United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 8, 1999 Decided October 5, 1999
No. 98-5455
United States of America,
Appellant/Cross-Appellee
v.
George O. Krizek, M.D. and Blanka H. Krizek,
Appellees/Cross-Appellants
Consolidated with
No. 98-5456
Appeals from the United States District
Court for the District of Columbia
(No. 93cv00054)
---------
Mark E. Nagle, Assistant U.S. Attorney, argued the cause
for appellant/cross-appellee. Wilma A. Lewis, U.S. Attorney,
R. Craig Lawrence and Dara A. Corrigan, Assistant U.S.
Attorneys, were on the briefs.
Jeffrey Bossert Clark argued the cause for appellees/cross-
appellants. With him on the briefs was Karen N. Walker.
Before: Wald, Silberman and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: After a three-week bench trial, the
district court found that defendants, a psychiatrist and his
wife/secretary, submitted claims for reimbursement for ser-
vices performed for Medicare/Medicaid patients in violation of
the False Claims Act. Because it was impossible to identify
precisely which claims were fraudulent, the district court held
defendants liable only for claims submitted on days they
billed for more than twenty-four hours of work, and then only
for those patient sessions that exceeded the twenty-fourth
hour. Following an appeal to this court, we remanded to the
district court to consider additional evidence from the Gov-
ernment and to recalculate the number of false claims based
on a new definition of "claim." Finding the district court's
actions on remand inconsistent with our mandate, we again
remand for further proceedings.
I
Dr. George Krizek practiced psychiatry in Washington,
D.C. His wife Blanka functioned as his secretary and was
responsible for his billing. In 1993, the Government filed a
civil complaint alleging that for six years the Krizeks had
submitted claims for reimbursement for services provided to
Medicare/Medicaid patients in violation of the False Claims
Act, 31 U.S.C. ss 3729-31. After a three-week bench trial,
the district court found that the Krizeks had submitted claims
for reimbursement "when Dr. Krizek could not have spent the
requisite time providing services...." United States v. Kri-
zek, 859 F. Supp. 5, 12 (D.D.C. 1994). Ruling that the
Krizeks would be "presumed liable" under the False Claims
Act for all claims they submitted in excess of nine hours per
day, the district court referred the case to a Special Master to
determine the number of false claims in excess of the nine-
hour benchmark and to calculate the precise amount of the
Krizeks' liability.
In the proceedings before the Special Master, the Govern-
ment introduced into evidence all "HCFA 1500" forms that
the Krizeks had submitted to the Government for reimburse-
ment. HCFA 1500 forms serve as invoices for billing Medi-
care and Medicaid: they must contain the doctor's name, the
patient's name, the dates services were provided, and a five-
digit code identifying each service provided to a particular
patient, called a "CPT code." For example, the CPT code
90844, which Dr. Krizek used frequently, indicates an individ-
ual psychotherapy session lasting approximately forty-five to
fifty minutes. While a single HCFA form includes services
for only one patient, it may include services rendered to that
patient on multiple days.
HCFA 1500 forms contain only the CPT codes that Dr.
Krizek billed, not the actual time he spent with each patient.
As a result, the Special Master had to fashion a methodology
to convert the codes into time periods in order to determine
the number of hours the doctor actually billed each day.
Because of the large number of claims (some days Dr. Krizek
saw upwards of fifty patients), changing the assumptions of
how much time each code represented would materially affect
the total time billed for the entire day. Largely accepting the
Government's proposed methodology for translating CPT
codes into time periods, the Special Master attributed to each
code the amount of time at the low end of its stated range
(unless the doctor had indicated a different time period on the
form). For the frequently used CPT code 90844, for example,
the Special Master assumed a forty-five-minute session, the
low end of the forty-five to fifty-minute range. For CPT code
90843, another frequently used code, this one having a twenty
to thirty-minute range, the Special Master assumed twenty
minutes. Using this methodology and determining that each
CPT code represented a "claim" under the False Claims Act,
the Special Master identified 264 days on which the Krizeks
billed for more than nine hours, amounting to 1,149 false
claims. Multiplying by $5,000, the minimum fine per claim
under the False Claims Act, the Special Master calculated a
total fine of $5.7 million.
The district court accepted the Special Master's findings of
fact. United States v. Krizek, 909 F. Supp. 32, 33 (D.D.C.
