October 6, 2011

The Eighth Circuit Holds That Health Care Kickbacks Are Different Than Fraud

Medical supplies are big business. Sadly, where there's big business, there's big money, and, often, there's big law enforcement attention.

Geff Yielding worked as an assistant for a surgeon, Dr. Jordan, in Little Rock Arkansas. His wife, Kelley, started a company called ANI, that was in the medical services business. She became a sales agent for two bone-related medical supply companies. As such, she was paid on commission based on the number of sales she generated to surgeons.

Dr. Jordan used a nurse named Jordan Wall to order his supplies. Mr. Wall was an employee of the hospital where Dr. Jordan practiced.

Between February 2003 and October 2004, Kelley Yielding earned $384,000 in commissions. Her company, over the same period, wrote twenty-two checks to Jordan Wall.

One suspects that those checks may have been, uh, fishy.

A side note about health care kickbacks - in the world of medicine, paying someone for using your medical service or supplies is illegal. It's a violation of the Stark Act. In many businesses, paying for referrals is legal, indeed, de rigueur. In medicine when you're dealing with Medicare or Medicaid, a kickback is a crime. It's codified at 42 U.S.C. § 1320a-7b.

In 2004, Jordan Wall was fired by the hospital because there appeared to be improprieties in the way he ordered the products sold by Kelley Yielding - the hospital thought they didn't need one of the products, yet Mr. Wall ordered it anyway.

Also, creepily enough, more than one hundred pieces of bone were missing from the hospital's bone inventory. It isn't clear how this is related, but the Eighth Circuit's opinion notes it.*

Three days after Mr. Wall was fired, Dr. Jordan forwarded an email he received from the hospital about how the hospital was still investigating suspicious and unnecessary purchases of the products that Kelley Yielding sold.

The hospital was also still investigating the missing bone.

Three days later, Jordan Wall paid ANI, Kelley Yielding's company, $34,000, the exact amount he was paid in 2004. The repayment was labeled "repayment on loan."

The FBI investigated, searched the Yielding's house, and found a document purporting to be a note. The note said it was for a no interest loan to Jordan Wall from ANI, Kelley Yielding's company.

While the investigation was happening, Kelley Yielding died.**

Jordan Wall pled and flipped. He said that Geff Yielding arranged kickbacks for the products his wife sold and created a fake note to cover their tracks after the investigation started.

Mr. Geff Yielding was indicted and convicted for the kickback scheme and creating a false document to obstruct justice. He was sentenced to 78 months in prison, or six and a half years.

It isn't clear if anyone was ever prosecuted for the missing bone.

The Eighth Circuit, in United States v. Yielding, reversed for resentencing because the sentencing court miscalculated the United States Sentencing Guidelines.

Mr. Yielding was convicted of participation in a kickback scheme. So the court should have used sentencing guideline § 2B4.1. Like many white-collar crime guidelines, § 2B4.1 looks to the amount of money at stake to determine how serious the crime is.

Unlike many white-collar crime guidelines, § 2B4.1 does not look at the loss caused by the crime, rather, it looks to the size of the bribe (or kickback) or the profit made from the bribe (or kickback).

The sentencing court looked at the loss to the purchasers who bought the unneeded bone products, rather than the value of the commissions that the Yieldings received, or the amount of the kickback that they offered.

So, the guidelines were miscalculated - bribery has very different rules than fraud.

As a result, Mr. Yielding's case was remanded for resentencing, presumably with a much lower guidelines range at the end.

For additional news coverage, check out the Times Record from Arkansas.

* Did you know hospitals keep bone stockpiled? Me neither.

** It's not explained how she died in the opinion, though I'd like to know if it was related to it. Or caused by stress from it?

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