Opinion ID: 2679626
Heading Depth: 2
Heading Rank: 1

Heading: Health Care Fraud Count

Text: Count One of the Second Superseding Indictment charged Mr. Houser and Washington with conspiring to commit health care fraud in violation of 18 U.S.C. § 1349.31 Section 1349 requires an agreement to commit the underlying offense, namely that the defendant (1) “knowingly and willfully execute[d], or attempt[ed] to execute, a scheme or artifice” (2) “to defraud any health care benefit program” or “to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program,” (3) “in connection with the delivery of or payment for health care benefits, items, or services.” 18 U.S.C. § 1347. The district court found that Mr. Houser and Washington, working together, 31 Section 1349 of Title 18 provides: “Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.” 18 Case: 12-14302 Date Filed: 06/19/2014 Page: 19 of 40 knowingly submitted to Medicare and Georgia Medicaid claims for services that had not been rendered. The district court stated: Specifically, the Government has proved beyond a reasonable doubt that the three Forum nursing facilities, Mt. Berry, Moran Lake, and Wildwood, under the direction of Defendant, submitted or caused to be submitted, during the course of the conspiracy, false or fraudulent claims to the Medicare and Georgia Medicaid programs for services that were worthless in that they were not provided or rendered, were deficient, inadequate, substandard, and did not promote the maintenance or enhancement of the quality of life of the residents of the Nursing Facilities, and were of a quality that failed to meet professionally recognized standards of health care.[32] On appeal, Mr. Houser does not contest the deplorable conditions of his nursing homes; indeed, he recites, in detail, those conditions in his opening brief. He admits that Forum routinely failed to pay the expenses of the nursing facilities, including bills for clinical laboratory services, physical therapy, transport services, telephone service, mobile x-ray services, pharmacy services, and various medical, nursing and cleaning supplies, as well as repair costs for washing machines and dryers, dishwashers, air conditioners and heaters, medical equipment, and leaking roofs.[33] He also admits that “[t]he administrators of the nursing facilities and other staff warned Mr. Houser, through telephone calls, e-mails and faxes, of these 32 R.290 at 428 (emphasis added). 33 Appellant’s Br. 18-19 (citations omitted). 19 Case: 12-14302 Date Filed: 06/19/2014 Page: 20 of 40 deficiencies.”34 Instead, Mr. Houser maintains that the district court erred in employing a “worthless services” concept in evaluating his guilt under the health care fraud statute. Moreover, he maintains that the record does not support a finding that he conspired with Washington--or anyone else--to violate 18 U.S.C. § 1347. We evaluate each of these arguments in turn.
Mr. Houser first takes issue with the district court’s use of the “worthless services” concept. Mr. Houser claims that “[t]he concept of ‘worthless services’ derives from civil suits brought under the False Claims Act.”35 According to Mr. Houser, “[a] claim of ‘worthless services’ can be the basis for a false claims action, if the plaintiff can show that ‘the performance of the service is so deficient that for all practical purposes it is the equivalent of no performance at all.’”36 Mr. Houser submits, however, that “engrafting a ‘worthless services’ concept onto the federal health care fraud statute renders the statute unconstitutionally vague and, therefore, void” because “determining at what point 34 Id. at 18. 35 Id. at 34. 36 Id. (quoting Mikes v. Straus, 274 F.3d 687, 703 (2d Cir. 2001)). 20 Case: 12-14302 Date Filed: 06/19/2014 Page: 21 of 40 health care services have crossed the line from merely bad to criminally worthless would leave many men of common intelligence guessing.”37 Mr. Houser distinguishes his case from those in which “the service for which a provider seeks reimbursement was never provided, see United States v. Hoffman-Vaile, 568 F.3d 1335 (11th Cir. 2009), or unnecessary, see United States v. Mateos, 623 F.3d 1350 (11th Cir. 2010), or not covered, see [United States v.] Medina, 485 [F.3d 1291,] 1299 [(11th Cir. 2007)].”38 The district court’s definition of worthless services, Mr. Houser continues, strays from these situations in that it introduces the idea of desirability into the calculus. In his view, the concept has no place in an evaluation of worthlessness because what is totally undesirable to one person nevertheless may have value for another. “We review whether a criminal statute is unconstitutionally vague de novo.” United States v. Wayerski, 624 F.3d 1342, 1347 (11th Cir. 2010). We do not believe that Mr. Houser’s conviction requires us to draw the proverbial line in the sand for purposes of determining when clearly substandard services become “worthless.” Although the indictment in this case sometimes describes “the care, services and environment provided by the Nursing Facilities” as being “so 37 Id. at 35-36 (internal quotation marks omitted). 38 Id. at 41. 