Fourth Circuit Abolishes the “Reasonable-Interpretation” Safe Harbor in Healthcare-Fraud Cases: United States v. Elfenbein

1. Introduction

In United States v. Ron Elfenbein, the United States Court of Appeals for the Fourth Circuit confronted a quintessential pandemic-era prosecution: whether a Maryland urgent-care physician defrauded Medicare and a private insurer by “upcoding” thousands of COVID-19 test encounters as high-complexity visits. The appellate panel (Judge Richardson writing, joined by Judge Agee and Judge Nachmanoff) reversed the district court’s post-verdict judgment of acquittal (Fed. R. Crim. P. 29) but upheld its contingent grant of a new trial (Fed. R. Crim. P. 33).

Beyond its immediate effect on Dr. Elfenbein’s prosecution, the opinion announces a significant doctrinal clarification: ambiguity in healthcare billing codes—or in any regulatory language—does not create a “reasonable-interpretation” safe harbor from fraud liability; unless the language is “fundamentally ambiguous,” the jury decides its best meaning, and convictions may rest upon that finding.

Key parties and positions:

• Appellant: United States of America (DOJ Fraud Section & USAO Maryland)
• Appellee: Dr. Ron Elfenbein (represented by Zuckerman Spaeder LLP)
• Amici: American Medical Association & Maryland State Medical Society (supporting the physician)
• District Court: Senior Judge James K. Bredar had set aside the guilty verdict and, in the alternative, ordered a new trial.

2. Summary of the Judgment

• Rule 29 (Judgment of Acquittal): Reversed. The Fourth Circuit held that, viewing the evidence most favorably to the government, a rational jury could find beyond a reasonable doubt that Dr. Elfenbein knowingly submitted materially false claims and records.
• Rule 33 (New Trial): Affirmed. Given the “close” evidentiary balance and the fact that the most damning testimony came from defense witnesses, the appellate court found no abuse of discretion in the district court’s alternative grant of a new trial.
• Disposition: “Affirmed in part, reversed in part, and remanded.” The case returns to the district court for retrial unless resolved by plea or dismissal.

3. Detailed Analysis

A. Precedents Cited and Their Influence

1. Jackson v. Virginia, 443 U.S. 307 (1979) – Established the deferential sufficiency-of-evidence standard: an appellate court asks only whether any rational juror could convict.
2. United States v. Sarwari, 669 F.3d 401 (4th Cir. 2012) – Introduced the “fundamentally ambiguous” concept; language that can reasonably be understood has truth value, so false statements are possible.
3. Schutte v. SuperValu Inc., 598 U.S. 739 (2023) – Emphasized that facial ambiguity in a regulatory term (“usual and customary”) does not preclude knowledge of falsity; context supplies meaning.
4. United States v. Harra, 985 F.3d 196 (3d Cir. 2021) – Recognized by the Fourth Circuit but expressly declined to follow. Harra permitted a “reasonable construction” defense; Elfenbein rejects that approach.
5. Additional authorities: Perry, McLean, Burgos, Rafiekian, historic commentary by Justice Story, Lord Hale, and others underscoring jury primacy.

Collectively, the panel synthesized these precedents to announce that “ambiguous but not fundamentally ambiguous” language is for the jury, and defendants do not escape liability merely by proposing a facially reasonable reading.

B. The Court’s Legal Reasoning

1. Statutory Framework: 18 U.S.C. § 1347 (healthcare fraud) criminalizes schemes “to defraud” or to obtain money under false pretenses from a healthcare benefit program.
2. “Falsity” Despite Ambiguity: CPT level-4 codes require moderately complex decision-making; whether a COVID-19 swab qualifies is debatable, but not indeterminate. Evidence—emails, employee discomfort, insurer audit, physician’s own testimony—permitted the jury to decide the codes were false or misleading.
3. No Safe Harbor for “Reasonable Interpretations”: Relying on Sarwari and Schutte, the court repudiated any doctrine that immunizes defendants so long as their statement could align with some reasonable reading. Only where language is “fundamentally ambiguous”—incapable of having a single best meaning—does falsity collapse. CPT terminology did not meet that bar.
4. Role of Expert Testimony: Expert witnesses need not opine on the ultimate question; once they equip the jury with the necessary framework, the jury may apply that framework unaided.
5. Rule 33 Deference: Although sufficiency was satisfied, the district court’s sense that “the case was close” justified a new trial. Appellate review is for “manifest abuse of discretion,” which was absent.

C. Likely Impact of the Decision

• Healthcare-Fraud Prosecutions: Prosecutors in the Fourth Circuit (MD, VA, WV, NC, SC) may proceed even where billing guidance is murky; defendants cannot defeat a case solely by pointing to plausible alternative readings of CPT or CMS rules.
• Beyond Healthcare: The holding resonates in bank-fraud, securities-fraud, and False Claims Act litigation: ambiguity rarely defeats falsity; materiality and scienter remain jury matters.
• Compliance Programs: Providers must document not only that an interpretation is a reasonable one, but that it matches prevailing professional usage; internal dissent (emails, audits) now poses heightened risk.
• Expert Witness Strategy: Defense teams can no longer rely on a “battle of the experts” to manufacture reasonable doubt where internal communications undermine credibility.
• Circuit Split: By rejecting Harra, the Fourth Circuit deepens tension with the Third Circuit on the “reasonable-interpretation” defense—raising the prospect of Supreme Court review.

4. Complex Concepts Simplified

• CPT Codes: Five-digit numbers created by the AMA to describe medical services for billing. Level-1 (simple) to Level-5 (complex) evaluation & management codes measure how much thinking, data review, and risk the visit entailed.
• Upcoding: Selecting a higher-paying CPT code than warranted, increasing reimbursement.
• Rule 29 vs. Rule 33:
  • Rule 29: Judge sets aside the verdict if no rational juror could convict.
  • Rule 33: Judge orders new trial if the verdict is against the weight of evidence and “the interest of justice so requires.” Discretionary and rarely granted.
• Fundamentally Ambiguous vs. Merely Ambiguous:
  • Fundamentally ambiguous: Words so indeterminate that they cannot carry a truth value (“good taste,” “appropriate”). Fraud impossible.
  • Merely ambiguous: Several plausible meanings exist, but context allows fact-finders to choose the best one. Fraud possible.
• Materiality: A misstatement is material if it could influence the payer’s decision, not just if it did influence it.

5. Conclusion

United States v. Elfenbein is now the Fourth Circuit’s leading statement on fraud where regulatory language is in play. The court:

1. Clarified that ambiguity is ordinarily for the jury, unless language is so vague that no single meaning is possible.
2. Discarded the “reasonable-interpretation” immunity some courts and commentators had perceived after Harra.
3. Confirmed that expert testimony may frame, but need not answer, the ultimate question.
4. Reaffirmed the distinct thresholds for Rule 29 (very high) and Rule 33 (broad discretion).

For healthcare providers and white-collar practitioners, the decision underscores that documentation and contemporaneous conduct—emails, audits, staff concerns—will be decisive evidence of intent, and that juries, not experts, will ultimately decide whose interpretation of technical guidance rings true. The judgment thus not only reshapes healthcare-fraud litigation in the mid-Atlantic but also sets the stage for potential Supreme Court clarification of the emerging circuit split on ambiguity and fraud.