United States v. Kuhlman

• Decision Date: 08 March 2013
• Docket Number: No. 11–15959.,11–15959.
• Citation: 711 F.3d 1321
• Parties: UNITED STATES of America, Plaintiff–Appellant, v. Rick A. KUHLMAN, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

711 F.3d 1321

UNITED STATES of America, Plaintiff–Appellant,

v.Rick A. KUHLMAN, Defendant–Appellee.

No. 11–15959.

United States Court of Appeals,Eleventh Circuit.

March 8, 2013.

Randy Scott Chartash, Nicholas Oldham, Lori Beranek, David Edward McCleman, Lawrence R. Sommerfeld, Sally Yates, U.S. Attys., Atlanta, GA, for Plaintiff–Appellant.

Jay L. Strongwater, Strongwater & Associates, LLC, Darryl B. Cohen, Cohen, Cooper, Estep & Allen, LLC, Atlanta, GA, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before HULL, WILSON and ANDERSON, Circuit Judges.

WILSON, Circuit Judge:

Dr. Rick Kuhlman pleaded guilty to perpetrating a five-year, $3 million health care fraud scheme. He was sentenced to probation for the “time served” while out on pre-trial release awaiting his sentence. Although the United States Sentencing Guidelines set forth a sentencing range of 57 to 71 months of imprisonment, Kuhlman was able to avoid a custodial sentence by simply paying the money back and performing community service, including speaking to medical and nursing students about the perils of health care fraud. Because we agree with the government that Kuhlman's sentence is unreasonable, we vacate the sentence and remand this case back to the district court so that a meaningful sentence may be imposed.

I. BACKGROUND

A. The Fraudulent Billing Scheme

Kuhlman is a doctor of chiropractic medicine. He owns and operates five clinics in the Atlanta, Georgia metropolitan area, and one clinic in Nashville, Tennessee. Beginning in January 2005, Kuhlman embarked on what would be a five-year scheme, falsely billing health insurance companies for services he knew were not rendered to his patients.

Normally after treating a patient, Kuhlman would request payment for the medical services rendered by submitting a claim form directly to the patient's health insurance company. The form, known as a “Health Care Financing Administration Form 1500” (HCFA 1500), identifies the treatment provided to the patient. Kuhlman was also required to record, on the same form, the appropriate “Physician's Current Procedural Terminology” (CPT Codes). The American Medical Association publishes CPT Codes as a uniform numerical classification of the most common treatments performed by physicians and other medical services providers, including chiropractors. This was the proper procedure.

But Kuhlman did not follow the proper procedure. Instead, Kuhlman recorded CPT Codes for services he knew were not and would not be rendered to patients on the recorded dates. He then submitted the false HCFA 1500 forms to an insurance company for payment. Thereafter, Kuhlman would receive payment for the treatment he never gave.

During his five-year scheme, at least two insurance companies notified Kuhlman that his billing practices did not conform to the proper procedure. In 2006, Kuhlman paid Blue Cross Blue Shield $500,000 to settle a string of contested claims. A few years later, Kuhlman's billing practices were flagged by Aetna; Kuhlman again settled, this time paying $70,000 to resolve the disputed claims. Aetna approached Kuhlman once more in 2009, and at that time, Aetna determined that Kuhlman's claims would be subject to pre-payment review. Kuhlman, however, continued to submit false claims until an FBI agent approached him in August 2010. It was only after the FBI became involved that Kuhlman ceased his improper billing practices. In total, Kuhlman pocketed $2,944,883 as a result of his fraudulent billing scheme.

B. Procedural History

On February 23, 2011, Kuhlman was charged in a criminal information with one count of health care fraud in violation of 18 U.S.C. §§ 1347 and 2. A few weeks later, on March 1, 2011, he pleaded guilty pursuant to a plea agreement. At the plea hearing, Kuhlman admitted that he did not steal out of need—he was not in financial trouble and he did not have “creditors breathing down [his] neck asking for money.” Instead, he “was just pushing the envelope and billing for [CPT] codes that [his] doctors weren't doing and once it started and [he] saw that the insurance companies were going to pay for it [he] just didn't fix it and [he] should have.” The court stated: “In other words, you weren't pressed to do it; you saw an opportunity to make money.... I am just trying to figure out why somebody like you would get involved in this type of activity when you weren't pressed for money and the creditors weren't pushing you and you weren't building a house and gotten behind.” Sentencing was then set for May 23, 2011.

