additional discovery. United States v. Krizek, 7

F. Supp. 2d 56, 58 (D.D.C. 1998) ("Krizek IV"). At the same

time, the district court refused to find False Claims Act

liability on the two additional twenty-four-hour days because

"the Government cannot prove that the claims in excess of 24

hours were the ones billed to Medicare/Medicaid as opposed

to those billed to non-Medicare/Medicaid private patients."

Id. Turning to Krizek III's definition of "claim," and reasoning that "[o]n the evidence submitted, the Government has

failed to establish which of the claims, under the new definition, are the ones in excess of the 24 hour presumption," the

district court found insufficient evidence in the record to

establish more than one false claim per day. Id. at 59. The

district court fined the Krizeks $30,000, $10,000 for each false

claim.

II

In this second appeal, again brought by both sides, the

parties fundamentally misunderstand the limited scope of this

court's remand in Krizek III. In their cross-appeal, for

example, the Krizeks argue that Krizek III's direction to the

district court to consider additional evidence regarding the

conservative time assumptions the Government adopted in

reliance on the nine-hour benchmark "reopened the methodological issue," allowing them to challenge the factual underpinnings of the Special Master's calculations. Not so. Krizek III's remand rested on its express finding that the switch

from a nine-hour to a twenty-four-hour benchmark prejudiced

the Government's prosecution of its case. Krizek III intended nothing more than to give the Government an opportunity

to revisit its assumptions, not to reopen all aspects of the

Special Master's methodology.

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We will not consider the Krizeks' cross-appeal for a second,

equally important reason. Although they insist that they

"challenged the government's methodology at every conceivable step," they failed to do so at one critical juncture: their

original appeal to this court. See Hartman v. Duffey, 88 F.3d

1232, 1236 (D.C. Cir. 1996) ("We do not reach the merits of

defendant's arguments on this issue because of the defendant's failure to pursue it in its prior appeal."), cert. denied,

520 U.S. 1240 (1997).

Equally misconstruing Krizek III's limited remand, the

Government faults the district court for failing to reconsider

the twenty-four hour benchmark. Nothing in Krizek III

entitled the Government to challenge that benchmark on

remand. Krizek III assumed the validity of the twenty-fourhour benchmark and remanded for the limited purpose of

giving the Government an opportunity to revisit its assumptions. If this court had intended to require the district court

to go beyond evaluating the Government's assumptions and to

reconsider the twenty-four-hour benchmark, it would have

done so directly, not as elliptically as the Government claims

it did.

Although the twenty-four-hour benchmark is a closed matter in this litigation, we do think the Government has pointed

out three respects in which the district court's actions are

inconsistent with Krizek III's mandate: the district court

refused to consider the Government's evidence regarding the

conservative assumptions it adopted in reliance on the ninehour benchmark; it excluded time billed to Dr. Krizek's

private pay patients from the calculation of twenty-four-hour

days; and it applied an incorrect methodology to determine

the number of false claims over the twenty-four-hour benchmark. With respect to the first two issues, Krizek III could

not have been clearer: "The government argues that the

District Court's use of a twenty-four hour presumption, having earlier announced its intent to use nine hours as the

benchmark, prejudiced its prosecution of the claim. We

agree and remand for further proceedings." Krizek III, 111

F.3d at 938. To flesh out the nature of that prejudice, Krizek

III directed the district court to (1) focus on the conservative

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assumptions the Government offered to determine how much

time to allocate to each CPT code and (2) allow discovery of

records of time billed to Dr. Krizek's private pay patients.

Id.

Referring to the first of these tasks, Krizek III characterized the Government's time estimates as conservative, concluding that: "Considering the large number of claims submitted on any given day these assumptions may have had a

material effect on the damages proved up by the government.

However, because the damages were likely to be substantial

already [using a nine-hour benchmark], the government chose

not to proffer less generous approximations." Id. Notwithstanding Krizek III's clarity, the district court flatly refused

to listen to the Government's arguments about its conservative assumptions, let alone to allow the Government to introduce additional evidence. When Government counsel raised

the issue at a September 5 Status Call, the district court said:

"You're dead on that issue. There is no--you're not going to

now say, okay, it's 30 [minutes]. No, no. The Court of

Appeals didn't say that. The Court of Appeals ... indicated

they accepted that." In response, Government counsel quoted the passages from Krizek III discussed above. "You've

misread that," replied the district court.

Don't mislead this Court, Mr. Hegyi.... You're misleading the Court now. That's not what it says.... All

it says is that you were generous, and it doesn't say that

I now go back and have to let you be less generous....

Look, Mr. Hegyi, I'm not going to argue with you any

more. So let's go on. No, you're not going to continue

with that because the Court of Appeals affirmed the

Special Master and I'm not going to undo that work.

