As the only physician giving a presentation for today's program --- perhaps I should have worn a bull's eye. I hope you will lend me your attention. I assure you that I did not come here to praise my profession --- I simply do not wish to see it buried. I came to speak about honor and the Law. I will proceed from the assumption that in this audience are men and women who do not simply wear the title "honorable," but who uphold justice and the honor of their profession.

I wish to speak to those whose goal is not simply to collect a piece of a $3 billion pie, or to "minimize the risk of fines and penalties" for whatever they are doing, but to end the scandalous outrage of fraud in American medicine. Our goal should not be to work at the problem, or to spend money on the problem, but to solve the problem.

Outcomes Assessment

The desired outcome of our efforts is akin to that described by the creator of Sherlock Holmes, the fictional epitome of the profession of many participants in this seminar. Sir Arthur Conan Doyle (1859-1930) wrote other books also, including The White Company, which is broadly about knighthood and is a kind of memorial to the Unknown Soldiers of an earlier day. Not inappropriate now, since we seem to be in a state of war. Doyle writes: "Through all the centuries and over all those southern waters, nameless men have fought in nameless places, their sole memorial a protected coast and an unravaged countryside."

We should not do "outcomes analysis" for our military by counting purple hearts, war widows and orphans, enemy casualties, bombs exploded on target, or high-tech weapons in the arsenal. Rather, we should judge by the safety of our homeland.

Outcomes analysis for American medicine, in its war against disease, should not be done by counting hospital beds or coronary artery bypass grafts, and certainly not by calculating the "medical loss ratio," but by evaluating the health and longevity of Americans. Our worth as physicians is not measured by gross income, or number of certificates and awards, or score on a computerized quality-assurance scale. Our true worth is immeasurable and incalculable: the suffering and disability we have prevented or relieved and the premature deaths we have averted.

And what about outcomes analysis for American law enforcement? Shall we count the number of convicts in prison; or the number of children deprived, by prison, of their father or mother; or the value of homes, cars, and other property confiscated; or the amount of fines and penalties collected; or the number of clinics shut down by investigations; or the number of private medical records seized and examined by compliance officers; or the number of receptionists (or patients or children) who have experienced an agent's gun in their face; or the size of the prosecutor's budget and work force? A nation with successful law enforcement has peaceful streets and secure property. Such a nation has citizens who respect and abide by the law, have faith in the integrity of law enforcement officials, and need not live in fear either of being mugged by street criminals or ruined by unjust denunciations by their fellow citizens. Such a peaceful society is also a prosperous society: citizens who expect to enjoy the fruits of their own labor work hard and produce abundance. Citizens who are not constantly searching for regulatory booby traps and trip-wires can concentrate on creative work.

And how are we doing? I have read that physicians are now the number two target of the U.S. Department of Justice and in particular Attorney General Reno. Some even think that physicians are the worst enemies of society. A recent Honolulu newspaper stated: "Authorities say that [health care] fraud is far more damaging to the public than most violent crime because of its collateral effects, such as driving up the cost of medical care and stealing tax dollars from the government."(1)

Both the AMA and U.S. assistant attorney Larry Tong of Hawaii declare most doctors are ethical and the huge new dragnet is just out to catch "a few bad apples."

But let's look at the numbers. The amount of health care fraud is declared to be $100 billion. This number gains credibility by frequent repetition in authoritative sources, despite lack of any evidence that it is correct. Maybe the true figure is $10 billion, or maybe it is $500 billion. But let's think about the implications of $100 billion.

One billion is 1,000 million. One hundred billion is 100,000 million. If each thief can manage to steal "only" one million dollars in a year (far more than the gross revenue of most doctors), it would take 100,000 thieves to steal 100,000 million dollars. There are only about 750,000 doctors in the United States, about 450,000 of them in office-based practice. If one in 7.5, or one in 4.5, is guilty of massive fraud, this is hardly a "few" bad apples.

It would be reasonable to suppose that most of the $100 billion is being taken in by large institutions or by outright scams: fly-by-night laboratories, Medicaid mills, dealers in huge volumes of medical supplies, and so forth. However, Neil Smith, head of the white-collar squad in Hawaii's FBI office states that "most fraud cases in Hawaii involve individual doctors."(1) And the enforcement actions we hear about --- 20 government agents bursting into an office, four of them with guns drawn --- involve individual doctors, who are still in shock months later and say that they still can't figure out what they did wrong.

