and three counts of perjury (Pen. Code, § 118, counts 3-5). The superior court denied
Banerjee’s motion to dismiss the information as unsupported by reasonable or probable
cause. (Pen. Code, § 995, subd. (a)(2)(B).)
Banerjee petitions for a writ of prohibition, directing the superior court to vacate
its order denying his Penal Code section 995 motion and to issue an order setting aside
the information. (Pen. Code, § 999a.) We issued an order to show cause and an order
staying further proceedings on the information, pending our resolution of the merits of
Banerjee’s petition. The People have filed a return, and Banerjee has filed a traverse.
The People claim the evidence supports a strong suspicion that Banerjee
committed two counts of insurance fraud and three counts of perjury, based on his
violations of Labor Code section 139.3, subdivision (a) (§ 139.3(a)),1 between 2014 and
2016. Section 139.3(a) prohibits a physician from referring patients to other persons or
entities for specified services, to the extent the services are to be paid pursuant to the
workers’ compensation system (§ 3200 et seq.), if the physician or his or her immediate
family has a “financial interest” with the person or in the entity receiving the referral.
1 Unspecified statutory references are to the Labor Code. References to subdivisions of sections 139.3 and 139.31 are denoted without the word “subdivision” or its abbreviated form. For example, we refer to subdivision (a) of section 139.3 as “section 139.3(a),” rather than as “section 139.3, subdivision (a),” or “§ 139.3, subd. (a).”
2
Between 2014 and 2016, Banerjee billed a workers’ compensation insurer for
services he rendered to patients through his professional corporation and through two
other legal entities he owned and controlled. The insurance fraud charges are based on
Banerjee’s 2014-2016 billings to the insurer through the two other entities. The perjury
charges are based on three instances in which Banerjee signed doctor’s reports, certifying
under penalty of perjury that he had not violated “section 139.3.”
Banerjee claims the information must be set aside for three reasons. First, he
claims the evidence shows he did not violate the referral prohibition of section 139.3(a)
because he complied with the written patient disclosure requirement of section 139.3(e).
Section 139.3(e) requires a physician who refers a patient to, or who seeks a consultation
from, an organization in which the physician has a financial interest to disclose the
financial interest to the patient in writing at the time of the referral. Banerjee claims that
a physician’s compliance with section 139.3(e) excuses the physician’s noncompliance
with the referral prohibition of section 139.3(a). That is, he claims a physician may refer
patients for services specified in section 139.3(a) to a person with whom, or an entity in
which, the physician has a financial interest (§ 139.3(a)), as long as the physician
discloses the financial interest to the patient in writing at the time of the referral
(§ 139.3(e)).
Second, he claims that, even if he did not comply with section 139.3(e), the
“physician’s office” exception to the referral prohibition of section 139.3(a)—set forth in
section 139.31(e)—applies to all of his referrals to his two other legal entities. He
observes that he treated all of his patients for all of the services he provided to them at the
3
same office location, and that the physician’s office exception of section 139.31(e) does
not prohibit a physician from rendering services through separate legal entities. Third, he
claims the patient disclosure requirement of section 139.3(e), the referral prohibition of
section 139.3(a), and the physician’s office exception to the referral prohibition
(§ 139.31(e)), are unconstitutionally vague. Thus, he argues, he cannot be criminally
prosecuted based on an alleged violation of section 139.3(a).
To date, no published court decision has interpreted sections 139.3 or 139.31. We
conclude that a physician’s compliance with the disclosure requirement of
section 139.3(e) does not excuse the physician’s noncompliance with the referral
prohibition of section 139.3(a), and that section 139.3(a) and 139.3(e) are neither in
conflict nor unconstitutionally vague. To save the physician’s office exception
(§ 139.31(e)) from an unconstitutionally vague interpretation, we construe the statute as
allowing a physician to render services to patients through separate legal entities,
including entities in which the physician has a financial interest, provided that the
services are rendered within the same “physician’s office” or the office of a group
practice. (§§ 139.3(b)(5), 139.31(e).)
Our interpretation of section 139.31(e) means that the physician’s office exception
applies to Banerjee’s financially interested “self-referrals” to his two other legal entities.
Thus, Banerjee did not violate section 139.3(a) by referring his patients to his two other
legal entities. Because Banerjee’s alleged violations of section 139.3(a) was the only
basis to support the perjury charges, the perjury charges must be dismissed.
4
Even though the evidence does not show that Banerjee violated section 139.3(a),
the evidence supports a strong suspicion that Banerjee specifically intended to present
false and fraudulent claims for health care benefits, in violation of Penal Code
section 550, subdivision (a)(6), by billing the workers’ compensation insurer substantially
higher amounts through his two other legal entities, between 2014 and 2016, than he
previously and customarily billed the insurer for the same services he formerly rendered
through his professional corporation and his former group practice. Thus, we grant the
writ as to the perjury charges but deny it as to the insurance fraud charges.
II. BACKGROUND
A. The Charges Against Banerjee
1. Insurance Fraud (Counts 1 & 2)
Banerjee is charged in counts 1 and 2 of the information with violating Penal Code
section 550, subdivision (a)(6), a form of insurance fraud. (See CALCRIM No. 2000.)
The statute makes it a crime to “[k]nowingly make or cause to be made any false or
fraudulent claim for payment of a health care benefit.” (Pen. Code, § 550, subd. (a)(6).)
The elements of the crime are (1) the knowing presentation of a false claim for payment
of a health care benefit, (2) with the intent to defraud the recipient. (See People ex. rel.
