Articles Posted in Health Care Fraud

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In U.S. v Bane, the defendant was convicted of committing federal Medicare fraud and raised three challenges on appeal: 1) his sentencing guidelines calculation, 2) the district court’s calculation of his restitution amount, and 3) the fine. Bane owned companies that provided Medicare patients with durable medical equipment including portable oxygen. Medicare only reimburses the equipment provider if the provider ensures the oxygen is medically necessary and requires that the provider send the patients to an independent laboratory for a “pulse oximetry” test, a non-evasive means of testing oxygen levels in blood. Instead of referring the patients to an independent lab, the defendant had the testing done at his own lab and directed employees to falsely represent they used independent labs and billed as if independent labs performed the exams.

The district court calculated the guidelines loss amount based on the amount of money the defendant billed Medicare for the oxygen equipment, which gave the defendant a 20-level increase because the amount billed exceeded $ 7 million. But the district court found that the oxygen was medically necessary for 80-90% of the patients, and the defendant argued that the dollar amount should be reduced accordingly. The court of appeals disagreed. Applying the special rule in guidelines Application Note 3(F)(v)(III), which states that “in a case involving a scheme in which…goods for which regulatory approval by a government agency was required but not obtained…loss shall include the amount paid for the property, services, or goods transferred…with no credit provided for the value of those items or services,” the majority held that the defendant should not receive credit for the value of oxygen given to patients even if the oxygen was medically necessary.

The court found the sophisticated enhancement was correctly imposed. The court rejected the defendant’s argument that his offense was not sophisticated because it involved a simple misstatement that an independent lab conducted the pulse oximetry test in order to qualify for Medicare reimbursement. The court found the offense met the guidelines commentary the defined sophisticated as “especially complex or especially intricate conduct pertaining to the execution or concealment of an offense.” The defendant created multiple corporations that appeared to be independent labs, created a paper trail to mask the fraud, and involved repetitive conduct designed to execute the fraud and evade detection.

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In U.S.v. Kuhlman, the defendant was a doctor of chiropractic medicine who owned and operated clinics in the Atlanta area. For five years he submitted $2,944,883 in fraudulent billings to Medicare for fictitious medical services. He did this by submitting HCFA forms to insurance companies indicating that medical procedures were performed by doctors in his clinic though the procedures were never provided. His sentencing guidelines range was 57 to 71 months imprisonment. As part of the plea agreement, the government recommended a variance sentence of 36 months. A few days prior to sentencing, the defendant paid the entire restitution amount of $2,944,883 in full, which impressed the sentencing judge enough to comment that Kuhlman was the first defendant the judge could recall who made such a large restitution payment prior to sentencing. The district court decided to continue the sentencing hearing for six months to allow the defendant extra time to pay off his fine and have the defendant perform public service. The district court expressed a desire to see how the defendant would handle the postponement time before sentencing, believing it would provide a more complete picture of the defendant. The defendant did not disappoint the judge. He logged 391 hours of community service, an average of two hours per day. He visited various medical nursing and chiropractic schools to give presentations on Medicare fraud. He provided 18 days of free chiropractic services at homeless shelters across Atlanta and painted a gym at an elementary school. At the second sentencing hearing the sentencing court imposed a sentence of probation, citing his community service work during the continuance, his restitution, and the rising cost of incarceration. The sentence was a downward variance of 20 levels.

The 11th Circuit found the sentence was substantively unreasonable because “he stole $3 million and did not receive so much as a slap on the wrist-it was more like a soft pat.” The time served sentence from a downward variance from 57 months failed to achieve an important goal of sentencing in a white collar crime prosecution, the need for general deterrence. The court gave its reason why deterrence was so important in health care fraud cases. It explained that insurance companies rely on the honesty and the integrity of medical practitioners in billing for their services. For that reason, deterrence is an important factor in the “sentencing calculus” because health care fraud is so rampant that the government lacks the resources to reach it all. The court found that one of the government’s primary objectives in obtaining a conviction in a health fraud prosecution is to send a message. While the court did not imply that probation could never be an option in a white-collar fraud case, in view of the totality of the circumstances, the nature of the offense and the extent of the variance, it was an unreasonable sentence here. Though the district court cited several §3553(a) factors at the sentencing hearing, the sentence did not reflect the seriousness of the crime, it did not promote respect for the law, provide just punishment or adequately deter other similarly inclined health care providers. Furthermore, 11th Circuit made a point of stating that the sentencing guidelines do not give a special sentencing discount for economic or social status as sentences given to the defendant are unavailable to defendants of lesser means.

