Government Contracts Monitor
Warning: Don’t Go to Court Without Your Evidentiary Support!
January 25, 2013
The United States Court of Appeals for the Fifth Circuit recently vacated and remanded a $43 million restitution judgment against two doctors who pled guilty to defrauding Medicare, Medicaid, and thirty private insurance companies by billing for pain injections that they never actually administered. United States v. Sharma, Nos. 11-20102, 11-20167, 11-20204 (5th Cir. Dec. 20, 2012). Pursuant to the Mandatory Victim Restitution Act (“MVRA”), the Court of Appeals found that the District Court abused its discretion in accepting the amount recommended by the Probation Office without adequate evidentiary support demonstrating that $43 million was the direct and proximate result of the defendants’ actions. However, the Court also found that the defendants cannot get credit for less expensive pain injections actually administered because the Defendants also lacked adequate evidentiary support demonstrating that the health insurance providers would have properly paid for those injections.
The defendants, Drs. Arun and Kiran Sharma, married physicians, were indicted on sixty-four counts of conspiracy, health-care fraud, mail fraud, unlawful distribution of controlled substances, and money laundering. Each pleaded guilty to (1) one count of conspiracy to commit health-care fraud and mail fraud and (2) one substantive count of health-care fraud in violation of 18 U.S.C. § 1347. These counts related only to the injection-billing fraud. In some instances, the defendants billed for injections that didn’t exist at all and in other instances, the defendants billed for more expensive injections than they actually administered. In the plea agreement, the Defendants agreed to pay restitution to the insurer victims under the MVRA in the amount set by the District Court.
The United States Probation Office prepared Presentence Investigation Reports (“PSRs”) for both defendants, which calculated that the loss to the insurer victims totaled $43 million. The Defendants objected that this amount overstated the actual loss to the victims resulting from the specific offenses of the Defendants’ conviction and failed to include a credit for injections actually administered. The District Court overruled the objections and ordered restitution in the exact amount recommended in the PSRs.
The MVRA limits restitution to the actual loss directly and proximately causes by the defendant’s offense of conviction. According to the Court of Appeals, “Every dollar must be supported by record evidence.” The Court of Appeals said the District Court may only adopt the recommendation in the PSR if it has an “adequate evidentiary basis.” The Probation Office calculated its recommendation by relying on statements from the insurer victims. However, the Court of Appeals provided examples from three of the private insurer victims’ statements which demonstrated the amounts were overstated and included losses beyond the scope of the offenses of the conviction. The Court of Appeals stated, “[T]hese obvious mistakes 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.” Therefore, the Court of Appeals found that the District Court abused its discretion when it adopted the PSR recommendations without scrutinizing the amount of the loss.
On the defendants’ second argument, the Court noted that “actual loss must also not include compensation for that which would have occurred in the absence of a crime.” The Court also noted that while the MVRA puts the burden on the government to demonstrate the amount of the loss, “a sentencing court may shift ‘the burden of demonstrating such other matters as the court deems appropriate . . . [to] the party designated by the court as justice requires.’” Thus, the Court shifted the burden to the defendants to demonstrate their entitlement to restitution credit. The Court found, “Although the Sharmas provided anecdotal statements from patients claiming some degree of pain relief, the victims of the crimes of conviction were the insurance companies, not the patients. The Sharmas did not produce competent evidence suggesting that even one injection to even one patient was medically necessary and met the insurer’s reimbursement standards.”
While this case did not change the law in this area, it provides an important reminder to all parties involved in cases under the MVRA about the importance of scrutinizing PSR recommendations and providing sufficient evidentiary support for restitution judgments and restitution credit.
Katie Calogero is the attorney responsible for the content of this article.