United States of America v. Lahue, No. 98-3146 (10th Cir. 03/23/1999)
|||U.S. Court of Appeals, Tenth Circuit
|||March 23, 1999
|||UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
ROBERT C. LAHUE, DOING BUSINESS AS ROBERT C. LAHUE, D.O., CHARTERED, DOING BUSINESS AS BLUE VALLEY MEDICAL GROUP; RONALD H. LAHUE, DEFENDANTS-APPELLEES,
|||Appeal from the United States District Court for the District of Kansas
(D.C. No. 97-20031-JWL)
|||Sean Connelly, Attorney, Department of Justice, Denver, Colorado (Jackie
N. Williams, United States Attorney, and Tanya J. Treadway, Asst. United
States Attorney, District of Kansas, and William H. Bowne, Department of
Justice, Washington, D.C., with him on the briefs), for Plaintiff-Appellant.
Jeffrey D. Morris, of Bryan Cave Llp, Overland Park, Kansas (James L. Eisenbrandt,
of Bryan Cave Llp, Overland Park, Kansas, Nilesh S. Patel, Kansas City,
Missouri, and Bruce Houdek, Kansas City, Missouri, with him on the briefs),
|||Before Seymour, Chief Judge, Ebel and Kelly, Circuit Judges.
|||The opinion of the court was delivered by: Seymour, Chief Judge.
|||UNITED STATES COURT OF APPEALS TENTH CIRCUIT
|||Patrick J. Fisher, Jr. Elisabeth A. Shumaker Clerk of Court Chief Deputy
|||March 30, 1999
|||TO: ALL RECIPIENTS OF THE OPINION
|||RE: 98-3146, USA v. LaHue
|||The slip opinion filed on March 23, 1999, contains a minor clerical error.
Please note the following correction.
|||1. On page one, Nilesh P. Patel, should be corrected to Nilesh S. Patel.
|||Please make the corrections to your copy of the slip opinion.
|||Sincerely, PATRICK FISHER, Clerk
|||Defendants Dr. Ronald LaHue and Dr. Robert LaHue, agents of Blue Valley
Medical Group (BVMG), were indicted on one count of conspiracy under 18
U.S.C. § 371 (count 1), seven counts of Medicare fraud under the Anti-Bribery
Act, 18 U.S.C. § 666 (b) (counts 2 through 8), one count of conspiracy under
18 U.S.C. § 286 (count 9), and one count of witness tampering under 18 U.S.C.
§ 1512 (count 10). The district court granted defendants' motion to dismiss
counts 2 through 8 on the theory that BVMG did not receive federal benefits
as required by section 666(b) and therefore was not within the ambit of
the statute. *fn1 United States v. LaHue,
998 F. Supp. 1182, 1184 (D. Kan. 1998). The government appeals, arguing
that the alleged fraud falls within section 666(b) because BVMG was a recipient
of Medicare reimbursements assigned to it by its patients. We affirm the
|||From 1985 to 1995, BVMG provided services in Kansas and Missouri as one
of the largest geriatric care practices in the United States. Dr. Robert
LaHue was president of BVMG and his brother, Dr. Ronald LaHue, was vice-president.
The LaHues and other BVMG physicians provided medical services to nuing
home residents and also referred patients to various hospitals for inpatient
and outpatient care.
|||The indictment alleged that the LaHues engaged in a criminal scheme to
receive bribes from various hospitals in return for referring Medicare patients
to the hospitals. It asserted that the LaHues proposed and entered into
a number of sham consulting agreements where BVMG received annual consulting
"fees" from each hospital in amounts ranging from $50,000 to $150,000
in return for referring patients to the paying hospital. The government
charged that the scheme constituted federal government program fraud in
violation of section 666, which applies to an organization that receives
"benefits" under a federal program.
|||The LaHues moved to dismiss the charges of program fraud, asserting that
Medicare reimbursements to doctors are not benefits within the meaning of
section 666(b). The district court agreed. The court determined that Medicare
payments are extended by Congress to the patient, who is both the intended
recipient of the funds and the intended beneficiary of Medicare. The patient
is permitted voluntarily to direct the funds to the medical provider through
assignment. Under this pattern of disbursement, the district court held
that reimbursements to BVMG physicians can not be characterized as section
666 benefits from a federal program because those benefits were disbursed
to the patient before dissemination to BVMG. Accordingly, the district court
dismissed the claims against BVMG under section 666. *fn2
|||In reviewing the district court's determination, we must decide whether
providers of medical services to Medicare Part B patients fall within the
statutory jurisdiction of 18 U.S.C. § 666(b). In other words, are the LaHues
agents of an organization, BVMG, that "receive[d] benefits in excess
of $10,000 under a Federal Program." Id. (emphasis added) In making
this determination, we look first at the nature of the Medicare program,
and then assess section 666 in light of that program.
