Court Opinion

ID: 2652407
Source: CourtListenerOpinion
Date Created: 2014-02-06 15:26:03.324511+00
Date Added: 2024-06-11T09:10:43.410005
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 14a0101n.06

                                         No. 13-1123

                         UNITED STATES COURTS OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                                                                  FILED
UNITED STATES OF AMERICA,                                                    Feb 06, 2014
                                                                         DEBORAH S. HUNT, Clerk
       Plaintiff-Appellee,
v.
                                                    ON APPEAL FROM THE UNITED
                                                    STATES DISTRICT COURT FOR THE
RICHARD ALAN BEHNAN,
                                                    EASTERN DISTRICT OF MICHIGAN
       Defendant-Appellant.

BEFORE:       CLAY and DONALD, Circuit Judges; MAYS, District Judge.*

       CLAY, Circuit Judge. Defendant Richard Behnan appeals from the 55-month sentence

and $1,624,089.66 order of restitution that the district court imposed following Defendant’s

guilty plea to one count of conspiracy to commit healthcare fraud in violation of 18 U.S.C.

§§ 1347 and 1349. Specifically, Defendant contends that the district court erred in calculating

the amount of loss caused by Defendant’s crime, which affects Defendant’s Guidelines

sentencing range and the order of restitution. For the reasons set forth below, we AFFIRM.

                                      BACKGROUND

I.     DEFENDANT’S FRAUD AND THE GOVERNMENT’S INVESTIGATION

       From 1985 to 2010, Defendant ran his own podiatry practice. Defendant had a somewhat

unique client base—he almost exclusively treated geriatric and mentally disabled patients. The

principal service he provided was trimming and polishing his patient’s toenails. Medicare does

       *
         The Honorable Samuel H. Mays, Jr., United States District Judge for the Western
District of Tennessee, sitting by designation.
                                          No. 13-1123

not compensate doctors for performing “routine foot care (including the cutting or removal of

corns or calluses, the trimming of nails, and other routine hygienic care).”          42 U.S.C.

§ 1395y(a)(13)(C). However, Medicare and other insurance companies do reimburse doctors for

removing ingrown toenails using a procedure known as a nail avulsion. The relevant insurance

billing code defines a nail avulsion as “the separation and removal of a border of or the entire

nail from the nail bed to the eponychium . . . performed using an injectable anesthesia except in

the instances in which a patient is devoid of sensation or there are extenuating circumstances in

which injectable anesthesia is not required or medically contraindicated.” (R.63, 11/28/2012

Order, at 561.) In layman’s terms, the doctor must remove a portion of an ingrown nail, from the

tip of the toe back to where the nail grows (the eponychium). Trimming or clipping the toenail

without going back to the eponychium constitutes routine foot care under the relevant billing

codes.

         Defendant’s clientele was prone to ingrown toenails, given their sedentary lifestyle.

Even so, Defendant billed for nail avulsions at an astonishing rate—over 37,000 times between

2000 and 2010. This figure accounted for approximately 80% of Defendant’s bills to insurance

providers.    Other podiatrists in Michigan billed this procedure only 10–20% of the time.

Medicare paid the vast majority of Defendant’s bills for nail avulsions, to the tune of over $1.4

million. Blue Cross Blue Shield of Michigan (“Blue Cross”) paid the remainder, approximately

$200,000.

         At some point in the mid-2000s, the government began investigating Defendant’s billing

practices, suspecting that Defendant was seeking compensation for nail avulsions he never

performed. As part of the investigation, two agents who did not need nail avulsions saw

Defendant and had their toenails trimmed. Even though he did not perform nail avulsions on the

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                                           No. 13-1123

agents, Defendant billed Blue Cross for phantom procedures. The government’s investigation

also uncovered four instances where Defendant billed for nail avulsions despite the fact that he

was traveling in Europe at the time.

       In June 2008, the government executed a search warrant at the home of Kelly Morel,

Defendant’s assistant in business and partner in crime. Morel had worked for Defendant since

the 1980s, initially assisting him in treating patients, and later moving on to handling billing and

cutting patients’ nails. Defendant paid Morel $600 per month for her billing work, plus 20% of

the take from insurance. When the government executed the search warrant, Morel gave a

statement to one of the agents about her and Defendant’s billing for nail avulsions. Morel told

the agent that

       about 95% of avulsion codes billed are not being done correctly. I do work with
       [Defendant] and most of the time an injection to numb the area for avulsions . . .
       [is] not used. Sometimes a topical spray is used but not that often. . . . We
       trimmed patients’ toenails and would bill for an avulsion. . . . [A] patient would
       come in and I would trim their nails and clean out the edges of their nails and it
       would always feel better but I know it should have been billed as routine foot
       care.