Commando-style raids occurred before the Kassebaum-Kennedy law, although most Americans, even most physicians, were probably unaware of the operations of the fraud squads. With few exceptions, such as a 1990 Prime Time Live special entitled "The Bounty Hunters," national media coverage of individual cases has been relatively sparse.

Compare, for example, media coverage of two fines of approximately one quarter of a million dollars.

The $300,000 fine that Newt Gingrich will pay was discussed in newspapers throughout the land and even on the Rush Limbaugh show. As I understand it, the fine resulted from some technical irregularity in the use of contributed funds. Mr. Gingrich will borrow the money [from former presidential candidate Bob Dole, it was reported] to pay the fine, and there is every expectation that he will easily be able to repay the loan, along with $360,000 in interest, once he is in private life, probably from speaking engagements and other opportunities resulting from his years in public office.

A fine of the same order of magnitude was imposed upon a Washington, D.C., psychiatrist, but people in flyover country haven't heard about it, unless they read AAPS News.(2) The fine resulted from technical irregularities in submitting bills to federally funded programs (Medicare or Medicaid). Similar errors would undoubtedly be found in the billing records of any active medical or legal practice, if an intensive audit were done. But there was no effort to "educate" the doctor, or to warn his colleagues to avoid similar errors. The order of the day was simply to punish.

We don't yet know how the case will eventually turn out. The appeals court remanded it to the lower court. Perhaps the fine will be lowered, but anyone w ho appeals a case takes the risk that his punishment will be made more severe. The original fine imposed was a startling $80 million, though the doctor's lifetime earnings were modest in comparison with his colleagues --- indeed they were such that the gross revenues of 320 years of 16-hour workdays would not have sufficed to pay the fine, much less the interest.

No Bob Dole has stepped forward to loan the doctor money. For one thing, there is no prospect of his repaying the loan. The doctor is an old man, and his life has been ruined. He has been unable to practice his profession for years. This situation is typical for doctors targeted by investigators: the investigation itself may ruin the doctor's reputation, and he may be bankrupted by legal fees long before he ever has a hearing in a court of law. If convicted on criminal charges, he will almost certainly lose his license to practice the profession in which he has invested at least ten years of training.

No one can say why this particular doctor was targeted. Perhaps what the government wants is his house. The doctor's wife, who had done the billing in the case at hand, said the prosecutors asked this question: "She lives in a beautiful mansion. Why doesn't she sell it and give the money to us?"

The beautiful home was purchased as a burnt-out wreck and was restored by this woman's own hard labor. She learned various building trades while her husband worked day and night attending the poorest and most disturbed patients in the city. Apparently, the patients appreciated his efforts; none could be found to testify against him, although the prosecutors interviewed quite a number of them.

This particular case is a civil one; I will also describe some criminal cases. The unvarnished facts show the penalties imposed on physicians under previous law, which will be magnified many times under Kassebaum-Kennedy, are indisputably draconian. The question is whether or not they are deserved. Like in a high school debate, I will present both sides to that question, the case for the defense and then the case for the prosecution.

First, I will argue that the current vendetta against physicians is outrageously unjust and contrary to the American system of constitutional government.

Then I will argue that physicians have nonetheless brought the wrath upon themselves. In the transcendental sense, they deserve what is happening to them. Still worse is inevitably to come unless they mend their ways.

Finally, I will lay out a challenge both for the medical and for the legal professions: what we and our colleagues must do to set things right.

Crime and Punishment

Let me assure you that my remarks are not intended to be anti-government or anti-prosecution. As Thomas Paine explained in Common Sense, government is produced by our wickedness. Its role is to punish: "Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of t he bowers of paradise."

It is also written that "rulers are not a terror to good works, but to the evil...if thou do that which is evil, be afraid; for [the ruler] beareth not the sword in vain." (Romans 13:4)

It is said that "if you can't do the time, don't do the crime." So doctors need to take note of what the time is, and what the crimes are.