21 Case: 12-14302 Date Filed: 06/19/2014 Page: 22 of 40 inadequate or deficient as to constitute worthless services,”39 Mr. Houser was not prosecuted solely on the basis of the deficient nature of some of the services provided. It is clear both from the indictment and the district court’s order of conviction that Mr. Houser also was prosecuted and convicted for failing to provide services that he had certified to Medicare and Georgia Medicaid had been provided to the residents in his homes. The indictment alleges that “[f]ederal statutes and regulations mandate that nursing facilities comply with federal requirements relating to the provision of services and quality of care. 42 U.S.C. § 1396r(b).”40 The indictment continues: “A nursing facility must care for its residents in such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.” 42 U.S.C. § 1396r(b)(1)(A). Additionally, nursing facilities “must provide services and activities to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident in accordance with a plan of care which . . . describes the medical, nursing, and psychosocial needs of the resident and how such needs will be met . . . [.] 42 U.S.C. § 1396r(b)(2)(A); 42 C.F.R. § 483.25.[41] The indictment goes on to describe how Mr. Houser’s nursing facilities failed to provide required services: “On numerous occasions, the defendants owed 39 R.139 at 12-13, ¶ 36. 40 Id. at 6, ¶ 17. 41 Id. at 6-7, ¶ 17 (alteration in original). 22 Case: 12-14302 Date Filed: 06/19/2014 Page: 23 of 40 considerable sums to many Nursing Facility vendors through consistent delinquency in payment or failure to pay despite promises and representations to the contrary. Defendants curtailed crucial services provided to residents by failing to pay the vendors who provided such services.”42 The fraudulent activity alleged in the indictment was based on the submission of claims for both the lack of services, as well as services that were “deficient, inadequate, [or] substandard”: 92. The Nursing Facilities submitted or caused to be submitted, during the course of the conspiracy, false or fraudulent claims to the Medicare and Georgia Medicaid program for services that were worthless in that they were not provided or rendered, were deficient, inadequate, substandard, and did not promote the maintenance or enhancement of the quality of life of the residents of the Nursing Facilities, and were of a quality that failed to meet professionally recognized standards of health care.[43] And, again, a few paragraphs later: “During the course of the conspiracy, defendants GEORGE D. HOUSER and RHONDA HOUSER fraudulently caused claims to be paid by Medicare and Georgia Medicaid for care and services that were either not rendered or were so inadequate or deficient as to constitute worthless services.”44 The district court’s order of conviction also rested, at least in part, on the 42 Id. at 17, ¶ 55 (emphasis added). 43 Id. at 29, ¶ 92 (emphasis added). 44 Id. at 30, ¶ 95 (emphasis added). 23 Case: 12-14302 Date Filed: 06/19/2014 Page: 24 of 40 facilities’ failure to provide necessary services. The district court explicitly found that there were occasions when “residents never received the medications that they were supposed to have,”45 residents went without diapers and medical care for their wounds,46 laboratory services were not performed,47 and residents were not transported for dialysis48 or provided with physical therapy.49 Moreover, it is clear from the court’s order that the complete lack of some services served as one of the bases for the district court’s determination that the Government had met its burden of proof with respect to the conspiracy charge: 13. For the following reasons, the Court finds that the Government has proved beyond a reasonable doubt that Defendant conspired with his wife, Washington, to defraud the Medicare and Georgia Medicaid programs and to obtain by means of material false and fraudulent pretenses, representations and promises, money and property owned by, and under the custody and control of, the Medicare program and Georgia Medicaid, in connection with the delivery of and payment for health care benefits and services, in violation of 18 U.S.C. §§ 1347 and 1349. 14. Specifically, the Government has proved beyond a reasonable doubt that the three Forum nursing facilities, Mt. Berry, Moran Lake, and Wildwood, under the direction of Defendant, 45 R.290 at 144. 46 See id. at 160. 47 See id. at 173. 48 See id. at 219. 49 See id. at 195. 24 Case: 12-14302 Date Filed: 06/19/2014 Page: 25 of 40 submitted or caused to be submitted, during the course of the conspiracy, false or fraudulent claims to the Medicare and Georgia Medicaid programs for services that were worthless in that they were not provided or rendered, were deficient, inadequate, substandard, and did not promote the maintenance or enhancement of the quality of life of the residents of the Nursing Facilities, and were of a quality that failed to meet professionally recognized standards of health care. . . . 15. The Government has proved beyond a reasonable doubt that, during the course of the conspiracy, Defendant fraudulently caused claims to be paid by Medicare and Georgia Medicaid for care and services that were either not rendered or were so inadequate or deficient as to constitute worthless services.