The United States Court of Appeals for the Fifth Circuit in U.S. v. Isiwele, No. 10-4037 (5th Cir. 3/7/2011) considered an appeal in a Medicare/Medicaid fraud case where the defendant was convicted of multiple counts of healthcare fraud and conspiracy to pay kick-backs in connection with a scheme to fraudulently bill Medicare and Medicaid for power wheelchairs. Some of the issues on appeal were whether the District Court correctly applied the “loss amount,” “mass marketing,” and “abuse of trust” enhancements for sentencing.
The defendant was a Medicare/Medicaid durable medical equipment provider who allegedly used a recruiter to go into elderly and low income communities to gather billing information from beneficiaries after Hurricane Katrina. The defendant was tried and found guilty on 16 counts of healthcare fraud and one count of conspiracy to pay illegal remunerations in violation of 18 U.S.C. §1347 and 42 U.S.C. §1320a-7b(b)(2)(A). For sentencing, the District Court applied a 14-level increase to the defendant’s base offense level on the basis of the "loss amount" occasioned by the fraud. The loss amount was calculated according to the amount billed to Medicare and Medicaid. However, the defendant argued on appeal that the proper “loss amount” was the total amount of payment for the wheelchairs by Medicare and Medicaid. The District Court also applied a 2-level increase to the offense level for the use of "mass marketing" and another 2-level increase for an "abuse of trust" based on the defendant’s status as a DME supplier for Medicare and Medicaid. The District Court sentenced the defendant to 97 months imprisonment and 3 years of supervised release and was ordered to pay a $1,700.00 special assessment and restitution in the amount of $201,397.34.
With regard to the "loss amount," the District Court measured the amount of intended loss by the amount billed to Medicare and Medicaid rather than the lower amount that Medicare and Medicaid actually paid for the wheelchairs. The defendant argued on appeal that the lower amount should have been deemed the “loss amount” because the defendant knew he would receive the lower capped amount and did not have the subjective intent to be paid the amount he billed. On appeal, the Fifth Court of Appeals adopted the standard that the amount fraudulently billed to Medicare/Medicaid is prima facie evidence of the amount of loss the defendant intended to cause, but the amount billed does not constitute conclusive evidence of intended loss and the parties may introduce additional evidence to suggest the amount billed either exaggerates or understates the billing party’s intent. However, because the record on appeal was uncertain as to what the District Court understood the law to be, the Court of Appeals remanded the case back to the District Court for resentencing on the issue of loss amount based on the standard adopted by the Court of Appeals.
On the issue of the "mass marketing" enhancement, the Fifth Circuit Court of Appeals found that mass marketing is not limited to just mass communication methods, but also contemplates face-to-face marketing intended to reach a large number of persons. The Court of Appeals cited to the 2009 Mauskar case in which it upheld the application of a mass marketing enhancement to a physician who conspired to defraud Medicare/Medicaid by falsely certifying that ambulatory patients needed power wheelchairs. In the earlier Mauskar case, recruiters were used to target elderly beneficiaries and escort them to the defendant’s clinic for evaluation and issuance of false certificates of medical necessity. In Mauskar the mass marketing enhancement for sentencing was applicable to the offenses as the mass marketing efforts of the recruiters was "relevant conduct constituting part of the offense of healthcare fraud.” The Court of Appeals adopted this same reasoning and held that the defendant in the Isiwele case was eligible for the mass marketing sentencing enhancement on the basis of his recruiters’ face-to-face recruitment of Medicare/Medicaid beneficiaries.
The Court of Appeals further found that because the defendant was a DME supplier, he was in a “relationship of trust” with Medicare/Medicaid. As a result, the Court of Appeals upheld the District Court’s application of a two-level "abuse of trust" sentencing enhancement to the offense level.