Federal Healthcare Fraud Sentencing After Obamacare: Analyzing Title 18 USC 1347

Last week I wrote about the recent national healthcare fraud takedown by the Department of Justice and its Medicare Fraud Strike Force.  We discussed the four cases brought in Brooklyn by the U.S. Attorney’s Office for the Eastern District of New York – U.S. v. Onyekwere, 14 CR 274; U.S. v. Thornhill, Thornhill and Johnson, 14 CR 278; U.S. v. Margossian; and U.S. v. Ahmed, 14 CR 277.

While these cases concern different offenses and schemes to defraud; one thing in common is the analysis that will be employed by the U.S. Attorney’s Office and the defense attorneys during plea negotiations regarding a potential sentence.

In virtually all Federal criminal cases, the Judge must consult the United States Sentencing Guidelines – this is a book that determines the seriousness of each offense as well as the criminal history of the defendant through a point (or “level”) system.  The idea is to make sure similarly situated defendants are treated virtually the same by all Federal Judges throughout the country.

In determining the seriousness of the offense, the Guideline establishes a “base offense level” for every Federal crime.  It then calculates “specific offense characteristics” – things that may or may not be a part of each case.

For purposes of Healthcare Fraud cases, the 2010 Patient Protection and Affordable Care Act (commonly referred to as “Obamacare”) changed, quite significantly, how that calculation is made.

There are two major changes that are relevant here:

The first change concerns what counts as a “loss” under the guidelines.  Under USSG Section 2B1.1, the court must determine what the “loss” was related to any healthcare fraud offense.  The question becomes, what counts as “loss.” Loss can be “actual” – defined as “the reasonably foreseeable pecuniary harm that resulted from the offense;” or it can be “intended” – defined as “pecuniary harm that was intended to result from the offense.”

In the context of healthcare fraud cases, whether a court would employ an actual loss number or an intended loss number is of great concern because of the way Medicare and private insurance is billed and paid.  Typically, a healthcare provider sends a bill (or claim) to Medicare for their actual fees related to a service.  Medicare, however, has a fixed schedule (previously agreed to by every Medicare provider) upon which it pays.  In other words, no matter what a provider bills to Medicare for a service, it will be paid a previously agreed upon fixed fee.

So, the question becomes, when looking at the “loss,” are courts going to look at the amount “billed” by the provider, or the amount “paid” by Medicare?  When aggregating hundreds or thousands of payments, the difference in these amounts can be significant.  Take the case of U.S. v. Ahmed – the amount paid by Medicare was $7.5 million even though Dr. Ahmed billed for $85 million.

Since all providers know what they are going to be paid, defendants typically argued that even though they may have “billed” for more than Medicare would pay, they knew the actual amount they would get.  Therefore, they said, the court should not use an “intended” loss analysis; precisely because there was no “intended” loss that was greater than the “actual” loss.  In other words, the providers knew (and intended) for Medicare to pay them what Medicare had agreed to pay them – no more, no less – regardless of what they billed.

Courts would often agree with defendants on this front.  Obamacare changed that.  Now, Application Note 3(F) to Section 2B1.1 of the Guidelines states that “the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss; i.e., is evidence sufficient to establish the amount of the intended loss, if not rebutted.”  This special rule does include language that a defendant may rebut this presumption; but in order to do so, it is likely that a defendant will have to testify or present some other live witness.

The second change directed the United States Sentencing Commission to amend the guidelines to provide that there should be:

(i) a 2-level increase in the offense level for any defendant convicted

of a Federal health care offense relating to a Government health

care program which involves a loss of not less than $1,000,000 and

less than $7,000,000;

(ii) a 3-level increase in the offense level for any defendant convicted of a

Federal health care offense relating to a Government health care program

which involves a loss of not less than $7,000,000 and less than

$20,000,000; and

(iii) a 4-level increase in the offense level for any defendant convicted of a

Federal health care offense relating to a Government health care program

which involves a loss of not less than $20,000,000.

So, not only will the Court likely use the “billed” amount as the “loss” amount, but that increased number (which already has a higher proposed sentencing range) will now result in a double hit – by increasing an additional 2 to 4 levels just because it is healthcare fraud case.

So, what does this mean?  Well, a 4 level increase in the guidelines increases the sentencing range by more than 50%.

These changes will have a profound effect on the recent Brooklyn cases.  Take for example again the case of U.S. v. Syed Imran Ahmed.  His “actual” loss number may be only $7.5 million.  But his “intended” loss number might be $85 million.  This alone would result in a 4 level increase.  Coupled with the new enhancement, the Court would add another 4 levels on top of that, resulting in an 8 level upward adjustment because of these two new provisions.  That would more than DOUBLE Dr. Ahmed’s sentencing guideline range from what it would have been before the changes.

These changes are significant, but have not received much attention.  It is quite possible that after cases such as the recent Brooklyn arrests, people will notice these dramatic changes.

To read more about Federal Healthcare Fraud crimes and Federal Sentencing, review this blog and the Saland Law PC website.

To learn more about Federal Healthcare Fraud crimes, contact Saland Law PC or follow the links throughout this blog entry.  A Federal criminal defense law firm located in lower Manhattan, the Federal criminal defense attorneys and former health care fraud prosecutors at Saland Law PC represent clients throughout the New York metropolitan area, as well as nationwide.

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