By Donielle Tigay Stutland, J.D.
Appeals court upheld conviction of a patient recruiter in a Medicare kickback scheme, noting that there was not enough evidence to show the recruiter was a bona fide employee who would fall under the safe harbor exception.
A Michigan appeals court upheld a conviction of a patient recruiter found to have received per patient healthcare kickbacks in a Medicare fraud scheme. While the plaintiff Sophia Eggleston sought appeal based on a contention that the district court erred by precluding her from introducing evidence to support a safe harbor defense, the Sixth Circuit disagreed and found that the Eggleston did not present enough evidence to show that she was a bona fide employee, such that the safe harbor would apply. (US v. Eggleston, August 6, 2020, Guy, R.).
Background. Sophia Eggleston was previously convicted by a jury in connection with a Medicare kickback scheme involving two home health agencies, Prestige Home Health Services and Empirical Home Health Care. At trial, Eggleston was found to have solicited and received kickbacks in exchange for referring Medicare beneficiaries to serve as patients at a home health agency owned by co-conspirators. The owners of the two agencies had testified at trial that they used recruiters to sign up new patients (many of whom who did not need home health care services) and paid the recruiters a fee for each patient recruited. Eggleston reported that she had previously worked as a community liaison helping seniors in various ways without compensation.
Eggleston had testified that the owners of the home health agencies had reached out and offered her a job as a community liaison and that she received an hourly rate for her work. She claims she was paid by check and was given 1099 forms. One of the owners of the agency testified that they used both the terms recruiter and community liaison when describing the work that Eggleston did, however, in contrast to what Eggleston represented, the owner of the agency testified that Eggleston was paid a fee on a per patient basis (initially $700 per patient, later $1,100), and she was aware that it was an illegal compensation scheme. According to the government’s tally, Eggleston received $507,000 for her work as a recruiter over the course of five years. According to the owners of the agencies, "Eggleston was an "aggressive" recruiter who formed the "backbone" of the agencies and negotiated her way to a higher per-patient fee."
Eggleston took issue with that characterization by the owners, insisting that she was paid hourly to, "do honest work" helping qualified patients receive treatment at home. The court noted that she had indicated that during the trial she had planned to rely on a "safe harbor" defense, as the ban against referral fees does not apply to, ""any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services[.]" Eggleston intended to offer evidence that she was paid by the hour and that the patients she worked with were eligible for home health care and received medically necessary services.
Safe Harbor Defense. Eggleston sought an appeal first based on the safe harbor defense. She argued that the lower court erred by not allowing her to present evidence supporting a safe harbor defense. However, on appeal, the court noted that the district court had, "made clear that Eggleston could "absolutely" present testimony from former patients to bolster her safe-harbor defense." However, Eggleston did not call such witnesses. The court notes that the only decision to review is the district court’s ruling that Eggleston could not call witnesses, ""for the mere purpose of saying that they received the treatment and . . . the treatment was required."
Given that it would make no difference if the kickbacks were earned from medically necessary services or unnecessary services, the appeals court found the district court did not abuse its discretion in prohibiting such witness testimony. The appellate judge noted, "evidence from patients praising Eggleston for helping them get necessary services, albeit illegally, might run the risk of currying jury sympathy with no countervailing probative value."
The appellate court also disagreed with Eggleston’s contention that she was deprived from having opportunity to present a complete defense. The appellate court found that the court did not prevent Eggleston from presenting any evidence in the sense that it would have been used to support a safe harbor defense.
Eggleston also argued that the lower court abused its discretion by refusing to instruct the jury about a safe harbor defense. The appellate court noted that Eggleston never requested such an instruction. The jury instructions were jointly proposed and were reviewed by Eggleston’s counsel. Further, the district court stated the reason for not giving such an instruction was because there was a lack of evidence to support that defense and the appellate court found that to be a permissible basis for refusing to give such an instruction.
In reviewing the safe harbor provision, the appeals court noted that it would only apply to Eggleston if she could show that: (1) was in "a bona fide employment relationship" with Prestige, and (2) the specific money she was charged with receiving was paid to her as part of her bona fide employment. Three factors were used to determine if the employment relationship is bona fide, (1) Prestige’s control over Eggleston’s work hours, (2) whether Eggleston’s work was part of Prestige’s regular business, and (3) the manner of Eggleston’s payment. The government maintained that not withstanding any jury instructions on this matter, there was not enough evidence to show a bona fide employee relationship. Eggleston disagreed.
The appeals court agreed with the government’s contention that there was not enough evidence to establish a bona fide employee relationship. Some key facts that the court relied on include that Eggleston rarely went into the office, Eggleston was issued 1099s, not W-2s, and when Eggleston was paid, it did not match up with the hours she claimed to have worked, but rather she was paid in consistent payments of the per-patient fee, $1,100, as testified to by the owners. Thus the appeals court found that the district court permissibly concluded there was not enough evidence to justify giving the jury a safe-harbor defense instruction.
Sentencing Enhancements due to Vulnerable Victims. Eggleston also argued that the district court erred in applying sentencing enhancements. Eggleston was given sentencing enhancements because she should have known that her victims were vulnerable victims. Eggleston contends the district court was erroneous because the patients should not be viewed as individual victims, as the victim was the United States and the Medicare program. The appeals court notes that other circuit courts have found patients involved in a fraudulent scheme against Medicare qualify as victims for purposes of sentencing enhancement.
Restitution. Eggleston also took issue with the district courts determination that the restitution should be imposed jointly and severally among all of the defendants, given that they were not parties to the same case. The appellate court disagreed and noted that while the defendants were not all defendants in the same case, they were each indicated and convicted of a case involving the same home health agencies, the same type of crime, the same co-conspirators and the cases were all overseen by the same judge.
The case is No.: 19-1748.
Attorneys: Amanda Jawad, U.S. Attorney's Office, for the United States. Melissa M. Salinas (Federal Appellate Litigation Clinic) for Sophia Eggleston.
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