Health Care Fraud Loss

Health Care Fraud Loss

Frequently, in criminal prosecutions for health care fraud, the deciding factor driving punishment is the health care fraud loss determined by the health care fraud loss Guidelines found at Section 2B1.1 of the federal sentencing Guidelines. What many practitioners forget though is that health care fraud loss is far from an exact science which is why even federal courts permit a finding of loss based 0n a “reasonable estimate.” The government’s estimation of loss, however, may range from reasonable to mere conjecture. Further, especially in cases involving “upcoding” or kickbacks, health care providers may be eligible for a credit against loss.

Indeed, according to §2B1.1 3(E)(I), “loss shall be reduced by…. the fair market value of the…..services rendered, by the defendant or other persons acting jointly, to the victim before the offense was detected.” Below is a list of cases from all over the United States where credits were applied or where the court recognized that credits may be applied against health care fraud loss .

• United States v. Medina, 458 F.3d 1291, 1304 (11th Cir. 2007) (concluding, in health care fraud case involving the payment of kickbacks, that loss under the Guidelines could not include amounts paid forems or services that were medically necessary); see also United States v. Guerra, 307 Fed. Appx. 283, 285 (11th Cir. 2009) (unpublished) (affirming district court’s re-sentencing on remand in Medina; district court correctly read Medina to mean there was no loss because “there was no evidence that an y of the prescriptions per se were not medically necessary”).
• Even in 11th circuit cases where loss credits were denied, the circuit has found that such credits may be appropriate. United States v. Ekpo, 266 Fed Appx 830 (11th Cir. 2008). The court found that defendant DME providers were not entitled to a credit against loss because there was no evidence adduced at sentencing showing that the recipients of the wheelchairs were “eligible” to receive those wheelchairs. Absent such evidence, the court found that it could not conclude that providing wheelchairs to those beneficiaries was the equivalent of providing value.); United States v. Campell, 765 F.3d 1291, 1303 (11th Cir. 2014) (denying any credit against loss to the defendant convicted of public corruption offenses, but reinforced that in billing fraud cases, “the pecuniary harm suffered by the victim is the difference between the amount billed and the amount of the legitimate services rendered.”).
• United States v. Klein, 543 F.3d 206, 213-14 (5th Cir. 2006) (vacating the sentence of defendant doctor convicted of health care fraud based in part on upcoding for treatment of Hepatitis C patients because the PSR failed to account for the value of the drugs that were administered for patients in calculating the total loss amount attributable to defendant).
• United States v. Jones, 475 F.3d 701,706-07 (5th Cir. 2007).The defendant was convicted of Medicare fraud based on claims for cost reimbursement for payments pmade by the billing entity to a third party. Although Medicare regulations required independence between the billing entity and the third party payee to prevent collusion, the defendants committed fraud by failing to disclose the lack of independence between the billing entity and the third party in violation of Medicare regulations. On appeal, the Fifth Circuit reversed the district court’s loss finding, holding that the loss was limited to the amounts proven by the government to have been claimed by the billing entity for payments to the third party that were “either unreasonable or greater than its actual cost.”).
• United States v. Tariq Mahmood, M.D., No. 15-40521 — at *22-23— (5th Cir. April 14, 2016) (Slip Op) (other citations omitted) (vacating defendant’s sentence in health care fraud case after defendant was convicted for resequencing the diagnosis codes at various hospitals in order to bill for more expensive treatments that were not provided. The court, in vacating his sentence, reasoned that that “Medicare receives ‘value’ within the meaning of U.S.S.G. § 2B1.1 comment. (n. 3(E)(i)) when its beneficiaries receive legitimate health care services for which Medicare would pay but for a fraud.”).
• United States v. Rutgard, 116 F.3d 1270 (9th Cir. 1997)( a doctor was prosecuted for Medicare fraud based on the performance of services that were not medically necessary. Ninth Circuit reversed the district court’s loss finding, holding that “Rutgard must be given credit for the medical services that he rendered that were justified by medical necessity. As always, the burden is on the government to establish what services were not medically necessary. The global estimate of loss made by the district court cannot stand.”).

Likewise, there is a growing body of case law in government contract/bid fraud cases authorizing credits against loss. United States v. Schneider, 930 F. 2d 555, 558 (7th Cir. 1991) (remanding for resentencing “without an additional punishment based on a proven loss – for none was proven.”); United States v. Anders, 333 F. App’x 950, 954-55 (6th Cir. 2009) (holding that it was error for district court not to credit value of services provided pursuant to a fraudulent bid contract when defendant contractor performed contract); United States v. Joseph Nagle, No. 16-1543 (3rd Cir. Nov. 30, 2016) (Slip. Op) (holding that defendant convicted of the largest contract bidding fraud scheme in history against the Department of Transportation was entitled to a substantial credit against loss based on the profits obtained by defendant company.); United States v. Sublett, 124 F.3d 693, 695 (5th Cir. 1997) (holding that it was proper to deduct the value of legitimate services actually provided by defendant’s operation under contracts he obtained by falsely misrepresenting his academic credentials to win bid to provide counseling services to IRS employees).

The Firm has substantial experience representing health care providers in health care fraud loss disputes and has obtained favorable results for clients seeking to discredit Government loss figures.

A provider ensnared in a Government investigation should not accept the Government’s estimates or methodology for computing loss at any point in the proceeding (pre indictment or after the filing of an information or indictment) without first conducting an independent investigation and analysis of that health care fraud loss estimate. Assessing loss also depends on the type of provider and the type of service provided.

A provider should not agree to a loss figure in a plea agreement or a loss figure in the factual basis in support of the plea agreement until and unless the provider has conducted an adequate review and confirmed the accuracy of that loss figure.

A provider should, where applicable, argue for credits against loss especially where the case involves services which are provided or services which are medically necessary. In either case, there is a fair market value for those services.

Where applicable, a provider should terminate any discussions regarding loss if the government is assuming a position that is contrary to the law and the facts. In certain cases, if the difference between the government’s figure and the defense figure is stark, then, depending on the strength of the Government’s case and evidence,  the provider should (a) proceed to trial (b) enter a written plea agreement without any provision governing loss or with a provision that outlines the position of the Government and the defense regarding loss and prepare for a sentencing loss hearing; or (c) if the Government will not agree to (b) then consider a potential open plea (best in cases involving 1 count) and prepare for a loss sentencing hearing.

Author: Andrew Feldman

Mr. Feldman represents professionals, corporations, health care providers, and health care marketers in government investigations and prosecutions throughout the United States. Mr. Feldman works tirelessly for his clients from the time an investigation begins until the time a jury renders a verdict.

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