Instead of defending the district court's actions with respect to the Government's conservative assumptions, the Krizeks argue that the Government failed to preserve the issue

for appellate review. The record demonstrates to the contrary. Not only did the Government twice bring the issue to

the attention of the district court during the September 5

Status Call, but it reiterated its claim in written submissions

to the district court: "The United States is aware that at the

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September 5, 1997 status conference the Court indicated it

would not permit such a re-calculation. However, the United

States includes this proposal out of an abundance of caution

to prevent a possible future claim of waiver or abandonment

by the Government." Given the district court's refusal to

discuss the assumptions and particularly given its accusation

that Government counsel was trying to mislead the court, we

have no idea what more the Krizeks think the Government

should have done (short of risking contempt) to preserve the

issue for appeal.

To avoid any confusion about the scope of our remand from

this appeal, we state our instructions with specificity. The

district court must first allow the Government to submit

additional evidence regarding its conservative assumptions.

It should then consider whether the Government's evidence

requires any change in the Special Master's calculation of the

number of hours billed each day. Nothing in this remand

"reopens" the methodological issues raised by the Krizeks in

their cross-appeal. The Krizeks may respond to the Government's claim that its assumptions were too conservative in

light of the twenty-four-hour benchmark, nothing more.

Krizek III's direction to the district court regarding the

handling of private pay patients breaks down into two issues:

discovery regarding the Krizeks' billing of private pay patients and incorporation of private pay patients into the

calculation of the number of hours billed each day. Beginning with the first issue, we disagree with the Government

that the district court improperly restricted its discovery.

Since the private pay records for the twenty-five worst days

yielded only two additional twenty-four-hour days, the district

court's conclusion that further discovery would not likely have

identified any more was hardly an abuse of discretion. See

Food Lion, Inc. v. United Food and Commercial Workers

Int'l Union, 103 F.3d 1007, 1012 (D.C. Cir. 1997) ("[A] district

court's decision to permit or deny discovery is reviewable only

for an abuse of discretion.").

We do agree with the Government, however, that the

district court's refusal to include time billed to private pay

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patients in the calculation of the number of hours the Krizeks

billed per day was inconsistent with the Krizek III mandate.

Krizek III stated: "Presumably, if the government had introduced evidence on [private pay] patients it could have established that the Krizeks billed in excess of twenty-four hours

on more days than indicated by Medicare and Medicaid

records alone." 111 F.3d at 938. Clearly implicit in this

statement is the proposition that private pay patients be

included in calculating twenty-four-hour days. Why else

would Krizek III have ordered such discovery? Yet the

district court refused to include private pay patients, explaining, "the Government cannot prove that the claims in excess

of 24 hours were the ones billed to Medicare/Medicaid as

opposed to those billed to non-Medicare/Medicaid private

patients." Krizek IV, 7 F. Supp. 2d at 58. "The mere

assumption that all hours exceeding the 24 hour benchmark

were hours billed to Medicare/Medicaid," the district court

said, "is insufficient to prove knowing or reckless conduct."

Id. at 59.

In refusing to include private pay patients as required by

Krizek III, the district court imposed on the Government a

burden not required by the False Claims Act. The Government does not have to "prove that the claims in excess of 24

hours were the ones billed to Medicare/Medicaid." The False

Claims Act requires only that the Government prove that the

Krizeks acted "in reckless disregard of the truth or falsity of

the information" they submitted to the Government, and that

it do so not beyond a reasonable doubt, but "by a preponderance of the evidence." 31 U.S.C. ss 3729(b)(3), 3731(c). Yet

under the district court's reasoning, it would be virtually

impossible for the Government to establish liability on any

twenty-four-hour day that included private pay patients.

Particularly in view of the district court's exceptionally

conservative twenty-four-hour benchmark--i.e., the Krizeks

could be found liable only on days they billed for more than

twenty-four hours of work, a physical impossibility--we think

the False Claims Act preponderance standard is easily satisfied when any patient is seen beyond the twenty-fourth hour.

Reinforcing this conclusion, an affidavit by a Government

Special Agent lists several reasons for suspecting that the

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false claims were most likely the Medicare/Medicaid claims,

including that many Medicare/Medicaid patients were being

treated for severe psychiatric disorders and likely lacked the

ability to monitor bills submitted on their behalf, that the

private pay patients had an "active self-interest" in ensuring

that the Krizeks billed them properly, and that the Krizeks

had a greater incentive to keep (and therefore not defraud)

their more lucrative private pay patients.

In sum, Krizek III's inclusion of private pay patients has

two implications for the calculation of the number of false

claims, implications the district court must account for on

remand. First, it adds two more twenty-four-hour days,

bringing the total to five. Second, it increases the number of

false claims on the three original twenty-four-hour days.

