“Please Tell Me you Didn’t. . . How to Keep Client’s Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse” -Blog
It’s another week and again my phone blew up, because another round of doctors and Pharmacy executives have been indicted under the Travel Act, (which is code for a “commercial only,” non-federal payer kickback case, like Forest Park.)
This iteration is US v. Mortazavi, in 3:24 -CR-049-S filed in the Northern District of Texas Dallas Division, involving something that happened just a squeak under 6 years ago which I believe is code for “an AUSA was looking for something to do,” and decided to see which cases had a statute of limitations coming up. It’s a “fish or cut bait” issue.
At any rate, the grand jury indicted the defendants for violations of the Travel Act 18 USC §1953, Commercial Bribery, Tex. Penal Code §32.43, Money Laundering, 18 USC §1956 and “Conspiracy to Deprive Patients of the Intangible Right to Honest Services,” 18 USC §1346 (which is a federal “bribery of a fiduciary” statute ).
All of this is related to Andrew Hillman’s Next Health, which was an amalgamation of MSO’s, CLIA Labs, pharmacies, surgical implant and device distributors, and only God knows what else (well, the government knows). Next Health has spun off more civil and criminal litigation than I have fingers and toes to count them with.
Tex. Patient Anti-Solicitation Statute. But what I really want to talk about is the Patient Solicitation Statute. Once again, an indictment mentions, but does not actually charge anybody with violations of the Texas Patient Anti-Solicitation Statute, Tex. Occ. Code 102.001. (The indictment opens with an observation that the Tex. Patient Anti-solicitation statute exists, but then makes no more mention of it in remainder of the entire indictment.)
Which if you ask me, is a clear violation of the narrative principle of “Chekhov’s Gun” (if you show a gun on the wall in Act I of a play, you are supposed to shoot somebody with it the end of Act III.) But nobody asked me.
Why no one is ever charged with 102.001. I have a three-part theory why no one ever is charged with Patient Solicitation under Occ, Code 102.001: (1) it stupidly written (it doesn’t outlaw anything it is supposed to outlaw (2) is probably unconstitutional as a violation of “commercial free speech” problems under the Central Hudson test and (3) it is only a Class C misdemeanor, so the “juice” isn’t worth the prosecutorial “squeeze.”
On the first point, take a look at Sec. 102.003. “Federal Law; Construction.” “Section 102.001 permits any payment, business arrangement, or payment practice permitted by 42 U.S.C. Section 1320a-7b(b) [the AKS] or any regulation adopted under that law.”
Trouble is, every kickback arrangement that does not involve federal payers, is permitted under 42 U.S.C. Section 1320a-7b(b), which only forbids kickbacks in government payer cases. Therefore, kickbacks of every other kind are permitted by 102.001 by the express wording of the statute. There is a reason 102.001 is written this way, it is supposed to recognize the supremacy of federal safe harbors over state law to the contrary. The legislature just butchered the drafting and execution.
Commercial Free Speech. Under 102.001, “(a) A person commits an offense if the person knowingly offers to pay or agrees to accept, directly or indirectly, overtly or covertly, any remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified, or registered by a state healthcare regulatory agency.”
The problem here is that unlike, say “soliciting prostitution,” providing pharmacy services is a lawful act. The statute completely bans paying someone to say truthful, non-misleading, commercial speech about a lawful activity, that is not restricted as to time or place. (There is a reason lawyer barratry statutes are specific as to when and how a lawyer can contact a car wreck victim.) These laws must be narrowly tailored to pass “strict scrutiny.”
That is the very definition of a Central Hudson free speech violation found in Virginia State Pharmacy Board v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976), where Justice Blackmun wrote for the majority explaining that states still retained the power to regulate some commercial speech, via content-neutral time, place, and manner regulations. Likewise, states retain the power to prohibit false or deceptive advertisements. However, he held that the states could not suppress truthful information about a lawful economic activity, simply out of fear of potential consequences (people might use too many services paid for by commercial insurance, for example.)