Attorney for Appellant
David F. McNamar
McNamar & McSharar, P.C.
Indianapolis, IN
Attorneys for Appellee
Steve Carter
Attorney General of Indiana
Rosemary L. Borek
Deputy Attorney General
Indianapolis, IN
IN THE
INDIANA SUPREME COURT
HEALTHSCRIPT, INC.,
Appellant (Defendant below),
v.
STATE OF INDIANA,
Appellee (Plaintiff below ).
)
) Supreme Court No.
) 49S05-0102-CR-00108
)
) Court of Appeals No.
) 49A05-9908-CR-370
)
)
)
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Jane Magnus-Stinson, Judge
Cause No. 49G06-9904-CF-69249
ON PETITION TO TRANSFER
June 28, 2002
SULLIVAN, Justice
Defendant Healthscript, Inc., was charged with Medicaid Fraud for allegedly overcharging Medicaid for
products it provided to its customers. The trial court denied its motion
to dismiss and Defendant appealed. We reverse the trial court’s denial of
Defendant’s motion to dismiss, finding that the statute under which Defendant was charged
is too vague to meet the requirements of due process.
Background
Medicaid is a joint federal-state program that pays for some health care costs
of low-income people, including care in long-term care facilities such as nursing homes.
The federal government pays about 62% of the costs of Medicaid in
Indiana; the state pays the balance. Kendra A. Hovey & Harold A.
Hovey, CQ’s State Fact Finder 135 (2002). Defendant is a licensed pharmacy
authorized to provide health-related services under Indiana’s Medicaid program. In Medicaid parlance,
Defendant is a “provider.” Between November, 1995, and June, 1997, Defendant submitted
claims to and was paid by Medicaid for deliveries of sterile water to
Haven Center, a long-term care facility. In 1998, the State charged Defendant
under Ind. Code § 35-43-5-7.1(a)(1) (Supp. 1997) – to be discussed in detail
infra – with the crime of “Medicaid Fraud” on the theory that Defendant
had overcharged Medicaid for the sterile water delivered to Haven Center.
Defendant filed a motion to dismiss, arguing that Defendant could not be charged
under Ind. Code § 35-43-5-7.1(a)(1) for the acts that the State had alleged.
Defendant also filed a motion to suppress regarding a search warrant, which
Defendant contends was illegally obtained. The trial court rejected both claims and
certified its rulings for interlocutory appeal. The Court of Appeals reversed the
trial court’s ruling on Defendant’s motion to dismiss.
See footnote
See Healthscript, Inc., v.
State, 740 N.E.2d 562 (Ind. Ct. App. 2000) (on rehearing). Having previously
granted transfer, 753 N.E.2d 6 (2001) (table), we now review the trial court’s
ruling.
Discussion
I
Reduced to its essentials, this is a case about whether a criminal statute,
Ind. Code § 35-43-5-7.1(a)(1) (Supp. 1997), is sufficiently definite to put Defendant on
notice that its alleged conduct was proscribed. As such, a fairly careful
parsing of the relevant statutory and regulatory language is required.
We start with the language of Ind. Code § 35-43-5-7.1(a)(1) (Supp. 1997), the
criminal statute under which Defendant was charged with the crime of “Medicaid Fraud.”
It provides in relevant part:
[A] person who knowingly or intentionally ... files a Medicaid claim, including an
electronic claim, in violation of Indiana Code § 12-15 ... commits Medicaid fraud,
a Class D felony.
As such, we are required to examine Ind. Code § 12-15 (1993 &
Supp. 1997). This article of the Code comprises Indiana’s Medicaid statute.
Among its provisions is the following:
A provider who accepts payment of a claim submitted under the Medicaid program
is considered to have agreed to comply with the statutes and rules governing
the program.
Ind. Code § 12-15-21-1 (1993). A Medicaid regulation in effect at the
time of Defendant’s alleged submissions specified that providers could not be paid by
Medicaid more than their “usual and customary charge” to private non-Medicaid customers.
Ind. Admin. Code tit. 405 r. 1-6-21.1(g)(3)(1996 & Supp. 1997).
