Opinion ID: 774568
Heading Depth: 3
Heading Rank: 1

Heading: Jury Instruction on and Construction of the Act

Text: 48 Defendants 9 claim the applicable jury instructions on the Act--Instruction #32 10 for Mr. Anderson and Instruction #33 11 for the LaHues are incorrect and warrant a new trial. Specifically, they challenge the at least in part or one purpose standard applied in these two instructions. In other words, they argue a defendant should not be convicted under the Act when his offer, payment, solicitation, or receipt of remuneration was motivated merely in part to induce or in return for referrals; rather, they suggest conviction is only appropriate when the motivation to induce or in return for referrals was the defendant's primary purpose. 49 In their opening briefs filed before the McClatchey panel published its decision defendants correctly noted this was an issue of first impression in this circuit, and argued for the rejection of the one purpose standard enunciated by the Third Circuit in United States v. Greber, 760 F.2d 68 (3d Cir.), cert. denied, 474 U.S. 988 (1985). Defendants argued the one purpose standard was inappropriate because: (1) [i]t converts a criminal statute passed with a specific aim to deter and punish abusive practices that threaten the integrity of federally funded health care programs into prohibition of all arrangements, no matter how slight, that implicate patient referrals (emphasis in original); (2) as a policy matter, it will destroy highly beneficial health care arrangements; (3) statutory construction principles require a narrower interpretation of the Act; (4) the Department of Health and Human Services, charged by statute in 1987 to promulgate regulations defining conduct not subject to the Act's prohibitions, did not provide any authoritative interpretation of the [Act] as it applied to hospital-physician relationships during the term of the charged conspiracy; and (5) it leads to unduly confusing jury instructions and courts should utilize the actual language of the Act instead. Finally, anticipating this court's potential agreement with Greber, defendants argued the one purpose standard renders the Act unconstitutionally vague by vesting undue discretion in government officials to decide what is legal and what is illegal. 50 In McClatchey, this court rejected Mr. McClatchey's same argument that the district court improperly instructed the jury it could convict [him] if remuneration was paid 'at least in part' to induce patient referrals. McClatchey, 217 F.3d at 826, 834 (emphasis added). We held Instruction #32 accurately informed the jury of the applicable law, because a person who offers or pays remuneration to another person violates the Act, so long as one purpose of the offer or payment is to induce Medicare or Medicaid patient referrals. Id. at 835 (emphasis added). We recognized [t]he only three Circuits to have decided this issue have all adopted the 'one purpose' test. Id. (citing cases from the Third, Fifth, and Ninth Circuits). Our decision to adopt the one purpose test rested upon our review of, and agreement with, the sound reasoning of the Third Circuit in Greber. Id. In this appeal, the government claims defendants' challenges to Instructions #32 and 33 are foreclosed by the stare decisis effect of McClatchey, the Act as construed by McClatchey is not void for vagueness under due process, and, therefore, defendants are not entitled to a new trial based on the jury instructions. We agree with the government. 12 51 We are bound by the precedent of prior panels absent en banc reconsideration or a superceding contrary decision by the Supreme Court. In re Smith, 10 F.3d 723, 724 (10th Cir. 1993) (per curiam), cert. denied, 513 U.S. 807 (1994). In this case, defendants' petition for initial hearing en banc on this issue was denied, and the Supreme Court has not decided a case on the Act since our McClatchey decision. See Order filed August 3, 2000. Accordingly, McClatchey is controlling authority, 13 and we must conclude Instruction #32 accurately informed the jury of the law applicable to Mr. Anderson. 52 Similarly, we conclude the reasoning underlying the McClatchey holding applies equally to remuneration solicited or received in return for Medicare or Medicaid patient referrals. See United States v. Meyers, 200 F.3d 715, 720 (10th Cir. 2000) (The precedent of prior panels which this court must follow includes not only the very narrow holdings of those prior cases, but also the reasoning underlying those holdings, particularly when such reasoning articulates a point of law.); see also McClatchey, 217 F.3d at 835 (citing the Ninth Circuit's opinion in United States v. Kats, 871 F.2d 105, 108 (9th Cir. 1989) adopting the one purpose standard); Kats, 871 F.2d at 108 (adopting the one purpose standard and affirming the defendant's conviction for receiving kickbacks in exchange for referral of Medicare payments). As a practical matter, if we held otherwise, we could illogically be faced with a case in which the offeror/payor is deemed to violate the Act, but the offeree/payee is not. Accordingly, we conclude Instruction #33 accurately informed the jury of the law applicable to the LaHues. 