Public Health Law Map - Beta 5 - Medical and Public Health Law Site

spacious definition of fraud in mail and wire fraud cases: “It is a reflection of
moral uprightness, of fundamental honesty, fair play and right dealing in the
general and business life of members of society.… As Judge Holmes so
colorfully put it ‘[t]he law does not define fraud; it needs no definition; it is as
old as falsehood and as versatile as human ingenuity.’” [Gregory v. United
States, 253 F.2d 104, 109 (5th Cir 1958)]
The Supreme Court reiterated the expansive reach of mail and wire fraud in the
1987 case of Carpenter v. United States. It affirmed the mail fraud conviction of a
Wall Street Journal reporter who used the paper’s confidential information in an
insider trading scheme. The reporter was held to have violated his fiduciary
obligation to protect his employer’s confidential information:
We cannot accept petitioners’ further argument that Winans’ conduct in
revealing pre-publication information was no more than a violation of
workplace rules and did not amount to fraudulent activity that is
proscribed by the mail fraud statute. [The statutes … reach any scheme to
deprive another of money or property by means of false or fraudulent
pretenses, representations, or promises.… [T]he words ‘to defraud’ in the
mail fraud statute have the ‘common understanding’ of ‘wronging one in
his property rights by dishonest methods or schemes,’ and ‘usually
signify the deprivation of something of value by trick, deceit, chicane or
overreaching.’ [Carpenter v. United States, 484 U.S. 19 (1987)]
The duty of fidelity between the employer and employee that was at issue in this
case is precisely the same type of common law fiduciary duty as that between
physician and patient. Providing incentives to physicians to change the medical
care offered their patients is a breach of fiduciary duty. The nature of the motive
behind such incentives is judged from the patient’s perspective, not the persons
offering the incentives. For example, it is common for managed care plans to give
physicians an incentive to reduce specialty referrals in an effort to control medical
care costs. Although this might be seen as a laudatory action on the part of the
managed care plan, the individual patient denied a referral will probably see it as
an improper interference with the physician–patient relationship. Irrespective of
the payers’ motive, these incentives are legally indistinguishable from giving
bribes to employees to violate their duty to their employers.
(2) Incentives and Commercial Bribery
In most states health maintenance organizations (HMOs), preferred provider
organizations (PPOs), and other managed care plans do not directly employ and
supervise physicians. The physicians are either employed by physician’s
associations that contract with the plan or independent practitioners who contract
directly with the plan. These contracts contain provisions that are intended to
encourage the physicians to change the medical care decisions that they would
have made in the absence of the plan.
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