The State alleged that Defendant charged between $22.50 and $25.00 per 9000 milliliters
to three other customers while charging the Medicaid program $181.00 per 9000 milliliters.
According to the State, the resulting payments exceeded $50,000. It was
the State’s theory, then, that Defendant did not comply with Ind. Admin. Code
tit. 405 r. 1-6-21.1(g)(3) when it overcharged the Medicaid program; that this in
turn violated Ind. Code § 12-15-21-1 because Defendant did not abide by its
agreement to “comply with the ... rules governing [Medicaid];” and Defendant therefore committed
a class C felony under the Medicaid Fraud Statute, Ind. Code § 35-43-5-7.1(a)(1),
by submitting a claim in violation of Ind. Code § 12-15.
II
Defendant attacks the charges against it with several arguments.
See footnote Its broadest claim
is that the charges must be dismissed because they violate constitutional separation of
powers principles. Citing Ind. Const. Art. III, § 1,
See footnote Defendant contends that
the Legislature has impermissibly delegated its constitutional power to an administrative agency.
Defendant a
rgues that only the Legislature can enact a criminal law: “The
legislature cannot delegate its statutory authority to enact criminal law to an administrative
agency by way of an agency's rule-making power.” (Br. of Appellant at
19) (citing Ensign vs. State, 250 Ind. 119, 235 N.E.2d 162, 164-65 (1968)).
See footnote
We have held that the Legislature may constitutionally delegate rule-making powers to an
administrative agency if that delegation is accompanied by sufficient standards to guide the
agency in the exercise of its statutory authority.
Barco Beverage Corp. v.
Indiana Alcoholic Beverage Com'n, 595 N.E.2d 250, 253-54 (Ind. 1992) (quoting Taxpayers' Lobby
of Indiana, Inc. v. Orr, 262 Ind. 92, 103, 311 N.E.2d 814, 819
(1974)).
See footnote Whether the delegation at issue here contravenes that principle is a
question we need not decide today because we decide the case on other
grounds.See footnote
III
At issue here is whether the criminal statute under which Defendant was charged
gave fair warning that the conduct alleged was proscribed. As set forth
supra, that statute provides:
[A] person who knowingly or intentionally ... files a Medicaid claim, including an
electronic claim, in violation of Indiana Code § 12-15 ... commits Medicaid fraud,
a Class D felony.
Ind. Code § 35-43-5-7.1(a)(1).
Defendant points out that while Indiana Code § 12-15 governs the operations of
the Medicaid program in Indiana generally, it does not “contain any statute which
makes it unlawful to submit claims exceeding a provider's ‘usual and customary charge,’”
the misconduct alleged. (Br. of Appellant at 15).
The State counters that Ind. Code § 12-15, cross-referenced in Ind. Code §
35-43-5-7.1(a)(1), includes the requirement that "[a] provider who accepts payment of a
claim submitted under the Medicaid program is considered to have agreed to comply
with the statutes and rules governing program." Ind. Code § 12-15-21-1.
As such, the State contends, Medicaid providers have been told by the Legislature
that action contrary to Medicaid rules is forbidden. And, as we have
seen, there was a Medicaid rule in place limiting providers of covered legend
drugs to their usual and customary charges. Ind. Admin. Code tit. 405
r. 1-6-21.1(g) (1996 & Supp. 1997).
While we find the state's argument plausible, we conclude that the link b
etween
Ind. Code § 12-15 and the conduct prohibited by the “ordinary and customary
charge” regulation is simply too attenuated to permit this prosecution to proceed.
Several venerable due process principles – variously framed as the “void for vagueness
doctrine,” the “rule of lenity,” and the “fair notice requirement” – bring us
to this conclusion. “As generally stated, the void for vagueness doctrine requires
that a penal statute define the criminal offense with sufficient definiteness that ordinary
people can understand what conduct is prohibited and in a manner that does
not encourage arbitrary and discriminatory enforcement."
Kolender v. Lawson, 461 U.S. 352,
357 (1983). The purpose of the "fair notice" requirement is "to give
a person of ordinary intelligence fair notice that his conte
mplated conduct is forbidden
by the statute. The underlying principle is that no man shall be
held criminally responsible for conduct which he could not reasonably understand to be
proscribed."
