Health Law Daily Wrap Up, HOSPICE—5th Cir.: Hospice physician’s convictions and $15 million in restitution affirmed for ‘pervasive’ fraud, (Aug 15, 2024)

By Justin Marcus Smith, J.D.

The Fifth Circuit found it circumstantially telling that the jurors saw multiple hospice patients testifying at trial nearly a decade after the convicted physician had recommended them for end of life care.

In an unpublished opinion, the United States Court of Appeals for the Fifth Circuit affirmed a physician’s conviction for conspiracy to commit health care fraud and for seven individual counts of healthcare fraud in connection with hospice care service recommendations. Applying de novo review, the court affirmed the convictions on the basis that the government presented enough circumstantial evidence, without direct evidence of intent, for a reasonable jury to have found guilt. With respect to sentencing, the circumstances surrounding 7,000 hospice claims formed a basis for fraud so pervasive that the government did not need to “sift” through each of the claims. Last, the court found the district court did not err by discounting defense expert testimony on how to calculate the government’s loss because the expert’s testimony was “far from conclusive” (U.S. v. Nelson, No. 23-60086 (5th Cir. Aug. 9, 2024)).

Background. A jury convicted a physician medical director of several hospice care providers of one count of conspiracy to commit healthcare fraud in violation of 18 U.S.C. §§ 1347, 1349, and seven individual counts of healthcare fraud in violation of § 1347. The district court sentenced the physician to 60 months of imprisonment and ordered him to pay over $15 million in restitution. The physician appealed his conviction and sentence.

Multiple agencies, after receiving reports of fraudulent hospice placements, conducted a joint investigation and decided that the physician was the “common denominator” among multiple implicated hospice providers. According to trial testimony or the Fifth Circuit’s summary of the record below, the physician would sometimes examine patients that runners brought to him in vans. At other times the physician would certify recommendations for hospice care without seeing the patients. It was said to be “very rare” that the physician would not admit a patient to hospice care, but “very few of them actually died.” Several of them testified at trial nearly a decade after the physician recommended them for hospice care. The hospice providers billed Medicare over $16 million, and the physician received more than $400 thousand in his role as the medical director of those hospice providers.

The district court denied the physician’s motion for a judgment of acquittal or a new trial. On appeal, the physician raised three issues: 1) there was insufficient evidence to support his conspiracy conviction; 2) there was insufficient evidence to support his convictions for specific charged instances of healthcare fraud; 3) the district court miscalculated the government’s loss amount for his crimes for purposes of sentencing and restitution. The Fifth Circuit applied de novo review to the physician’s convictions and sentence. More specifically, the court applied de novo review to the physician’s challenge to the method used to calculate the government’s loss as that related to the Sentencing Guidelines. The court also applied abuse of discretion review to the district court’s decision to deny the physician’s motion for a new trial, but it did not reach that issue because the Fifth Circuit affirmed the physician’s conviction and sentence.

Convictions affirmed. The Fifth Circuit determined the circumstantial evidence the government presented at trial was enough to convict the physician of both conspiracy to commit health care fraud and actual healthcare fraud. In reviewing the trial court record, the court said it could not say that no rational jury could have reached the guilty verdicts here.

The court acknowledged the physician’s argument that the government did not produce direct evidence of a conspiratorial agreement or culpable mens rea, but it noted the government proffered substantial circumstantial evidence. The Fifth Circuit also found the court “appropriately instructed” the jury that inferring a conspiracy should not be taken lightly and mere associations would not necessarily prove the existence of a conspiracy.

Regardless of how the physician’s initial examination occurred, the Fifth Circuit found the evidence supported that it was “very rare” for the physician not to certify prospective patients as hospice eligible. Likewise, it was also “very, very rare” for hospice patients he certified to die while in hospice care. According to the court’s review, several who were not expected to live for more than six months testified at trial ten years later. Several did not even know the physician placed them in hospice.

Of the seven individual patients underlying the physician’s conviction for defrauding Medicare, the physician personally examined four. Three testified that they were not terminally ill at the time the physician examined them, that no one ever told them they were placed in hospice, and they never believed they were dying. The Fifth Circuit found it telling that the jurors saw six of these seven patients testify at trial in person nearly a decade after the physician placed them in hospice. The Fifth Circuit concluded that the fact the patients were still alive and healthy enough to testify was itself circumstantial evidence supporting the physician’s convictions on the individual counts of healthcare fraud. The jury conviction comported with Fifth Circuit Pattern Jury Instructions (Criminal Cases) § 2.59 (2019) that the physician either knowingly engaged in healthcare fraud or “deliberately closed his eyes to what [should] otherwise have been obvious to him.”

Sentence affirmed. The court did not find any deficiency in the way the district court calculated the government’s loss. The calculation of the loss amount mattered for sentencing because it affected the total offense level. Resentencing could be warranted if there was an error in calculating the loss amount.

Again, according to the Fifth Circuit’s review, at sentencing, the government introduced evidence the physician was the referring physician for over 7,000 hospice claims that yielded over sixteen million dollars from Medicare. Based on that and related evidence, the district court concluded the physician’s fraud was “pervasive.” The Fifth Circuit said the trial record and precedent supported that finding of pervasiveness. Accordingly, the district court did not need “to sift through thousands of claims of dubious reliability to sort the fraudulent from the nonfraudulent.” United States v. Mesquias, 29 F.4th 276, 283 (5th Cir. 2022). The Fifth Circuit accordingly affirmed the district court’s loss calculation for purposes of the physician’s sentencing.

Restitution affirmed. Unlike the loss amount for sentencing, restitution was limited to the victim’s actual loss. The district court determined the government’s actual loss was $16,596,186.57. The Fifth Circuit found this number was based on “robust evidence presented during trial and at sentencing.” However, the district court deducted some money it found could not be reliably attributed to the physician to reach a final restitution amount of $15,454,316.57.

The physician rebutted that his expert witness proposed only $935,696, but the Fifth Circuit said it was not clear how that expert narrowed over 600 records to just thirty that “accurately” related to the physician. As to that witness’ contention that the government had many errors in its math, the Fifth Circuit found the expert’s own aggregated figures were “far from conclusive.” The Fifth Circuit held the district court did not err by discounting her testimony.

The case is No. 23-60086.

Judge: Per Curiam.

Attorneys: Clayton Adair Dabbs, U.S. Attorney's Office, for the U.S. Arthur Hugo Calderon (Calderon & Williams, P.L.L.C.) for Scott E. Nelson.

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