In preparation for sentencing, the probation office drafted a Presentence Investigation Report, which calculated a base offense level of six, pursuant to U.S.S.G. § 2B1.1. Kuhlman qualified for an 18–level enhancement pursuant to U.S.S.G. § 2B1.1(b)(1)(J) because the loss amount was more than $2,500,000. In addition, because Kuhlman derived more than $1,000,000 in gross receipts from one or more financial institutions—Aetna, Blue Cross Blue Shield, and United Healthcare—the offense level was increased two levels pursuant to U.S.S.G. § 2B1.1(b)(14)(A). Since Kuhlman abused his position of trust with the insurance companies by billing them for services that were not rendered, the offense level was increased by two levels pursuant to U.S.S.G. § 3B1.3. Kuhlman, however, was entitled to a two-level reduction for acceptance of responsibility under U.S.S.G. § 3E1.1(a) and an additional one-level reduction under U.S.S.G. § 3E1.1(b) for assisting in the investigation by timely notifying authorities of his intention to plead guilty.

After these adjustments, Kuhlman's total offense level amounted to 25, with a criminal history category of one and zero criminal history points. Based on these numbers, the Sentencing Guidelines advised a range of 57 to 71 months' imprisonment. As part of the plea agreement, however, the government ultimately recommended a sentence of 36 months' imprisonment, which was effectively a five-level downward variance. See U.S.S.G. § 5A.

On May 23, 2011, the parties appeared ready for sentencing. A few days before sentencing, Kuhlman paid $2,944,883 in full restitution. Impressed, the district judge remarked that Kuhlman was the first defendant that the judge could recall who made such a large restitution payment prior to sentencing.

The district court then proceeded to discuss the rising costs of incarceration, citing a recent Georgia state commission formed to explore alternatives to prison for nonviolent criminals. The court alluded to the fact that Kuhlman needed some extra time to “pay off his fine and support his family.” In addition, if given extra time before sentencing, Kuhlman could, “and should, perform public service.” The court then sua sponte continued the sentencing hearing for six months. In the eyes of the court, the continuance would provide “a more complete picture of [Kuhlman] and how he handle[d] this postponement time before sentencing.”

Next, the court repeated its concerns over the rising costs of prison and suggested that a continuance would save “the court ... at least $10,000 by not incarcerating [Kuhlman] during this period.” The court also noted that it had ordered a similar continuance for a “budding rock star,” which had yielded positive results. During that six month continuance, the “budding rock star” made “hundreds of visits to young people” and had a positive impact on the community. The district court continued, “[t]he case was finally concluded to the satisfaction of all parties who were initially skeptical as to whether the defendant was being sufficiently punished for his wrongdoing.” Kuhlman, the district court believed, could benefit from a similar opportunity.

The government objected, concerned that a continuance would allow Kuhlman to go right back to work and right back to his old routine of filing false claims with insurance companies. Kuhlman, for obvious reasons, did not object to the continuance.

Over the next several months, Kuhlman heeded the district judge's advice. Between May 23, 2011, and the time of Kuhlman's continued sentencing hearing on November 15, 2011, Kuhlman logged 391 hours of community service.¹ He visited various medical, nursing, and chiropractic schools and gave presentations on health care insurance fraud. He also provided 18 days of free chiropractic services at homeless shelters across Atlanta and painted a gym at an elementary school. And, as previously stated, Kuhlman had paid back the full amount he stole—$2,944,883—prior to the initial May 23, 2011 sentencing hearing.

At the second sentencing hearing on November 15, 2011, the district court lauded Kuhlman's work during his six-month continuance. In light of Kuhlman's full restitution payment, his community service, and the rising costs of incarceration, the district court sentenced Kuhlman to probation for the “time served” while awaiting his sentence. In doing so, the district court varied downward 20 levels.

II. STANDARD OF REVIEW

We review the reasonableness of a sentence under an abuse of discretion standard. Gall v. United States, 552 U.S. 38, 41, 128 S.Ct. 586, 591, 169 L.Ed.2d 445 (2007). “That familiar standard allows a range of choice for the district court, so long as that choice does not constitute a clear error of judgment.” United States v. Irey, 612 F.3d 1160, 1189 (11th Cir.2010) (en banc) (internal quotation marks omitted). We have explained that, under the abuse of discretion standard of review, “there will be occasions in which we affirm the district court even though we would have gone the other way.” Id. (internal quotation marks omitted). The burden of establishing unreasonableness lies with the party challenging the sentence. United States v. Talley, 431 F.3d 784, 788 (11th Cir.2005) (per curiam). Here, the government appeals Kuhlman's sentence; thus, the government carries the burden of demonstrating that Kuhlman's...