Defense Forensic Expert Trumps PSR

December 27, 2012

Two married doctors were charged with several types of health care fraud crimes, including, (1) "upcoding" cheaper "trigger-point injections for more expensive "facet-point" injections, (2) submitting "phantom" bills for services never rendered, and (3) unlawful distribution of controlled substances. They pled guilty to counts only charging the "up coded" injection-billing fraud. The agreement did not specify an agreed restitution amount. The PSR recommended restitution of $43,318,170.93, and defendants objected on several bases: (1) no credit was given for amounts insurers would have paid for actual trigger-point injections; (2) improper inclusion of insurer payment for non-injection treatment unrelated to the offenses of conviction, such as undisputedly legitimate allergy services.

The defendants submitted a report prepared by their own forensic accountant. Applying credits for the two categories mentioned above, the accountant concluded the actual loss to insurers totaled $21,028,963.61. The district court overruled the objections and ordered restitution of $43,318,170.93. The Fifth Circuit vacated the district court's sentence and remanded the case for recalculation. See United States v. Sharma & Sharma, Nos. 11-20102, 20167, & 20204.

As to the first argument, the court found that the probation office "went astray" by including the total amount of insurer payments to the doctors, resulting in an overstatement of victim loss. Specifically, the court found the restitution award should not have included amounts for non-injection medical services (i.e., conduct outside the counts of conviction), particularly where one insurance company's report expressly stated it was "not sure which claims relate to the guilty plea." The Fifth Circuit found that the "obvious mistakes" in the PSR "undermine our confidence that the Probation Office gave any meaningful scrutiny to the actual losses of Medicare, Medicaid, and the remaining twenty-seven private insurer victims."

As for the defendants' second argument, the court observed that restitution awards should always allow credit for amounts that insurers would have paid had the defendant not committed the fraud. In this case, however, the defendants failed to submit competent evidence that actual services that were medically necessary were provided and would have been paid absent the upcoding. Conversely, the government submitted unrebutted evidence of misdiagnosis, improper medical advice, and an assembly-line injection stream without routine sanitary precautions. Anecdotal statements from several patients was insufficient to counter the government's evidence.

This case does not set forth any change in the law that I can see, but it does demonstrate how different an outcome can be dependent on a defendant's response. Clearly, the case reinforces the need to challenge a PSR's conclusory findings and recommendations, and to do so with competent evidence. Too often, I've seen PSR mirror government offense reports without undertaking the type of "meaningful scrutiny" referenced by the Fifth Circuit. Here, the contrast of different responses by the defense was evident: a good forensic analysis was quite useful in one of the defendants' arguments, and yet the failure to provide evidence (assuming there would have been any evidence) on the second argument led to a different result.