1995) ("Krizek II"). Seemingly moved by the enormity of the
$5.7 million fine, however, the district court abandoned the
nine-hour presumption, ruling instead that defendants could
only be liable under the False Claims Act for claims submit-
ted on days on which they billed for more than twenty-four
hours of work, and then only for those patient sessions
exceeding the twenty-fourth hour. Id. at 34. Applying this
new benchmark, the Special Master identified three days on
which the Krizeks billed more than twenty-four hours; on
those days, he found a total of eleven false claims. The
district court, assessing the $10,000 maximum fine under the
False Claims Act for each violation, entered judgment against
the Krizeks for $110,000, plus unjust enrichment damages of
$47,100. Id. Both parties appealed.
In United States v. Krizek, 111 F.3d 934 (D.C. Cir. 1997)
("Krizek III"), this court affirmed the Krizeks' liability under
the False Claims Act but remanded for further proceedings
with respect to the calculation of the number of violations and
the penalties to be assessed. In so doing, Krizek III resolved
two issues central to the current appeal. First, it held that
"the District Court's use of a twenty-four hour presumption,
having earlier announced its intent to use nine hours as the
benchmark, prejudiced [the Government's] prosecution of the
claim." Id. at 938. In this regard, the court noted that the
Government, in reliance on the district court's nine-hour
benchmark, had adopted conservative estimates regarding the
time attributable to each CPT code and declined to pursue
discovery of Dr. Krizek's billings for non-Medicare/Medicaid
patients. Id. Second, Krizek III rejected the conclusion of
both the Special Master and the district court that each
individual CPT code on a HCFA 1500 form represents a
"claim" under the False Claims Act, holding instead that each
HCFA 1500 form is a claim. Id. at 939-40. For example, if a
particular HCFA 1500 form identifies five services performed
by Dr. Krizek for a single patient on five separate days, the
form could constitute at most one false claim.
On remand, the district court ordered the Krizeks to give
the Government their records of private pay patients seen on
the ten "worst" days--those days the Government identified
as reflecting the Krizeks' most egregious billing practices.
Citing the "meager fruit" to be expected from further discov-
ery when the ten worst days plus fifteen additional days
voluntarily provided by the Krizeks yielded only two addition-
al days on which the Krizeks had billed more than twenty-
four hours, the district court rejected the Government's re-
quest for additional discovery. United States v. Krizek, 7
F. Supp. 2d 56, 58 (D.D.C. 1998) ("Krizek IV"). At the same
time, the district court refused to find False Claims Act
liability on the two additional twenty-four-hour days because
"the Government cannot prove that the claims in excess of 24
hours were the ones billed to Medicare/Medicaid as opposed
to those billed to non-Medicare/Medicaid private patients."
Id. Turning to Krizek III's definition of "claim," and reason-
ing that "[o]n the evidence submitted, the Government has
failed to establish which of the claims, under the new defini-
tion, are the ones in excess of the 24 hour presumption," the
district court found insufficient evidence in the record to
establish more than one false claim per day. Id. at 59. The
district court fined the Krizeks $30,000, $10,000 for each false
claim.
II
In this second appeal, again brought by both sides, the
parties fundamentally misunderstand the limited scope of this
court's remand in Krizek III. In their cross-appeal, for
example, the Krizeks argue that Krizek III's direction to the
district court to consider additional evidence regarding the
conservative time assumptions the Government adopted in
reliance on the nine-hour benchmark "reopened the methodo-
logical issue," allowing them to challenge the factual under-
pinnings of the Special Master's calculations. Not so. Kri-
zek III's remand rested on its express finding that the switch
from a nine-hour to a twenty-four-hour benchmark prejudiced
the Government's prosecution of its case. Krizek III intend-
ed nothing more than to give the Government an opportunity
to revisit its assumptions, not to reopen all aspects of the
Special Master's methodology.
