United States v. Medlock

• Citation: 786 F.3d 431
• Decision Date: 13 May 2015
• Docket Number: Nos. 14–5084,14–5100.,s. 14–5084
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Kathy MEDLOCK (14–5084); Woody H. Medlock, Sr. (14–5100), Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

786 F.3d 431

UNITED STATES of America, Plaintiff–Appellee,
v.
Kathy MEDLOCK (14–5084); Woody H. Medlock, Sr. (14–5100), Defendants–Appellants.

Nos. 14–5084
14–5100.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 15, 2015.
Decided and Filed: May 13, 2015.

BOGGS, Circuit Judge.

Defendants-Appellants Woody and Kathy Medlock (the Medlocks) appeal their jury convictions for aggravated identity theft, health-care fraud, and related crimes.¹ The Medlocks, who are married, owned and operated Murfreesboro Ambulance Service (MAS), a non-emergency ambulance company that transported Medicare patients to regular kidney-dialysis appointments. In their appeals, which we decide together, the Medlocks argue that:

(1) their misrepresentation that certain beneficiaries were transported by stretcher (entitling the Medlocks' company to reimbursement) does not constitute a "use" of identification under 18 U.S.C. § 1028A;

(2) the district court should have instructed the jury that, for the purposes of the fraud statute, Medicare, not merely a prudent person, was the relevant decision-maker;

(3) as a matter of law, they are not guilty of defrauding Medicare, because the program would have reimbursed their company even without their misrepresentations;

(4) the evidence did not suffice to support their convictions; and

(5) the court's refusal to sever either the two defendants from one another or the charge specific to Kathy Medlock from

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the other charges prejudiced Woody Medlock.

For the following reasons, we reverse the district court's judgment that the Medlocks violated 18 U.S.C. § 1028A (criminalizing aggravated identity theft), and affirm the other judgments of the district court.

I

MAS transported patients to kidney dialysis. Medicare reimbursed MAS for those transports. United States Department of Health and Human Services (HHS) regulations provide that Medicare will reimburse non-emergency ambulance transport only when such transport is medically necessary for bedridden patients, i.e., when any alternative form of transport, such as taxicabs, is contraindicated. 42 C.F.R. § 410.40 (regulating Medicare payment for certain non-emergency repetitive transports). Medicare policy requires that, in addition to the driver, an Emergency Medical Technician (EMT) accompany any such passenger. The ambulance company documents each trip with a certification of medical necessity (CMN), signed by a doctor, and a "run sheet,"² which a Medicare contractor other than the ambulance company reviews to determine whether Medicare should reimburse the company for the trip.

Medicare contracts with AdvanceMed Corporation to reduce waste, fraud, and abuse. In or before 2006, AdvanceMed analysis identified MAS as the fifth-highest biller in Tennessee for ambulance transports to dialysis. Accordingly, in December 2006, AdvanceMed audited MAS's billing office. MAS's records were missing some CMNs.

As part of the same investigation, in December 2006, August 2007, and September 2007, Special Agent Christ Covington of HHS, Office of the Inspector General, covertly surveilled a dialysis clinic to which MAS transported patients. Agent Covington videotaped four patients walking, riding in the front seat, being double-loaded in an ambulance (i.e., being driven two patients, rather than one, at a time), being driven by single-staffed ambulances, or being transported by wheelchair (rather than stretcher). MAS had billed the transports as single-passenger and "stretcher required" (or equivalent).

Investigators also executed a search warrant at the Medlocks' home. They seized an envelope during that search that contained CMNs and run tickets. Some CMNs obtained during the search and by subpoena had been altered. The government later established that some of these CMNs and run tickets had been forged altogether at Kathy Medlock's direction.

786 F.3d 436

On July 27, 2011, a grand jury indicted the Medlocks on several counts, including:

(1) one count of conspiracy to commit health-care fraud and make false statements related to health care matters, in violation of 18 U.S.C. § 371;

(2) eighteen counts of health-care fraud, in violation of 18 U.S.C. § 1347;

(3) eighteen counts of making a false statement in connection with payment for health-care benefits, in violation of 18 U.S.C. § 1035;

(4) two counts of wire fraud, in violation of 18 U.S.C. § 1343; and

(5) two counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1).

The grand jury also indicted Kathy Medlock on an additional count of aggravated identity theft, in violation of 18 U.S.C. §§ 2 and 1028A(a)(1).