Government Employees Ins. Co. v. Cruz (2016) 244 Cal.App.4th 1184, 1193.) Insurance
fraud is a specific intent crime; the defendant must specifically intend to defraud a person
with a false or fraudulent claim. (People v. Scofield (1971) 17 Cal.App.3d 1018, 1025-
1026.) The crime is complete upon the presentation of the claim, regardless of whether
anyone is defrauded by or anything of value is taken or received in consideration for the
5
claim. (People ex. rel. Government Employees Ins. Co. v. Cruz, supra, 244 Cal.App.4th
at pp. 1193-1194.)
2. Perjury (Counts 3, 4, and 5)
Banerjee is charged in counts 3, 4, and 5 with perjury in violation of Penal Code
section 118. (See CALCRIM No. 2640.) “In order to lawfully hold a person to answer
on the charge of perjury under [Penal Code] section 118, evidence must exist of a ‘willful
statement, under oath, of any material matter which the witness knows to be false.’ ”
(Cabe v. Superior Court (1998) 63 Cal.App.4th 732, 735.) Perjury is also a specific
intent crime. To commit perjury, the defendant must (1) knowingly make a false
statement, and (2) specifically intend that the false statement be made under oath or
penalty of perjury. (People v. Viniegra (1982) 130 Cal.App.3d 577, 584-586.)
B. Sections 139.3 and 139.31, Overview
The insurance fraud and perjury charges are based on Banerjee’s alleged
violations of section 139.3(a) between 2014 and 2016. To date, no published court
decision has interpreted sections 139.3 or 139.31. The statutes were enacted in 1993
(Stats. 1993, ch. 121, §§ 20, 21, eff. July 16, 1993) as part of Assembly Bill No. 110
(1993-1994 Reg. Sess.) (Assembly Bill 110), itself part of a comprehensive package of
legislation that reformed our state’s workers’ compensation laws. (Historical and
Statutory Notes, 42A West’s Ann. Ins. Code (2013 ed.) foll. Ins. Code § 675, pp. 234-
235.)2 Assembly Bill 110 was intended to reduce costs and strengthen conflict of interest
2 Assembly Bill 110 repealed former section 139.3 and reenacted section 139.3 in its current form. (Stats. 1993, ch. 121, §§ 19-20.)
6
rules in the workers’ compensation system. (See Historical and Statutory Notes,
42A West’s Ann. Ins. Code, supra, foll. Ins. Code § 675 at p. 235.)3
Section 139.3(a) makes it unlawful for a physician[4] to refer a person for specified
services, to the extent the services are paid pursuant to our state’s workers’ compensation
system (see § 139.3(a) [referencing § 3200 et seq.]), “if the physician or his or her
immediate family[5] has a financial interest[6] with the person or in the entity that receives
the referral.” (§ 139.3(a).) The statute lists the services that are covered by its
prohibition on financially interested physician referrals: “clinical laboratory, diagnostic
3 Sections 139.3 and 139.31 were most recently amended in 2011. (Stats. 2011, ch. 545, §§ 2, 3, eff. Jan. 1, 2012.)
4 Section 139.3(b) defines several terms for purposes of sections 139.3 and 139.31. “ ‘Physician’ means a physician defined in Section 3209.3.” (§ 139.3(b)(3).) Section 3209.3 defines “physician” as including “physicians and surgeons holding an M.D. or D.O. degree, psychologists, acupuncturists, optometrists, dentists, podiatrists, and chiropractic practitioners licensed by California state law and within the scope of their practice as defined by California State law.”
5 “ ‘Immediate family’ includes the spouses and children of the physician, the parents of the physician, and the spouses of the children of the physician.” (§ 139.3 (b)(2).)
6 Section 139.3(b)(4) defines “a financial interest” as including but not limited to, “any type of ownership , interest, debt. Loan lease compensation, remuneration, discount, rebate, refund, dividend, distribution, subsidy, or other form of direct or indirect payment, whether in money or otherwise, between a licensee and a person or entity to whom the physician refers a person for a good or service specified in subdivision (a). A financial interest also exists if there is an indirect relationship between a physician and the referral recipient, including, but not limited to, an arrangement whereby a physician has an ownership interest in any entity that leases property to the referral recipient. Any financial interest transferred by a physician to, or otherwise established in, any person or entity for the purpose of avoiding the prohibition of this section shall be deemed a financial interest of the physician.”
psychometric testing, home infusion therapy, outpatient surgery[7], diagnostic imaging
goods or services[8], or pharmacy goods, whether for treatment or medical-legal
purposes.” (§ 139(a).)
A violation of section 139.3(a) is a misdemeanor. (§ 139.3(g).) Physicians
convicted of violating section 139.3(a) are also subject to disciplinary action by the
appropriate licensing board if the licensee physician has committed unprofessional
conduct, along with civil penalties of up to $5,000 for each violation. (Ibid.)
Subdivisions (c), (d), (e), and (f) of section 139.3 impose further prohibitions or
affirmative obligations on licensees, physicians, insurers, and others, regarding section
7 “Outpatient surgery includes both of the following: [¶] (A) Any procedure performed on an outpatient basis in the operating rooms, ambulatory surgery rooms, endoscopy unites, cardiac catherization laboratories, or other sections of a freestanding ambulatory surgery clinic, whether or not licensed under paragraph (1) of subdivision (b) of Section 1204 of the Health and Safety Code. [¶] (B) The ambulatory surgery itself.” (§ 139.4, subd. (b)(7).)
8“ ‘Diagnostic imaging’ includes, but is not limited to, all X-ray, computed axial tomography magnetic resonance imaging, nuclear medicine, positron emission tomography, mammography, and ultrasound good and services.” (§ 139.3(b)(1).)
8
139.3(a)’s prohibition on financially interested physician referrals.9 Violations of
section 139.3(c), 139.3(d), 139.3(e), and 139.3(f) are public offenses, punishable by a
fine of up to $15,000 and “appropriate disciplinary action.” (§ 139.3(g).)