We will not consider the Krizeks' cross-appeal for a second,
equally important reason. Although they insist that they
"challenged the government's methodology at every conceiva-
ble step," they failed to do so at one critical juncture: their
original appeal to this court. See Hartman v. Duffey, 88 F.3d
1232, 1236 (D.C. Cir. 1996) ("We do not reach the merits of
defendant's arguments on this issue because of the defen-
dant's failure to pursue it in its prior appeal."), cert. denied,
520 U.S. 1240 (1997).
Equally misconstruing Krizek III's limited remand, the
Government faults the district court for failing to reconsider
the twenty-four hour benchmark. Nothing in Krizek III
entitled the Government to challenge that benchmark on
remand. Krizek III assumed the validity of the twenty-four-
hour benchmark and remanded for the limited purpose of
giving the Government an opportunity to revisit its assump-
tions. If this court had intended to require the district court
to go beyond evaluating the Government's assumptions and to
reconsider the twenty-four-hour benchmark, it would have
done so directly, not as elliptically as the Government claims
it did.
Although the twenty-four-hour benchmark is a closed mat-
ter in this litigation, we do think the Government has pointed
out three respects in which the district court's actions are
inconsistent with Krizek III's mandate: the district court
refused to consider the Government's evidence regarding the
conservative assumptions it adopted in reliance on the nine-
hour benchmark; it excluded time billed to Dr. Krizek's
private pay patients from the calculation of twenty-four-hour
days; and it applied an incorrect methodology to determine
the number of false claims over the twenty-four-hour bench-
mark. With respect to the first two issues, Krizek III could
not have been clearer: "The government argues that the
District Court's use of a twenty-four hour presumption, hav-
ing earlier announced its intent to use nine hours as the
benchmark, prejudiced its prosecution of the claim. We
agree and remand for further proceedings." Krizek III, 111
F.3d at 938. To flesh out the nature of that prejudice, Krizek
III directed the district court to (1) focus on the conservative
assumptions the Government offered to determine how much
time to allocate to each CPT code and (2) allow discovery of
records of time billed to Dr. Krizek's private pay patients.
Id.
Referring to the first of these tasks, Krizek III character-
ized the Government's time estimates as conservative, con-
cluding that: "Considering the large number of claims sub-
mitted on any given day these assumptions may have had a
material effect on the damages proved up by the government.
However, because the damages were likely to be substantial
already [using a nine-hour benchmark], the government chose
not to proffer less generous approximations." Id. Notwith-
standing Krizek III's clarity, the district court flatly refused
to listen to the Government's arguments about its conserva-
tive assumptions, let alone to allow the Government to intro-
duce additional evidence. When Government counsel raised
the issue at a September 5 Status Call, the district court said:
"You're dead on that issue. There is no--you're not going to
now say, okay, it's 30 [minutes]. No, no. The Court of
Appeals didn't say that. The Court of Appeals ... indicated
they accepted that." In response, Government counsel quot-
ed the passages from Krizek III discussed above. "You've
misread that," replied the district court.
Don't mislead this Court, Mr. Hegyi.... You're mis-
leading the Court now. That's not what it says.... All
it says is that you were generous, and it doesn't say that
I now go back and have to let you be less generous....
Look, Mr. Hegyi, I'm not going to argue with you any
more. So let's go on. No, you're not going to continue
with that because the Court of Appeals affirmed the
Special Master and I'm not going to undo that work.
Instead of defending the district court's actions with re-
spect to the Government's conservative assumptions, the Kri-
zeks argue that the Government failed to preserve the issue
for appellate review. The record demonstrates to the con-
trary. Not only did the Government twice bring the issue to
the attention of the district court during the September 5
Status Call, but it reiterated its claim in written submissions
to the district court: "The United States is aware that at the
September 5, 1997 status conference the Court indicated it
would not permit such a re-calculation. However, the United
States includes this proposal out of an abundance of caution
to prevent a possible future claim of waiver or abandonment
by the Government." Given the district court's refusal to
discuss the assumptions and particularly given its accusation
that Government counsel was trying to mislead the court, we
have no idea what more the Krizeks think the Government
should have done (short of risking contempt) to preserve the
issue for appeal.
To avoid any confusion about the scope of our remand from
this appeal, we state our instructions with specificity. The
district court must first allow the Government to submit
additional evidence regarding its conservative assumptions.
It should then consider whether the Government's evidence
requires any change in the Special Master's calculation of the
number of hours billed each day. Nothing in this remand
"reopens" the methodological issues raised by the Krizeks in
their cross-appeal. The Krizeks may respond to the Govern-
ment's claim that its assumptions were too conservative in
light of the twenty-four-hour benchmark, nothing more.