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In U.S. v. Duran, the Eleventh Circuit ruled that a party claiming an interest in property subject to a government’s restitution lien has the right to have a federal court adjudicate on their claim under 28 U.S.C. § 3203. In this case, Duran was convicted in federal court in Miami of Medicare fraud and sentenced to 50 years in prison. In addition to his jail sentence the district court entered a restitution judgment against Duran in favor of the United States in the amount of $87 million dollars. The United States applied for a writ of execution against an apartment Duran owned to collect the judgment and the clerk issued a writ of execution. The writ ordered the U.S. Marshal to satisfy the judgment by levying on and selling the apartment. One month later, the Defendant’s ex-wife moved to dissolve the writ of execution, arguing she is an “innocent owner” of the apartment and requesting a hearing on the issue of her legitimate ownership of the apartment, the concerns over notice and due process, and her complete independence from the defendant, her former spouse. She alleged that she and Duran divorced in June of 2010 and as part of the divorce settlement he agreed to transfer his interest in the apartment to the ex-wife. In July of 2010 he executed a deed that conveyed his interest in the apartment to his ex-wife, and she retained counsel to properly record the deed in New York. Unfortunately for her, the attorney never completed the recording process and her deed was not recorded.

The United States opposed the Carmen’s motion to dissolve the writ of execution and the district court denied the motion on the ground that it lacked jurisdiction to make findings with respect to Duran’s divorce dispute and corresponding property disputes. While the government agreed she was one-half owner of the property when the government recorded its lien, it argued that its lien took priority over her unrecorded claim to sole ownership of the property. The ex-wife countered that she was the sole owner and the government could not levy on the property. She claimed she was unaware that her attorney failed to record the deed.

The Eleventh Circuit affirmed that the Fair Debt Collection Practices Act provides the civil procedure for the government to satisfy a restitution judgment in a criminal case, and the Act gives the government authority to levy on property owned by the debtor, including property jointly owned by another person. The government may levy on property co-owned by the debtor and another person to the extent allowed by the law of the state where the property is located. Furthermore the government must give notice of its application for a writ of execution to any persons who have an interest in the property. The district court must determine ownership interest of the debtor (the defendant) and any persons who move to dissolve the writ (the ex-wife). The Eleventh Circuit concluded that the district court erred when it refused to adjudicate the ex-wife’s motion to dissolve or stay the writ of execution.

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The defendant in U.S. v. Webb was physician charged with unlawfully distributing numerous controlled substances such as oxycodone and fentanyl. Three of his patients died as a result of their over use and he was charged with enhanced provisions of the controlled substances law and enhanced provision of the healthcare fraud statute. He was charged with dispensing oxycoten, fentanyl, and alprazolan with death resulting from these three pain killers. Charges for a crime such as this have been filed in the past against other doctors in Miami and South Florida. This will probably continue in the future if there are fatalities resulting from the abuse of pain medicine. Webb raised three arguments on his appeal.

  • The judge’s instruction to the jury was error,
  • The evidence was not sufficient to sustain a conviction, and
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In a 2 to 1 decision the Eleventh Circuit Court of Appeals reversed a district court’s sanctions imposed under the Hyde Amendment. The majority called this case a high stakes appeal involving the sovereign immunity of the United States, the separation of powers and the civil rights and professional reputation of two federal prosecutors. In U.S. v. Shaygan, Dr. Shaygan was investigated by the D.E.A. after one of his patients died from a lethal combination of prescription drug and illegal drug. He was charged in a 23 count indictment with dispensing controlled substances outside the scope of professional practice. Shaygan’s attorney moved to suppress statements he made to agents alleging a violation of his right to counsel. Soon after the motion was filed, the AUSA informed the defense counsel that if the Defendant chose to litigate the issues, there would be no more plea discussions a “seismic shift” would result in the way he would prosecute the case. Within weeks, the government filed a superseding indictment containing 141 additional counts based on the newly identified patients.

During the pretrial phase, the government investigator expressed concern to the government prosecutors that he thought there was possible witness tampering by the defense team. After the two assistants approached the chief of narcotics section, an investigation was opened, though permission from United State Attorney was never given. A separate investigation of the defense team opened up under the direction of the chief of narcotics. The two witnesses recorded conversations with the defense investigator. After listening to the conversations, the chief of narcotics determined nothing wrong took place.

At trial, one of the cooperating government witnesses mentioned in cross examination that he recorded a conversation with the attorney. That was when the defendant’s attorneys learned they were subjects of a parallel witness tampering investigation and that two government witnesses were acting as informants. The defendant was allowed to reopen cross examination and the jury heard about the parallel investigation of the defendant’s attorneys
After the acquittal, the Defendant filed a motion for attorney’s fees under the Hyde Amendment. The district court held a hearing and granted the defendant’s Hyde Amendment motion awarding fees in the amount of $601,795 for Miami Attorneys who represented the acquitted of the crime chargee in the superseding indictment. It concluded that the prosecutors acted vexatiously and in bad faith in bringing the superseding indictment. The district court also publicly reprimanded the prosecutors.