The parties dispute whether the written patient disclosure requirement of
section 139.3(e) is an exception to or excuses a physician’s noncompliance with the
prohibition on financially interested physician referrals under section 139.3(a) and, if so,
whether Banerjee complied with section 139.3(e). Section 139.3(e) provides: “A
physician who refers to or seeks consultation from an organization in which the physician
has a financial interest shall disclose this interest to the patient or if the patient is a minor,
to the patient’s parents or legal guardian in writing at the time of the referral.”
Section 139.31 expressly addresses situations in which “section 139.3” does not
apply. Section 139.31(e) provides: “The prohibition of section 139.3 shall not apply to
any service for a specific patient that is performed within, or goods that are that are
supplied by, a physician’s office, or the office of a group practice. . . .”
9 Section 139.3(c)(1) prohibits a “licensee” from entering “into an arrangement or scheme, such as a cross-referral arrangement, that the licensee knows, or should know, has a principle purpose of ensuring referrals by the licensee to a particular entity that, if the licensee directory made referrals to that entity, would be in violation of this section.” Section 139.3(c)(2) makes it “unlawful for a physician to offer, deliver, receive, or accept any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for a referred evaluation or consultation.” Section 139.3(d) prohibits an “entity” from presenting a claim for payment for a referral prohibited under section 139.3, and section 139.3(f) prohibits “any insurer, self- insurer, or other payor” from paying “a charge or lien for any goods or services resulting from a referral in violation” of section 139.3.
9
Section 139.3(b)(5) defines “physician’s office” for purposes of sections 139.3 and
139.31. “Physician’s office” means either “[a]n office of a physician in solo practice”
(§ 139.3(b)(5)(A)), or “[a]n office in which the services or goods are personally provided
by the physician or by employees in that office, or personally by independent contractors
in that office, in accordance with other provisions of law. . . .” (§ 139.3 (b)(5)(B)). All
such employees or independent contractors are required to be licensed. (Ibid.)
The parties also dispute whether the physician’s office exception (§ 139.31(e)) to
the prohibition on financially interested physician referrals (§ 139.3(a)) applies to
Banerjee’s patient referrals. Banerjee claims the physician’s office exception applies;
thus, he did not violate section 139.3(a) because he only referred his patients for services
that he personally performed within his “physician’s office” (§139.3(b)(5)), at the same
physical location, even though he performed the services through three separate legal
entities that he owned and operated from that location. The People maintain that the
physician’s office exception does not apply to services rendered by a single physician
through separate legal entities, even if the services are rendered at the same location.
C. Preliminary Hearing Evidence
1. The Operative Complaint
In July 2019, the People filed an amended complaint charging Banerjee with two
counts of insurance fraud (Pen. Code, § 550, subd. (a)(6)), and three counts of perjury
(Pen. Code, § 118). At the preliminary hearing, the People presented evidence that the
insurance fraud and perjury charges were based on Banerjee’s presentation of invoices or
10
billings, along with doctor’s reports, to a workers’ compensation insurer, Berkshire
Hathaway Homestate Companies (BHHC), between 2014 and 2016.
The billings and doctor’s reports concerned medical services that Banerjee
provided to patients, between 2014 and 2016, through three entities that Banerjee owned
and operated from a single location in Wildomar: (1) Sanjoy Banerjee, M.D., Inc., doing
business as Pacific Pain Care Consultants (PPCC); (2) Kensington Diagnostics, LLC
(Kensington); and (3) Rochester Imperial Surgical Center, LLC (Rochester). All of the
services for which Banerjee billed BHHC, through these entities, were payable pursuant
to the state’s workers’ compensation system. (§ 3200 et. seq.)
2. Banerjee’s Formation of Three Service Provider Entities
Banerjee is a licensed physician, specializing in pain management.10 He formed
his professional corporation, Sanjoy Banerjee, M.D., Inc., in 2005, and in 2010, he began
operating the corporation under the fictitious name, PPCC. Kensington and Rochester
were formed in 2014. The articles of organization for Kensington and Rochester state
that they were to be managed by their members and identify Banerjee as their sole
member. Statements of information for Kensington and Rochester, filed in 2014, identify
Kensington’s type of business as a “clinical diagnostic and reference laboratory” and
Rochester’s as an “ambulatory surgical center.”
10 The record indicates that Banerjee was also a qualified medical evaluator under the state’s workers’ compensation system. (§ 139.2, subd. (b).)
11
As indicated, Banerjee operated PPCC, Kensington, and Rochester from a single
medical office in Wildomar (the Wildomar location).11 Through PPCC, Banerjee billed
BHHC for “physician-related services.” Banerjee billed BHHC for diagnostic-related
services through Kensington, and for surgical services (epidurals) through Rochester.
3. BHHC’s Investigation of Banerjee
Gordon Oard, an investigator for BHHC, was the only witness who testified at the
preliminary hearing. Oard was tasked with investigating “suspicious” claims and service
providers for BHHC, and he began investigating Banerjee in 2017.12 Oard discovered
that Banerjee had been billing BHHC through three legal entities, namely, PPCC,
Kensington, and Rochester, which Banerjee owned and operated from the Wildomar
location.
Oard visited the Wildomar location, met with Banerjee there, and took pictures “of
the interior of the clinic.” The Wildomar location had a lobby and front desk area, “a
small closet-type room” in which toxicology tests were performed, and a “converted
treatment room . . . [for] the surgery center.” In addition to Banerjee, several staff
members were working at the Wildomar location. Three plaques, one denoting Sanjoy
11 PPCC also had an office in Corona. The articles of organization for Kensington and Rochester, filed in February and March 2014, respectively, list their street addresses as PPCC’s Corona office. But statements of information for both Kensington and Rochester, filed in April 2014, show that Kensington and Rochester were at that time located at PPCC’s Wildomar location.