Krizek III's direction to the district court regarding the
handling of private pay patients breaks down into two issues:
discovery regarding the Krizeks' billing of private pay pa-
tients and incorporation of private pay patients into the
calculation of the number of hours billed each day. Begin-
ning with the first issue, we disagree with the Government
that the district court improperly restricted its discovery.
Since the private pay records for the twenty-five worst days
yielded only two additional twenty-four-hour days, the district
court's conclusion that further discovery would not likely have
identified any more was hardly an abuse of discretion. See
Food Lion, Inc. v. United Food and Commercial Workers
Int'l Union, 103 F.3d 1007, 1012 (D.C. Cir. 1997) ("[A] district
court's decision to permit or deny discovery is reviewable only
for an abuse of discretion.").
We do agree with the Government, however, that the
district court's refusal to include time billed to private pay
patients in the calculation of the number of hours the Krizeks
billed per day was inconsistent with the Krizek III mandate.
Krizek III stated: "Presumably, if the government had intro-
duced evidence on [private pay] patients it could have estab-
lished that the Krizeks billed in excess of twenty-four hours
on more days than indicated by Medicare and Medicaid
records alone." 111 F.3d at 938. Clearly implicit in this
statement is the proposition that private pay patients be
included in calculating twenty-four-hour days. Why else
would Krizek III have ordered such discovery? Yet the
district court refused to include private pay patients, explain-
ing, "the Government cannot prove that the claims in excess
of 24 hours were the ones billed to Medicare/Medicaid as
opposed to those billed to non-Medicare/Medicaid private
patients." Krizek IV, 7 F. Supp. 2d at 58. "The mere
assumption that all hours exceeding the 24 hour benchmark
were hours billed to Medicare/Medicaid," the district court
said, "is insufficient to prove knowing or reckless conduct."
Id. at 59.
In refusing to include private pay patients as required by
Krizek III, the district court imposed on the Government a
burden not required by the False Claims Act. The Govern-
ment does not have to "prove that the claims in excess of 24
hours were the ones billed to Medicare/Medicaid." The False
Claims Act requires only that the Government prove that the
Krizeks acted "in reckless disregard of the truth or falsity of
the information" they submitted to the Government, and that
it do so not beyond a reasonable doubt, but "by a preponder-
ance of the evidence." 31 U.S.C. ss 3729(b)(3), 3731(c). Yet
under the district court's reasoning, it would be virtually
impossible for the Government to establish liability on any
twenty-four-hour day that included private pay patients.
Particularly in view of the district court's exceptionally
conservative twenty-four-hour benchmark--i.e., the Krizeks
could be found liable only on days they billed for more than
twenty-four hours of work, a physical impossibility--we think
the False Claims Act preponderance standard is easily satis-
fied when any patient is seen beyond the twenty-fourth hour.
Reinforcing this conclusion, an affidavit by a Government
Special Agent lists several reasons for suspecting that the
false claims were most likely the Medicare/Medicaid claims,
including that many Medicare/Medicaid patients were being
treated for severe psychiatric disorders and likely lacked the
ability to monitor bills submitted on their behalf, that the
private pay patients had an "active self-interest" in ensuring
that the Krizeks billed them properly, and that the Krizeks
had a greater incentive to keep (and therefore not defraud)
their more lucrative private pay patients.
In sum, Krizek III's inclusion of private pay patients has
two implications for the calculation of the number of false
claims, implications the district court must account for on
remand. First, it adds two more twenty-four-hour days,
bringing the total to five. Second, it increases the number of
false claims on the three original twenty-four-hour days.
This brings us to the final respect in which the district
court's actions were inconsistent with Krizek III. Krizek III
required the district court to recalculate the number of false
claims submitted by the Krizeks in light of the court's redefi-
nition of "claim" as the HCFA 1500 form itself, not the
individual CPT codes on the forms. 111 F.3d at 940. Al-
though determining the number of false claims requires noth-
ing more than calculating how many forms actually contained
fraudulent entries, the district court simply concluded that
three twenty-four-hour days equals three false claims. The
district court explained:
On the evidence submitted, the Government has failed to
establish which of the claims, under the new definition,
are the ones in excess of the 24 hour presumption. The
evidence merely establishes that on the 3 days in ques-
tion, the Defendants billed in excess of 24 hours to
Medicare/Medicaid. Based on this record, the Court can
only conclude that on each of the 3 days, there was at
least one false claim under the definition established by
the Court of Appeals.... While there certainly could
have been more than one form with a false statement
submitted on each given day, there is insufficient proof in
the record.
