U.S. v. Gupta
| Decision Date | 05 September 2006 |
| Docket Number | No. 04-16091.,04-16091. |
| Citation | 463 F.3d 1182 |
| Parties | UNITED STATES of America, Plaintiff-Appellee Cross-Appellant, v. Mahendra Pratap GUPTA, Cardinal Care Inc., Marshal Medical Services, Inc., Atlantic Health Care Services, Inc., West Coast Healthcare Services, Inc., and Treasure Coast Health Care Services, Inc., Defendants-Appellants Cross-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Thomas Emerson Scott, Jr. and Maria Trejos Kleppinger, Cole, Scott & Kissane, P.A., Miami, FL, for Defendants-Appellants Cross-Appellees.
Leif M. Johnson, Billings, MT, for U.S.
Appeals from the United States District Court for the Southern District of Florida.
Before ANDERSON, FAY and SILER,* Circuit Judges.
Individual defendant Mahendra Pratap Gupta, a private health care consultant, appeals from a criminal conviction for conspiracy to submit false claims to the United States, 18 U.S.C. § 286, and two convictions for mail fraud, 18 U.S.C. § 1341. Several corporate defendants operating as home health care agencies, Cardinal Care, Inc., Marshal Medical Services, Inc., Atlantic Health Care Services, Inc., West Coast Healthcare Services, Inc., Treasure Coast Health Care Services, Inc. (collectively the health care agencies will be referred to as "Corporate Defendants," and "Defendants" when including Gupta), also directly appeal their convictions for conspiracy to submit false cost reports to Medicare, 18 U.S.C. § 286. Allegheny Management Company, a health care consulting company, was also convicted but did not appeal.
The district court sentenced Gupta to three years' probation on each conviction to run concurrently and fined him $10,000. It sentenced Marshal Medical, Cardinal Care, West Coast, Treasure Coast, and Atlantic Health to three years' probation. It also fined Marshal Medical and Cardinal Care $1,000 each but did not fine the remaining defendants because they were no longer in business. The imposed sentences also resulted in all Defendants' exclusion from Medicare programs for a period of five years. 42 U.S.C. § 1320a-7. The United States cross-appeals the validity of the sentences. For the reasons discussed below, we AFFIRM all convictions. However, we VACATE and REMAND for re-sentencing with respect to Gupta, Marshal Medical, and Cardinal Care because the court clearly erred in its application of United States Sentencing Guidelines ("USSG") §§ 3B1.1(a) and 2F1.1(b)(1).
The Medicare program is a federal health insurance program for persons 65 years old and older and for certain disabled persons. Under the Medicare program, a home health agency may seek reimbursement for necessary reasonable costs related to patient care. Such reimbursement is administered through fiscal intermediaries — private insurance companies such as Blue Cross and Blue Shield — that contract to manage the Medicare program. Fiscal intermediaries review bills and make payments. The providers, at the end of the year, file "cost reports" seeking settlement of all annual costs.
Under the Medicare regulations, if a provider receives services from a "related" organization, its reimbursement is limited to the supplier's cost rather than the amount paid by the provider. 42 C.F.R. § 413.17 provides:
(a) Principle .... [C]osts applicable to services, facilities, and supplies furnished to the provider by organizations related to the provider by common ownership or control are includable in the allowable cost of the provider at the cost to the related organization ....
(b) Definitions —
(1) Related to the provider. Related to the provider means that the provider to a significant extent is associated or affiliated with or has control of or is controlled by the organization furnishing the services, facilities, or supplies.
(2) Common ownership. Common ownership exists if an individual or individuals possess significant ownership or equity in the provider and the institution or organization serving the provider.
(3) Control. Control exists if an individual or an organization has the power, directly or indirectly, significantly to influence or direct the actions or policies of an organization or institution.
The Provider Reimbursement Manual, published by the Health Care Financing Administration1 ("HCFA"), explains the purpose of the "related party" regulation: "(1) to avoid the payment of a profit factor to the provider through the related organization (whether related by common ownership or control), and (2) to avoid payment of artificially inflated costs which may be generated from less than arm's length bargaining." Provider Reimbursement Manual § 1000.