Possibly the most important case now in court is that of Jeffrey Jay Rutgard, M.D. A few years ago, he was wealthy, popular, and very successful. His surgical skills were highly regarded; other eye surgeons referred their mothers to him. He thought he was on top of the world, until the day the investigators seized some 20,000 charts and started to go through them with a fine-tooth comb. Even then, he probably never imagined that by April 1997 he would have served more than two years in several federal penitentiaries, including Fort Dix, New Jersey, far away from his wife and five young children in San Diego. His sentence is for 11.25 years.

The Rutgard case illustrates the truth of the saying that the sins of the fathers are visited upon the children. His children hardly ever catch a glimpse of him and know that their daddy is thought to be so wicked that he is locked up with rapists and murderers. He is not even allowed to receive a hand-made piece of artwork from his little girl; that would be too dangerous to society. Nor can he buy her a doll or a pair of shoes, much less pay for her education; his bank accounts were confiscated.

As Richard Henry Dana wrote in Two Years Before the Mast, "When a convict is confined to prison, the distress consequent to his inability to earn a livelihood falls upon a poor wife and helpless children or an i nfirm parent." Even after Dr. Rutgard's release, he will not be able to earn a livelihood with his hard-won surgical skills because he has been delicensed. He may be saddled with lifelong debt.

What exactly did Dr. Rutgard do? He did eye surgery. Did he leave behind him a trail of broken or dead bodies? No, he had thousands of satisfied patients, whose vision was improved. He was not accused of harming any of them. Rutgard did something far worse, in the Hawaiian prosecutors' view, than the gang member who guns down a person who happens to be walking through his territory. The victim of Rutgard's crimes was not a mere human being, but "society," or the government, which paid the bills for all that surgery, some of which (specifically, in 15 out of 20,000 patients) was ruled to be unnecessary. Most patients were not allowed to testify in the doctor's defense. The doctor was not permitted to demonstrate for the jury the effects of a cataract on one's vision while driving in sun conditions common in southern California.

I am not here to defend everything ever done by Dr. Rutgard. My goal is to make sure doctors understand that Dr. Rutgard was punished, not just for "unnecessary" procedures but for everything he did during the period covered by the indictment. The prosecutorial theory was that his practice was "permeated with fraud." Therefore, all of his gross revenue (not just his profits) was subject to seizure, and his time in prison was calculated on the basis of that gross revenue, which was called the "loss" experienced by the insurer.

Rutgard was convicted of $65,140.02 of fraud (which in itself would carry a sentence of three years) but because of the prosecutors' extrapolation methodology was sentenced to 11.25 years in prison and $16.2 million in restitution. One could argue there might actually have been much more fraud than was proved; however, the prosecutors did not do a random sample, but selected the strongest cases from the total universe of 20,000 patients. They themselves dropped about one-third of the charges, and the court threw out others.

Fortunately, the Ninth Circuit Court of Appeals ruled against the prosecution on some very important issues, holding that "it was the burden undertaken by the government...to show that 100% of Rutgard's practice was fraudulent." The concept of being "permeated with fraud" would sustain probable cause for a search warrant but was inadequate to sustain a criminal conviction, said the judges, noting that no fraud was charged for certain aspects of the practice (for which Rutgard was nonetheless being punished) such as self-paying patients, glaucoma patients, and patients with retinal problems, and it was unlikely that all cataract patients were persons who did not need cataract surgery, given that almost every one in four Medicare beneficiaries does need such surgery.

The prosecution argued that Dr. Rutgard's whole practice was nothing more than a scheme to defraud insurers. It was like a securities scam. Dr. Rutgard's motives were purported to be solely to make money.

The Case for the Defense

I think that Dr. Rutgard's conviction was inherently unjust because I think he did not know and could not have known his practice involved the risk of prison time and of utter ruin. To avert further injustice, I think it is critical to inform all physicians that the slightest taint of noncompliance with insurance regulations, as for determining and documenting medical necessity, potentially turn every medical service for which they submit an insurance claim into a federal crime punishable by imprisonment, not just the ones that are specifically questioned by investigators.

