Primum Non Nocere: The Expanding "Honest Services" Mail Fraud Statute and the Physician-Patient Fiduciary Relationship
Jones, Gregory D., Vanderbilt Law Review
Primum Non Nocere:l The Expanding "Honest Services" Mail Fraud Statute and the PhysicianPatient Fiduciary Relationship
Fraud is infinite in variety; sometimes it is audacious and unblushing; sometimes it pays a sort of homage to virtue, and then it is modest and retiring; it would be honesty itself if it could only afford it.
-Lord Macnaghten in Reddaway v. Ban.liam, 1896.2
In one case, a physician refers a patient to a certain hospital in return for an undisclosed referral fee from the hospital. In another, a physician decides not to refer a patient to a specialist for further examination. The physician, however, does not disclose to the patient that part of the cost of sending the patient to the specialist would come out of the physician's potential earnings. In the previous examples, has the physician breached her fiduciary duty to the patient by not disclosing her own financial interest in the patient's treatment? If so, the physician could be guilty of mail fraud under the federal "honest services" mail fraud statutes and subject to severe criminal penalties.
This Note explores the connection between the "honest services" mail fraud statute and the traditional physician-patient fiduciary relationship. At present, the connection is closer than one might expect and promises to become even closer in the near future. The federal judiciary and, most recently, Congress, have steadily expanded the mail fraud statute, which was originally enacted to protect the mail service,4 to criminalize an undisclosed breach of public or private fiduciary duty, or rather, to protect the beneficiary's intangible right to "honest services." This expansion of the mail fraud statute is partly a result of the statute's broad and ambiguous language, which allows the statute, in the discretionary hands of a federal prosecutor, to criminalize breaches of fiduciary duties not previously covered under other criminal statutes, such as the fiduciary duty a physician owes the patient.6
Given the paradigmatic fiduciary relationship that exists between a physician and patient, a physician's breaching her fiduciary duty by failing to disclose a referral fee or other financial kickback appears to be subject to an honest services mail fraud prosecution. Likewise, in a managed health care setting, a physician's failure to disclose financial incentives to limit the patient's care and the resulting breach of fiduciary duty would logically come within the purview of the mail fraud statute. The application of the statute to the rapidly developing and evolving managed health care system raises even larger questions and concerns.7 Although federal prosecutors have not relied extensively upon honest services mail fraud to prosecute health care fraud, they are beginning to make use of this powerful statute with some success.s
This Note will address the honest services mail fraud statute's use, and misuse, in this relatively unexplored area of the physicianpatient fiduciary relationship. Part II traces the evolution and expansion of the mail fraud statute, with particular emphasis on the intangible right to honest services. Part III examines the physician's fiduciary obligations in the physician-patient relationship. In light of these fiduciary duties, Part IV discusses the actual and potential prosecution of physicians under the honest services mail fraud statute. Specifically, it analyzes the current judicial confusion over the application of the mail fraud statute and its relation to other federal anti-kickback statutes. Part V concludes by suggesting that the mail fraud statute can be an effective and appropriate weapon to protect patients from a physician's undisclosed breach of fiduciary duty.
II. THE EXPANDING MAIL FRAUD STATUTE
A. History and Development
The mail fraud statute was first enacted in 18729 to protect the integrity of the postal service from abuses by swindlers, counterfeiters, and other "rapscallions. …