At year end, health care agencies would submit reimbursement forms in which they answered Question A.4.a. of HCFA Form 339, the "Provider Cost Report Reimbursement Questionnaire," requiring the disclosure of goods or services purchased from a "related party." That form states:
The provider, members of the board of directors, officers, medical staff or management personnel are associated with or involved business transactions with the following: Related organizations, management contracts and services under arrangements as owners (stockholders), management, by family relationship, or any other similar type relationship.2
This form is submitted to the fiscal intermediary with each cost report. In section A-6 of each cost report, the home health agencies were asked, "Are there any costs included on worksheet A which resulted from transactions with related organizations as defined in HCFA Pub. 15-1, chapter 10?" In addition, during routine audits of health care agencies, auditors inquired if there were any related party transactions as defined by Medicare regulations.
All the Corporate Defendants except Allegheny were home health agencies, or "providers" of care to "homebound" Medicare beneficiaries. Allegheny operated as a health care management consulting firm, owned by Edward Quinlan, and provided business management consulting to the home health agencies—preparing bills, payroll, and Medicare cost reports, and supplying accounting, computer and clerical services.
This case began in September 1997 when a federal grand jury in Montana returned a sixteen-count indictment against defendants Gupta, three other natural persons, Allegheny, and ten other companies involved in providing home healthcare services and supplies. In essence, the indictment charged the named defendants with having created a scheme to defraud Medicare based upon violations of the "related party" regulation by use of false claims, straw owners, and other deceptive actions to conceal the close relationship between the various persons. See 42 C.F.R. § 413.17.
In 1998, the case was transferred to the Southern District of Florida pursuant to Rule 21 of the Federal Rules of Criminal Procedure. The district court then severed the trial of four defendants3 from the trial of Gupta and the six companies. After the district court dismissed thirteen counts of the indictment, the case proceeded to trial on October 25, 1999, against the remaining defendants — Gupta, Quinlan, and Kuldeep K. Hajela, and the remaining six companies, Allegheny, Cardinal, Marshal, Atlantic, West Coast, and Treasure Coast — on the three remaining counts: conspiracy to submit false claims, 18 U.S.C. § 286, and two counts of mail fraud, 18 U.S.C. § 1341.
At the close of the government's case, the district court granted defendant Hajela's motion for a judgment of acquittal and reserved ruling pursuant to Rule 29(b) of the Federal Rules of Criminal Procedure on the motions of the remaining eight defendants. On November 5, 1999, the jury acquitted Quinlan, but convicted Gupta and the six companies, finding them guilty as charged.
Finally, on October 16, 2002, the district court granted the Rule 29 and 33 motions to reconsider its previous denial of their original motions for acquittal or for a new trial. It granted acquittals for Allegheny, Gupta, Marshal Medical, Cardinal Care, Atlantic Healthcare, Treasure Coast Healthcare, and West Coast Healthcare or, in the alternative, granted a new trial.
The government appealed, arguing first that the district court had no jurisdiction to entertain the motions for a judgment of acquittal or for a new trial because of the time limits contained in Rules 29 and 33, and that, in any event, the court erroneously granted the motions on the merits. We vacated the orders as untimely and remanded for sentencing. See United States v. Gupta, 363 F.3d 1169, 1176-77 (11th Cir.2004).
The government alleged that Gupta created Allegheny for the purpose of collecting an additional layer of reimbursable costs from the Medicare program that increases his home health agencies' reimbursable costs closer to Medicare's "cost caps." Subject to the cost caps, Medicare reimburses each home health agency for the costs necessary for the treatment of Medicare beneficiaries. As long as the consultant is not related to the agency by ownership or control, and as long as the agency acts as a prudent consumer in hiring the consultant, Medicare will reimburse the agency for the amount of its consulting contract. See 42 C.F.R. § 413.17. Conversely, related party contracts are not negotiated at arm's length and are treated as if the health provider is dealing with itself.
The government alleged that Gupta realized that he could make more money from Medicare if he could charge his home health agencies with consulting fees. With Quinlan's help, Gupta set up Allegheny to provide management services to help run the Corporate Defendants as home health care agencies. Under the plan, Quinlan would act as the figurehead owner of Allegheny in order to increase the amount billable to Medicare. Allegheny's only employees came from one of the Corporate Defendants.4
The government focused on the...
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