Insurance Fraud Indictment Thrown Out Because of Inadequate Presentation to Grand Jury

Prosecutor Improperly Relied on Insurer’s Fraud Investigator’s Inadequate Investigation to Indict Physician and Assistant

Sep 10, 2021

THE INDICTMENT

The State alleged Rodriguez practiced medicine without a license; Dr. Ferraro and Rodriguez fraudulently billed for Rodriguez’s services; and Galvan joined Rodriguez and Dr. Ferraro in conspiring to commit this fraud. The State asserts it presented sufficient evidence to survive dismissal and urges us to reinstate

The indictment is the second attempt to indict the doctor and her assistant. The trial court dismissed the indictment without prejudice, holding it was “palpably deficient in its failure to produce any testimony before the grand jury to support the dates set forth in the indictment.”

FACTS

Dr. Ferraro knew Rodriguez was not a licensed medical doctor in the United States. Still, when speaking with patients, Dr. Ferraro would refer to Rodriguez as “Dr. Rodriguez or Dr. Yvonne.” Although Dr. Ferraro said “most of the time” she would come into the room to go over Rodriguez’s impressions of the patient with the patient present, Dr. Ferraro acknowledged there were times when she did not do that, and instead submitted billing orders based solely on Rodriguez’s exam and impressions.

Rodriguez told the grand jury that her effort to secure a license was stymied by her failure to obtain a residency. Instead, she worked as a medical assistant, first at St. Joseph’s Hospital, and then for Ferraro.

Menendez, an insurer’s SIU investigator described how his “audit” of a random sample of 100 patients’ files led him to conclude that Dr. Ferraro’s office received over $150,000 in payments for services that Rodriguez performed, but which the office billed in Ferraro’s name. One patient told Menendez that Rodriguez treated her when Dr. Ferraro was not physically present in the office. By examining patient notes, Menendez claimed to be able to distinguish between Rodriguez’s and Ferraro’s handwriting.

In dismissing the indictment, the trial judge identified three flaws in the grand jury process.

The prosecutor improperly referred to evidence that was not presented to the grand jury by referring to “thousands of claims” of health care claims fraud.
Tthe evidence the State did present was insufficient. The court noted that Menendez’s analysis was too speculative, because it consisted of “inferences drawn from unfounded inferences leading to a further inference.” There was no proof Rodriguez or Galvan obtained a financial benefit. And there was inadequate evidence regarding the scope of practice of a medical assistant.
The indictment lacked sufficient specificity regarding dates of treatment and the names of patients to provide defendants notice and a fair opportunity to defend.

ANALYSIS

The grand jury fulfills a dual role under the Constitution: to decide if there is probable cause that a crime was committed, and to protect the innocent against unfounded charges. Though the grand jury is an arm of the court, an appellate court will reluctantly and sparingly review the grand jury’s actions to protect its independence.

A court may also act if the indictment does not clearly and in sufficient detail apprise a defendant of that against which he must defend..

The most significant defect in the grand jury process was the prosecutor’s failure to adequately and accurately instruct the jury about what a medical assistant, as an unlicensed medical professional, may do, and what activities encroach upon the licensed practice of medicine.

A physician may not delegate tasks that require the exercise of medical judgment and assessment (although that may be easier to say than to implement) or that encroach on tasks specifically assigned to other licensed professionals. What specific tasks a physician may delegate should best be defined by the Legislature and the expert regulators of the profession.

The “fair warning” requirement is manifest. There are some things that are black or white. For example, the court logically assumed it “reasonably clear” that medical assistants may not prescribe medicine or diagnose illness (as opposed to other health care professionals who are licensed and specifically authorized to do so). However, the prosecutor did not instruct the grand jury to limit itself to such clear encroachments into the practice of medicine. Instead, the prosecutor relied upon the testimony of a witness, Horizon Blue Cross/Blue Shield’s fraud investigator.

The failure to clearly instruct the grand jury as to the appropriate scope of a medical assistant’s practice tainted the counts charging theft by deception, health care claims fraud, and conspiracy to commit health care claims fraud. The crux of the deception and the fraud was that Dr. Ferraro sought reimbursement for procedures and activities that Rodriguez performed, by falsely conveying Dr. Ferraro performed them instead. Menendez stated that only licensed health care professionals had identification numbers to bill insurers for services.

Menendez’s opinion lacked sufficient reliability to support the indictment. An indictment’s “primary purpose” is to enable a defendant to prepare a defense by adequately describing the offense charged. Under the circumstances, the State’s allegation that the crimes occurred “on or about January 2012 until on or about May 2017” failed to apprise defendants of the crimes alleged or to enable them to mount a defense.

The prosecutor failed to adequately and accurately instruct the grand jury about what a medical assistant may do without encroaching upon the licensed practice of medicine. And, because the law does not clearly draw a line around a medical assistant’s allowable activities, prosecuting someone for crossing the line may violate the right to fair warning.

The prosecutor also improperly referred to additional evidence that he did not present to the grand jury, and presented a questionable analysis of the amount of money involved in the charged offenses. And the indictment lacked sufficient detail to give defendants a fair opportunity to mount a defense.

ZALMA OPINION

SIU investigators are insurance people not police officers nor are the investigators working for prosecutors. They are required by statute to advise the state that fraud is suspected. The state is obligated, before seeking an indictment, to gather evidence that supports a criminal charge. The state of New Jersey relied upon Mr. Menendez, an insurance investigator, whose inferences indicated fraud but failed to provide the grand jury with actual evidence. Although it is often true that a grand jury will indict a ham sandwich no court will allow trial to go forward against the sandwich and that is why this indictment failed.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at

http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4