United States v. Richard E. Paulus

952 F.3d 717
CourtCourt of Appeals for the Sixth Circuit
DecidedMarch 5, 2020
Docket19-5532
StatusPublished
Cited by5 cases

This text of 952 F.3d 717 (United States v. Richard E. Paulus) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Richard E. Paulus, 952 F.3d 717 (6th Cir. 2020).

Opinion

RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 20a0072p.06

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA, ┐ Plaintiff-Appellee, │ │ > No. 19-5532 v. │ │ │ RICHARD E. PAULUS, M.D., │ Defendant-Appellant. │ ┘

Appeal from the United States District Court for the Eastern District of Kentucky at Ashland. No. 0:15-cr-00015-1—David L. Bunning, District Judge.

Argued: February 4, 2020

Decided and Filed: March 5, 2020

Before: BATCHELDER, McKEAGUE, and GRIFFIN, Circuit Judges. _________________

COUNSEL

ARGUED: Hilary Holt LoCicero, SCHERTLER & ONORATO, LLP Washington, D.C., for Appellant. David Lieberman, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Hilary Holt LoCicero, Robert S. Bennett, Lisa Hertzer Schertler, SCHERTLER & ONORATO, LLP Washington, D.C., for Appellant. David Lieberman, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., Charles P. Wisdom, Jr., Kate K. Smith, UNITED STATES ATTORNEY’S OFFICE, Lexington, Kentucky, for Appellee. _________________

OPINION _________________

McKEAGUE, Circuit Judge. Richard Paulus was convicted of healthcare fraud and making false statements relating to healthcare matters. Before sentencing, Paulus learned that No. 19-5532 United States v. Paulus Page 2

the government withheld evidence from him on the district court’s orders. On appeal he argues that this withholding violated his due process rights under Brady v. Maryland, 373 U.S. 83 (1963). We agree. Therefore, we VACATE Paulus’s conviction and REMAND for further proceedings.

I

A.

For years Paulus was a successful cardiologist at King’s Daughters Medical Center (KDMC). He performed an incredible number of angiograms and was “first in the nation for the total amount billed to Medicare for these procedures.” United States v. Paulus, 894 F.3d 267, 272 (6th Cir. 2018) (Paulus I). But not all was well. Complaints emerged that Paulus was performing medically unnecessary procedures. And several audits indicated that in multiple cases Paulus had reported a higher degree of blockage in his patients’ arteries than their angiograms reflected. Id. at 272–73. Meaning, in some cases, the patient’s angiogram showed a low degree of blockage and thus that the patient didn’t need a stent inserted. Yet Paulus reported a much more severe blockage, inserted a stent, and then billed patients and their insurance companies for the stent procedure. See id. at 273.1

Eventually, these allegations reached the federal government. At first, the government considered entering into a civil settlement with Paulus. In a letter setting forth its demands, the government stated that its consultants had reviewed 496 of Paulus’s procedures and concluded that 146 of them (or about 30%) were unnecessary because the patients’ angiograms showed minimal arterial blockage. The government further noted that its experts weren’t the only ones who found Paulus’s procedures to be problematic: the letter explained that KDMC’s “consultants [had] also reviewed a random selection of Dr. Paulus’ procedures, and found 75 angiographic films with [minimal blockage] in the artery he stented.” But after some back-and-forth, the attempts at a civil settlement fell through, and the government obtained an indictment.

1We gave a more thorough background on the medical science and Paulus’s conduct in our earlier opinion. Paulus I, 894 F.3d at 271–74. No. 19-5532 United States v. Paulus Page 3

B.

At trial the government called three expert witnesses, Drs. Ragosta, Morrison, and Moliterno, who showed angiograms from 72 different patient files to the jury. Id. at 273–74. While displaying each angiogram, the doctors diagnosed the amount of blockage in the patient’s artery and contrasted their diagnosis with that stated in Paulus’s report. Based on the differences between what the government’s experts saw in the angiograms and what Paulus reported, the experts concluded that Paulus overstated his patients’ arterial blockage and inserted medically unnecessary stents. They also emphasized that this was not “an isolated case[.]” Instead, Ragosta presented evidence of overstatements in 62 out of the 250–300 cases he reviewed, and he called the 62 cases a “representative sample”; Morrison noted that over half of the 11 randomly selected procedures he reviewed were unnecessary; and Moliterno asserted that all of the stent procedures he reviewed were unnecessary. Based on this testimony, the government argued that Paulus “saw one thing on the angiogram and consciously wrote down another.” Id. at 276. And he didn’t just do it occasionally. According to the government’s closing argument, Paulus did it “frequently, repetitive[ly], daily.”

After 23 days of trial, four days of jury deliberations, one judicial pep talk, and one Allen charge, the jury convicted Paulus of one count of healthcare fraud and ten counts of making false statements relating to healthcare. But the case didn’t proceed to sentencing. The district court vacated the convictions, finding that there was insufficient evidence both that Paulus made false statements and that he had fraudulent intent. But that didn’t stand. We disagreed with the district court’s reasoning and reversed its order. Paulus I, 894 F.3d at 280.

C.

The plot twisted once more. After remand and before sentencing, the government disclosed to Paulus for the first time the “Shields Letter.” According to the letter, when KDMC was facing its own legal trouble, it hired a team of independent experts to review Paulus’s work (“KDMC Review”). KDMC’s consultants reviewed 1,049 of Paulus’s cases and flagged 75 of his procedures as unnecessary. In the Shields Letter, KDMC’s attorneys explained to the No. 19-5532 United States v. Paulus Page 4

government their consultants’ findings and offered to refund Medicare for the payments the hospital had collected for the 75 flagged procedures.

While Paulus already knew that KDMC had identified 75 of his procedures as problematic, he did not know that KDMC consultants had reviewed 974 other procedures that they apparently found non-problematic. The defense viewed this evidence as exculpatory because it meant that the KDMC Review found that the rate of unnecessary surgeries, 75 out of 1,049, or about 7%, was far lower than what the government experts had testified at trial; this lower percentage was less consistent with systemic and purposeful fraud and more consistent with occasional mistakes or diagnostic differences of opinion between cardiologists. Seeking more information, Paulus moved to compel the government to produce all information related to the letter.

It was only then that the defense got the full picture. The government disclosed to Paulus a series of events that had taken place before his trial. Long before Paulus was indicted, KDMC sent the government the Shields Letter. And when the government later elected to charge Paulus, it planned to use the Shields Letter in its case-in-chief and to disclose the letter to Paulus. But KDMC objected, arguing that the letter was both privileged and inadmissible. So, about a month before trial, the government brought the dispute to the district court, and the court scheduled an ex parte hearing, so as to protect KDMC’s asserted privilege.

But even though privilege was ostensibly the reason for holding the hearing ex parte, the district court made no decision regarding the privilege issue. The court opened the hearing by saying it would put privilege aside and decide instead whether the information was inadmissible under Federal Rule of Evidence 408.

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Bluebook (online)
952 F.3d 717, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-richard-e-paulus-ca6-2020.