United States v. LaHue ( 1999 )

UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
Office of the Clerk
Byron White United States Courthouse
Denver, Colorado 80257
(303) 844-3157
Patrick J. Fisher, Jr. Elisabeth A. Shumaker
Clerk of Court Chief Deputy Clerk
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
Deputy Clerk
F I L E D
United States Court of Appeals
Tenth Circuit
MAR 23 1999
PUBLISH PATRICK FISHER
Clerk
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
v.
No. 98-3146
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), for Defendants-Appellees.
Before SEYMOUR, Chief Judge, EBEL and KELLY, Circuit Judges.
SEYMOUR, Chief Judge.
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.1 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
1
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).
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affirm the district court.
I
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
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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 666.2
II
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
2
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.
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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;3 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
3
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.
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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
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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-
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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.4 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
4
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.
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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 1187.5 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
5
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).
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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.”6 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”
In New York Conference of Blue Cross v. Travelers Ins. Co., 514 U.S. 655 (1995), the
6
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).
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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 Cir. 1997).
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
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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
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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
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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.7
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.
The government argues that “basing statutory coverage on whether federal
7
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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