This brings us to the final respect in which the district

court's actions were inconsistent with Krizek III. Krizek III

required the district court to recalculate the number of false

claims submitted by the Krizeks in light of the court's redefinition of "claim" as the HCFA 1500 form itself, not the

individual CPT codes on the forms. 111 F.3d at 940. Although determining the number of false claims requires nothing more than calculating how many forms actually contained

fraudulent entries, the district court simply concluded that

three twenty-four-hour days equals three false claims. The

district court explained:

On the evidence submitted, the Government has failed to

establish which of the claims, under the new definition,

are the ones in excess of the 24 hour presumption. The

evidence merely establishes that on the 3 days in question, the Defendants billed in excess of 24 hours to

Medicare/Medicaid. Based on this record, the Court can

only conclude that on each of the 3 days, there was at

least one false claim under the definition established by

the Court of Appeals.... While there certainly could

have been more than one form with a false statement

submitted on each given day, there is insufficient proof in

the record.

Krizek IV, 7 F. Supp. 2d at 59.

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Again, we think the district court heightened the Government's burden of proof beyond the False Claims Act's preponderance standard. The Government need not prove which

particular patient sessions occurred after the twenty-fourth

hour. Indeed, both parties agree that would be an impossible

task because records indicating the time of day Dr. Krizek

saw particular patients do not exist. Even defense counsel

seems to agree that the district court's rationale for finding

only three false claims is flawed, conceding at oral argument

that the proper method of determining the number of false

claims is to count the number of patient sessions after the

twenty-fourth hour and then to eliminate any overlap among

those sessions, i.e., instances in which the Krizeks billed on a

single HCFA form more than one patient session occurring

after the twenty-fourth hour.

To accomplish this simple task, the parties in the district

court need do nothing more than utilize the methodology for

calculating the number of false claims developed by the

Special Master. The Special Master's methodology was employed by the district court in Krizek II and not appealed by

the Krizeks. Krizek III's new definition of "claim" merely

adds an additional step--the elimination of overlap.

We need not describe the Special Master's methodology

here; his procedures and assumptions are fully explained in

the record. Suffice it to say that his methodology, based on

assumptions favorable to the Krizeks, identified which particular patient sessions occurred after the twenty-fourth hour

and produced a total of eleven such sessions on the three

original twenty-four-hour days. To calculate the number of

false claims, all the district court needed to do on remand

from Krizek III--and all it needs to do now--is eliminate any

overlap among patient sessions occurring after the twentyfourth hour that are billed on the same HCFA form. For

example, if Dr. Krizek saw patient X after the twenty-fourth

hour on two of the twenty-four-hour days, and billed both

days on the same HCFA 1500 form, only one false claim

occurred, not two.

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Not surprisingly, the parties do not even agree about this

simple mathematical calculation. Citing an affidavit by its

Special Agent, the Government claims that there is no overlap

among the eleven false claims found by the district court in

Krizek II. Counsel for the Krizeks, who conceded at oral

argument that the district court's reasoning was flawed,

nonetheless claims that eliminating the overlap would yield

the same result as the district court reached in Krizek IV--

only three false claims. To support this proposition, counsel

directed us to a chart in the record before the district court.

As we read that chart, however, it speaks not to the overlap

among the three twenty-four-hour days the district court

originally identified, but to overlap among one of those three

days and the two twenty-four-hour days the Government

discovered when accounting for private pay patients. The

chart, moreover, fails to employ the Special Master's methodology for identifying which particular patient sessions occurred after the twenty-fourth hour.

The district court's task on remand is simple and mathematical. To determine the number of false claims, it must (1)

use the Special Master's methodology to count the number of

patient sessions that occurred after the twenty-fourth hour on

the five twenty-four-hour days (the three original twentyfour-hour days plus the two additional twenty-four-hour days

discovered on remand from Krizek III) and then (2) eliminate

any overlap among those sessions.

III

This prosecution of a single doctor has now spanned over

six years. It has consumed three weeks of trial, several days

of hearings before the Special Master and the district court,

two fully briefed, fully argued appeals, and five published

opinions (three by the district court and two by this court).

The five days on which the false claims were made occurred

over twelve years ago. According to defense counsel, Dr.

Krizek no longer practices medicine and is dying of cancer.

It is time for the parties to stop refighting battles long-ago

lost and for the district court to bring this prosecution to an

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expeditious close. To facilitate that goal, we repeat our

instructions. (1) The district court must permit the Government to introduce evidence regarding its conservative assumptions and then consider whether to change any of the

Special Master's assumptions in light of this evidence. (2)

The district court must include private pay patients in its

recalculation of the number of hours the Krizeks billed on

each of the five twenty-four-hour days. (3) Then, using the

methodology adopted by the Special Master, the district court

must determine the number of false claims by recalculating

the number of patient sessions after the twenty-fourth hour

on each of the five twenty-four-hour days and eliminating any

overlap. We fully expect that these simple steps will bring

this prosecution to a long-deserved end.

The clerk is directed to issue the mandate forthwith.

So ordered.

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