Federal Judge Overrules Jury’s Fraud Conviction of Cardiologist

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By Eric Topor

A former Kentucky cardiologist won’t face 20 years in prison for allegedly performing unnecessary heart procedures ( United States v. Paulus , 2017 BL 70676, E.D. Ky., No. 15-cr-15, 3/7/17 ).

A federal judge overturned his conviction by a jury because the government didn’t provide enough evidence to support the verdict. The U.S. District Court for the Eastern District of Kentucky acquitted Richard Paulus on all counts of health-care fraud and making false statements following the jury’s verdict Oct. 27, 2016. Judge David L. Bunning ruled the variation in testimony between the government’s expert witnesses on patient angiogram evidence and the medical need for the allegedly unnecessary stent procedures Paulus performed was too wide to prove his decisions were motivated by fraud.

The decision follows a string of federal district court rulings holding that differing medical opinions alone cannot form the basis of fraud charges and False Claims Act liability, including another case where a court vacated a jury verdict for the government against a hospice provider ( United States v. AseraCare, Inc. , 2016 BL 100986, 176 F. Supp. 3d 1282, N.D. Ala., No. 2:12-cv-00245, 3/31/16 ) ( 20 HFRA 237, 4/13/16 ). The government has appealed two of those cases, including the AseraCare case, and could appeal Bunning’s ruling as well.

Bunning said medical disagreement about the correct patient diagnosis based on an angiogram was sufficiently subjective that a reasonable jury couldn’t conclude that Paulus made false statements to perform unnecessary stent procedures paid for by Medicare and Medicaid. Bunning also said the government’s circumstantial evidence was “woefully inadequate” to support conviction.

Robert S. Bennett, a partner with Hogan Lovells US LLP in Washington who focuses on trial work, represented Paulus and told Bloomberg BNA March 9 that the case “never should have been brought.” Bennett said the case was an “extreme example of prosecutorial overreach,” and it was “fortunate that an independent and thoughtful judge gave Dr. Paulus the justice he deserved.”

The charges concerned Paulus’s time working at King’s Daughters Medical Center in Ashland, Ky., which settled civil allegations related to billing for unnecessary cardiac procedures and improper physician compensation arrangements for $41 million in 2014. Paulus was named as one of five physicians whose compensation violated the Stark physician self-referral law, though the hospital didn’t admit to any liability in the settlement.

Acting U.S. Attorney for the Eastern District of Kentucky Carlton Shier IV said in a statement provided to Bloomberg BNA March 9, “We have received the Court’s order and will be reviewing it, along with the court record in the case, in consideration of our legal options and the best course of action.” Shier added, “Ensuring the proper medical care of patients and the integrity of governmental health care programs will remain a key priority for our office.”

Expert Evidence Key

The court largely focused on the testimony of two expert witnesses who reviewed numerous angiograms of patients on which Paulus performed stent procedures and testified that the level of arterial blockage was lower than Paulus recorded. The government pinned Paulus’s alleged fraudulent intent on the level of blockage Paulus diagnosed a patient with based on the angiogram, and explained to the court, “that is the lie.”

However, the court said the variation between medical experts on the percentage of arterial blockage turned out to be more than the 10 percent to 20 percent the government claimed, and noted that for one patient the government’s own experts gave blockage estimates that varied at least as much from each other as they did from Paulus’s estimate of the patient. In another angiogram, Bunning pointed out one government expert cited an artery that was “completely blocked,” and that the other government witness and Paulus didn’t mention the blockage at all.

Bunning said the variability in medical judgment from an angiogram alone was too subjective to say that Paulus’s medical judgments were objectively wrong and showed intent to commit fraud. Further, Bunning said circumstantial evidence of the volume changes in Paulus’s stent procedures over time, testimony from other physicians at King’s Daughters and patient testimony either weren’t strong enough to prove fraudulent intent, or weren’t evidence of falsity at all.

Hiding Behind ‘Medical Judgment’?

The court emphasized, though, that the defense of subjective medical judgment wasn’t an absolute shield that any physician can hide behind against health-care fraud charges. Bunning noted that two federal appeals courts upheld physician convictions in such cases, which the government cited as well ( United States v. McLean, 715 F.3d 129, 4th Cir., 2013 ; United States v. Patel, 485 F.App’x 702, 5th Cir., 2012 ).

However, Bunning said that evidence in Patel and McLean showed much more variation in blockage diagnosis from angiogram evidence, and stronger circumstantial evidence not present in Paulus’s case, including statements from the defendant, false patient records, suspicions of perjury and destruction of evidence.

Bunning also granted Paulus’s motion for a new trial on the grounds that the jury’s verdict was against the manifest weight of the evidence. Although Paulus was acquitted of all charges, the court explained he was entitled to a new trial should the acquittal be overturned on appeal.

Hogan Lovells US LLP and C. David Mussetter in Catlettsburg, Ky., represented Paulus. The U.S. Attorney’s Office for the Eastern District of Kentucky represented the government.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Peyton Sturges at psturges@bna.com

For More Information

The opinion is at http://src.bna.com/mQm.

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