|||A. Medicare Part B
|||Many BVMG patients were eligible for Medicare reimbursements under 42
U.S.C. §§ 1395j-1395k and used the reimbursements to pay for BVMG services
under Medicare Act Part B. The Medicare Act consists of two parts: Part
A, Hospital Insurance Benefits for the Aged and Disabled, 42 U.S.C. §§ 1395c-
1395i; *fn3 and Part B, Supplementary
Medical Insurance Benefits for the Aged and Disabled, 42 U.S.C. §§ 1395j-1395w.
Our case exclusively addresses Medicare Part B payments. Part B of the Medicare
system was established to provide "benefits" to the individual
beneficiary for use in paying the costs of certain medical services, including
physicians' services. Part B is a voluntary program where beneficiaries
pay monthly premiums that, along with federal government contributions,
are remitted to the Federal Supplementary Medical Insurance Trust Fund.
See id. § 1395t. The Department of Health and Human Services has responsibility
for administering the program and contracts with private insurance carriers
who evaluate and pay Part B claims out of the Trust Fund. See id. § 1395u.
|||Under Part B, a physician may either request direct payment by patients
on the basis of an itemized bill or accept assignment agreements. Under
an assignment agreement, the beneficiaries execute formal assignments of
their individual benefits to the physicians to compensate the physicians
for health care services. See id. § 1395u(h). A physician who does not accept
assignment can charge her patient in excess of the Medicare allowed expense,
a practice called "balance billing." Medicare pays eighty percent
of reasonable reimbursable claims while the beneficiary is responsible for
the remaining twenty percent and any "balance billing." See 42
U.S.C. § 1395l. The dismissed charges at issue here all involved patient
assignments directing that their Medicare reimbursements be sent to the
BVMG physicians to pay for medical services rendered. A BVMG physician who
accepted assignment agreed to accept a specified amount as full payment
for each service. This assignment scheme implies that the intended beneficiary
of Medicare Part B is the patient. The Medicare statute reinforces this
interpretation. It provides in relevant part:
|||Scope of benefits; definitions (a) The benefits provided to an individual
by the insurance program [Medicare] established by this part shall consist
of --(1) entitlement to have payment made to him or on his behalf (subject
to the provisions of this part) for medical and other health services .
. . . 42 U.S.C. § 1395k. As the statute reads, "benefits" are
"provided to an individual," who has the authority to direct whether
they are to be paid "to him or on his behalf." Id. With this in
mind, we turn to an analysis of section 666.
|||B. 18 U.S.C. § 666
|||We review legal issues of statutory construction de novo. United States
v. Oberle, 136 F.3d 1414, 1423 (10th Cir. 1998). In interpreting section
666, we recognize that the Supreme Court directs us to use restraint in
interpreting federal criminal statutes. Dowling v. United States, 473 U.S.
207, 214 (1985). "Courts in applying criminal laws generally must follow
the plain and unambiguous meaning of the statutory language." Salinas
v. United States, 118 S.Ct 469, 474 (1997) (quoting United States v. Albertini,
472 U.S. 675, 680 (1985)). Where the statute is ambiguous, we look to the
legislative history and the underlying public policy of the statute. See
United States v. Simmonds, 111 F.3d 737, 742 (10th Cir. 1997).
|||The Anti-Bribery Act, 18 U.S.C. § 666, prohibits the unlawful acceptance
of anything of value of $5,000 or more if the person taking the bribe is
an agent of an organization subject to the statute. Whether an organization
falls within the scope of the statute is determined pursuant to the limits
of section 666(b), which reads:
|||The circumstances referred to in subsection (a) of this section is that
the organization, government, or agency receives, in any one year period,
benefits in excess of $10,000 under a Federal program involving a grant,
contract, subsidy, loan, guarantee, insurance, or other form of Federal
assistance. 18 U.S.C. § 666(b). The district court acknowledged the superficial
appeal of the government's contention that the plain language of section
666(b) includes the patient assignments to BVMG. See LaHue, 998 F. Supp.
