White Collar Criminal Defense Group

Two Convicted Physicians Ask The Supreme Court To Give Them Credit For Medically Necessary Procedures

Two Houston, Texas physicians have asked the United States Supreme Court to determine whether the Fifth Circuit erred in failing to reimburse them for claims that the Federal Government argued were medically unnecessary.  The husband and wife physicians, Arun and Kiran Sharma, were indicted on sixty-four counts of conspiracy, healthcare fraud, mail fraud, unlawful distribution of controlled substances and money laundering.  They ultimately pled guilty to one count of conspiracy to commit healthcare fraud and mail fraud and one count of healthcare fraud in violation of 18.U.S.C. §1347.  The conduct underlying the convictions related to the Sharmas submitting “phantom bills” for injections or patient visits, as well as providing trigger-point injections but “upcoding” the procedure and billing Medicare for a more expensive injection. 

At sentencing, the Sharmas objected to the restitution amount calculated by the United States Probation Office in the Presentence Investigation Reports.  The Sharmas objected, primarily because the recommendation did not give them credit for the amount that the insurers would have paid for the trigger-point injections that were actually administered.  In addition, the Sharmas argued that the amount calculated by the United States Probation Office overstated the insurers’ actual loss, because the loss amount was not properly reduced by the amount of payments for non-injection treatments provided that were unrelated to the Sharmas’ specific offenses of conviction.  At the sentencing hearing, the United States District Court for the Southern District of Texas heard arguments regarding the amount of restitution and the Sharmas’ entitlement to credit for medical services actually provided.  The District Court, however, overruled the Sharmas’ objections and ordered restitution in the amount of $43,318,170.93, the exact amount recommended in the Presentence Investigation Reports.

The Sharmas appealed to the Fifth Circuit. In their appeal, the Sharmas contended that the total restitution awarded exceeded the aggregate amount of the insurer’s actual loss by: 1) erroneously including restitution for payments not related to the injection-billing fraud; and 2) failing to give credit for the amounts the insurers would have paid for the less expensive injections that were actually administered.

In its decision, the Fifth Circuit vacated the lower Court’s $43 million judgment after finding that the figure exceeded the insurers’ actual losses, which the Defendants argued were less than half that amount.  The Fifth Circuit determined that the United States Probation Office “went astray” in preparing the Presentencing Investigation Reports against the Sharmas, which led to the judgment of $43 million in restitution to Medicare, Medicaid and 30 private insurers.  The Fifth Circuit, however, affirmed the District Court’s decision to deny the Sharmas credit for injection therapy that was actually provided, but overbilled as a more expensive injection.  In doing so, the Fifth Circuit concluded that the Sharmas never established that the injections that were provided were medically necessary and would have been reimbursed in the absence of fraud.

In their Petition to the United States Supreme Court, the Sharmas argue that the Fifth Circuit erred on two fronts.  First, the Court improperly shifted the burden of proof to the Sharmas to prove medical necessity. Second, the Court allowed the Government to argue for the first time on appeal that the Sharmas never established that the injections that were provided were medically necessary and ignored the extensive proof of medical necessity that the Sharmas presented in the District Court.  The Sharmas now hope that the Supreme Court will determine when, if ever, it is appropriate to shift the burden of proof to the Defendant under the mandatory Victim’s Restitution Act and whether an appeals court can permit the Government to argue for the first time on appeal that a Defendant/Physician’s Medical Services were not medically necessary.

IRS Targets Tax-Exempt Applications Of Administration Opponents

A story that has developed throughout the week, the Internal Revenue Service targeting of conservative groups applying for tax-exempt status, now has criminal implications for top officials of the IRS.  The allegations, which fully came to light with the release of the Treasury Inspector General’s Report, are that beginning in 2010 and continuing for more than 18 months, the IRS used inappropriate criteria to identify tax-exempt applications for review. 

Specifically, the IRS identified organizations with the name “Tea Party,” “Patriots,”  “9/12 Project” or other political sounding names.  The IRS also flagged applications for organizations that identified issues such as government spending, government debt and taxes, that aimed to “make America a better place to live” through advocacy or lobbying, or that included a statement in the application criticizing how the country is being run.  Once these political groups had been identified, the IRS delayed the processing of their applications and issued unnecessary and burdensome information requests. 

In response to the IG Report, Attorney General Eric H. Holder, Jr., indicated that the Justice Department will investigate whether the targeted groups had their civil rights criminally violated and whether false statements were made by IRS officials in violation of criminal statutes.  The statements likely at issue appear to be the potentially false information provided by IRS officials to members of Congress in late 2012. 

One of these officials, acting IRS Commissioner Steve Miller, resigned on Wednesday.  In July of 2012, Miller, then the Deputy Commissioner, testified before a Congressional oversight committee but did not admit to any targeting efforts, despite being questioned about them.  Miller’s resignation came on the heels of news that the IRS had identified two employees in its Cincinnati office, who were primarily responsible for the improper targeting.  According to Miller, the two employees have been disciplined, however there is a debate over whether the improper targeting was actually limited to these employees.