[50] Although acknowledging that some services simply were not provided to residents, Mr. Houser nevertheless argues that, for purposes of Medicare and Georgia Medicaid reimbursements, these services are “bundled.” Consequently, he urges, we must evaluate the provision of services as a whole and cannot evaluate whether residents were deprived of a single, although necessary, service. 50 Id. at 427-29 (emphasis added). At oral argument, Mr. Houser’s counsel maintained that the Government proceeded only on a worthless services theory, that it had not prosecuted Mr. Houser for seeking reimbursement from Medicare and Georgia Medicaid for services that the nursing homes had failed to provide, and that, if the failure to provide services were the basis for the prosecution, Mr. Houser had not been given adequate notice. Counsel pointed specifically to the district court’s comments at sentencing (concerning the calculation of loss) to support this contention. See R.341 at 3-4. We believe that the cited passages of the indictment clearly put Mr. Houser on notice that the Government considered his fraudulent scheme to include the submission of claims for services that were not rendered as well as the submission of claims for services that were so substandard as to constitute worthless services. Moreover, the cited passages of the conviction order establish that the district court rested its determination of guilt on Count One, at least in part, on Mr. Houser’s complete failure to provides some services. 25 Case: 12-14302 Date Filed: 06/19/2014 Page: 26 of 40 Mr. Houser maintains that this approach is mandated by United States ex rel. Sanchez-Smith v. AHS Tulsa Regional Medical Center, LLC, 754 F. Supp. 2d 1270 (N.D. Okla. 2010), and United States ex rel. Swan v. Covenant Care, Inc., 279 F. Supp. 2d 1212 (E.D. Cal. 2002). Even if we were bound to follow these cases, and we are not, we could not conclude that they require reversal of the district court’s judgment. Turning first to Sanchez-Smith, the court held that, for purposes of bringing a qui tam action under the False Claims Act, a plaintiff could “reach a jury on a factual falsity theory in the context of ‘bundled’ per diem Medicaid billing” by “present[ing] facts amounting to (1) the provision of entirely worthless services, or (2) at a minimum, the provision of grossly negligent services with regard to a particular standard of care or regulatory requirement.” 754 F. Supp. 2d at 1287 (citation omitted) (internal quotation marks omitted). The court then concluded that the relators had failed to “demonstrate the provision of worthless services or anything amounting to gross negligence” because, in the most egregious case, one patient had received 677.25 of the 840 hours of required therapy. Id. Under those circumstances, the court concluded that “[n]o reasonable jury could conclude that TRMC billed Medicaid for worthless services provided to Patient 19, and no reasonable jury could conclude that TRMC billed Medicaid for even ‘grossly 26 Case: 12-14302 Date Filed: 06/19/2014 Page: 27 of 40 negligent’ services provided to Patient 19.” Id. Here, however, the facts are very different. The indictment alleged, and the district court found, that patients went entirely without necessary services such as physical therapy, medication, dialysis and wound care. Moreover, we note that the district court concluded that Mr. Houser had actual knowledge of the conditions and lack of services in his nursing homes “through an almost daily barrage of telephone calls, emails, and faxes from the administrators at all three nursing homes during the entire period of the conspiracy, yet Defendant affirmatively chose to ignore these alerts.”51 In short, the record reflects not simply “gross negligence” in the provision of required services, but an intentional disregard of those requirements. Swan also does little to assist Mr. Houser. In that case, a plaintiff in a qui tam action alleged that a nursing facility was “so severely understaffed . . . that patients were often denied the most basic care such as repositioning, feeding, bathing, and wound treatment.” Swan, 279 F. Supp. 2d at 1216. The district court granted summary judgment for the defendant, Covenant Care, on the ground that the court lacked subject matter jurisdiction over the action because the essential elements of the plaintiff’s claims had been disclosed in a previous action. See id. at 1217-20. The court then went on to state that, even if it had jurisdiction, 51 R.290 at 435. 