UNITED STATES OF AMERICA v BETH PALIN
US Court of Appeals for the Fourth Circuit, Motz, Oct. 30, 2017
Health Care Fraud- Materiality – Providing and billing for unnecessary testing constituted “material” health care fraud

Facts:
Palin and Webb ran a medical business which processed urine drug tests ordered by doctors. For drug tests on an insured patient, they used an expensive test. For drug tests on an uninsured patient, they used a cheap test. Insurance companies, including Medicare, were thereby overcharged.
Palin and Webb were indicted and convicted for health care fraud.
On appeal, they argued that because the doctors ordered a drug test, they provided a drug test, and the insurers paid for the more expensive tests, there was no fraud. In their view, it doesn’t matter that the test for which they billed insurers was more expensive.

Held:
The 4th Circuit disagreed. If the insurers knew that the more expensive test was unnecessary, they would not have paid for it. Therefore, Palin and Webb committed fraud.

Health Care Fraud – It is a crime to knowingly and willfully execute a scheme to defraud a health care benefit program or obtain money from one by means of fraud

Fraud – Materiality – Fraud must be “material” in order to qualify as a crime

Fraud – Materiality – “Material” means that it did or likely would have an effect on the behavior of the other person

For example: If you knew the truth, would you do the same thing? If so, then the lie probably wasn’t “material.”

From the case: Because insurers would not have paid for the expensive test if they knew they were not necessary, the fraud here was “material”