At trial and on appeal, the government and the Medlocks dispute whether Medicare would have reimbursed MAS for the transport of a patient who could have been transported by other means and whether Medicare would reimburse for a transport authorized by a CMN but without a run ticket. The Medlocks claim that either a CMN or an actual medical necessity was sufficient for reimbursement as a matter of law, so that any fabrication of run sheets was immaterial to reimbursement and therefore not criminal. Woody Medlock filed proposed jury instructions to this effect. Several of the proposed instructions remain relevant on appeal: He proposed instructions pertaining to the health-care counts suggesting that the relevant statutes' requirements that false statements be material meant material to Medicare, not merely to a prudent person; Medlock also proposed instructions defining "materiality" in more detail. Together, the instructions suggested that the government bore the burden of proving that the transports at issue both lacked valid CMNs and were medically unnecessary.

The court refused to provide Woody Medlock's instructions to the jury. To accommodate the Medlocks' argument, the court offered to give a different charge, containing the language of the relevant regulations. Both the United States and the Medlocks asked the judge not to give that different charge. Ultimately, counsel for Woody Medlock and counsel for Kathy Medlock stated that their clients were "satisfied with the jury instructions."

The Medlocks were tried between May 21 and 31, 2013. The jury convicted the Medlocks on all counts. On January 16, 2014, the court sentenced Woody Medlock to imprisonment for 75 months and Kathy Medlock to imprisonment for 70 months.

II

We first address the Medlocks' contention that they did not "use" the names of patients within the meeting of the aggravated-identity-theft statute.

18 U.S.C. § 1028A ("Aggravated Identity Theft" in Chapter 47, "Fraud and False Statements") provides that "[w]hoever, during and in relation to" a violation of the health-care fraud or certain other statutes "knowingly ... uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be" imprisoned for a period in addition to his imprisonment for fraud. 18 U.S.C. § 1028A(2)(1). For the purposes of § 1028A(a)(1), a "means of identification" is defined as "any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual." 18 U.S.C. § 1028(d)(7).

The government alleged that the Medlocks "used" the name and Medicare

786 F.3d 437

Identification Numbers of Medicare beneficiaries when they "caused a claim to be submitted to Medicare for reimbursement that contained" such names and numbers "without lawful authority to do so because the claim falsely stated that" stretchers were required for transport. In addition, the government alleged that Kathy Medlock used the signature of a certain doctor in order to forge CMNs.

"Whether a criminal statute applies to the proven conduct of the defendant is an issue of statutory interpretation that we review de novo." United States v. Miller, 734 F.3d 530, 539 (6th Cir.2013). This court must start "with the language of the statute." Bailey v. United States, 516 U.S. 137, 144, 116 S.Ct. 501, 133 L.Ed.2d 472 (1995) (construing "use" in a different statute). "The word `use' in the statute must be given its `ordinary or natural' meaning, a meaning variously defined as `[t]o convert to one's service,' `to employ,' `to avail oneself of,' and `to carry out a purpose or action by means of.'" Ibid.; see also Black's Law Dictionary at 1777 (10th ed.2014) (defining use), Webster's Ninth New Collegiate Dictionary at 1299 (1986) (same).

In United States v. Miller, we held that a managing member of an LLC "did not `use' a means of identification within the meaning of § 1028A by signing a document in his own name which falsely stated" that his business partners authorized him to apply fraudulently for a loan. 734 F.3d at 542. In that case, the defendant wrote down the names of his business partners on a document purporting to be minutes of a meeting wherein they authorized him to apply for a (fraudulent) bank loan. We applied the canons of noscitur a sociis and ejusdem generis to narrow the definition of "use": since Congress placed "use" near "transfers" and "possesses," "both of which are specific kinds of use.... the meaning of `uses' is not as expansive as the government suggests and ... the term must have practical boundaries...." Ibid. Accordingly, this court held that, "as a matter of law, [the defendant] did not `use' a means of identification within the meaning of § 1028A by signing a document in his own name which falsely stated that" his business partners gave him authority to act on behalf of the business with respect to the loan. Miller, 734 F.3d at 542.

This rationale remains persuasive. Given the statutory scheme at issue here, "use" must have a more limited definition than the government suggests. The government's contention precisely is that the beneficiaries whom the Medlocks transported were not entitled to reimbursed rides. That the defendant in Miller lied about what his partners did and the Medlocks lied about what they...