53 We turn to defendants' due process challenge to our one purpose interpretation of the Act as unconstitutionally vague, which is the only unresolved issue after McClatchey and our above conclusions. When reviewing a statute alleged to be vague, courts must indulge a presumption that it is constitutional, and the statute must be upheld unless the court is satisfied beyond all reasonable doubt that the legislature went beyond the confines of the Constitution. United States v. Day, 223 F.3d 1225, 1228 (10th Cir. 2000) (quotation marks and citation omitted). Under settled law, a broadly worded statute can be sufficiently clarified by a narrowing, authoritative interpretation to fend off a vagueness challenge. Dirks v. SEC, 802 F.2d 1468, 1471 (D.C. Cir. 1986). 54 Defendants appear to argue this court's one purpose interpretation of the Act is unconstitutional on its face and as applied to them. As a preliminary matter, we hold their facial challenge is prohibited. See United States v. Gaudreau, 860 F.2d 357, 360-61 (10th Cir. 1988). Facial challenges are permitted when the statute threaten[s] to chill constitutionally protected conduct and in some instances ... on pre-enforcement review. Id. at 360-61. In this case, defendants have not argued, nor do we perceive, that the Act threatens to chill constitutionally protected conduct, 14 and this is not a pre-enforcement situation. See id. at 361. Accordingly, we must examine the Act, as applied in this case, for vagueness in light of the conduct with which defendants are charged. See id. 55 [T]he void-for-vagueness doctrine requires that a penal statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement. Kolender v. Lawson, 461 U.S. 352, 357 (1983). The same facets of a statute usually raise concerns of both fair notice and adequate enforcement standards. Hence the analysis of these two concerns tends to overlap. The Supreme Court, however, while ... recognizing the second concern as more important, continues to treat each as an element to be analyzed separately. Gaudreau, 860 F.2d at 359-60. We evaluate each element in turn. 15 56 Regarding fair notice, [o]ne to whose conduct a statute clearly applies may not successfully challenge it for vagueness. Day, 223 F.3d at 1228 (addressing the defendant's vagueness challenge to a federal criminal statute) (quotation marks and citations omitted). In this case, the evidence produced at trial clearly demonstrated defendants negotiated and entered consulting contracts in an attempt to camouflage an underlying agreement to exchange remuneration for patient referrals. Therefore, defendants' conduct is the very conduct contemplated by the Act, and they cannot successfully challenge the Act for vagueness as to fair notice. See id. at 1228-29. 57 Specifically, the record shows the following about the Baptist-LaHues relationship: 16 (1) the LaHues entered negotiations with Baptist, because University Hospital refused to acquiesce to their demand for an increased salary in return for continued patient referrals; (2) the 1985 contract and 1986 agreement established a fee of $150,000 per year from Baptist to the LaHues; (3) Baptist and the LaHues resolved the fee before discussing an arrangement to justify it; (4) from Mr. Anderson's perspective, these negotiations were grounded in the hospital receiving patient referrals, and he told Ms. Grim the Baptist-Blue Valley relationship was a business deal in which Baptist would pay money to Blue Valley in return for patient referrals; and (5) once Baptist began the payments, Blue Valley referred massive numbers of patients to Baptist with a corresponding halt in referrals to University Hospital. 58 Further evidence substantiates this was a pay-for-patients scheme. For instance, the record on whether the LaHues fulfilled their commitments under the 1985 contract and 1986 agreement and Mr. Anderson's knowledge thereof reveals: (1) Ms. Grimes was unaware of the 1985 contract, which purportedly made the LaHues co-directors of gerontology services, and she documented the LaHues' failure to fulfill all but one of the activities required of them in the 1986 agreement as of March 1987; (2) Ms. Flynn testified the LaHues did nothing required of them in the 1986 agreement from 1988 to 1990, and intimated Mr. Anderson knew this because he was very knowledgeable about the Clinic's operations; (3) in late 1991/early 1992, Mr. McGrath met with Mr. Anderson and discussed (a) Dr. Robert LaHue's statement that he and Dr. Ronald LaHue were not performing some of the services listed in the 1986 agreement, and (b) documentation reflecting the LaHues consulted at Baptist for only two hours per week 17 ; and (4) Mr. Eckard testified the LaHues provided minimal to no services under the 1985 contract, and failed to provide the enumerated services in the 1986 agreement on a routine basis, if at all. 59 Finally, we note the evidence supports the following conclusions: (1) although Mr. Anderson controlled whether the payments would continue, he did not stop them when he learned the services were neither entirely bona fide nor performed by the LaHues, and the payments were more than fair market value for consulting services; and (2) when it appeared the Baptist/LaHues relationship might end in 1994, Mr. Anderson worked to develop a strategy to replace the Blue Valley patients, but did nothing to replace the LaHues' consulting services. We therefore conclude the evidence produced at trial demonstrated defendants knew their conduct, which was clearly a pay-for-patients scheme, was prohibited by the Act. Accordingly, their vagueness challenge as to fair notice must fail. See Day, 223 F.3d at 1228-29. 