at 1187. The scope of section 666(b) jurisdiction reaches any organization
that "receives . . . benefits" from a federal program in an amount
over $10,000. 18 U.S.C. § 666(b). Medicare is indisputably a federal program
and BVMG did receive reimbursements in any one year in excess of $10,000
for its physicians' services to Medicare recipients.
|||In support of this argument, the government offers an analogy to anti-discrimination
statutes, contending that "section 666 `expressly equates "benefits"
with "Federal assistance."'" Br. of Aplt. at 15 (quoting
United States v. Rooney, 986 F.2d 31, 34 (2d Cir. 1993)). The government
then directs us to cases holding that providers who accept Medicare funds
receive "federal assistance" under an anti-discrimination statute.
Id. at 16 (citing United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039,
1042-48 (5th Cir. 1984)). The government concludes by analogy that a health
care provider who accepts Medicare funds thereby receives federal benefits
and accordingly falls within the scope of section 666.
|||We are not persuaded by the analogy to anti-discrimination statutes, which
are civil rather than criminal. We must exercise particular restraint in
interpreting federal criminal statutes. Dowling, 473 U.S. at 214. Moreover,
there are inherent policy differences between these criminal and civil statutes.
*fn4 Section 666 was designed to prevent
diversions of federal funds enroute to their intended beneficiaries, whereas
the anti-discrimination statutes were enacted to prevent the use of federal
funds to support discrimination. See United States v. Wyncoop, 11 F.3d 119,
123 (9th Cir. 1993) (Title IX anti-discrimination provision different in
purpose and language from section 666).
|||Finally, like the district court, we believe that a closer look at the
government's position reveals ambiguity in the plain meaning of section
666. Under the government's interpretation of section 666(b), any organization
that is assigned $10,000 in a year in funds initially disbursed under a
federal program source would fall within the statute. Thus, when funds have
passed to the beneficiary and she assigns the funds further to any number
of organizations which may assign them even further, the government's theory
suggests that these monies are all considered benefits as long as they originated
under a federal benefits program. Presumably under this interpretation,
if the recipient physician endorsed Medicare checks to pay a supplier of
medical goods, the supplier would be receiving benefits from a federal program.
As the district court aptly noted, this construction creates almost a limitless
statutory reach beyond a plain commonsense interpretation of the statute.
See LaHue, 1182 F. Supp. at 1187. *fn5
Even in the context of anti-discrimination statutes, the Supreme Court has
distinguished between direct and indirect beneficiaries, holding that "federal
coverage [does not follow] the aid past the recipient to those who merely
benefit from the aid." United States Dept. of Trans. v. Paralyzed Veterans
of America, 477 U.S. 597, 607 (1986) (construing 29 U.S.C. § 794 prohibition
against subjecting handicapped individuals "to discrimination under
any program or activity receiving Federal financial assistance.").
In so holding, the Court pointed out that if the statutes were construed
to extend to all those who receive an indirect economic benefit from the
federal assistance, "[t]he statutory `limitation' on [the anti-discrimination
statute's] coverage would virtually disappear, a result Congress surely
did not intend." *fn6 Id. at 609.
Similarly, in our judgment, the implausibility that Congress intended this
limitless result in a criminal statute creates an ambiguity regarding the
meaning of just who "receives . . . benefits . . . under a Federal
Program," within the meaning of section 666(b).
|||Like other courts that have wrestled with an interpretation of section
666(b), we look to the legislative history and the underlying purpose of
the statute for guidance. See United States v. Copeland, 143 F.3d 1439,
1441 (11th Cir. 1998); United States v. Rooney, 37 F.3d 847, 850-51 (2d
Cir. 1994); United States v. Wyncoop, 11 F.3d 119, 121 (9th Cir. 1993).
The legislative history reveals that although Congress intended "federal
programs" to be broadly construed, Congress also intended to limit
the statute to be consistent with its underlying purpose to "protect
the integrity of the vast sums of money distributed through federal programs
from theft, fraud, and undue influence by bribery." S. Rep. No. 95-225,
at 370 (1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3511. As further explained
by our sister circuit, the purpose of section 666 is to prevent diversions
of federal funds not only by agents of organizations that are direct beneficiaries
of federal benefits funds, but by agents of organizations to whom such funds
are `disbursed' for further `distribut[ion]' to or for the benefit of the
individual beneficiaries. United States v. Zyskind, 118 F.3d 113, 116 (2d
|||When Congress enacted section 666, it cited three cases that represent
the types of situations section 666 was intended to cover. See S. Rep. No.
