United States: Constitutionality of Florida’s Patient Brokering Statute and Medicaid Provider Fraud Statute in Doubt

On February 1, 2005, Judge Thomas B. Smith of the Florida Circuit Court, 9th Judicial Circuit in Orlando, Florida ("Court"), declared unconstitutional certain provisions of Florida's Patient Brokering Statute. In addition, Judge Smith declared unconstitutional portions of the Florida Medicaid Provider Fraud Statute (Florida v. Rubio, "Rubio"). While the rulings were based on technical and arcane legal arguments, they will undoubtedly have a wide ranging impact on current healthcare investigations, as well as administrative and criminal proceedings in Florida, involving either or both of these statutes. In addition, the rulings call into question Florida’s strict interpretation of relationships between health care providers and practice management companies that has effectively curtailed the operation of practice management companies in Florida.

While these rulings will not open the floodgates of patient brokering or send a message condoning fraudulent billing, they could ultimately result in a change in Florida.s regulatory landscape, considered harsh by many providers. We may also see an increase in challenges to similar laws in other states.

The Court ruled on joint motions brought by five defendants to dismiss various counts of criminal indictments. Three of the five defendants are licensed dentists who own a dental practice management company. The other two defendants are the owner and an employee of a different dental practice management company.

The practice management companies received remuneration based on a percentage of the fees collected by the respective dental practices. All of the patients in question were Medicaid beneficiaries. The Court implied that the remuneration was consistent with fair market value.

The prosecution alleged, among other matters, that the defendants operated a weekend dental clinic in Orlando that lured children to the clinic by offering pizza and soda, and the defendants billed for services that were not performed. In all, 130 felony charges were brought under multiple criminal statutes. These charges were predicated upon alleged violations of Florida’s Patient Brokering Statute and Florida’s Medicaid Provider Fraud Statute.

Florida's Patient Brokering Statute language is similar to the federal Anti- Kickback Statute. The Court found unconstitutional Section 817.515(1)(b) of the Florida Patient Brokering Statute which provides that it is unlawful to:

In analyzing the constitutionality of the Patient Brokering Statute, the Court focused on the language prohibiting "any" split-fee arrangement as opposed to "a" split-fee arrangement. After invoking the theory of "multiplicity" the Court determined what constituted an appropriate "unit of prosecution," and reasoned that applying a single offense to more than one felony count .. . ."prejudices the defendant because it suggests to the judge and jury that he committed more than one crime and could result in multiple convictions and punishments for a single offense in violation of the Fifth Amendment to the United States Constitution and Article 9 of the Florida Constitution." The Court declined to substitute the article "a" as a subject modifier for the "unit of prosecution" and applied the language in the statute in a strict and narrow sense. The Court concluded "based upon a plain reading of the language chosen by the Legislature, . . . that charging each fee splitting incident as a separate and distinct crime results in an impermissibly multiplicitous information." In other words, because the language in the statute was narrowly drafted, the Court refused to apply it in a broader sense and allow a single offense by a defendant to apply to multiple felony counts. The Court, accordingly, dismissed the multiple felony counts and declared the Patient Brokering Statute unconstitutional.

Following a similar ruling by a Florida appellate court in 2004, the Court in Rubio also declared unconstitutional Section 409.920(2)(a) of the Florida Statutes relating to the submission of false claims.

The operative language of that law makes it unlawful to:

The Court then directed its attention to the term "knowingly" and compared the definition of "knowingly" under Florida law with its counterpart definition under a comparable federal law. Under the Florida statutes, "knowingly" is defined as:

The defendants argued that the Florida statutes provided for a standard that is lower than the standard under federal law and is therefore a violation of the supremacy clause of the United States Constitution. After discussing preemption, generally, the Court stated that its primary task was "..to determine whether state regulation is consistent with the structure and purpose.. " of the Federal regulatory scheme as a whole. The Court concluded that Congress clearly intended a "willfulness" standard as a prerequisite to a criminal prosecution and, therefore, Florida could not criminalize the same behavior under a lesser "knowingly" standard. Because of this definitional inequality, the Court declared Section 409.920(2)(a) unconstitutional.

For the first time, Florida's Patient Brokering Statute has been declared unconstitutional, and its Medicaid Provider Fraud Statute has again been declared unconstitutional. It seems likely other Florida healthcare statutes will also be subject to constitutional scrutiny, however, the Florida Attorney General will, no doubt, appeal any orders or decisions declaring all or part of these statutes unconstitutional, making Judge Smith's order simply the first step in a process where the courts and/or legislature may eventually refine these provisions of Florida law.

While these rulings will likely have an immediate impact on current Florida investigations, and administrative and criminal proceedings, due to the current state of legal uncertainty it is not anticipated that there will be significant changes in business practices until these uncertainties are finally resolved by the courts or the legislature.

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