United States v. Harriss, 347 U.S. 612, 617 (1954).
The rule of lenity is premised on two ideas: First, "'a fair
warning should be given to the world in language that the co
mmon world
will understand, of what the law intends to do if a certain line
is passed'"; second, legislatures and not courts should define criminal activity.
United
States v. Bass, 404 U.S. 336, 347-348 (1971) (quoting McBoyle v. United States,
283 U.S. 25, 27 (1931)).
The penal statute at issue here, Ind. Code § 35-43-5-7.1(a)(1), it is true,
cross-references Ind. Code § 12-15. But Ind. Code § 12-15 is an
entire article of the Indiana Code, covering 50 pages of the 1993 Code
and comprising 280 sections organized in 37 chapters.
See footnote
Many of the chapters
impose duties on or otherwise speak to the state agency responsible for administering
the Medicaid program. Others define the eligibility of, impose duties on, or
otherwise speak to individuals who receive Medicaid assistance. Only a portion speak
to Medicaid providers. The effect of the statute, then, is to say
that a provider is prohibited from filing a Medicaid claim “in violation of”
nothing more specific than this vast expanse of the Indiana Code. This
is not, in our view, “fair warning ... in language that the common
world will understand, of what the law intends to do if a certain
line is passed.” Bass, 404 U.S. at 348 (quoting McBoyle, 283 U.S.
at 27). Here, to understand what conduct Ind. Code § 35-43-5-7(a)(1) prohibits
requires following a cross-reference to Ind. Code § 12-15, then through the 50
pages and 280 sections of that article, and then to the language of
an agency regulation in the Indiana Administrative Code. This lacks the “sufficient
definiteness” that due process requires for penal statutes.
See footnote
Kolender, 461 U.S. at
357.
We hold that the general reference Ind. Code § 12-15 in Ind. Code
§ 35-43-5-7.1(a)(1) is too vague in defining the conduct sought to be proscribed
to meet the requirements of due process.
Conclusion
Having previously granted transfer, we summarily adopt the opinion of the Court of
Appeals as to the issues referred to in footnotes 1 and 2 and
remand this case to the trial court with directions to dismiss the information
without prejudice.
SHEPARD, C.J., and DICKSON, BOEHM, and RUCKER, JJ., concur.
BOEHM, Justice, concurring.
I agree with the majority that the statutory provisions at issue here are
less than mo
dels of clarity. One must sift through the many provisions
of Indiana Code 12-15 to find the general requirement of section 12-15-21-1 that
a Medicaid provider is considered to have agreed to comply with the statutes
and rules governing the Medicaid program. One must then look to the
Medicaid rules in the Indiana Administrative Code to find that providers are limited
to their usual and customary charges when paid by Medicaid. Ind. Admin.
Code tit. 405, r. 1-6-21.1(g) (1996). I agree with the majority that
a violation of section 7.1(a)(1) is simply too attenuated.
However, subsection (a)(1) is not the only relevant provision under section 7.1.
Healthscript was charged in the second amended information with violating Indiana Code section
35-43-5-7.1 without specifying which subsection of that section was violated. Su
bsection 7.1(a)(2)
provides that a person who knowingly or intentionally “obtains payment from the Medicaid
program under IC 12-15 by means of a false or misleading oral or
written statement or other fraudulent means” commits Medicaid fraud. The conduct alleged
in the information was submitting a claim “for amounts exceeding the usual and
customary charge which resulted in payments.” According to the affidavit for probable
cause filed with the information, Healthscript knowingly charged the Medicaid program $181 per
9000 milliliters of sterilized water while it charged private non-Medicaid customers $22.50 and
$25 for the same 9000 milliliters of water. One need not have
a finely tuned moral compass to know that this conduct constitutes the obtaining
of payments from the Medicaid program by means of a false statement.
The usual and customary charge requirement was well known in the industry.