95-225, at 370 nn. 2 & 3, reprinted in 1984 U.S.C.C.A.N. at 3182, 3511
nn. 2 & 3; see also Salinas, 118 S.Ct. at 474 (discussing legislative
history). In all three cases, the organization in question received federal
program funds as the intended recipient, and each was charged with the responsibility
for administering or spending the federal grant monies to benefit the intended
beneficiaries. In United States v. Del Toro, 513 F.2d 656, 661 (2d Cir.
1975), the Harlem-East Harlem Model Cities Program (Model Cities) received
funds for revitalization projects in inner city areas. Model Cities had
the responsibility to administer and disburse funds to benefit the communities.
In United States v. Hinton, 683 F.2d 195, 196 (7th Cir. 1982), United Neighborhoods,
Inc. (UNI) entered into contracts with the city of Peoria, Illinois, to
administer federal funds under a Community Development Block Grant from
HUD. The intended beneficiary, again, was the community and UNI was charged
with the administration and disbursement of federal funds to benefit that
community. In United States v. Mosley, 659 F.2d 812, 813 (7th Cir. 1981),
the State of Illinois Bureau of Employment Security as part of the Comprehensive
Employment and Training Program administered employment and training programs
for the unemployed, the intended beneficiaries. The Bureau received the
funds and had the responsibility to administer them to benefit the unemployed.
None of the cases represent a situation where the beneficiary had already
received the benefits.
|||The purpose of section 666 to prevent the diversion of federal program
funds on the distribution path to the intended beneficiaries is fulfilled
once the funds have been received by the actual beneficiary. Cases interpreting
section 666(b) support this Conclusion. In Wyncoop, 11 F.3d 119, a private
college participated in federal student loan programs. The issue was whether
the college's receipt of tuition payments funded by the loans qualified
as receipt of benefits under section 666. In the program, the government
guaranteed the student's loan and a private bank then issued a check, often
jointly to the student and the college. The student was the intended beneficiary
of the loans. The college had no responsibility to administer or disburse
the funds to the student. The court held that "the statute was not
intended to cover thefts from institutions like Trend College that do not
themselves receive and administer federal funds." Id. at 122.
|||In both Wyncoop and the instant case, the beneficiary had discretionary
rights to the money. Although the court in Wyncoop did not emphasize the
fact, we believe it was important to the outcome of the case that the checks
were issued either to the students or jointly to the students and the school.
The loans were thus made to the students and passed on to the college in
the form of tuition payments. As such, the court's ultimate determination
that the college did not receive "benefits" within the meaning
of section 666(b) is consistent with our Conclusion in this case. Here,
the private insurance company administering the Medicare benefits issued
a check to the BVMG physician only after an assignment of the fees by the
patient to the physician.
|||In Zyskind, 118 F.3d 113, the issue was whether an adult home that received
federal funds as a contracted fiduciary thereby received a benefit within
the meaning of section 666(b). The home, Hi-Li, served handicapped or mentally
impaired adults. Most of the residents received federal benefits from either
the Social Security Administration or the Department of Veterans Affairs.
The statutory scheme envisioned that the federal funds could be paid to
a caretaker or custodian in a fiduciary capacity for the benefit of the
veteran. Id. at 115. Under that scheme, some benefit checks were made payable
directly to the Hi-Li administrator as legal custodian of the veteran. The
court held that since the funds reached Hi-Li before the veterans and Hi-Li
was required to administer the funds on behalf of these intended beneficiaries,
Hi-Li fell within section 666 jurisdiction. Id. at 117.
|||Zyskind is distinguishable from the instant case. There, Hi-Li received
the money directly and was charged with a fiduciary responsibility to use
the money for the benefit of the intended beneficiary, the resident. True
to the purposes of section 666 to protect federal funds enroute to the beneficiary,
the court upheld section 666 coverage over Hi-Li. By contrast, BVMG was
merely accepting each patient's payment by voluntary assignment for services
already rendered. BVMG had no power or duty to administer or disburse the
funds further to the benefit of its Medicare patients. *fn7
|||We conclude that Congress intended the reference in section 666(b) to
an organization receiving federal program benefits to mean one that receives
benefits before final distribution to the intended beneficiary, here the
patient. What happens to the funds once the patient receives them is beyond
the scope of section 666. Thus, any assignment of such funds to a third
party does not constitute a receipt of federal program benefits within the
reach of section 666. We are not persuaded it was Congress's intent in enacting
section 666(b) to follow the intended beneficiaries' further distribution
of the federal benefits. As a result, we hold that BVMG falls outside the
scope of section 666.
