United States Appeals Court Determines District Court Did Not Err in Medicare Fraud Case

Wednesday, October 7, 2015
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

The Fifth Circuit Court of Appeals upheld the convictions and sentences of defendant, Lawrence Dale St. John, and his son and employee, Jeffrey St. John, in a case involving Medicare fraud.  The pair were convicted of conspiracy to commit health care fraud and 13 substantive counts of health care fraud.  Dale St. John and Jeffrey St. John were both sentenced to serve prison time as well as ordered to pay a substantial amount of restitution based on the pervasive nature of the fraudulent offenses.  The government calculated the actual loss to the Medicare program at over $9.6 million.  

To see the final order of the appeals court, click here.


Getting to Know the Background.

Dale St. John founded A. Medical, a company that certifies patients as homebound and develops plans of care.  Jeffrey St. John was an employee of the firm.  Dr. Nicholas Padron was the physician employed by A. Medical to oversee the plans of care for the patients.  Dr. Padron was also alleged to be a co-conspirator in the scheme.  

A. Medical was a physician housecall company.  Its purpose was to provide primary care, certify patients as "homebound," and engage in care plan oversight (CPO).  CPO could be performed by a nurse or physician assistant, but only under the direct supervision of the physician who signed off on the care plan, in this case namely Dr. Padron.  To receive reimbursement from Medicare, a minimum of thirty minutes per month was required to be spent on CPO for each patient.  


The Fraudulent Health Care Scheme Unfolds.

A. Medical's Medicare fraud scheme was dependant upon a steady stream of patients for whom it could bill Medicare.  The government alleged that home health agencies (HHAs) referred patients to A. Medical in exchange for a "near-certain certification" for home health care services.  Dr. Padron, who ultimately pled guilty, testified against the St. Johns at trial attesting that he certified almost all patients as homebound and did not supervise the attending nurses and physician assistants as required by law for billing Medicare for CPO services.

Normally the referral process works in reverse, with the physician housecall company certifying a patient as homebound, submitting a "485 form" to Medicare and then referring the patient to an HHA for care.  However, with the HHAs bringing referrals to A. Medical for certification, A. Medical was guaranteed a consistent progression of patients for whom to submit Medicare claims.  Furthermore, the HHAs were almost certain to receive patients for whom to bill Medicare as well.  


The District Court's Ruling.

At the district court level, a jury convicted the defendants of conspiracy to commit health care fraud and 13 substantive counts of health care fraud.  The pre-sentence report (PSR) recommended that the defendants be held culpable for losses stemming from the fraudulent CPO claims and fraudulent certification of patients as homebound as well as all of the bills submitted to Medicare by HHAs for patients certified as homebound by A. Medical.  This equated to a total intended loss of nearly $11.2 million and an actual loss of more than $9.6 million.  

Based on the loss calculations, the PSR recommended a base offense level of 29 for both defendants.  The district court adopted the PSR's recommendations and ordered Dale St. John to pay $9.6 million in restitution and Jeffrey St. John to pay restitution of more than $8.6 million.

To see a copy of the indictment from the United States District Court, Northern District of Texas, click here. 


The Issues on Appeal.

Several issues were raised by the St. Johns on appeal.  The Fifth Circuit reviewed the following:

    (a)    Intracorporate Conspiracy Doctrine (raised by Jeffrey St. John).

        Jeffrey St. John argued that his involvement in A. Medical's scheme did not satisfy conspiracy's plurality requirement because a corporation cannot conspire with itself.  While the court has applied the intracorporate conspiracy doctrine in antitrust and civil rights cases, the appeals court declined to expand its applications in a criminal context here.

    (b)    Proposed Jury Instruction (raised by Jeffrey St. John).

        Jeffrey St. John argued that the district court abused its discretion by refusing to adopt his proposed jury instruction as to the term "willfully."  The Supreme Court has recognized a heightened standard of willfulness required for criminal tax cases (where statutes are highly technical and can become ensnaring).  However, the principle in this case remains that ignorance of the law is not a valid defense to a criminal charge.  The plain language of Section 1347(b), 18 United States Code, states:
            "...a person need not have actual knowledge of this section or specific intent to commit a violation of this section."  
        Knowledge of the Medicare fraud and the intent to further the fraud is a sufficient enough finding.  

    (c)    Loss Calculations (raised by both defendants).