The court of appeals reversed, stating that the district court misinterpreted and misapplied the Hyde Amendment. It reviewed the evidence against Shaygan and found the superseding indictment was not filed in bad faith, despite the prosecutor’s ill will towards the defense for filing a motion to suppress. The record shows the prosecutor has an objectively reasonable basis for superseding the indictment. It in light of the evidence, the majority found the charges were not objectively filed in bad faith. The court compared the standard to civil rules where bad faith is an objective standard that is satisfied when an attorney knowingly and recklessly pursues a frivolous claim. Imposing sanctions on the government for exercising prosecutorial discretion would conflict with the separation of powers clause of the constitution.
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In U.S. v. Ly the defendant was a medical doctor licensed in Georgia to practice medicine and dispense controlled substances to his patients. Ly was charged in federal court with unlawfully dispensing controlled substances by writing prescriptions made “outside the usual course of professional practice and without legitimate medical purpose.” At his arraignment, he requested a court appointed lawyer but this was denied the district court’s probation office determined that Ly had transferred his assets to his wife “to obtain appointed counsel at public expense.” Ly informed the trial court at a hearing that he could not afford a lawyer and would then defend himself pro se. His case proceeded to trial with Ly representing himself. The Government’s case included expert testimony regarding standard prescription practices the regulation of controlled substances, testimony from his patient’s concerning his prescription practices, and testimony from pharmacist who became suspicious of Ly’s practice and stopped filling prescriptions written by Ly.

At the close of the Government’s case, the district court asked Ly at a side-bar if he intended to testify. The colloquy (or dialogue) with the Ly showed that Ly was unaware that he could testify in a narrative form and that he did not need an attorney to ask him questions. The district court did nothing to correct Ly’s misunderstanding about how he could testify.

The record showed that Ly chose not to testify because he believed he could not give his testimony without an attorney asking him questions. He believed that his only testimony would come from the Government’s cross examination. The appellate court found Ly was clearly confused and the district court did not clear up his confusion. A criminal defendant has a fundamental right to testify in his defense, and the right to testify is protected only when made “knowingly and intelligently.” When Ly’s misunderstanding of his right to testify became apparent during the colloquy, the district court was required to correct Ly’s misunderstanding by explaining that Ly could testify in a narrative form. By failing to clear up Ly’s confusion, the district court denied Ly his right to decide knowingly and intelligently.

The Defendant’s confusion about his right to testify made this a case of “exceptional, narrowly defined circumstances” that triggered a district court’s duty to discuss with a defendant his decision whether to testify. The district court’s knowledge of Ly’s confusion required the district court to correct Ly’s misunderstanding. For a defendant represented by counsel, the responsibility falls on counsel to assist the defendant in ensuring that his decision regarding testifying is made knowingly and intelligently. “The district court does not normally engage in a colloquy with the defendant to ensure that the decision was made knowingly and intelligently.”
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Bradley and codefendants were convicted of conspiracy to commit wire fraud, mail fraud and money laundering along with other federal statutes. Bradley, the lead defendant, owned “Bio-Med Plus,” a pharmaceutical wholesaler that purchased and sold blood-derivatives (intravenous immune globulin) used to treat patients with HIV. The fraud Bradley committed was that he recruited physicians who dispensed blood-derivatives (IVIG) at AIDS clinics in the Miami area to fill their prescription at Bradley’s pharmacies for a kickback. Bradley purchased the unused portions (from patients who failed to appear at the clinic for the IVIG infusion) for one-third of the price that Florida Medicaid paid the pharmacies.

Bio-Med put those derivatives in their inventory and sold the unused derivatives to third party pharmacies in Florida and California for a substantial profit. The third party pharmacies unwittingly billed Medicaid for theses unused prescriptions. Bradley’s pharmacies filled prescriptions with the recycled derivatives and obtained reimbursement from the state’s Medicaid programs.