12 Oard testified that Banerjee was linked to a pharmaceutical provider who was suspected of offering financial incentives in exchange for its services. Oard’s investigation of Banerjee “spun off of that” investigation.
12
Banerjee, M.D., as “Pacific Pain,” and two others separately denoting Kensington and
Rochester, were on display in the lobby of the Wildomar location.
4. Banerjee’s Billings to BHHC
Between 2015 and 2016, Banerjee presented billings totaling $157,797.01 to
BHHC, through Kensington and Rochester, for services that Banerjee provided to
patients between 2014 and 2016. BHHC paid less than 10 percent of the $157,797.01
amount billed. According to Oard, Banerjee was obligated to disclose his financial
interests in Kensington and Rochester to BHHC, and BHHC had no business records
indicating that Banerjee had made this disclosure.
The People presented additional evidence that in one instance, Banerjee twice
billed BHHC, through both PPCC and Rochester, for two epidural injections (outpatient
surgeries) provided to the same patient on the same day. Through PPCC, Banerjee billed
BHHC $2,650,13 on form 1500,14 for several services he provided to his patient, C.M., on
March 9, 2016, including an office examination, a urine toxicology test, and two epidural
injections. It is unclear from the record how much of the $2,650 amount billed was
attributable to the epidural injections, as opposed to other services provided through
PPCC. But, through Rochester, Banerjee billed BHHC $12,395, on form UB 92, for the
13 Oard mentioned that the amount billed was both $2,615 and $2,650, but one of these amounts appears to be a typo, and this particular PPCC billing is not part of the record in this writ proceeding.
14Banerjee’s billings to BHHC were submitted on state-approved forms “1500” and “UB 92.” Form 1500 is used for medical office visits, while form UB 92 is used for medical procedures.
13
same two epidural injections he provided to C.M. on March 9, 2016, through PPCC. The
two billings for the two epidural injections, through PPCC and Rochester, used the same
“CPT” (current procedural terminology) code numbers: 66483 and 66484.15
Oard testified that, before Banerjee began practicing “on his own,” he practiced
with a medical group in Corona that billed BHHC “for similar services at substantially
less[er] amounts” than the $12,395 that he charged for the two epidurals through
Rochester. A spreadsheet (People’s exhibit 10) showed that Banerjee customarily billed
BHHC $12,395 for epidural injections he provided to patients through Rochester. These
Rochester billings were part of the $157,790.01 total amount that Banerjee billed BHHC,
through both Kensington and Rochester, between 2015 and 2016. With each $12,395
billing, Banerjee submitted a document showing how the $12,395 sum was divided
between various services, including an “operating room charge,” “room nurse,”
“circulating scrub tech,” and other items related to the process of administering an
epidural injection.
15 The parties stipulated to the authenticity and admissibility of numerous prosecution exhibits, including billing statements, doctor’s reports, and other documents that Banerjee submitted to BHHC with his billings through PPCC, Kensington, and Rochester. All of these exhibits were admitted into evidence, but the record does not include many of them, including any of Banerjee’s billings to BHHC through Kensington. The record indicates that, in each of his billings to BHHC through Rochester, Banerjee identified himself as the provider of the services rendered. Documents related to Banerjee’s billings to BHHC through Rochester, including requests for authorization for the services, patient progress reports, and patient charts, also identified Banerjee as the provider of the services rendered through Rochester.
14
5. The Defense’s Case
The defense submitted a single exhibit (defense exhibit A), which was admitted
into evidence. This exhibit is not part of the record, but the record indicates that the
exhibit is a form, titled, “Patient Consent to Procedure” (the patient consent form), which
states: “Your treating physician may have an ownership interest in the center and may
gain financially by performing a procedure at the center. You, the patient, have the right
to choose where your procedure is performed. By signing this, you consent you’re
agreeing to have the procedure performed at Rochester Imperial Surgical Center.”
Defense counsel adduced the patient consent form while cross-examining Oard, in
an attempt to show that Banerjee complied, or at least intended to comply, with the
written patient disclosure requirement of section 139.3(e) before he referred patients to
Rochester and Kensington. When shown the form, Oard said he had never seen it before,
and it had never been provided to BHHC. No witness testified that Banerjee had ever
used the form, and no copies of the form, signed by any patients, were offered into
evidence.
6. The Parties’ Arguments
The insurance fraud charges in counts 1 and 2 are based on Banerjee’s aggregate
billings to BHHC, through Kensington and Rochester, between 2014 and 2016. The
prosecutor argued that these billings were false and fraudulent (Pen. Code, § 550,
subd. (a)(6)), because Banerjee violated section 139.3(a) by referring the patients to
Kensington and to Rochester—entities in which he had a financial interest—without
informing BHHC that he had a financial interest in Kensington and Rochester.
15
Count 1, a felony charge, is based on the aggregate amount that Banerjee billed
BHHC, through Kensington, between October 2, 2014, and November 24, 2015. The
count was chargeable as a felony because this aggregate amount exceeded $950. (See
and probable cause” ’ or ‘a state of facts as would lead a [person] of ordinary caution or
18
prudence to believe and conscientiously entertain a strong suspicion of the guilt of the
accused.’ ” (People v. Ramirez, at p. 813.)
“ ‘An information will not be set aside or a prosecution thereon prohibited if there
is some rational ground for assuming the possibility that an offense has been committed
and the accused is guilty of it. A reviewing court may not substitute its judgment as to
the weight of the evidence for that of the magistrate, and every legitimate inference that
may be drawn by the reviewing court from the evidence must be drawn in favor of the
information.’ ” (People v. Williams (1988) 44 Cal.3d 883, 924-925.)