27 Case: 12-14302 Date Filed: 06/19/2014 Page: 28 of 40 “Covenant Care would still be entitled to summary judgment on [the] false records claim.” Id. The court observed that “Covenant Care does not bill the government separately for individual acts of patient care such as feeding, turning, or bathing. Instead, the government pays Covenant Care a per diem rate for providing room and board, including the provision of such routine services . . . .” Id. at 1221. The court then concluded that “[b]ecause Swan does not allege that Covenant Care’s neglect of its patients was so severe that, for all practical purposes, the patients were receiving no room and board services or routine care at all, her FCA claim does not fit within the worthless services category.” Id. (emphasis added). Without endorsing or adopting the standard set forth in Swan, we note that Mr. Houser’s situation is markedly different. In the present case, the district court’s judgment does not simply rest on the fact that some services were severely substandard; it rests on the fact that certain services, including those mandated by statute,52 were not provided to residents at all.53 52 By way of example only, 42 U.S.C. § 1396r(b)(4)(A) states that “a nursing facility must provide . . . (i) . . . rehabilitative services . . . ; (iii) pharmaceutical services . . . ; [and] (iv) dietary services that . . . meet the daily nutritional and special dietary needs of each resident.” 53 Because the Government proceeded, and the district court’s conviction rested, at least in part, on the nursing facilities’ complete failure to provide some necessary services to the residents, we need not consider whether the concept of worthless services based on inadequacy or undesirability is unconstitutionally vague. See Appellant’s Br. 35-39. In his reply brief, Mr. Houser suggests that the Government used his profit margin of twenty-five percent to establish the element of willfulness. This strategy, he continues, (continued...) 28 Case: 12-14302 Date Filed: 06/19/2014 Page: 29 of 40 We believe this conclusion is consonant with that reached by the Court of Appeals for the Sixth Circuit in Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011), on which Mr. Houser relies. In Chesbrough, relators had filed a False Claims Act action against VPA alleging “that VPA defrauded the government by submitting Medicare and Medicaid billings for defective radiology studies.” Id. at 464. The court held that the relators’ action could not go forward on the basis of 53 (...continued) contributed to the vagueness of the statute because “it is impossible to state with any degree of certainty that a ‘person of ordinary intelligence’ necessarily would realize that he could be prosecuted criminally for health care fraud if he runs his nursing home for-profit and takes what the Government considers to be too much in profits.” Reply Br. 5. Again, Mr. Houser’s argument misses the mark. The Government did not charge Mr. Houser with taking an excessive profit; it charged him, and the district court found him guilty of, a scheme wherein he consciously disregarded his legal obligations to provide basic services to Medicare and Medicaid beneficiaries, while simultaneously diverting substantial funds to personal uses. His purchases evidence that he had funds available to pay for those services, but that he intentionally used those funds for other purposes. Mr. Houser’s brief does not raise a facial vagueness objection to the health care fraud statute under which he was prosecuted. See Reply Br. 9 (“Mr. Houser[] . . . does not challenge the clarity of § 1347 as a statute . . . .”). Moreover, we do not believe Mr. Houser reasonably could argue that the statute is unconstitutionally vague because it criminalizes the complete failure to provide some services. As the Court of Appeals for the Sixth Circuit recognized in United States v. Semrau, 693 F.3d 510 (6th Cir. 2012), “[a]lthough the health care fraud statute does not (and could not) specify the innumerable fraud schemes one may devise, it is difficult to imagine a more obvious way to commit healthcare fraud than billing for services not actually rendered.” Id. at 530 (citation omitted) (internal quotation marks omitted). Moreover, the mens rea requirement contained in the statute, see 18 U.S.C. § 1347 (“Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice-- . . . shall be fined under this title or imprisoned not more than 10 years, or both.” (emphasis added)), largely mitigates any ambiguity, see United States v. Conner, 752 F.2d 566, 574 (11th Cir. 1985) (“‘The requirement that the act must be willful or purposeful may not render certain, for all purposes, a statutory definition of the crime which is in some respects uncertain. But it does relieve the statute of the objection that it punishes without warning an offense of which the accused was unaware.’” (quoting Screws v. United States, 325 U.S. 91, 102, 65 S.Ct. 1031, 1036, 89 L. Ed. 1495 (1945) (plurality opinion))). 29 Case: 12-14302 Date Filed: 06/19/2014 Page: 30 of 40 VPA’s reimbursement claims for the x-ray studies that were “‘suboptimal’ or of ‘poor quality.’” Id. at 467-68. Nevertheless, the court determined that the relators could go forward on the basis of five studies that were “nondiagnostic.” Id. at 468 (internal quotation marks omitted). It reasoned that, “[i]f VPA sought reimbursement for services that it knew were not just of poor quality but had no medical value, then it would have effectively submitted claims for services that were not actually provided. This would amount to a ‘false or fraudulent’ claim within the meaning of the FCA.” Id. As the defendants in Chesbrough did, Mr. Houser sought reimbursement from Medicare and Georgia Medicaid for required services--pharmaceutical, diagnostic, medical and dietary--that simply were not provided.