Even if physicians have nearly perfect records, they conceivably could be prosecuted successfully, using methods that would outrage most Americans --- or lead to the invalidation of a prosecution if it involved a mere violent street thug or drug dealer. Weekly, AAPS hears reports of methods such as the following: intimidation of patients; tampering with witnesses; armed invasions of offices; seizures exceeding the authority of a search warrant; refusal to state the charges; denial of requests for the assistance of counsel; slander in the press before any hearing; the use of paid spies and informants; and the knowing use of perjured testimony.

The last tactic is the most disturbing of all, because it is the duty of the prosecutor, and of all attorneys, as officers of the court, to uphold the integrity of the court, and not to mislead the court, even when telling the truth may be detrimental to their case.

What are we as Americans to think: a physician may be punished for fraud, for lying to Medicare, on the basis of an inaccurate note in his own records which were never intended to be submitted to the insurer and which came to someone's attention only because they were seized. On the other hand, if someone is convicted on the testimony of false witnesses, even those who tell a story that is utterly bizarre, the conviction may be upheld in the interest of preserving the "finality" of the court's decisions.(3) Or the occurrence of perjury may simply be ignored or glossed over, as in the refusal of U.S. Attorney Eric Holder to prosecute Ira Magaziner for misleading the court in the case of AAPS v. Clinton.(4)

To convict physicians of insurance fraud, a prosecutor need only convince a jury that the procedure codes used do not accurately describe the service rendered by the physician. For this purpose, the prosecutor needs a credible "expert" to assert under oath that codes clearly mean something that may actually contradict the coding manuals or at best be obscure or inconsistent.

A physician told me he had overheard two U.S. attorneys conversing, while he was having lunch in a federal building. One asked, "Do you have a problem with lying under oath?" The other replied, "Not at all."

This report, of course, is hearsay. However, allegations of false statements by prosecutors are frequently made --- and not just by doctors who are in trouble. These are the words of a California Superior Court judge:

Appellant argued that respondent's attorney lied to the administrative law judge....We agree. The statement made to the administrative law judge was pure deception....We punish children under such circumstances, attempting to impress upon them the fact that truth does not come in various shades and is not distinguished from prevarication merely by degree. The Deputy Attorney General representing respondent at the administrative hearing is in desperate need of a lesson in basic ethics - we expect and demand better from an officer of the court and representative of the state than the sanctimonious responses tendered here.(5)

I am assuming that all the members of this audience are honorable men and women and that they would agree with these judges.

The Case for the Prosecution

Having now made a case for the defense, I will now make the case that doctors are getting the treatment they deserve. After all, even the tactics I have described may be justified in certain circumstances, as in wartime against an enemy who threatens to destroy the state. Are doctors the enemy? Are almost all of them engaging in reprehensible conduct that endangers civil society, day in and day out?

I don't think many doctors view themselves as criminals, but that's irrelevant, isn't it? They are professionals and should know better. After all, when they submit an insurance claim they are attesting to the accuracy of the codes, about which they may know very little. Moreover, it is always a lie to assert that a square peg will fit into a round hole.

Far beyond the technical issues in billing, doctors need to take a hard look at the basic nature of their practice. For if doctors are actually violating the Oath of Hippocrates, then they willed their own destruction at the time they took the Oath: "If I keep this oath faithfully, may I enjoy my life and practice my art, respected by all men and in all times; but if I swerve from it or violate it, may the reverse be my lot."(6)

Many physicians have turned aside from their Oath so completely --- often without being fully conscious of the fact --- that the mere reading of it makes them acutely uncomfortable. The AMA writes of the Oath in a generally derogatory fashion, calling it archaic, as with its assumption of absolute ethics and the existence of a transcendent Lawgiver, and various substitute oaths have been written.

Today, more medical graduates are probably swearing to the Oath of Lasagna, which for all its noble-sounding sentiments has turned medical ethics upside down by making physicians primarily responsible to "society," which operationally means to the third-party payer. The Oath of Lasagna even sanctions the deliberate taking of human life.(6)

Most physicians have not reached that point, but many have contractually placed themselves in a conflict of interest with their patients and may subjugate their own judgment to the requirements of the payer.

But it is not only as physicians that we have transgressed. Most of us have become accessories to the crime of stealing, in the everyday conduct of our business. And once we have violated the rights of others, then we have forfeited our own rights.