B. A Physician’s Compliance with the Disclosure Requirement of Section 139.3(e) Does
Not Excuse the Physician’s Noncompliance with the Referral Prohibition of
Section 139.3(a)
Banerjee first argues that the information must be set aside because the evidence
shows he did not violate section 139(a), given that he complied with section 139.3(e). He
claims that section 139.3(e) provides for an exception to the operation of
section 139.3(a). That is, he claims that a physician’s compliance with the disclosure
requirement of section 139.3(e) excuses the physician’s noncompliance with the referral
prohibition of section 139.3(a), and he complied with section 139.3(e) by having his
patients sign his patient consent form before he referred the patients to Kensington and
19
Rochester for diagnostic and outpatient surgery services described in section 139.3(a).16
(a) No Evidence Shows Banerjee Complied with Section 139.3(e)
We first observe none of the evidence shows that Banerjee complied with section
139.3(e). Although the superior court admitted Banerjee’s unsigned patient consent form
into evidence, no evidence shows that Banerjee required his Kensington or Rochester
patients to sign the form before he referred the patients to these entities. Nor did any
witness testify that it was Banerjee’s custom or practice to have his patients sign the
form, and no signed patient consent forms, disclosing that Banerjee had a financial
interest in either Kensington or Rochester, were admitted into evidence.
Moreover, Banerjee’s patient consent form did not disclose that Banerjee had a
financial interest in Kensington or Rochester. Section 139.3(e) requires a physician “who
refers to or seeks consultation from an organization in which the physician has a financial
interest” to “disclose this interest to the patient . . . in writing at the time of the referral.”
(Italics added.) By stating that Banerjee “may have” an interest in Rochester (the center)
or Kensington, and that Banerjee “may benefit financially” from the procedures
16 Thus, Banerjee argues he did not commit insurance fraud because his billings to BHHC through Kensington and Rochester were not false or fraudulent (Pen. Code, § 550, subd. (a)(6)), given that he complied with Labor Code section 139.3(a); and he did not commit perjury (Pen. Code, § 118) in signing the doctor’s reports, certifying to BHHC under penalty of perjury that he complied with Labor Code “section 139.3,” because he had, in fact, complied with Labor Code section 139.3.
20
performed through these entities,17 the patient consent form did not disclose that
Banerjee had a financial interest in these entities. (§ 139.3(e).)
Thus, even if Banerjee had all of his Kensington and Rochester patients sign his
patient consent form at the time he referred the patients to Kensington and Rochester, the
form, and therefore Banerjee, did not comply with section 139.3(e).
(b) Compliance with Section 139.3(e) Does Not Excuse Noncompliance
with Section 139.3(a)
As we next explain, a physician’s compliance with section 139.3(e) for a given
patient referral does not excuse the physician’s noncompliance with section 139.3(a) for
the referral, if section 139.3(a) applies to the referral. This is a question of statutory
construction. “Our fundamental task in construing a statute ‘is to ascertain the
Legislature’s intent [and] effectuate the law’s purpose. [Citation.] We begin our inquiry
by examining the statute’s words, giving them a plain and commonsense meaning.
[Citation.] In doing so, however, we do not consider the statutory language “in
isolation.” [Citation.] Rather, we look to “the entire substance of the statute . . . in order
to determine the scope and purpose of the provision . . . . [Citation.]” [Citation.] That is,
we construe the words in question “ ‘in context, keeping in mind the nature and obvious
purpose of the statute . . . .’ [Citation.]” We must harmonize “the various parts of a
17 As noted, the patient consent form stated: “Your treating physician may have an ownership interest in the center and may gain financially by performing a procedure at the center. You, the patient, have the right to choose where your procedure is performed. By signing this, you consent you’re agreeing to have the procedure performed at Rochester Imperial Surgical Center.” (Italics added.)
21
statutory enactment . . . by considering the particular clause of section in the context of
the statutory framework as a whole.” [Citations.] We must also avoid a construction that
would produce absurd consequences, which we presume the Legislature did not intend.’ ”
(In re Greg F. (2012) 55 Cal.4th 393, 406.) Every statute is to be read “ ‘with reference
to the entire scheme of law of which it is part so that the whole may be harmonized and
Banerjee argues that a physician’s compliance with section 139.3(e) for a given
patient referral must be interpreted as an exception to, or as excusing the physician’s
noncompliance with, section 139.3(a) for the same referral because the two statutes are
“in complete conflict” and cannot otherwise be reconciled. The statutes are not in
conflict. Section 139.3(a) prohibits a physician from making a financially interested
referral of a patient for services specified in section 139.(a), if the services are to be paid
pursuant to the worker’s compensation system (§ 3200 et. seq.)18 That is,
section 139.3(a) prohibits a physician from making a financially interested patient
referral, but only for the services specified in section 139.3(a). In contrast, the written
patient disclosure requirement of section 139.3(e) applies to all financially interested
patient referrals, regardless of whether the services for which the patient is referred are
18 As indicated, the specified services are: “clinical laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy, outpatient surgery, diagnostic imaging goods or services, or pharmacy goods, whether for treatment or medical-legal purposes.” (§ 139.3(a).)
22
specified in section 139.3(a). In addition, section 139.3(a) applies “notwithstanding any
other law,” which includes section 139.3(e).19
Our interpretation of section 139.3(a) and 139.3(e) is bolstered by the broader
structure and scheme of sections 139.3 and 139.31. Subdivisions (a), (c), (d), (e), and (f)
of section 139.3 impose separate and independent obligations on physicians, licensees,
insurers, and others.[20] Each of these obligations can be performed independently of the
others, regardless of whether the other obligations will be performed or have been
performed. Violations of section 139.3(a), 139.3(c), 139.3(d), 139.3(e), and 139.3(f) are
also separately and independently punishable under section 139.3(g). Nothing in section
139.3 makes a person’s duty under one subdivision of the statute dependent upon or
excused by the person’s performance of a duty under another subdivision.
