When sentencing a provider convicted of submitting false claims for reimbursement, a court must credit the physician for the fair market value of services that were rendered to patients at his hospitals. The U.S. Court of Appeals for the Fifth Circuit affirmed a physician’s conviction of several counts related to health care fraud and identity theft, but remanded the matter back to a Texas district court for resentencing and recalculation of the nearly $600,000 restitution amount (U.S. v. Mahmood, April 14, 2016, Stewart, C.).
Creative billing. The physician owned several Texas hospitals, each enrolled as a Medicare and Medicaid provider. In 2005, he requested that the medical records director at one of his facilities fax the diagnosis codes for all Medicare inpatients. Without reviewing the medical records, he would then instruct the director to change the sequence of the codes, primarily by switching a primary diagnosis with a secondary one or adding complications. He began instructing employees at other hospitals to do so, but they were less inclined to acquiesce.
One inpatient coder refused to participate in the scheme, so the physician instructed her to fax the diagnosis code sheets for each Medicare patients at two facilities. Before sending the codes, she documented them on a separate sheet that she retained, and entered the codes into the billing system under her own username. When she began receiving audit letters advising that many Medicare claims had been reviewed and denied, she compared her retained code sheet with the entered code and determined that she had entered the codes as the Medicare auditor suggested, but that the codes were later changed by another user. The government was able to identify 85 claims that were changed by another user, resulting in overpayments.
Sentencing. An HHS auditor repriced these claims according to their proper codes and found that the Medicare program overpaid the hospitals $143,608. The district court calculated the total loss associated with the fraud at just under $600,000. This enhanced his base offense level significantly, resulting in a sentencing range of 51 to 63 months of imprisonment for health fraud charges, as well as 24 months’ imprisonment for each identity theft count. The physician was ultimately sentenced to 135 months of imprisonment.
Remand for recalculation. Although the appeals court disagreed with the physician’s many assertions that there was insufficient evidence to convict him on the charges and that he should have received a new trial, it found that the district court inappropriately calculated the sentencing. Under comments to United States Sentencing Guidelines section 2B1.1(b)(1), a court must only make a reasonable estimate of the loss resulting from a crime of fraud, but that loss must account for the fair market value of services provided.
The appeals court noted that Medicare receives a service of value when care is provided to beneficiaries, and that the government would have paid for the services rendered aside from the fraudulent billing. Therefore, the physician was entitled to a credit for the fair market value. The court held that the physician met his burden of showing that the hospitals rendered legitimate services, and that he was entitled to a credit of the $430,639 that Medicare would have paid for these services. The court vacated the sentencing and restitution orders, and remanded the matter to district court for reconsideration.
The case is No. 15-40521.
Attorneys: Nathaniel Christopher Kummerfeld, U.S. Attorney's Office, for the United States. Franklyn Ray Mickelsen, Jr. (Broden, Mickelsen, Helms & Snipes, LLP) for Tariq Mahmood, M.D.
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