The Federal Criminal Appeals Blog

Medicare is a huge federal program. It's also a huge source of criminal liability for doctors and other health care providers, as they try to comply with the byzantine regulations for billing issued by the Centers for Medicare and Medicaid Services.

Take United States v. Jones as an example.

Statewide Physical Medical Group

Telandra Jones and Theddis Pearson started a health care company with a few other people. It was called Statewide Physical Medical Group. The state that it was wide was Mississippi.

Mr. Pearson was the CEO. Ms. Jones handled the billing remotely, from Dallas, Texas.

Statewide's patients were first evaluated by a doctor to see if they needed therapeutic exercise. If they did, and the doctor ordered it, Statewide would send a person to the patient's home.

The people who were sent were kinesiotherapists. These therapists provided care at the patient's home without a doctor present.

Medicare's Rules for Physician Supervision

The rub is that Medicare's billing regulations require that a doctor supervise a kinesiotherapists' work. And, for Medicare billing, while, "supervise" doesn't mean that the doctor is in the same room, it generally means that the doctor is in the same building and can come in and help if need be.

If that's the definition, then Statewide's kinesiotherapists were not supervised by physicians.

So, it looks like the therapeutic work that Statewide submitted bills for did not comply with the Medicare billing regulations. Which is a pleasant way of saying that Statewide's bills may have been fraudulent.

There was one saving possibility for Statewide's billing practices - there is an exception to the direct supervision rule for people in certain kinds of underserved areas and for home treatments with other kinds of home health benefits under Medicare had been exhausted. If this exception applied, then there was an exception to the physician supervision requirement. If there was an exception to the physician supervision requirement, then there was no Medicare fraud!

Ms. Jones and Mr. Pearson relied on this provision.

At trial, the government presented evidence that the Statewide's interpretation was untenable, in the form of an expert about Medicare billing.

It looked like maybe Statewide has an argument there. The trouble, however, was that Statewide billed more for the task than for the amount of time it spent.

The government's Medicare billing expert explained to the jury that Statewide's billing practices caused treatments that took an hour to be billed as taking ten hours.

That's never going to look good to a jury.

Who Knew What When

The question then, turned on whether Ms. Jones and Mr. Pearson knew that they were submitting fraudulent bills. The process for sending bills in was a little complicated. First a secretary in an office - there were seven - would collect the therapists' treatment records and enter that data into a billing sheet.

The therapists did not keep records of how much time they spent, just what treatments they performed.

These billing sheets were then sent to Ms. Jones in Dallas, who turned them into bills to Medicare, based on the part of the body that was treated, instead of the amount of time that the treatment took.

Mr. Pearson was the CEO and generally managed the day-to-day affairs of the company, including its billing systems.

The Medicare Fraud Indictment

Mr. Pearson and Ms. Jones were charged with conspiracy to commit Medicare Fraud, Medicare Fraud, theft of government funds, health care false statements, and money laundering.

The jury convicted Ms. Jones because she was the one who submitted these bills to Medicare. There was evidence that Mr. Pearson was in the weeds with the business - he was convicted for also having the requisite knowledge.

Mr. Pearson was convicted of making false statements relating to health care. Both Mr. Pearson and Ms. Jones were convicted of theft of government property and health care fraud.

The Jury Verdict Form

To make a false statement in violation of 18 U.S.C. § 1035, a person has to make the false statement knowingly and willfully." It isn't enough if the person makes a mistake and submits false information - the statement has to be a lie.

So, we don't send people who make math errors to prison. It's only if the math errors are made on purpose - so they aren't really math errors, as such - that the person makes the willfully false statement.

In Mr. Pearson's case, the jury verdict form did not use the legal standard for what the person charged with the crime had to know from section 1035. Rather, the jury was told that they could convict if they found that Mr. Pearson

"knew, or should have known, that the services billed by [Statewide], were not provided by a physician or under the direct supervision of a physician, as required by Medicare."

This jury instruction is much weaker than what the statute requires. If a person "should have known" that 2+2=4, but puts 5 when adding 2 twice, she meets this standard. And that's not what section 1035 allows.

As a result, Mr. Pearson's conviction was reversed and sent back for a new trial.

Related Posts:

• The Eighth Circuit Holds that Health Care Kickbacks Are Different Than Fraud


• How Not To Respond To A Grand Jury Subpoena

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?

There's a story out of Connecticut that I find particularly troubling; a woman has entered a guilty plea to obstruction of justice after lying to federal agents in a health care fraud investigation. To my mind, obstruction of justice charges have one cause - failing to hire a lawyer when you need one.

