U.S. v. Patient Transfer Service, Inc., 04-1384.

• Decision Date: 05 July 2005
• Docket Number: No. 04-1372.,No. 04-1373.,No. 04-1384.,No. 04-1381.,No. 04-1421.,04-1384.,04-1372.,04-1421.,04-1373.,04-1381.
• Citation: 413 F.3d 734
• Parties: UNITED STATES of America, Appellee, v. PATIENT TRANSFER SERVICE, INC., Appellant. United States of America, Appellant/Cross-Appellee, v. Shirley Wallace, Appellee/Cross Appellant. United States of America, Appellant/Cross Appellee, v. Kevin Wise, Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

413 F.3d 734

UNITED STATES of America, Appellee, v. PATIENT TRANSFER SERVICE, INC., Appellant.

United States of America, Appellant/Cross-Appellee, v. Shirley Wallace, Appellee/Cross Appellant.

United States of America, Appellant/Cross Appellee, v. Kevin Wise, Appellee/Cross-Appellant.

No. 04-1384.

No. 04-1372.

No. 04-1421.

No. 04-1373.

No. 04-1381.

United States Court of Appeals, Eighth Circuit.

Submitted: January 10, 2005.

Filed: July 5, 2005.

COPYRIGHT MATERIAL OMITTED

Mark F. Hampton, argued, Little Rock, AR, for Shirley Wallace in 04-1372/1421.

Patrick Russell James, argued, Little Rock, AR, for Kevin Wise in 04-1373/1381.

Matthew Richard House, argued, Little Rock, AR (Samuel Arnold Perroni, on brief), for Patient Transfer Service in 04-1384.

Sandra Wilson Cherry, argued, First Assistant U.S. Attorney, Little Rock, AR (H.E. (Bud) Cummins and Douglas Chavis, on brief), for U.S.

Before LOKEN, Chief Judge, MORRIS SHEPPARD ARNOLD and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

Patient Transfer Service, Inc. (PTS) and two of its employees were convicted by a jury for filing false Medicare and Medicaid claims. The district court sentenced PTS to a large fine, Kevin Wise to 30 months and a $6,000 fine, and Shirley Wallace to 100 hours of community service. PTS appeals its conviction and sentence. The government appeals the sentences of the employees, and on their cross appeals they appeal their convictions and sentences. We affirm in part and reverse in part.

I.

PTS is an Arkansas company owned by Donald Wise that provides ambulance transport services. Donald Wise's brother, Kevin Wise, is a licensed paramedic who worked as the general manager of PTS. In that capacity Kevin Wise was in charge of all personnel and oversaw billing procedures. Shirley Wallace is the cousin of these two brothers, and she was the office manager and supervised the billing clerks who filed claims with Medicare and Medicaid.

From January 1997 to March 1999, PTS filed 2,568 Medicare or Medicaid claims with identical coding. All of the claims related to the transportation of twelve individuals with end stage renal disorder. PTS transported them by ambulance from home to a dialysis treatment center and back. In advance of each transport Wallace prepared a transfer form which stated that the patient was confined to bed and could only be moved by stretcher to and from the hospital. The transfer form was given to the paramedics operating the ambulance, who would fill in information particular to the transport, such as the date, time, and crew names. After the patients were transported, the transfer forms would be routed to billing clerks to prepare claim forms for Medicare and Medicaid.

The claim forms contain billing codes the ambulance provider had to fill out to describe the transport: Hospital Admit (yes or no); Type of Transport (initial trip, return trip, transfer trip, or round trip); Bed Confined—Before (yes or no); Bed Confined—After (yes or no); Moved by Stretcher (yes or no); Unconscious / Shock (yes or no); Emergency Situation (yes or no); Physical Restraints (yes or no); Visible Hemorrhaging (yes or no); Transported To / For (nearest facility, preferred physician, nearness of family members, or care of a specialist or availability of specialized equipment); and Medically Necessary (yes or no). In each of the claims at issue, the billing clerk at PTS marked "Y" for "yes" for the codes Bed Confined— Before, Bed Confined—After, Moved by Stretcher, and Medically Necessary. PTS was reimbursed $841,276 on the basis of these 2,568 claims.

The government investigated PTS and uncovered evidence that these patients had not been confined to bed, had not been moved by stretcher, and had not needed to be transported by ambulance. Medical personnel from the treatment centers testified that each of these twelve patients could have been transported to and from the centers by other means without endangering their health. The FBI videotaped several of the patients walking to or out of the ambulance and their home or treatment center without assistance. Paramedics testified that instead of being transported by stretchers, some of the twelve rode in the front seat of the ambulance or in the captain's chair (an individual seat behind the driver). One of the patients testified that statements on the claim forms indicating that she was confined to bed and needed a stretcher and ambulance transport were false. The husband of another patient gave similar testimony. There was additional evidence that the patients' activities were inconsistent with the descriptions on the claim forms. Some of them drove, cleaned house, gardened, bowled, and engaged in other active pursuits.