(R. 85, Morel Statement, at 983–84.)

II.    PROSECUTION, SENTENCING, AND LOSS CALCULATION

       Two years after the government took Morel’s statement, she and Defendant were indicted

for conspiracy to commit healthcare fraud and numerous discrete acts of healthcare fraud. Morel

went to trial, but pleaded guilty to all counts halfway through. Defendant cut a deal with the

government and pleaded guilty only to the conspiracy count. In his plea agreement, Defendant

admitted to twelve instances when he billed for nail avulsions that he did not perform.1

Defendant received just under $900 for these bogus procedures. In addition, the government
       1
       The plea agreement defined a nail avulsion as “a surgical procedure used to treat
ingrown toenails wherein the nail, or portion of the nail, is removed or torn from the nail bed
below.” (R. 41, Plea Agreement, at 366.)

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                                            No. 13-1123

asked the district court to hold Defendant accountable for the $1.6 million he had received from

Medicare and Blue Cross for nail avulsions during the course of the conspiracy. This loss figure

was relevant both to the calculation of Defendant’s Guidelines sentencing range, which is

affected by the amount of loss caused by a defendant’s fraud, and to the amount of restitution

Defendant would need to pay to the victims of his crime. Defendant disputed the government’s

loss calculation and the district court held three days of hearings to resolve this issue.

       Morel testified on the first day of Defendant’s sentencing hearing. The government

introduced her 2008 statement that Defendant improperly billed approximately 95% of the nail

avulsion procedures he claimed to have performed. Morel reiterated this figure in her testimony.

She stated that only 5–10% of the procedures that Defendant billed as nail avulsions involved the

application of anesthetic and the removal of a nail from the nail plate (the flesh covered by the

nail). Defense counsel questioned whether Morel had a good sense of what constituted a nail

avulsion. She testified “that [she] was taught that they were to cut down the side and take the

curette2 back to the eponychium and bring them up,” but that from the expert testimony at her

trial, she now believed that any procedure performed without anesthesia could not be a nail

avulsion. (R. 61, Sentencing Tr. vol. I, at 525.)

       The district court remembered the testimony for Morel’s trial slightly differently: “the

nail avulsion procedure could be performed without anesthesia. . . . [I]t depends on the patient

and the tolerance for pain.” (Id. at 537.) Defendant’s witness Dr. Mary Barna, a podiatrist,

confirmed the court’s position. Barna testified that a “nail avulsion is removing the nail plate

from the nail bed, in any portion.” (R. 64, Sentencing Tr. vol. II, at 653.) Barna herself

       2
         A curette is a “spoon-shaped instrument for removing material from the wall of a cavity
or other surface.” Dorland’s Illustrated Med. Dictionary 447 (32d ed. 2012).

                                                 -4-
                                          No. 13-1123

preferred not to use anesthesia before performing a nail avulsion, since administering the

anesthesia could cause more pain and complications than the nail avulsion itself.

       In addition to Morel, the government presented evidence of a less-than-rigorous survey of

Defendant’s patients to support its theory of loss calculation. Charles Story, an FBI agent,

testified that an investigator had randomly selected fifty patients who had purportedly received

nail avulsions, according to Defendant’s billing history. Of the fifty, agents only managed to

speak to approximately twenty. Story personally interviewed eight of these patients, and none of

them reported receiving a nail avulsion. Paul Smith, an agent in the Department of Health and

Human Services, also testified about this sampling. He interviewed some of the selected patients

and none reported receiving nail avulsions. One patient reported having pain in her big toe, but

Smith did not determine if the pain was caused by an ingrown nail. Another patient told Smith

that Defendant had removed an ingrown portion of one of her nails, but had not removed the nail

“back to where the bottom of the nail meets the skin.” (Id. at 617.) The government did not

assert that the sampling and interviewing of these patients provided any statistical basis for

extrapolating a loss figure.

       As a final piece of evidence, Defendant submitted an affidavit in which he estimated that

he inappropriately billed nail avulsions just 2–3% of the time. Defendant did not testify at the

sentencing hearing, so neither the district court nor the government had the opportunity to

scrutinize this evidence.

       In the end, the district court credited Morel’s estimation that 95% of Defendant’s nail

avulsion billings were fraudulent and rejected the calculation in Defendant’s affidavit. The court

believed that Morel would have more incentive to give a lower loss figure than a higher one.