Mr. Houser also challenges his conviction on Count One on the ground that the “evidence did not establish that Mr. Houser conspired either with Rhonda Houser or with anyone else.”54 According to Mr. Houser, “[n]either Rhonda Houser nor anyone else had any control or authority over how the funds were 54 Appellant’s Br. 43. 30 Case: 12-14302 Date Filed: 06/19/2014 Page: 31 of 40 allocated or how the nursing homes were run.”55 We typically “review challenges to the sufficiency of the evidence in criminal cases de novo, viewing the evidence in the light most favorable to the [G]overnment.” United States v. Dominguez, 661 F.3d 1051, 1061 (11th Cir. 2011). Here, however, Mr. Houser never challenged the sufficiency of the evidence before the district court. The only basis for his motion for acquittal on the conspiracy count was his vagueness challenge. [W]here a defendant fails to preserve an argument as to the sufficiency of the evidence in the trial court, the predominant rule in this circuit--established by a long and unchallenged line of cases--is better stated as requiring that we uphold the conviction unless to do so would work a “manifest miscarriage of justice.” United States v. Fries, 725 F.3d 1286, 1291 n.5 (11th Cir. 2013) (quoting United States v. Perez, 661 F.3d 568, 573-74 (11th Cir. 2011) (per curiam)). Regardless of the standard applied, however, Mr. Houser’s sufficiency challenge fails. We frequently have noted that “direct evidence of an agreement is unnecessary; the existence of the agreement and a defendant’s participation in the conspiracy may be proven entirely from circumstantial evidence.” United States v. McNair, 605 F.3d 1152, 1195 (11th Cir. 2010). Here the record is replete with evidence that Washington knew of the lack of provisions and services in the 55 Id. at 44. 31 Case: 12-14302 Date Filed: 06/19/2014 Page: 32 of 40 nursing homes;56 that she had access to and control over nursing home funds;57 and that she was involved in efforts to placate employees,58 mask the poor conditions at the homes59 and stave off government enforcement actions.60 We believe that this is more than sufficient circumstantial evidence to establish Washington’s agreement to participate in the conspiracy to defraud Medicare and Georgia Medicaid.61 56 See, e.g., Gov’t’s Trial Ex. 487 at 2 (fax apprising Mr. Houser and Washington of numerous issues including the state of the roof, lack of transportation services and lack of laboratory services); Gov’t’s Trial Ex. 492 (fax to Washington complaining of broken dishwasher and pest control problems); Gov’t’s Trial Ex. 499 (fax apprising Washington that Medicare Part A patients would have to be discharged because the home did not have sufficient wheelchairs to conduct physical therapy); Gov’t’s Trial Ex. 504 (fax apprising Washington of the lack of nursing supplies). 57 See, e.g., R.223 at 28 (testimony concerning Washington’s use of the residents’ trust account); R.225 at 68-69 (testimony concerning Washington’s control over the nursing home’s operating account). 58 See R.242 at 844 (testimony concerning Mr. Houser and Washington handing out fifty dollar bills to employees). 59 See R.260 at 64-69 (testimony concerning Washington bringing in food to satisfy the Inspector General for Medicaid for the Department of Community Health that a home had enough food to last through the weekend). 60 See R.244 at 81-82 (testimony concerning Washington’s delivery of, and instructions for depositing, payroll tax checks to Officer Justice). 61 It is of no moment that the Government dismissed the conspiracy charge against Washington. “[A]s a simple matter of logic, the government’s voluntary dismissal of a conspiracy charge against a defendant’s only alleged coconspirator does not preclude proof beyond a reasonable doubt, at defendant’s trial, that the defendant conspired with that same alleged coconspirator.” United States v. Lopez, 944 F.2d 33, 40 (1st Cir. 1991). Indeed, even if Washington had been tried and acquitted of the conspiracy charge, it would not have affected the validity of Mr. Houser’s conviction. See United States v. Andrews, 850 F.2d 1557, 1561 (11th (continued...) 32 Case: 12-14302 Date Filed: 06/19/2014 Page: 33 of 40