The investigation also yielded evidence that the defendants knew that these twelve patients did not fit the descriptions on the claims. Both Kevin Wise and Wallace met a few of the patients in the PTS office, and Wise made some of the transports himself. Transfer forms were occasionally returned with notes from the paramedics indicating that family or friends picked up the patients from the treatment center, and some of the paramedics questioned Kevin Wise about the necessity of ambulance transport for patients who walked without assistance. Wise distributed a memo directing the paramedics to have all dialysis patients ride on stretchers and to take them into the treatment centers on stretchers. He also told paramedics and other employees that PTS had letters of medical necessity on file for the dialysis patients, but an FBI search uncovered no such letters relating to these twelve patients. One item discovered in the search was a note written by Wallace indicating that the nephrologist treating Phyllis Warren, one of the patients had advised that she did not need ambulance transport.

The government also investigated two instances in which PTS "double hauled" by transporting two patients together in one ambulance and billing both accounts for the mileage. Neither were on stretchers; one patient rode in the front seat, and the other in the captain's chair. When the billing clerk at PTS noticed the coincidence of dates and times on the transfer forms, she asked Wallace and Kevin Wise how to prepare the claim forms because she did not believe the mileage could be reimbursed twice. She was nevertheless instructed to submit individual claims for each patient. The claim forms did not indicate that more than one patient had been transported, and each form claimed the full mileage for the trip.

PTS, Wallace, Kevin Wise, and Donald Wise were all charged with and acquitted of a conspiracy count that encompassed all 2,568 claims. The jury convicted PTS of twenty two counts of aiding and abetting false or fraudulent claims involving Medicare, in violation of 18 U.S.C. §§ 2 and 287, and two counts of false statements involving Medicaid, in violation of 42 U.S.C. § 1320a-7b. Kevin Wise was convicted of four counts of aiding and abetting false or fraudulent claims involving Medicare in connection with double hauling. Wallace was convicted of one count of aiding and abetting false or fraudulent claims involving Medicare in connection with the transport of Phyllis Warren. The court fined PTS $1,177,786, sentenced Wise to 30 months of imprisonment and a $6,000 fine, and Wallace to 100 hours of community service in lieu of a fine.

II.

PTS, Wallace, and Kevin Wise all argue on appeal that their convictions must be vacated because the statute and regulations governing false or fraudulent claims to Medicare are unconstitutionally vague and ambiguous. They contend that the rules which allowed reimbursement only if an ambulance transport was medically necessary did not define that standard adequately and that their due process rights were consequently violated. PTS and Kevin Wise contend their convictions for double billing for mileage when two patients were transported in one ambulance should be overturned because no statute or regulation explicitly prohibited that practice. Kevin Wise also claims that the district court erred by not telling the jury that its instruction on deliberate ignorance did not apply to him and by not instructing the jury on entrapment by estoppel.

A.

The statute governing reimbursement provides that Medicare will pay for "ambulance service where the use of other methods of transportation is contraindicated by the individual's condition, but ... only to the extent provided in regulations." 42 U.S.C. § 1395x(s)(7). The limiting regulation in place before 1999 said that payment would be made only if "[o]ther means of transportation would endanger the beneficiary's health." 42 C.F.R. § 410.40(b) (1998). Effective February 24, 1999, the regulation said that for nonemergency situations, "the following criteria must be met to ensure that ambulance transportation is medically necessary: (i) The beneficiary is unable to get up from bed without assistance. (ii) The beneficiary is unable to ambulate. (iii) The beneficiary is unable to sit in a chair or wheelchair." 42 C.F.R. § 410.40(d) (1999).

An argument made by PTS, which Wallace and Wise also adopt, rests on the assumption that this case is governed by the regulation in place before 1999 because the indictment uses its terms and because notice of the new regulation was not distributed to PTS and other providers until after the relevant period. For purposes of these appeals, we will assume without deciding that the pre1999 regulation governs. PTS also asserts that the governing statute and regulation provided no comprehendible standard for providers to follow and that the concept of medical necessity is subjective.

PTS asserts that its claim of vagueness and ambiguity is supported by the fact that its own interpretation of the statute and pre1999 regulation is reasonable although contrary to the government's. The statute refers to "other methods of transport" being contraindicated, and the regulation refers to ...