Ultimately,

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                                              No. 13-1123

           there is no evidence that’s been tendered that would suggest that the government
           has gotten their numbers wrong and that we should disregard Miss Morel’s
           testimony. . . . There is no reason to dispute the estimates that have been tendered
           by the government. I do not find the evidence having been sufficiently—any
           evidence, to contradict that other than [Defendant’s] affidavit and I don’t find the
           testimony in the context of that affidavit accurate or truthful.

(R. 83, Sentencing Tr. vol. III, at 933–34.) The court therefore adopted the government’s loss

calculation of $1,624,089.66, which, updated through November 2011, came to $1,766,869.15.

This loss amount translated into a 16-point increase to Defendant’s base offense level of 6. See

U.S.S.G. § 2B1.1(a), (b)(1)(I). With four points added for Defendant’s role in the conspiracy,

and two removed for acceptance of responsibility, Defendant’s total offense level was 24. Since

Defendant’s Criminal History Category was I, Defendant’s Guidelines sentence range was 51–61

months. The court imposed a sentence of 55 months’ imprisonment, and ordered restitution

totaling $1,624,089.66, with $1.4 million going to Medicare and almost $200,000 going to Blue

Cross. Defendant timely appealed.

                                             DISCUSSION

           Defendant appeals the district court’s loss calculation as it affected his Guidelines

sentencing range and the amount of restitution the district court imposed. We address each claim

in turn.

I.         GUIDELINES LOSS CALCULATION

           We review a district court’s sentence for procedural and substantive reasonableness for

abuse of discretion. See Gall v. United States, 552 U.S. 38, 51 (2007). The review of procedural

reasonableness includes evaluating whether the district court properly calculated a defendant’s

Guidelines sentencing range. See id. “We review the district court’s calculation of the ‘amount

of loss’ for clear error, but consider the methodology behind it de novo.” United States v.

Washington, 715 F.3d 975, 984 (6th Cir. 2013).

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                                          No. 13-1123

       Under U.S.S.G. § 2B1.1(b)(1), a defendant’s Guidelines offense level increases based on

the amount of loss caused by his crime. The government bears the burden of proving the amount

of loss by a preponderance of the evidence. See United States v. Jones, 641 F.3d 706, 712 (6th

Cir. 2011). The Guidelines advise that the district court “need only make a reasonable estimate

of the loss. The sentencing judge is in a unique position to assess the evidence and estimate the

loss based upon that evidence. For this reason, the court’s loss determination is entitled to

appropriate deference.” U.S.S.G. § 2B1.1 application note 3(C). In other words, the district

court “does not have to establish the value of the loss with precision; it simply needs to publish

the resolution of contested factual matters that formed the basis of the calculation.” United

States v. Poulsen, 655 F.3d 492, 513 (6th Cir. 2011) (quotation marks omitted).

       The district court’s loss calculation rested almost entirely on Morel’s testimony that 95%

of Defendant’s billings for nail avulsions were fraudulent. The court explicitly found Morel

credible, since each cent she added to Defendant’s loss amount applied equally to her own

Guidelines calculation. “This conclusion is basically unassailable on appeal.” United States v.

Greco, 734 F.3d 441, 446 (6th Cir. 2013) (quotation marks omitted). But Defendant does not

challenge the court’s credibility determination per se—he asserts that Morel’s sincere statements

lacked a proper foundation. Morel’s 95% estimate applied to over 37,000 procedures that

Defendant billed over the course of a decade. Defendant argues that Morel could not have seen

or recollected this vast number of procedures over such a long amount of time. The Guidelines,

however, do not call for mathematical exactitude—they allow a district court to make a

“reasonable estimate of the loss.” U.S.S.G. § 2B1.1 application note 3(C). Morel worked

closely with Defendant throughout the conspiracy, handling his billing and assisting him when

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                                           No. 13-1123

he worked on patients. She more than anyone was competent to testify to how Defendant’s bills

matched up with the procedures he performed.

       Defendant also claims that Morel cannot make a reasonable estimate since she has no

idea what a nail avulsion is. At the sentencing hearing, Morel testified that Defendant only used

anesthesia in 5–10% of procedures that he billed as nail avulsions. Morel further testified that

she believed that anesthesia was required for the removal of an ingrown toenail to constitute a

nail avulsion. The testimony of Dr. Barna (and the court’s own recollection of the testimony at

Morel’s trial) established that nail avulsions do not always require anesthesia. But Morel’s 95%

estimate remained consistent before and after her trial—when she heard the testimony that made

her question the definition of a nail avulsion. When Morel first gave this estimate in 2008, she

stated that “[t]he 11730 [the nail avulsion billing code] we did not do correctly. We trimmed

patients’ toenails and would bill for an avulsion.” (Morel Statement at 984.) With or without

anesthesia, simple nail trimming is not a nail avulsion.