Additionally, unlike section 139.3, section 139.31 expressly provides for
exceptions to “section 139.3.” Section 139.31 is titled, “Permissible Referrals,” and
begins by stating: “The prohibition of Section 139.3 shall not apply to or restrict any of
the following.” Section 139.31 proceeds to list several scenarios or conditions in which
19 Section 139.3(a) provides: “Notwithstanding any other law, to the extent those services are paid pursuant to Division 4 (commencing with Section 3200), it is unlawful for a physician to refer a person for [specified services] . . . if the physician or his or her immediate family has a financial interest with the person or in the entity that receives the referral.” (Italics added.) In contrast, section 139.3(e) provides: “A physician who refers to or seeks consultation from an organization in which the physician has a financial interest shall disclose this interest to the patient . . . in writing at the time of the referral.”
20 See fn. 9, ante.
23
section 139.3(a) does not apply. (§ 139.31(a)-(j).)21 Nothing in section 139.31 indicates
that any of the subdivisions of section 139.3 are exceptions to its other subdivisions, or
that compliance with one subdivision excuses noncompliance with another. The
obligation imposed by section 139.3(e), that a physician disclose the physician’s financial
interest in an organization to which the physician is referring the patient at the time of the
referral, is not included in the list of exceptions to the prohibition of such referrals in
section 139.31.
It is a settled principle of statutory construction that, “where exceptions to a
general rule are specified by statute, other exceptions are not to be implied or presumed.”
(Wildlife Alive v. Chickering (1976) 18 Cal.3d 190, 195.) Construing section 139.3(e) as
an exception to section 139.3(a) would violate this principle. It would also fail to
harmonize sections 139.3 and 139.31 in a manner that gives effect to each of their
provisions. (People v. Pieters, supra, 52 Cal.3d at p. 899.)
Banerjee argues it is nonsensical to require a physician to disclose to a patient that
the physician has a financial interest in a referred or consulted organization (§ 139.3(e)),
if the physician is prohibited from referring the patient to the organization for services
described in section 139.3(a). He further argues that, unless a physician’s compliance
21 For example section 139.31(a) allows a physician to refer a patient for goods or services “otherwise prohibited by” section 139.3(a) “if the physician’s regular practice is where there is no alternative provider of the service within either 25 miles or 40 minutes traveling time, via the shortest route on a paved road.” (§ 139.31(a).) Section 139.31(a) reiterates section 139.3(e) by requiring “[a] physician who refers to, or seeks consultation from, an organization in which the physician has a financial interest under this subdivision to disclose this interest to the patient or the patient’s parents or legal guardian in writing at the time of referral.” (§ 139.31(a).)
24
with section 139.3(e) is construed as an exception to or as excusing the physician’s
noncompliance with section 139.3(a), then section 139.3(e) would effectively require a
physician to incriminate himself for violating section 139.3(a). We disagree.
A physician’s disclosure to a patient that the physician has a financial interest in
an organization to which the physician refers the patient or seeks a consultation
(§ 139.3(e)) makes perfect sense as a means of informing the patient that the physician
has a conflict of interest with the organization, regardless of whether the services for
which the patient is referred make the referral unlawful under section 139.3(a). The
section 139.3(e) disclosure informs the patient that the patient’s interests may best be
served by seeking the services or the consultation from another organization, given that
the referring physician’s financial interest, rather than the patient’s best interests, may be
motivating the physician to make the referral or to seek the consultation.
In addition, the Legislature could have reasonably determined that section 139.3’s
purpose of reducing costs and strengthening conflict of interest rules in the workers’
compensation system would best be served by making section 139.3(e) apply to all
financially interested physician referrals, regardless of whether the referral is for services
specified in section 139.3.(a). If referrals prohibited by section 139.3(a) were exempted
from the disclosure requirement of section 139.3(e), then referrals prohibited by section
139.3(a) might never come to light, and the cost-saving and conflict-of-interest-
strengthening purposes of section 139.3 would be undermined.
Lastly, given that section 139.31 provides for exceptions to section 139.3(a), a
physician may disclose that the physician has a financial interest in an organization to a
25
patient, and refer the patient to that organization for services described in
section 139.3(a), without violating section 139.3(a), if one or more of the exceptions
listed in section 139.31 applies. For this reason, and because section 139.3(e) applies to
all financially interested physician referrals, including referrals that are not prohibited by
section 139.3(a), the physician does not necessarily incriminate himself for violating
section 139.3(a) by complying with section 139.3(e).
C. Sections 139.3(a), 139.3(e), and 139.31(e) Are Not Unconstitutionally Vague
Banerjee claims that the interplay or combined operation of sections 139.3(a),
139.3(e), and 139.31(e) are unconstitutionally vague; therefore, he cannot be criminally
charged, as he is here, with any crime based on his alleged violation of section 139.3(a).
We disagree that the statutes are unconstitutionally vague.
1. Applicable Legal Principles
The government violates a person’s Fifth Amendment right to due process of law
“by taking away someone’s life, liberty, or property under a criminal law so vague that it
fails to give ordinary people fair notice of the conduct it punishes, or so standardless that
it invites arbitrary enforcement.” (Johnson v. U.S. (2015) 576 U.S. 591, 595.) Thus,
“[t]o satisfy due process, ‘a penal statute [must] define the criminal offense [1] with
sufficient definiteness that ordinary people can understand what conduct is prohibited and
[2] in a manner that does not encourage arbitrary and discriminatory enforcement.’ ”
(Skilling v. U.S. (2010) 561 U.S. 358, 402-403.) A statute is void as unconstitutionally
vague unless it satisfies both of these requirements. (Id. at p. 403.)
