Chicago Sun-Times

June 25, 1997, WEDNESDAY, Late Sports Final Edition

‘Ostrich Defense’ just won’t wash

BYLINE: Steven P. Garmisa

SECTION: FINANCIAL; YOU AND THE LAW; Pg. 58

LENGTH: 641 words

Repressing bad thoughts might work as a psychological defense mechanism. But the “Ostrich Defense” (as in: I didn’t know what was happening because my head was stuck in the sand) didn’t work for a psychiatrist accused of defrauding the government.
Dr. George Krizek is a Washington, D.C., psychiatrist. His wife, Blanka Krizek, handled billing for his office.
A civil complaint filed by the government accused the Krizeks of “upcoding” bills for payment from Medicare and Medicaid. The billing code for a 45-minute therapy session with a psychiatrist is “90844,” while the code for a 20-minute session is “90843.” By upcoding claims for reimbursement — such as changing a “3” to a “4” — doctors who provide brief therapy sessions can get paid for longer meetings.
According to the government, the Krizeks upcoded claims 8,002 times from 1986 to 1992, generating an extra $ 245,000 in payments.
The False Claims Act says people who “knowingly” steal from the government can be ordered to repay three times the amount obtained by the fraud, plus $ 10,000 for each false claim. So the government asked for triple damages, plus $ 10,000 for each false claim, for an eye-popping $ 81 million.
At the end of the trial, the judge ruled the Krizeks knowingly made false claims because they acted with extreme negligence.
Both sides appealed.
The U.S. Court of Appeals first decided the trial judge didn’t give the government a fair chance to prove the full amount of damages caused by the fraud. But the Krizeks argued that the trial judge used the wrong guidelines for deciding whether they acted knowingly when they submitted false claims.
As defined in the False Claims Act, someone acts knowingly if that person:
(1) Has “actual knowledge” that a claim is false.
(2) Submits a claim with “deliberate ignorance” about whether the claim is true.
(3) Or the claim is submitted with “reckless disregard” for whether the information in the claim is true.
The Krizeks argued that the trial judge mistakenly decided they could be held liable for merely being extremely negligent in preparing reimbursement forms.
As the appellate court explained, there is a spectrum running from actually intending to defraud the government all the way to merely being careless about whether a claim form is accurate.
“Reckless disregard” for whether a claim is true lies somewhere between the extremes of intentional fraud and ordinary negligence.
The law sometimes uses reckless disregard as a substitute for intentional wrongdoing so people won’t be able to get away with closing their eyes. As one of the legislators who sponsored the current version of the False Claims Act explained, the statute was drafted to prevent the “ostrich-with-his-head-in-the-sand problem where government contractors hide behind the fact they were not personally aware that such overcharges may have occurred.”
The appellate court agreed there was sufficient evidence to show that the Krizeks acted with “reckless disregard.”
Blanka Krizek didn’t check to see how much time George Krizek spent with patients, the court said. And George Krizek, who didn’t bother to review the billing forms, sometimes billed for nearly 24 hours in a single day. Since Blanka Krizek used the code for longer sessions without checking on how much time her husband actually spent, and he failed to check the bills, there was enough evidence to prove the Krizeks acted with reckless disregard for whether their bills were accurate, the court concluded.
So the Krizeks get a dose of shock-therapy under the False Claims Act. And everyone else who submits bills to the government learns to keep their heads out of the sand and their eyes open.
Steven P. Garmisa, a partner in the Chicago law firm of Torshen, Spreyer & Garmisa & Slobig Ltd., specializes in civil litigation.