Where’s the Crime in Providing Free Medical Care?

Can it be a crime to provide free medical care?  That’s the question presented by a post-conviction motion by the so-called King of Nursing Homes, Dr. V. Kuchipudi.

Dr. K was convicted on nine counts of violating the Anti-Kickback Statute (AKS) and one count of conspiracy for an arrangement with now-defunct Sacred Heart Hospital, in Chicago.  The basis of the conviction was what the government describes as an arrangement under which Dr. K sent his patients to Sacred Heart, and in return for the referrals, the hospital assigned a physician and advanced medical practitioners to care for the patients, with Dr. K billing Medicare and other insurers for those services.

Now Dr. K has moved for a judgment of acquittal, on the basis of the AKS “bona fide employee” safe harbor, which protects “any amount paid by an employer to an employee, who has a bona fide employment arrangement with the employer.”  As he sees it, Sacred Heart, as an employer, paid its physicians and other personnel, as employees; so the arrangement fits squarely into the safe harbor.

The government says that’s hogwash: The safe harbor protects payments by an employer to an employee who refers patients to the employer; otherwise, a physician employee of a hospital couldn’t refer patients to that hospital.  Besides, the government argues, the remuneration at the heart of Dr. K’s arrangement isn’t the compensation the hospital paid to its employees; it’s the value to Dr. K of the medical services Sacred Heart provided to his patients—services for which he billed insurers.

Law360 quotes U.S. District Judge Matthew Kennelly as expressing some concern about the government’s position and noting that doctors often use the help of hospital staff to care for their patients in the hospital:  “If that’s illegal, then a lot of stuff that’s going on is illegal.”

SPOILER ALERT: Law360 reported on June 23 that the judge overcame his concern and denied Dr. K’s motion.

The case is U.S. v. Novak et al., No. 1:13-cr-00312 (N.D. Ill. 2016).

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