26
Courts are required to construe statutes in a limited way, in order to save the
statutes from being unconstitutionally vague, if this is fairly possible. (Skilling v. U.S.,
supra, 561 U.S. at p. 403.) As courts have long observed, “[t]he elementary rule is that
every reasonable construction must be resorted to, in order to save a statute from
unconstitutionality.” (Hooper v. Cal. (1895) 155 U.S. 648, 657.) That is, a statute will
not be construed as void for vagueness “ ‘ “ ‘if any reasonable and practical construction
can be given to its language’ ” ’ ” (In re Perdue (2013) 221 Cal.App.4th 1070, 1077), or
“ ‘ “if its terms may be made reasonably certain . . . ” ’ ” (People v. Hall (2017) 2 Cal.5th
494, 500-501).
2. Section 139.3(a) and 139.3(e)
Banerjee first argues that sections 139.3(a) and 139.3(e) are “unconstitutionally
conflicting” for the same reasons he claims that compliance with section 139.3(e) must be
construed as an exception to or as excusing noncompliance with section 139.3(a). As we
have explained, section 139.3(a) and 139.3(e) are not in conflict, and the language of
each statute is sufficiently definite to apprise a person of ordinary intelligence of what it
prohibits and requires. (Skilling v. U.S., supra, 561 U.S. at pp. 402-403.)
Banerjee next argues that section 139.3(e), standing alone, is unconstitutionally
vague because it does not “state with definiteness how specific a disclosure must be, or
what specific language a physician must use in a disclosure.” The statute provides: “A
physician who refers to or seeks consultation from an organization in which the physician
has a financial interest shall disclose this interest to the patient or if the patient is a
minor, to the patient’s parents or legal guardian in writing at the time of the referral.”
27
(§ 139.3(e), italics added.) Section 139.3(e) is not unconstitutionally vague simply
because it does not require any particular language to be used in the disclosure, or
precisely state how specific the disclosure must be. The terms of section 139.3(e) are
reasonably certain. (Ivory Education Institute v. Department of Fish & Wildlife (2018)
28 Cal.App.5th 975, 981 [Only a reasonable degree of certainty is required to save a
statute from being void for vagueness.].)
A physician may comply with section 139.3(e) by disclosing to the patient in
writing at the time of the referral that the physician “has a financial interest” in the
referred or consulted organization. (§ 139.3(e).)22 Nothing in section 139.3(e) requires
the physician to disclose the precise nature or extent of the financial interest. In addition,
the disclosure of details concerning the financial interest is unnecessary to inform the
patient that the physician has a conflict of interest in the referral. If the physician’s
financial interest disclosure form states that the physician has “a financial interest” in the
organization referred or consulted, the physician will have complied with section
139.3(e).)
3. The “Physician’s Office” Exception (§ 139.31(e))
Section 139.31(e) provides: “The prohibition of section 139.3 shall not apply to
any services for a specific patient that is performed within, or goods that are supplied by,
a physician’s office . . . .” Banerjee claims that section 139.31(e) is unconstitutionally
22Section 139.3(b)(4) defines “financial interest” for purposes of sections 139.3 and 139.31. See fn. 6, ante.
28
vague because it does not specify what “ ‘within . . . a physician’s office’ ” means, and
because other parts of section 139.31 do not provide guidance.
Section 139.3(b)(5) defines “physician’s office,” for purposes of sections 139.3
and 139.31, as “either of the following: [¶] (A) An office of a physician in a solo
practice,” or “(B) An office in which the services or goods are personally provided by
the physician or by employees in that office, or personally by independent contractors in
that office, in accordance with other provisions of law. . . .” Thus, neither the definition
of “physician’s office” (§ 139.3(b)(5)) nor the language of section 139.31(e) specifies
whether the physician’s office exception (§ 139.31(e)) to the referral prohibition of
section 139.3(a) applies only if the services described in section 139.3(a) are provided at
(1) the same physical office location, (2) are provided through a single legal entity, or
(3) are provided both at the same physical office location and through a single legal
entity.
But section 139.31(e) can be fairly construed as applying to services and goods
described in section 139.3(a), that are provided to a patient in more than one physical
office location, through more than one legal entity, or both provided that the services are
performed and the goods are provided either (1) by a single physician in a “solo practice”
(§ 139.3(b)(5)(A)), or (2) by licensed employees or independent contractors working
under the auspices of a single physician (§ 139.3(b)(5)(B)). Nothing in sections 139.3 or
139.31 is inconsistent with this interpretation of section 139.31(e).
This interpretation of section 139.31(e), together with the operation of section
139.3(e), ensures that patients who are treated for services or who are provided with
29
goods specified in section 139.3(a), whether by a single physician or by other licensed
health care providers working under the auspices of a single physician (§ 139.3(b)(5)),
will have been informed that the physician has a financial interest in any legal entities
that are part of the physician’s practice (§ 139.3(e)), and to which the patient is referred
for services or goods specified in section 139.3(a).
This interpretation of section 139.31(e) is also supported by the second sentence of
section 139.31(e), which states, “Further, the provisions of section 139.3 shall not alter,
limit, or expand a physician’s ability to deliver, or direct and supervise the delivery of, in-
office goods or services according to the laws, rules and regulations governing his or her
scope of practice.” The parties have not pointed to nor are we aware of any laws, rules,
or regulations that would prohibit a physician, who specializes in pain management such
as Banerjee, and who treats patients for services paid pursuant to the workers’
compensation system (§ 3200 et seq.), from providing services or goods described in
section139.3(a) through separate legal entities.