|||We AFFIRM the district court.
|||*fn1 Section 666 provides in relevant
part: (a) Whoever, if the circumstance described in subsection (b) of this
section exists- (1) being an agent of an organization, or of a State, local,
or Indian tribal government, or any agency thereof- . . . . (B) corruptly
. . . accepts or agrees to accept, anything of value from any person, intending
to be influenced or rewarded in connection with any business, transaction,
or series of transactions of such organization, government, or agency involving
anything of value of $5,000 or more; shall be fined under this title, imprisoned
not more than 10 years, or both. (b) The circumstance referred to in subsection
(a) of this section is that the organization, government, or agency receives,
in any one year period, benefits in excess of $10,000 under a Federal program
involving a grant, contract, subsidy, loan, guarantee, insurance, or other
form of Federal assistance. 18 U.S.C. § 666(a)(b).
|||*fn2 After the dismissal, the government
impaneled a new grand jury that indicted the LaHues for the same alleged
conduct under an anti-kickback statute, 42 U.S.C. § 1320a-7b, which criminalizes
the acceptance of bribes for Medicare patient referrals.
|||*fn3 Part A concerns institutional health
providers (hospitals, nursing homes, rural health clinics) and is funded
out of Social Security taxes. Payment by Medicare under Part A for services
rendered by a hospital or other institution may only be made to the institution,
and the institution may not bill the patient directly, except for deductibles
and coinsurance. Part A is not implicated under the government's theory
in this case.
|||*fn4 We note in this regard that in
United States v. Baylor Univ. Med. Ctr., 736 F.2d 1039 (5th Cir. 1984),
the court expressly grounded its holding on the legislative history of the
anti-discrimination statutes, judicial decisions construing them, and regulations
adopted under them. See id. at 1042.
|||*fn5 We note that § 666(c) refines §
666(b) by carving out certain transactions in the ordinary course of business:
"This section does not apply to bona fide salary, wages, fees, or other
compensation paid, or expenses paid or reimbursed, in the usual course of
business." 18 U.S.C. § 666(c). Cf. United States v. Copeland, 143 F.3d
1439 (11th Cir. 1998) (holding § 666(b) inapplicable to defense contractor
without referencing § 666(c)). Neither the parties nor the district court
addressed § 666(c), however. Since there are no circuit cases addressing
§ 666(c)'s application to § 666(b), we leave that analysis for another day.
See United States v. Grossi, 143 F.3d 348, 350-51 (7th Cir. 1998) (declining
to decide whether certain payments have met § 666(c) requirements where
the parties did not argue the issue below); United States v. Mills, 140
F.3d 630 (6th Cir. 1998) (determining that § 666(c) applies to § 666(a)).
We merely introduce § 666(c) as an additional legal wrinkle that contributes
to the ambiguity of § 666(b).
|||*fn6 In New York Conference of Blue
Cross v. Travelers Ins. Co., 514 U.S. 655 (1995), the Supreme Court similarly
refused to extend a statutory phrase to its full expansive meaning. The
governing text of ERISA is clearly expansive. Section 514(a) marks for pre-emption
"all state laws insofar as they . . . relate to any employee benefit
plan" covered by ERISA, and one might be excused for wondering, at
first blush, whether the words of limitation ("insofar as they . .
. relate") do much limiting. If "relate to" were taken to
extend to the furthest stretch of its indeterminancy, then for all practical
purposes pre-emption would never run its course, for "[r]eally, universally,
relations stop nowhere," H. James, Roderick Hudson xli (New York ed.,
World's Classics 1980). But that, of course, would be to read Congress's
words of limitation as mere sham . . . . Id. at 655 (emphasis added).
|||*fn7 The government argues that "basing
statutory coverage on whether federal payments are for past or future services
. . . has been rejected as `frivolous.'" Br. of Aplt. at 20 (citing
Baylor University, 736 F.2d at 1048). What the government ignores is that
Baylor University was a civil case and involved Medicare Part A. Medicare
Part A is a different scheme where all payments to the hospitals are direct,
without the voluntary choice of the patient. We need not decide whether
the scope of section 666 would extend to such a case.
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