Court Opinion

ID: 184994
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:26:32+00
Date Added: 2024-06-11T17:26:12.516637
License: Public Domain

192 F.3d 1024 (D.C. Cir. 1999)
United States of America, Appellant/Cross-Appelleev.George O. Krizek, M.D. and Blanka H. Krizek, Appellees/Cross-Appellants
No. 98-5455 Consolidated with No. 98-5456
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 8, 1999Decided October 5, 1999

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/cross appellants. With him on the briefs was Karen N. Walker.
Before:  Wald, Silberman and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge:

1
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.

2
* 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. §§ 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.

3
In the proceedings before the Special Master, the Government introduced into evidence all "HCFA 1500" forms that 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.

4
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.

5
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 $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.

6
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.

7
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 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 twenty four 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

8
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.

9
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).

10
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-four hour 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.

11
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 nine hour 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 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.

12
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.

13
Don't mislead this Court, Mr. Hegyi....  You're mis-leading 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 anymore.  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.

14
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 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.

15
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.

16
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.").

17
We do agree with the Government, however, that the  district court's refusal to include time billed to private pay patients in the calculation of the number of hours the Krizeks  billed per day was inconsistent with the Krizek III man date. 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.

18
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. §§ 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.

19
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 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.

20
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.

21
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:

22
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.

23
Krizek IV, 7 F. Supp. 2d at 59.

24
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.

25
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.

26
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.

27
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.

28
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 twenty four-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

29
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.

30
It is time for the parties to stop refighting battles long-ago  lost and for the district court to bring this prosecution to an 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.

31
The clerk is directed to issue the mandate forthwith.

32
So ordered.