D. Our Interpretation of Section 139.31(e) Means That the Perjury Charges Are
Unsupported, but Probable Cause Supports the Insurance Fraud Charges
Our interpretation of the physician’s office exception of section 139.31(e) means
that the exception applied to Banerjee’s referrals of patients to Kensington and Rochester
(§ 139.3(a)), and that Banerjee did not violate section 139.3(a) by referring patients for
services specified in section 139.3(a) to Kensington and Rochester. Thus, Banerjee’s acts
of signing three doctor’s reports, under penalty of perjury, certifying to BHHC that he
had complied with “section 139.3” was not false (§ 118). Given that Banerjee’s allegedly
30
false certification of his compliance with “section 139.3” was the only basis to support
the perjury charges, the perjury charges must be dismissed.23
The People’s theory for the insurance fraud charges is that Banerjee presented
false and fraudulent billings to BHHC for services described in Labor Code section
139.3(a), after he referred the patients to Kensington and Rochester for the services, in
violation of Labor Code section 139.3(a). (Pen. Code, § 550, subd. (a)(6).) Even though
the People did not show that Banerjee violated section 139.3(a), because the physician’s
office exception applied to the otherwise prohibited referrals (§ 139.31(e), the record
supports an alternative basis to support the insurance fraud charges.
As discussed, Penal Code section 550, subdivision (a)(6), a form of insurance
fraud, is committed when the defendant knowingly makes or causes to be made any false
or fraudulent claim for a health care benefit. (People v. rel. ex re. Government
Employees Ins. Co. v. Cruz, supra, 244 Cal.App.4th at p. 1193.) Insurance fraud is a
specific intent crime; the defendant must specifically intend to defraud a person with a
false or fraudulent claim. (People v. Scofield, supra, 17 Cal.App.3d at pp. 1025-1026.)
The evidence adduced at the preliminary hearing shows that the superior court had
probable cause to believe that Banerjee was guilty of the insurance fraud charges.
(People v. Ramirez, supra, 244 Cal.App.4th at p. 813.)
23 Although the evidence adduced at the preliminary hearing does not show that Banerjee complied with the patient disclosure requirement of section 139.3(e), Banerjee’s noncompliance with section 139.3(a) was the sole basis the People offered to support the perjury charges. The People did not attempt to show that Banerjee committed perjury by failing to comply with section 139.3(e). Banerjee’s failure to show that he complied with section 139.3(e) does not foreclose the possibility that he complied with section 139.3(e).
31
The evidence showed that, between 2014 and 2016, Banerjee presented false and
fraudulent claims for health care benefits to BHHC through Kensington and Rochester,
with the specific intent to defraud BHHC. Banerjee’s billings through Kensington and
Rochester were for substantially higher amounts than Banerjee had previously billed
BHHC for the same or similar services that he provided solely through PPCC, and that
BHHC had been billed by the group practice with whom Banerjee had formerly
practiced. Banerjee did not inform BHHC that he owned and operated Kensington and
Rochester; and in one instance, Banerjee double billed BHHC for two epidural injections
provided to the same patient on the same day, through PPCC and Rochester. The
Rochester billing for the two epidural injections was approximately $9,000 higher than
the total billing for the patient through PPCC.
The record also supports a strong suspicion that Kensington and Rochester were
sham entities, and that Banerjee formed Kensington and Rochester with the specific
intent to defraud BHHC through his Kensington and Rochester billings. The Kensington
and Rochester billings gave the appearance that the entities were not part of Banerjee’s
medical practice but were stand alone, diagnostic testing and surgical centers, operating
independently of any physician’s office. But when BHHC’s investigator, Oard, visited
Banerjee’s Wildomar location, he discovered that Banerjee was operating Kensington
from “a small closet-type room,” and that Banerjee was operating Rochester from a
“converted treatment room.” The evidence supports a strong suspicion that Banerjee had
no business reason for forming Kensington and Rochester, other than to use them to
present highly inflated billings for his diagnostic and surgical services to BHHC. (People
32
v. Ramirez, supra, 244 Cal.App.4th at p. 813.) The information cannot be set aside as to
the insurance fraud charges because the evidence demonstrates that there is some rational
ground for assuming the possibility that those offenses have been committed and the
defendant is guilty of them.
IV. DISPOSITION
Let a writ of prohibition issue, ordering the respondent superior court to set aside
its order denying Banerjee’s Penal Code section 995 motion and to enter a new order
granting the motion, in part, as to the three perjury charges (counts 3, 4, and 5.) Further
proceedings may continue, and this court’s previous order staying further proceedings on
the information is lifted, insofar as the stay order concerned the pending criminal
prosecution against Banerjee for the two insurance fraud charges. (Pen. Code, § 550,
subd. (a)(6).) Banerjee is directed to prepare and have the writ of prohibition issued,
copies served, and the original filed with the clerk of this court, together with proofs of
service on all parties.
CERTIFIED FOR PUBLICATION
FIELDS J. We concur:
MILLER Acting P. J.
CODRINGTON J.
33
AI Brief
AI-generated · verify before citing
Holding. The court held that the physician's office exception (Lab. Code, § 139.31, subd. (e)) permits a physician to render services through separate legal entities provided the services occur within the same office, thereby exempting the petitioner's referrals from the prohibition in section 139.3, subdivision (a). Consequently, the perjury charges were dismissed, but the insurance fraud charges were sustained because the evidence supported a strong suspicion of intent to defraud through inflated billing practices.
Issues
Does compliance with the disclosure requirement of Labor Code section 139.3, subdivision (e) excuse noncompliance with the referral prohibition of section 139.3, subdivision (a)?
Does the physician's office exception in section 139.31, subdivision (e) apply to services rendered by a physician through separate legal entities at the same location?
Are the referral prohibition and disclosure requirements of section 139.3 unconstitutionally vague?
Does the evidence support a strong suspicion of insurance fraud under Penal Code section 550, subdivision (a)(6)?
Disposition. Petition granted in part; denied in part.
Quotations verified verbatim against the opinion
“a physician’s compliance with the disclosure requirement of section 139.3(e) does not excuse the physician’s noncompliance with the referral prohibition of section 139.3(a)”
“the evidence supports a strong suspicion that Banerjee specifically intended to present false and fraudulent claims for health care benefits”