CASE STUDIES | United States v. Krizek

The False Claims Act: From American Dream to American Nightmare

(September 2003 Case Study)

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)