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From Health Law Daily, August 10, 2016

Home health provider defrauds Medicaid, owner’s actions ‘willful’

By Harold Bishop, J.D.

The conviction of an owner of a home healthcare company, and his wife, on numerous counts of Medicaid fraud were upheld on appeal. The charges arose from a scheme to overbill Virginia’s Medicaid program. The Fourth Circuit Court of Appeals rejected challenges to the sufficiency of evidence, the government’s use of certain civil Medicaid regulations, and instructions to the jury on the meaning of "willfully." The convictions were affirmed in an unpublished per curiam opinion that is not binding precedent in the Fourth Circuit (U.S. v. Perry, August 9, 2016, Per curiam).

Virginia’s in-home healthcare services. The Virginia Department of Medical Assistance Services (DMAS) administers Medicaid programs for low income individuals in Virginia. One such program, the Virginia Medical Assistance Program (VMAP), authorizes companies to provide two types of in-home healthcare services, "personal care" and "respite care" services. Personal care services assist the patient with the activities of daily living, such as bathing and dressing. Respite care refers to services provided on a periodic basis to fill in for the designated primary caregiver when he or she is sick, absent, or otherwise needs a break from the responsibilities of caring for the patient. Invoices to DMAS must be based on the actual amount of time that aides spend providing these services, rather than the maximum number of hours authorized by the plan of care.

Fraud allegations. The home healthcare company was founded in 1998. The owner served as president and CEO. His wife served as his executive assistant and oversaw various staffers. Over a period of several years, the companies employees engaged in a widespread practice known as "billing by the plan of care," that is, billing DMAS for the maximum number of personal care hours authorized by a patient’s plan of care, rather than by the number of hours documented on the health aides’ timesheets, as required by DMAS regulations. The employees also routinely billed for respite care services that were never provided.

Indictment. In February 2014, a grand jury indicted the owner and his wife on 18 counts of healthcare fraud, conspiracy to commit healthcare fraud, making false statements relating to health care, alteration of records, and aggravated identity theft. Testimony by employees, mostly given under grants of immunity, indicated that they were directed to commit these acts by the owner and his wife. After a trial by jury, the owner and his wife were convicted on all counts.

Sufficiency of evidence. The Fourth Circuit found that there was ample evidence to support the jury’s conclusion that the owner participated in the respite care fraud. Employees testified that they were told by the owner to "run the respite" or "burn up the respite," and they understood this to mean that they should submit invoices for respite hours that were not worked. This testimony was further supported by evidence that employees who engaged in fraudulent billing were given bonuses.

The court reached the same conclusion as to the owner’s wife. The testimony showed that she actively directed employees in their fraudulent billing, and that with regard to personal care services, she knew about the practice of billing the plan of care by the hours available under the plan of care rather than the actual hours worked.

Use of civil regulations. The Fourth Circuit found that the government did not use violations of civil Medicaid regulations as the basis for the criminal convictions. In fact, the court noted that the district court clearly instructed the jury that the owner and his wife were not charged with violating civil regulations and that evidence of these regulations was admitted only to show their knowledge and intent. The government also stressed this point to the jury on multiple occasions. In light of these admonitions, as well as undisputed evidence that the owner and his wife were familiar with the regulations in question, the Fourth Circuit concluded that there was no danger that the jury would convict them of fraud or knowingly making false statements simply because they violated DMAS regulations.

Jury instruction challenge. The owner and his wife contended that they must have known that their conduct was unlawful to order to act "willfully." The district court instructed the jury that, for the purposes of the charged offenses, that "a person acts ‘willfully’ when that person acts deliberately, voluntarily, and intentionally." Although the owner and his wife proposed a different instruction, they failed to specifically object to the district court’s instruction at trial. As a result, the Fourth Circuit reviewed the district court’s instruction for plain error.

The Fourth Circuit found that it had previously endorsed jury instructions that were similar to the one given in this case. It also noted that neither the U.S. Supreme Court nor the Fourth Circuit has directly addressed the issue. The court concluded that, while the Fourth Circuit’s law on this issue is not clear at present, the district court’s instruction was not plainly erroneous.

The judgment of the district court was affirmed.

The case is No. 15-4050.

Attorneys: Dana James Boente, U.S. Attorney's Office, for the United States. John Staige Davis, V (Williams Mullen) for W. Wayne Perry, Jr.

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