In my view, given the regulatory scheme, presenting this claim constituted a representation
that the $181 price was “usual and customary.” There are undoubtedly many
situations where the meaning of that phrase is debatable, but this is not
one of them. Whatever rubber is in the concept is stretched far
beyond the snapping point by a claim of $181 for water sold for
$25 to commercial customers. The information charges that the misrepresentation was knowingly
made and resulted in payment. If so, in my view, it violated
subsection 7.1(a)(2).
In my view, Healthscript’s constitutional separation of powers argument—that del
egating criminal authority to
an administrative agency is improper—becomes a non-issue if this case is viewed as
a subsection (a)(2) fraudulent claim case. The administrative regulation does not define
the crime. Rather, it is part of the background that renders Healthscript’s
payment requests false. The prohibited conduct of making a false statement to
receive payment is prohibited by subsection (a)(2).
Although I believe a violation of 7.1(a)(2) could have been charged, I concur
in the majority opinion because the i
nformation did not accomplish that. The charge
in the second amended information of a violation of Indiana Code section 35-43-5-7.1
was obviously not clear in alleging a violation of subsection (a)(2). The
State itself focuses on Healthscript’s conduct as a violation subsection (a)(1).
See footnote
In
addition, the parties appear to have stipulated on appeal that the charge was
under subsection (a)(1).
For these reasons, I would find that the charging information did not charge
a viol
ation of (a)(2) with sufficient clarity. See Moran v. State, 477
N.E.2d 100, 104 (Ind. Ct. App. 1985) (finding that a count in the
indictment failed the specificity test by failing to restrict the allegations to a
violation of a particular subsection of a statute). The accused has the
right to require that the allegations contained in the charging instrument state the
crimes charged with sufficient certainty to enable the accused to anticipate the evidence
adduced against him at trial, thereby enabling him to marshal evidence in his
defense. Harwei, Inc. v. State, 459 N.E.2d 52, 56 (Ind. Ct. App.
1984). “The indictment must state the crime charged in direct and unmistakable
terms.” Moran, 477 N.E.2d at 103-04. Any reasonable doubt as to
the offense charged must be resolved in favor of the accused. Id.
Simply charging Healthscript with conduct that contravenes a statute without specifying the
violated subsections is insufficient specificity in the charging information.
DICKSON and RUCKER, JJ., concur.
Footnote:
The Court of Appeals affirmed the trial court’s ruling on the
search warrant.
Healthscript, Inc. v. State, 724 N.E.2d 265, 271-73 (Ind. Ct. App.
2000), rev’d on reh’g on other grounds, 740 N.E.2d 562 (Ind. Ct. App.
2000). We summarily affirm the Court of Appeals on this issue.
Ind. Appellate Rule 58 (A)(2).
Footnote: Healthscript is charged with respect to covered legend drugs alleged to
have been delivered between Nov. 1, 1995, and June 30, 1997. The
"usual and customary charge" regulation, Ind. Admin. Code tit. 405 r. 1-6-21.1(g), was
repealed July 25, 1997. See 20 Ind. Reg. 3365 (1997). In
the Court of Appeals, Healthscript argued that it could not be prosecuted because
the regulation had been repealed. The Court of Appeals rejected this claim.
Healthscript, Inc. v. State, 724 N.E.2d 265, 270 (Ind. Ct. App. 2000),
rev’d on reh’g on other grounds, 740 N.E.2d 562 (Ind. Ct. App. 2000).
We summarily affirm the Court of Appeals on this point. App.
R. 58 (A) (2).
Footnote:
“The powers of the Government are divided into three separate departments;
the Legisl
ative, the Executive, including the Administrative, and the Judicial; and
no person, charged with official duties under one of these departments, shall exercise
any of the functions of another, except as in this Constitution expressly provided.”
Footnote:
In
Ensign, an employee of the Discount Gas Corp. was indicted
on a charge of involuntary manslaughter in the death of a woman killed
in an explosion on Halloween night, 1963, at the State Fairgrounds Coliseum.
The basis of the indictment was that the explosion occurred after the defendant
had unsafely stored three 100-pound cylinders of liquid propane at the Coliseum.
A jury trial resulted in a verdict of guilty of assault and battery.