Krizek IV, 7 F. Supp. 2d at 59.
Again, we think the district court heightened the Govern-
ment's burden of proof beyond the False Claims Act's pre-
ponderance standard. The Government need not prove which
particular patient sessions occurred after the twenty-fourth
hour. Indeed, both parties agree that would be an impossible
task because records indicating the time of day Dr. Krizek
saw particular patients do not exist. Even defense counsel
seems to agree that the district court's rationale for finding
only three false claims is flawed, conceding at oral argument
that the proper method of determining the number of false
claims is to count the number of patient sessions after the
twenty-fourth hour and then to eliminate any overlap among
those sessions, i.e., instances in which the Krizeks billed on a
single HCFA form more than one patient session occurring
after the twenty-fourth hour.
To accomplish this simple task, the parties in the district
court need do nothing more than utilize the methodology for
calculating the number of false claims developed by the
Special Master. The Special Master's methodology was em-
ployed by the district court in Krizek II and not appealed by
the Krizeks. Krizek III's new definition of "claim" merely
adds an additional step--the elimination of overlap.
We need not describe the Special Master's methodology
here; his procedures and assumptions are fully explained in
the record. Suffice it to say that his methodology, based on
assumptions favorable to the Krizeks, identified which partic-
ular patient sessions occurred after the twenty-fourth hour
and produced a total of eleven such sessions on the three
original twenty-four-hour days. To calculate the number of
false claims, all the district court needed to do on remand
from Krizek III--and all it needs to do now--is eliminate any
overlap among patient sessions occurring after the twenty-
fourth hour that are billed on the same HCFA form. For
example, if Dr. Krizek saw patient X after the twenty-fourth
hour on two of the twenty-four-hour days, and billed both
days on the same HCFA 1500 form, only one false claim
occurred, not two.
Not surprisingly, the parties do not even agree about this
simple mathematical calculation. Citing an affidavit by its
Special Agent, the Government claims that there is no overlap
among the eleven false claims found by the district court in
Krizek II. Counsel for the Krizeks, who conceded at oral
argument that the district court's reasoning was flawed,
nonetheless claims that eliminating the overlap would yield
the same result as the district court reached in Krizek IV--
only three false claims. To support this proposition, counsel
directed us to a chart in the record before the district court.
As we read that chart, however, it speaks not to the overlap
among the three twenty-four-hour days the district court
originally identified, but to overlap among one of those three
days and the two twenty-four-hour days the Government
discovered when accounting for private pay patients. The
chart, moreover, fails to employ the Special Master's method-
ology for identifying which particular patient sessions oc-
curred after the twenty-fourth hour.
The district court's task on remand is simple and mathe-
matical. To determine the number of false claims, it must (1)
use the Special Master's methodology to count the number of
patient sessions that occurred after the twenty-fourth hour on
the five twenty-four-hour days (the three original twenty-
four-hour days plus the two additional twenty-four-hour days
discovered on remand from Krizek III) and then (2) eliminate
any overlap among those sessions.
III
This prosecution of a single doctor has now spanned over
six years. It has consumed three weeks of trial, several days
of hearings before the Special Master and the district court,
two fully briefed, fully argued appeals, and five published
opinions (three by the district court and two by this court).
The five days on which the false claims were made occurred
over twelve years ago. According to defense counsel, Dr.
Krizek no longer practices medicine and is dying of cancer.
It is time for the parties to stop refighting battles long-ago
lost and for the district court to bring this prosecution to an
expeditious close. To facilitate that goal, we repeat our
instructions. (1) The district court must permit the Govern-
ment to introduce evidence regarding its conservative as-
sumptions and then consider whether to change any of the
Special Master's assumptions in light of this evidence. (2)
The district court must include private pay patients in its
recalculation of the number of hours the Krizeks billed on
each of the five twenty-four-hour days. (3) Then, using the
methodology adopted by the Special Master, the district court
must determine the number of false claims by recalculating
the number of patient sessions after the twenty-fourth hour
on each of the five twenty-four-hour days and eliminating any
overlap. We fully expect that these simple steps will bring
this prosecution to a long-deserved end.
The clerk is directed to issue the mandate forthwith.
So ordered.