60 Regarding the adequacy of enforcement standards, [d]ue process requires that legislation state reasonably clear guidelines for law enforcement officials, juries, and courts to follow in discharging their responsibility of identifying and evaluating allegedly illegal conduct. Gaudreau, 860 F.2d at 363. Where the legislature fails to provide such minimal guidelines, a criminal statute may permit 'a standardless sweep [that] allows policemen, prosecutors, and juries to pursue their personal predilections.' Kolender, 461 U.S. at 358 (quoting Smith v. Goguen, 415 U.S. 566, 575 (1974)). A statute is unconstitutionally vague if its language and construction by the courts vest authority in law enforcement officers, prosecutors, and juries to assign their own subjective meaning to an element of the offense. See Kolender, 461 U.S. at 355-61; Gaudreau, 860 F.2d at 363-64. 18 61 Even if defendants understood the illegality of a pay-for-patients scheme under the Act, they claim the Act is unconstitutionally vague because it encourages arbitrary enforcement. Defendants argue prosecutors and agency officials may choose to proceed criminally against virtually anyone in the health care community under the one purpose test, which they describe as having limitless reach. Specifically, they claim the one purpose test 62 makes virtually every arrangement between a hospital and a physician unlawful, because the hospital executive will always have patient referrals in mind, at least to some degree.... 63 ... In other words, in the hospital-physician context at least, according to the district court, all conduct is illegal unless the [Department of Health and Human Services] has expressly, or through an 'advisory' dispensation, made a specific act legal. 64 We disagree for two reasons. 65 First, the Act explicitly prohibits any remuneration knowingly and willfully offered or paid to induce, or solicited or received in return for, Medicare or Medicaid patient referrals. See 42 U.S.C. 1320a-7b(b). Defendants fail to point to any language in the Act or the one purpose test that vests authority in law enforcement officers, prosecutors, and juries to assign their own subjective meaning to an element of the offense. We do not perceive any such problem, and conclude a fair reading of the Act provides reasonably clear guidelines for law enforcement officials, juries, and courts to evaluate and discern illegal conduct. See Gaudreau, 860 F.2d at 363-64. Moreover, it is the application of the Act to defendants by law enforcement officials we review; in an as applied examination, defendants may not generalize beyond the conduct with which they are charged. See id. at 360-61. As noted above, the evidence produced at trial shows defendants clearly participated in a pay-for-patients scheme. Thus, enforcement of the Act as applied to defendants was not arbitrary or discriminatory. See United States v. Corrow, 119 F.3d 796, 804 (10th Cir. 1997) (Our analysis of the fairness issue infuses our disposition of the second vagueness concern, the potential for arbitrary and discriminatory enforcement.), cert. denied, 522 U.S. 1133 (1998). 66 Second, defendants' argument ignores the actual instructions given in this case. The district court instructed the jury that 67 [Mr.] Anderson ... cannot be convicted merely because [he] hoped or expected or believed that referrals may ensue from remuneration that was designed wholly for other purposes. Likewise, mere oral encouragement to refer patients or the mere creation of an attractive place to which patients can be referred does not violate the law. 68 The district court further instructed the jury that 69 Robert LaHue and Ronald LaHue cannot be convicted merely because they received remuneration wholly in return for services and also decided to refer patients to the hospital. Likewise, mere referral of patients because of oral encouragement or because of a belief that the place to which patients are to be referred is attractive does not violate the law. 70 This application of the Act by the district court clearly allows business relationships between a hospital and physician where the motivation to enter into the relationship is for legal reasons entirely distinct from the collateral hope for or decision to make referrals. See McClatchey, 217 F.3d at 834 & n.7. Accordingly, contrary to defendants' assertion, the Act, as applied in this case, does not make all conduct illegal when a hospital executive or physician has referrals in mind. 71 In summary, under the controlling authority of McClatchey and for the other reasons articulated herein, we conclude the district court correctly instructed the jury on the Act. We hold the Act, as applied to defendants, is not unconstitutionally vague. Accordingly, defendants are not entitled to a new trial on this issue. 72