250 Ind. at 120, 235 N.E.2d at 162-63.
On appeal, our court held that defendant’s indictment should have been dismissed because
it was “not based upon the violation of any statute of the State
of Indiana” but instead attempted “to charge [a] violation of certain rules and
regulations of the Fire Marshall of Indiana.” This was impermissible, we said,
because “[t]he legislature cannot delegate its express authority defining criminal responsibility to anyone.”
250 Ind. at 124, 235 N.E.2d at 164-65. (As to the
assault and battery conviction, our court reversed on grounds that the indictment did
not “allege any of the essential elements of assault and battery.” 250
Ind. at 125, 235 N.E.2d at 165.)
Footnote:
As a matter of federal constitutional law, the U.S. Supreme Court
recently revisited these principles in
Whitman vs. Am. Trucking Ass’ns, where the court
said, “In a delegation challenge, the constitutional question is whether the statute has
delegated legislative power to the agency. Article I, § 1, of the
Constitution vests ‘all legislative Powers herein granted . . . in a Congress
of the United States.’ This text permits no delegation of those powers.”
531 U.S. 457, 472 (2001). See Barco, 595 N.E.2d at 254,
for a brief history of federal jurisprudence in this area, including Panama Refining
Co. v. Ryan, 293 U.S. 388 (1935), and Schechter Poultry Corp. v. United
States, 295 U.S. 495 (1935).
Footnote:
As a general matter, the U.S. Constitution does not
per se
prohibit Congress from delegating to an administrative agency some responsibility for defining elements
of a criminal offense. See Touby v. State, 500 U.S. 160, 165
(1991) (authorized drug prosecution where Attorney General authorized to specify controlled substances on
a temporary basis when doing so was "necessary to avoid an imminent hazard
to the public safety"); United States v. Grimaud, 220 U.S. 506 (1911) (ruling
that Congress acted within its constitutional power in delegating to the Secretary of
Agriculture the power to make rules for the lawful use of forest reservations).
However, the extent to which administrative rule-making in this regard should be
entitled to the deferential standards of review set forth in Chevron U.S.A. v.
Natural Resources Defense Council, 467 U.S. 837, 866 (1984), has been the subject
of scholarly debate. See Sanford N. Greenberg, Who Says It's a Crime?:
Chevron Deference to Agency Interpretations of Regulatory Statutes That Create Criminal Liability, 58
U. Pitt. L. Rev. 1 (1996) (arguing that exceptions to Chevron deference when
courts interpret administrative statutes that are criminally enforceable are not desirable, necessary, or
easily administered); Mark D. Alexander, Note: Increased Judicial Scrutiny for the Administrative Crime,
77 Cornell L. Rev. 612 (1992) (arguing that courts reviewing challenges to criminal
rule-making should consider de novo whether a particular criminal rule falls within the
grant of power authorized in Congress's delegation); Cass R. Sunstein, Law and Administration
After Chevron, 90 Colum. L. Rev. 2071, 2097-2100 (1990) (arguing that when courts
interpret administrative statutes that are criminally enforceable, Chevron deference may conflict with the
doctrine of lenity, or the canon of strict construction of criminal statutes).
Footnote:
The Indiana Code is subdivided into 36 “titles.” Each title
is further subdivided, first, into “articles,” then “chapters,” and then “sections.” The
citation “Ind. Code § 12-15” refers to Article 15 (“Medicaid”) of Title 12
(“Human Services”).
Footnote: The Legislature itself has shown that it can be much more
definite in identifying conduct for which a Medicaid provider can be held criminally
responsible.
See, e.g., Ind. Code § 35-43-5-7.1(a)(2) (Supp. 1997) (a person commits
Medicaid fraud who “obtains payment from the Medicaid program under IC 12-15 by
means of a false or misleading oral or written statement or other fraudulent
means.”).
Footnote:
The State quotes subsections (a)(1), (a)(2), and (a)(5), but makes no argument
focusing on either (2) or (5). Rather it contends, “This statute makes
it a crime to knowingly or intentionally file a Medicaid claim in violation
of Indiana Code 12-15” and “To be guilty of Medicaid Fraud, a provider
must knowingly or intentionally file a claim in violation of Title 12, Article
15.” Both seem to point to a claim of a subsection (1)
violation.