This might best be illustrated by a story about Leonard Read, who once told an upstanding, highly respected businessman that when he died he would go straight to hell. When the man expressed his utter shock and asked why, Read said that he had stolen from widows and orphans. "What do you mean? I have always been considered an honest man." Read pointed out that as a member of some association, say the Updale Do-Good association, he had voted for a municipal golf course in which they took tax money from widows and orphans for the benefit of golfers.

How does that story pertain to physicians? Let's think about the cataract patients of Dr. Rutgard. Who paid for their surgery?

We have the convenient fiction that senior citizens have paid for their own Medicare benefits because they once paid taxes. But everybody really knows that the money they paid in taxes was spent long ago. Their medical care is now being paid for, involuntarily, by other taxpayers. The man who is sweating out in the hot sun to dig ditches, the young person flipping hamburgers to pay for his education, the young mother standing many hours at a cash register, are all being forced to help pay doctors like Dr. Rutgard for doing cataract surgery.

Now, I think most people would agree that doctors should be paid for their work. And that persons who suffer impaired vision due to cataracts should have their problem fixed. The question is, who should pay?

Generally, of course, human beings prefer not to have to pay for the goods they receive. And the human beings who serve them like to get paid but find it unpleasant to try to collect the money.

Medicare seems to be the ideal solution for medical care. Beneficiaries can have lots of medical care, more than they would actually be willing to pay for, and doctors can do lots of work at a higher price than they would be willing to charge or able to collect.

The people who suffer are the ones who have to pay the bills, but they have been under the impression that they are actually paying for their own medical care. Only now are young people awakening to the fact that Social Security and Medicare may be gone by the time they reach the age of 65 --- and that every dollar they pay to these programs is spent immediately.

So is it right for a person who lives a life of leisure, who spends his winters in a recreational vehicle in Arizona, and who has paid off his mortgage, to force a ditchdigger or a waitress or other people's grandchildren to pay for his cataract surgery, so that he can play golf better?

I think not. I think he should pay for it himself. If the price is higher than he likes, then he should try to get a better price. It's true that he was once robbed when making his "contribution" to Medicare, but that does not justify robbing others.

But what about the person who has to work, but can't do his job very well because of a cataract? Maybe the person even endangers others by his driving. Maybe this person is very poor and couldn't possibly afford to pay for an operation. What about him?

I say that doctors should help him. But the question is, should doctors be allowed to shake down ditchdiggers and waitresses and other people's as-yet-unborn grandchildren to pay their fees? I think not.

Doctors were at first opposed to Medicare, or socialized medicine for the elderly, on principle. But somehow that opposition evaporated when they found out how much money they could make when billing an anonymous third party which apparently had bottomless pockets. They conveniently forgot what they were really doing.

The laws of human behavior cannot be repealed. Willie Sutton will always rob banks because that's where the money is. The money is now in health care plans, so it is not surprising that they are being robbed. Medicare is actually set up to encourage thievery; those who spend their lives studying the codes so as to game the system can collect millions without ever having to talk to a patient who is irate about his bill. Those who concentrate on helping the sick and the injured and do not attend coding seminars are punished financially. Many of them can hardly make ends meet. And if they don't participate in Medicare, they are constantly harassed by the carrier --- their claims are ignored, altered, or denied, and their patients are contacted by clerks who accuse the doctor of defrauding them.

What will enhanced law enforcement accomplish? I predict it will drive the most conscientious doctors out of the profession. Others, who are willing to compromise their principles and try to serve two masters, will sign up with large organizations like managed care where they are insulated from individual accountability. Computer-adept scam artists will make fortunes and stay at least two steps ahead of the gendarmes. The AMA and other organizations will sell lots of code books and compliance seminars. Both prosecutors and defense attorneys will do a thriving business. And patients will increasingly find that their doctor is not in, and the person who is in either isn't a doctor at all or is the company's doctor, not theirs.