       Morel’s estimate was also bolstered by the other evidence the government submitted.

The undercover agents who were treated by Defendant did not receive nail avulsions, nor did the

few patients the government interviewed. Defendant billed Medicare and Blue Cross for nail

avulsions nonetheless. This independent data compares favorably to Morel’s 95% estimate. The

government’s investigation would not likely support a rigorous statistical analysis of Defendant’s

37,000 billings for nail avulsions. But “[t]here is no rule that a district court must rely upon

statistical analysis in a situation such as this to determine the amount of loss pursuant to section

2B1.1.” Jones, 641 F.3d at 712. The district court was entitled to rely on the government’s data

as support for Morel’s 95% estimate. See Greco, 734 F.3d at 446–47; United States v. Goosby,

523 F.3d 632, 639–40 (6th Cir. 2008).

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                                           No. 13-1123

       A district court faces an imposing task when asked to calculate the amount of loss for a

decade-long fraudulent scheme such as Defendant’s. But the district court ultimately need only

make a reasonable estimate of the loss. We will not disturb that finding unless the court’s

“evaluation of the loss was not only inaccurate, but outside the realm of permissible

calculations.” United States v. Gray, 521 F.3d 514, 543 (6th Cir. 2008) (quotation marks

omitted). The district court was entitled to rely on Morel’s honest estimate. In fact, the district

court could have simply relied on the “aggregate dollar amount of fraudulent bills submitted to”

Medicare, which “shall constitute prima facie evidence of the amount of the intended loss, i.e., is

evidence sufficient to establish the amount of the intended loss, if not rebutted.” U.S.S.G.

§ 2B1.1 application note 3(F)(viii). We cannot say that the loss amount the court reached after

three days of hearings was clear error. See United States v. Sufi, 455 F. App’x 672, 676–77 (6th

Cir. 2012).

       Finally, Defendant argues that the district court erred when it failed to account for the

amount Defendant could have received had he billed his procedures legitimately. The only

evidence Defendant produced to support this position was his own affidavit. Defendant refused

to testify, and therefore this evidence was not subjected to cross-examination. The district court

could have relied on this evidence, see United States v. Graham-Wright, 715 F.3d 598, 601 (6th

Cir. 2013), but its choice not to does not rise to the level of clear error. Defendant bore the

burden of proving the amount of any offset to his loss amount by a preponderance of the

evidence. See Washington, 715 F.3d at 984–85; see also United States v. Mahmud, --- F. App’x

----, 2013 WL 5925992, at *5 (6th Cir. Nov. 6, 2013). The district court did not err in finding

that Defendant had not met this burden.

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                                             No. 13-1123

II.      RESTITUTION CALCULATION

         Defendant next asserts that the district court’s calculation of the amount of restitution was

error.   The Mandatory Victims Restitution Act of 1996, 18 U.S.C. § 3663A, applies to

convictions for conspiracy to commit healthcare fraud. See United States v. Hunt, 521 F.3d 636,

639, 648 (6th Cir. 2008). As with loss under the Guidelines, the government bears the burden of

proving “the amount of the loss sustained by a victim as a result of the offense,” 18 U.S.C.

§ 3664(e), by a preponderance of the evidence. See United States v. White, 492 F.3d 380, 418

(6th Cir. 2007). This Court “review[s] the amount of restitution the district court ordered for

abuse of discretion.” United States v. Bogart, 576 F.3d 565, 573 (6th Cir. 2009).

         Defendant argues that the district court’s order of restitution was error “for precisely the

same reasons that the government’s proofs fell short when it came to establishing an amount of

loss” for Guidelines purposes. (Appellant’s Br. at 18.) Since we affirm the district court’s loss

calculation as it affected Defendant’s Guidelines sentencing range, we further hold that the

district court did not abuse its discretion in using the same reasoning to calculate the amount of

Defendant’s restitution.

                                          CONCLUSION

         For the reasons set forth above, we hold that the district court did not err in calculating

the amount of Defendant’s loss under U.S.S.G. § 2B1.1, nor did the court abuse its discretion in

calculating the amount Defendant was ordered to pay in restitution. We therefore AFFIRM the

district court in full.

                                                 -10-