        Both defendants argued that the district court erred in the calculation of the intended loss.  Dale St. John argued that the loss calculations included sums that were not "relevant conduct" and also, that the amount of any loss should have been reduced by the value of legitimate services provided.  

        For purposes of sentencing, the loss is the greater amount of the actual loss or intended loss.  The St. Johns argued as to the intended loss, however, the court found on review that the defendants' actual and intended loss amounts constituted the same 20 base offense level increase.  Therefore, an error that does not affect the defendants' offense level is harmless.

        As to Dale St. John's argument of "relevant conduct," the appeals court held, "...that the HHA amounts were properly included as 'relevant conduct' as part of the same 'common scheme' as the offense of conviction."  

        And lastly, the appeals court found that the fraud was so pervasive that the district court did not plainly err in failing to subtract any amounts from the actual loss calculations absent evidence from the defendant showing legitimate services.  Dale St. John did not provide any such evidence at trial.  

    (d)    Restitution (raised by Dale St. John).

        Dale St. John argued that the indictment did not allege that the HHAs' Medicare reimbursement claims and the non-CPO fraudulent billing were included in A. Medical's Medicare fraud scheme.  Therefore, these amounts should not have been included in the restitution award.  

        The appeals court noted it has previously held, "where a fraudulent scheme is an element of the conviction, the court may award restitution for 'actions pursuant to that scheme.'"  United States v. Cothran, 302 F.3d 279, 289 (5th Cir. 2002).  Furthermore, the appeals court held, "The HHAs' Medicare reimbursement claims were a necessary component of A. Medical's scheme to defraud Medicare."  Therefore, the appeals court upheld the restitution award concluding that these claims were sufficiently referenced in the indictment.  

To see a copy of the indictment the appeals court referenced, click here. 


Editor's Comments:

Physicians should be leery of getting sucked into fraud schemes, especially with small organizations owned by nonphysicians.  Offers are often made to physicians for exorbitant amounts of money for little or no work.  In many cases, unscrupulous individuals may just be looking to use a physicians Medicare Identification Number or Personal Identification Number to submit fraudulent claims or make fraudulent certifications.  The old adage "If it's too good to be true, it ain't" applies here.  


Health Care Fraud is an Extremely Serious Matter.

The government enacted anti-fraud laws in health care to eliminate fraud and abuse in government health care programs and to protect tax payers' dollars.  This protects the integrity of the health care system as a whole by focusing on the utmost care of the patient rather than the financial interest of the physician or other health care provider.  

Click here for information directed at physicians regarding how to best avoid fraud and abuse in government health care programs. 

We have been consulted by many individuals, both before and after criminal convictions for fraud or related offenses.  In many cases, those subject to Medicare fraud audits and investigations refuse to acknowledge the seriousness of the matter.  Some decide not to spend the money required for a highly experienced health attorney to defend them.

Click here to read one of my previous blog posts regarding Medicare audits. 

If you are accused of Medicare fraud, realize that you are in a fight for your life.  Your liberty, property/possessions and profession are all at stake.  Often it is possible to settle allegations of Medicare fraud by agreeing to pay civil monetary penalties and fines.  If given such an opportunity, the Medicare provider should consider whether it is worth the risk of facing decades in prison.  Be prepared to give up whatever you need to in order to avoid a conviction and preserve your liberty.


Don’t Wait Until It’s Too Late; Consult with a Health Law Attorney Experienced in Medicare Issues Now.

The attorneys of The Health Law Firm represent healthcare providers in Medicare audits, ZPIC audits and RAC audits throughout Florida and across the U.S.  They also represent physicians, medical groups, nursing homes, home health agencies, pharmacies, hospitals and other healthcare providers and institutions in Medicare and Medicaid investigations, audits, recovery actions and termination from the Medicare or Medicaid Program.

For more information please visit our website at www.TheHealthLawFirm.com or call (407) 331-6620 or (850) 439-1001.


Comments?

Have you ever been suspected of Medicare fraud or faced with a Medicare fraud audit?  


Sources:

American Health Lawyers Weekly.  "Fifth Circuit Upholds Convictions, Sentences in Physician House Call Scheme."  Fraud and Compliance: AHLA.  18 Sept. 2015.  Web.  5 Oct. 2015.  

United States v. St. John, No. 14-10406 (5th Cir. Sept. 9, 2015).


About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida area.  www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.


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10/7/2015

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