The Court of Appeals decided that a reasonable jury could find sufficient evidence that the defendants engaged in a scheme to defraud Florida Medicaid and Medi-Cal. It determined that Florida Medicaid and Medi-Cal never intended to reimburse for recycled blood derivatives that had been previously dispensed; that Bradley knew of these policies; that the programs would not knowingly pay for recycled blood derivatives previously dispensed; that the Bradley purchased recycled medications at discount prices from corrupt physicians with the intent to resell them for a significant profit; and that the defendants sold them off at full wholesale prices to pharmacies which dealt almost exclusively with Medicaid patients that bill the Medicaid program as if the blood derivative had never been recycled.
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American Therapeutic Corporation pled guilty to operating a chain of clinics in South Florida that submitted seven years of fraudulent Medicare claims amounting to nearly $200 million dollars. The company was shut down at the end of 2010 in the wake of a lengthy federal investigation that revealed the company had operated one of the largest mental health Medicare fraud schemes in the country. The Justice Department had filed a superseding indictment in February, 2011, charging the corporation and its principals Lawrence Duran and Marianella Valera with Medicare fraud. The Justice Department announced that the Medicare program paid American Therapeutic alone approximately $83 million dollars for unnecessary treatment or for treatment that was never received. Fraudulent claims included partial hospitalization programs connected with the treatment of mental illness.

Money was funneled from American Therapeutic to its subsidiary Medilink, to pay off employees and others. The principals started a company known as American Sleep Institute (ASI) that purportedly provided sleep study services which also provided extensive false Medicare claims. Fraudulent claims were also made for the treatment of sleep disorders for patients that were not in need of it.

The companies’ principals Lawrence Durand and Marianella Valera pled guilty last month to extensive fraud charges that included conspiracy to submit false claims to Medicare by falsifying medical records and paying kickbacks to assisted living facilities for patients. Over 20 individuals were charged in this conspiracy with the couple including doctors, patient recruiters and employees. The charges outlined in the indictment describe submitting false claims to Medicare through American Therapeutic for services that were not medically necessary. Other charges included the following:

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Alicia Rodriguez pled guilty to a Federal Medicare fraud conspiracy involving 19 million dollars in bogus Medicare claims. In exchange for her cooperation, the prosecutor filed a motion pursuant to §5K1.1 of the Federal Sentencing Guidelines. It is the prosecutor’s discretion to file this motion if and when the prosecutor decides the defendant has provided “substantial assistance” in the investigation or prosecution of another case. Here the prosecutor recommended a 40% sentence reduction from the guidelines while the defendant’s attorney requested a 60% reduction.

The court followed the government’s 40% recommendation but expressed its disapproval with the defendant before imposing sentence. “This is really a disturbing case. She comes to this country as a Cuban refugee seeking freedom from the Communist rule and the first thing she does is she rips off the Government for $19 million on a program that’s designed to help people who have physical disabilities, and to me that’s shocking. That’s shocking.” On appeal, the defendant claimed the court showed biased against her Cuban nationality when he mentioned her nationality in imposing sentence. No objection was raised to this comment at sentencing so the court reviewed it on the basis of plain error. To overcome the plain error review hurdle, the defendant cited two Second Circuit opinions that excuse the failure to make a contemporaneous objection at sentencing to perceived judicial bias because a defendant is understandably reluctant to accuse a judge, who is about to impose sentence, of bias.

The Eleventh Circuit panel rejected the Second Circuit’s plain error review exception when there is no contemporaneous objection to bias at sentencing. Applying the plain error standard, to be reversible the error “must be clear from the plain meaning of a statute or constitutional provision, or from a holding of the Supreme Court or this Court.” It found that the appearance of bias, without any actual bias, is not a constitutional violation. The Court found no actual bias and concluded there was no plain error. The court rejected outright the argument that a defendant should not be required to object for fear of retribution from the judge. In view of the lawyer’s obligation to represent a client zealously, a judge should not be offended by an attorney’s objection that the court is biased against his or her client.
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The Justice Department has directed federal law enforcement to make Medicare fraud a top priority. As a result South Florida has been the a hotbed of Medicare fraud indictments for the past several years. In this Medicare fraud trial, the evidence was sufficient to uphold a jury verdict involving a scheme to give false HIV positive diagnosis and dispensing medicine not medically necessary. Defendants were a doctor and a nurse who worked at an HIV clinic where patients were falsely diagnosed as having HIV positive. Medicare was falsely billed for treatment of WinRho, an expensive drug reimbursable by Medicare at a rate of $4,900 per treatment. The defendants at trial claimed no knowledge of the fraud. They appealed trial and sentencing issues.

Both defendants argued a lack of sufficient evidence to convict. The doctor’s conviction was upheld based on the circumstantial evidence showing she had knowledge of the scheme, altered patient charts, and her presence in the office when “professional” patients screamed for more money. The jury was entitled to draw a reasonable inference of guilt from the evidence and to disbelieve the doctor’s testimony she did not know the treatments were not medically necessary.

Exculpatory tape recorded statement by a codefendant to the defendant was not hearsay though its exclusion was harmless error.

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