In a decision that could have wider ramifications for sentencing in health care fraud cases, a Ninth Circuit panel last week affirmed a lower court’s sentencing enhancement, applied because the defendants were found to have abused a “position of trust” by submitting false information in Medicare claims.
The case involves owners of a California-based DME supplier convicted of various federal health care fraud crimes for providing power wheelchairs to Medicare beneficiaries who did not need them. In calculating their sentences, the District Court applied the Sentencing Guidelines’ two-level enhancement for a defendant who “abused a position of public or private trust . . . in a manner that significantly facilitated the commission or concealment of the offense.” § 3B1.3. A position of “public or private trust” is one characterized by “professional or managerial discretion. § 3B1.3 cmt.
As in many areas of Medicare billing, claims for motorized wheelchairs are not individually reviewed by the government. Thus, according to the District Court, the Medicare program employs what a trial witness dubbed the “honor system,” which relies on suppliers to submit accurate information about whether DME is appropriate for a particular patient.
A Medicare local coverage determination requires DME suppliers to perform home assessments to evaluate whether a power wheelchair is appropriate, including whether a patient’s residence has doorways and rooms large enough to accommodate a power wheelchair. By using a certain code on Medicare claims—the “KX modifier”—a DME supplier signals to Medicare that the beneficiary meets these and other relevant medical and home environment criteria. Further, if a DME supplier selects the KX modifier, the Medicare contractor automatically processes the claim. The panel majority concluded that indicating the KX modifier requires the type of professional judgment on which the government relies: “Medicare trusted [the defendants] to exercise their professional discretion in providing appropriate medical equipment to individuals who actually needed it.”
There is some precedent for this position. The Ninth Circuit cited a 1997 decision that applied the abuse-of-trust enhancement to an ophthalmologist convicted of Medicare fraud for submitting claims for procedures that were not medically necessary. The court in that earlier case reasoned that “the government as insurer depends upon the honesty of the doctor and is easily taken advantage of if the doctor is not honest.” The Fifth Circuit has come to similar conclusions.
A dissenting opinion argued that a DME supplier plays a “ministerial role” and does not exercise any professional judgment on its own, but rather facilitates delivery of equipment after a physician has recommended it.
While it may be true that physicians occupy a “position of trust” with respect to the Medicare program when they represent that services they order are medically necessary, the Ninth Circuit’s decision could place on an equal footing all other healthcare service providers who exercise any discretion that results in the provision of healthcare services that are reimbursed by federal healthcare programs.
The case is United States v. Adebimpe, No. 14-10303.