In the Courts

Fifth Circuit Adopts Approach of Sister Circuit For Assessing Medicare/Medicaid Fraud Loss Calculation

On March 7, 2011, in United States v. Isiwele, No. 10-40347, the United States Court of Appeals for the Fifth Circuit, in an opinion authored by Judge Carolyn Dineen King, affirmed the district court convictions of Enitan Osagie Isiwele on 16 counts of health care fraud and a single count of conspiracy to pay illegal remunerations, but vacated his corresponding sentence. As the Fifth Circuit held that the fixed allowances provided by Medicare/Medicaid provided the proper basis for calculating the loss amount under the U.S. Sentencing Guidelines, the court remanded the case for resentencing on these limited grounds.

Isiwele, the owner of a durable medical equipment (“DME”) supply company entitled Galaxy Medical Supply, had previously been convicted for his role in a scheme to fraudulently bill Medicare and Medicaid for power wheelchairs. Specifically, Isiwele was accused of compiling billing information from Medicare/Medicaid beneficiaries in both elderly and low-income communities, via the use of a recruiter. Once Isiwele had the information, without the participation and/or knowledge of the unsuspecting beneficiaries, he proceeded to submit power wheelchair claims for reimbursement from Medicare/Medicaid using an exception that had eliminated the requirement of specific documentary evidence for replacement DME of this sort.

At sentencing before the district court, Isiwele had received a 14-level increase to his calculated base offense level due to the “loss amount” his fraudulent scheme had caused in total. The court calculated the loss amount using the amount that Isiwele had billed to Medicare/Medicaid, with a resultant sentence of 97 months' imprisonment, a three-year term of supervised release, and $201,397.34 in restitution.

On appeal, Isiwele contended that a lower amount, the total of the capped allowances paid for the wheelchairs by Medicare/Medicaid, represented the proper basis for calculating the loss amount, as he contended that he was aware at the time of submission that this was the maximum reimbursement he would receive, regardless of his billed charges.

In its assessment of Isiwele's appeal, the Fifth Circuit began by noting that a fact-specific, case-by-case inquiry into Isiwele's intent was required when assessing the applicable loss amount. In making this inquiry, the court adopted the approach previously taken by the Fourth Circuit in United States v. Miller, 316 F.3d 495 ( 4th Cir. 2003), whereby “the amount fraudulently billed to Medicare/Medicaid is 'prima facie evidence of the amount of loss [the defendant] intended to cause,' but the amount billed does not constitute conclusive evidence of intended loss; the parties may introduce additional evidence to suggest that the amount billed either exaggerates or understates the billing party's intent.” Id. at 504.

Applying the newly adopted standard, the Fifth Circuit found that the district court record lacked clarity as to whether it had applied this individualistic intent analysis when calculating the loss amount for Isiwele. As the court separately held that enhancements for mass marketing and abuse of trust had both been properly applied by the district court, the court remanded the case for resentencing only on the limited issue of the loss calculation.

Fifth Circuit Adopts Approach of Sister Circuit For Assessing Medicare/Medicaid Fraud Loss Calculation

On March 7, 2011, in United States v. Isiwele, No. 10-40347, the United States Court of Appeals for the Fifth Circuit, in an opinion authored by Judge Carolyn Dineen King, affirmed the district court convictions of Enitan Osagie Isiwele on 16 counts of health care fraud and a single count of conspiracy to pay illegal remunerations, but vacated his corresponding sentence. As the Fifth Circuit held that the fixed allowances provided by Medicare/Medicaid provided the proper basis for calculating the loss amount under the U.S. Sentencing Guidelines, the court remanded the case for resentencing on these limited grounds.

Isiwele, the owner of a durable medical equipment (“DME”) supply company entitled Galaxy Medical Supply, had previously been convicted for his role in a scheme to fraudulently bill Medicare and Medicaid for power wheelchairs. Specifically, Isiwele was accused of compiling billing information from Medicare/Medicaid beneficiaries in both elderly and low-income communities, via the use of a recruiter. Once Isiwele had the information, without the participation and/or knowledge of the unsuspecting beneficiaries, he proceeded to submit power wheelchair claims for reimbursement from Medicare/Medicaid using an exception that had eliminated the requirement of specific documentary evidence for replacement DME of this sort.

At sentencing before the district court, Isiwele had received a 14-level increase to his calculated base offense level due to the “loss amount” his fraudulent scheme had caused in total. The court calculated the loss amount using the amount that Isiwele had billed to Medicare/Medicaid, with a resultant sentence of 97 months' imprisonment, a three-year term of supervised release, and $201,397.34 in restitution.

On appeal, Isiwele contended that a lower amount, the total of the capped allowances paid for the wheelchairs by Medicare/Medicaid, represented the proper basis for calculating the loss amount, as he contended that he was aware at the time of submission that this was the maximum reimbursement he would receive, regardless of his billed charges.

In its assessment of Isiwele's appeal, the Fifth Circuit began by noting that a fact-specific, case-by-case inquiry into Isiwele's intent was required when assessing the applicable loss amount. In making this inquiry, the court adopted the approach previously taken by the Fourth Circuit in United States v. Miller , 316 F.3d 495 ( 4th Cir. 2003), whereby “the amount fraudulently billed to Medicare/Medicaid is ' prima facie evidence of the amount of loss [the defendant] intended to cause,' but the amount billed does not constitute conclusive evidence of intended loss; the parties may introduce additional evidence to suggest that the amount billed either exaggerates or understates the billing party's intent.” Id . at 504.

Applying the newly adopted standard, the Fifth Circuit found that the district court record lacked clarity as to whether it had applied this individualistic intent analysis when calculating the loss amount for Isiwele. As the court separately held that enhancements for mass marketing and abuse of trust had both been properly applied by the district court, the court remanded the case for resentencing only on the limited issue of the loss calculation.