The only way to solve the problem of fraud was implicitly recognized by U.S. Attorney Alan Bersin:

The basic cause appears to be that we mostly have separated the consumer of medical service from the payer for that service. In so doing, we have removed the element of personal responsibility from the equation....The consumer/patient is not a watchdog; the cheating provider is not compelled to confront the victim of his theft; and the third-party payer has passed along costs in the form of higher premiums or higher taxes.(7)

Bersin's goal, however, appears to be to manage fraud and to keep it within "tolerable" limits, instead of removing the moral hazards that stimulate its growth. I think that comes from a reluctance to recognize who is really the victim of theft: not the consumer, who is getting goods and services at a fraction of the cost (except when he is the victim of covert rationing), and not the government or the insurer, who simply passes along the costs and takes a share of whatever funds pass through their hands (and the more the better for them). The victim is the hard-working American who is running harder and harder to stay in the same place.

How to Solve the Problem of Fraud

We cannot solve the problem of individuals who exploit the system until we acknowledge that the system itself is based on fraud. The basic unmentionable problem is that we have accepted, even embraced, the concept of legal plunder, of having the government do things that would be illegal if done by individuals, such as robbing Peter to pay for Paul's operation. Once this concept is accepted, society becomes engaged in a war of all against all. The only way to have peace is to renounce the spoils of war. As Frederic Bastiat (1801-1850) recognized, there are only three resolutions to the problem of legal plunder: "The few plunder the many; everybody plunders everybody [the closest description to what we have now]; and nobody plunders anybody."(8)

The last was the American way, and is the only honorable way. So while we defend the due process rights of our colleagues, we must continue to exhort all physicians: there is no right way to do the wrong thing. We must return to serving our patients, not the third-party master, and we must look only to patients for payment of a fair and mutually agreeable fee. Patients then should look to insurers for reimbursement according to the terms of their contract (which does not involve the doctor). If you have an old superbill, printed prior to 1982, you may find the equivalent of this statement on the back.

When doctors live by the Oath of Hippocrates, when public servants live by their Oath to uphold the Constitution of these United States, and when we arrange society so as to reward those who do right and punish those who do wrong (instead of the opposite), only then will the problem of health care fraud mostly vanish.

Will the compliance officers, the auditors, the prosecutors, the defense attorneys, and prison guards have less to do?

No, but they will be doing different things. They will not be disrupting medical care (and increasing its cost), breaking windows in doctors' offices, or filing motions in court as prosecutors make use of unlimited public funds to bring dubious but endless actions. Instead, they will find productive work.

Let us not wish for an enemy attack as a means of maintaining full employment for young soldiers. And let us not promote policies that breed moral indifference and larceny in order to support the burgeoning industry of constructing new prisons to confine those who used to be our most respected citizens.

References

1. Pai D. Agencies kept busy on health care fraud. The Honolulu Advisor, March 17, 1997, p.A1-2.
2. Krizek sanctions should be overturned. AAPS News 1996;52(10):3.
3. Rabinowitz D. Justice in Massachusetts. The Wall Street Journal, May 13, 1997, p.A22.
4. Is government accountable? AAPS News, October 1995, p.1.
5. Moore, Wallin, Sonenshine: unpublished opinion in the Court of Appeals of the State of California Fourth Appellate District, Division Three, Tad Emery Lonergan, MD v. Medical Board of California, G011581, (Super. Ct. No. 654888), Oct. 29, 1992.
6. Orient J. Your Doctor Is Not In. Appendix: Physician Oaths. Macon, Georgia, Hacienda Publishing, Inc., p.257-258. For further discussion of the various medical oaths and what they mean to the medical profession, see "The Transformation of Medical Ethics Through Time (Part I): Medical Oaths and Statist Controls," by Miguel A. Faria, Jr., M.D., in the Medical Sentinel 1998;3(1):19-24.
7. Bersin AD. Punishing costly health-care fraud. San Diego Union Tribune, Nov. 22, 1996, p.B15.
8. Bastiat F. The Law. The Foundation for Economic Education, New York, Irvington-on-Hudson, 19th printing, 1995.(This book was originally published as a pamplet in France in 1850.)

Dr. Orient practices internal medicine in Tucson, Arizona, and is the Executive Director of the AAPS, 1601 N. Tucson Blvd., Suite 9, Tucson, AZ 85716. This article is based on a presentation before the American Bar Association conference on "The Unexamined Anatomy of Title II Kassebaum-Kennedy," The Sphinx Club, Washington, DC, April 24, 1997.

Originally published in the Medical Sentinel 1998;3(4):124-130. Copyright © 1998 Association of American Physicians and Surgeons (AAPS).