David F. McNamar
McNamar & McSharar, P.C.
Attorneys for Appellee
Attorney General of Indiana
Rosemary L. Borek
Deputy Attorney General
Appellant (Defendant below),
STATE OF INDIANA, Appellee (Plaintiff below ).
) Supreme Court No.
) Court of Appeals No.
June 28, 2002
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 courts denial of
Defendants motion to dismiss, finding that the statute under which Defendant was charged
is too vague to meet the requirements of due process.
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 courts ruling on Defendants motion to dismiss.
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 courts
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 Indianas 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 Defendants 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 States 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.
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
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
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
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, J., concurs with separate opinion in which DICKSON and RUCKER, JJ., co ncur.
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, Healthscripts constitutional separation of powers argumentthat del egating criminal authority to an administrative agency is improperbecomes 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 Healthscripts 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 Healthscripts 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.
The Legislature itself has shown that it can be much more
definite in identifying conduct for which a Medicaid provider can be held criminally
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