Too many people think they can go it alone in a federal investigation and wait to hire a lawyer. This is a mistake. To be sure, there are drawbacks to hiring a lawyer - lawyers are expensive, they take time, they tell you things you may not want to hear. But they also can advise you how to act when you, or someone you know, is caught up in an investigation.

The woman in this story said she lied about whether a patient signed an admissions form. One may think that some folks are liars and some folks aren't and that hiring a lawyer won't make a difference. I disagree. A good lawyer can intelligently explain why lying is a remarkably bad strategy when you're caught up in an investigation.

Moreover, most folks who are going to lie, lie when someone is talking to them. Hiring a lawyer early is an excellent way to make sure that you have to do the least amount of unaccompanied talking possible. And reducing the amount of your unaccompanied talking is a good way to reduce your exposure to an obstruction of justice charge.

Sorry to have been off line recently; technical updates have been happening. All in an effort to give you a better Kaiser blog experience.

I wanted to quickly note that the New York Times ran an AP article last week revealing that the health care fraud prosecutions are continuing. Thirty more people have been rounded up and arrested, allegedly for committing Medicare Fraud.

The article says that doctors were giving "arthritis kits" that consisted of heating pads and braces. And that was just for the lucky ones who got a kit.

Apparently Eric Holder and Kathleen Sebelius remain eager to prosecute health care providers.

The Eleventh Circuit recently decided a case that highlights why responding to a grand jury subpoena needs to be taken seriously. The case is United States v. Hoffman-Vaile. As a teaser, a doctor is going to prison for longer than she should because of how she handled a grand jury subpoena.

In the case, a doctor, Dr. Hoffman-Vaile, was being investigated for upcoding a series of dermatological procedures. Basically, the doctor was billing Medicare for a surgical procedure called "an adjacent tissue transfer or rearrangement that measures more than 30 square centimeters and is unusual or complicated." This procedure was billed under code 14300.

The government's suspicion was that Dr. Hoffman-Vaile using the billing code 14300, but, in fact, she was do a simpler dermatological procedure, with a different billing code. Telling Medicare that you're doing a procedure that pays better than the one you're actually doing is called "upcoding," and it's one form of medical billing fraud.

Health and Human Services began investigating Dr. Hoffman-Vaile when it noticed that she used billing code 14300 more times than any other code, and that she used billing code 14300 more than any other doctor in Florida in 1998 or 1999.

These are bad facts. The way Dr. Hoffman-Vaile responded, though, made them much worse. The Inspector General of Health and Human Services raided the doctor's offices with a search warrant. They found files were missing. They then issued a grand jury subpoena asking for those missing files and any accompanying photographs.

Unfortunately, it appears from the opinion that Dr. Hoffman-Vaile directed her employees to strip the files of the photographs before she sent them to the government to satisfy the grand jury subpoena. Since one of the issues about whether code 14300 is proper is the size of the affected area in the procedure, it matters what the photos show.

Dr. Hoffman-Vaile was then indicted for both health care fraud and obstructing justice for stripping the files. She was convicted and sentenced to five years in prison.

I have represented many clients in fraud cases. Basically, the issue is whether your client is a liar. It is really hard to argue that your client is not a liar if the government has evidence that your client tried to lie to the prosecutors, agents, or grand jury during the investigation. That is why a grand jury subpoena has to be looked at very carefully and responded to with the same amount of care.

The Department of Justice and Department of Health and Human Services have announced a massive joint effort to prosecute health care fraud. The press release details an indictment against fifty-three people across the country.

And there is other health care fraud news around the country. Just today, a surgeon was charged in New Jersey, and a doctor who runs three clinics was indicted in Illinois. Last week, forty-two people were arrested in California on health care fraud charges. Health care fraud is a hot law enforcement priority.

I've represented people being investigated for health care fraud charges, and I've represented people charged with crimes related to health care fraud. These prosecutions and investigations are tricky for defense lawyers. They routinely require defense counsel to investigate the details of Medicare regulations in order to effectively represent their clients.

In addition to focusing on the specific regulations at issue, one good thing to look at is what evidence of fraudulent intent is there. I have found that not infrequently law enforcement agents, even federal law enforcement agents, focus on whether a statement on a form is true or false, without focusing on whether the person made the statement with the specific intent to defraud.

Obviously, a crucial part of this is how forms are processed in a health care provider's office. A carefully crafted claims process may be the best defense that a health care professional has against a criminal charge. Conversely, a process for filing Medicare claims that is sloppy or, worse, absent, can make a defense lawyer's job harder.