POSITION OF UNITED STATES FEDERAL

COURTS WITH RESPECT TO COMPUTATION OF

LOSSES IN HEALTHCARE FRAUD CASES

Introduction

The purpose of this case law compilation is to shed light on the subject of
computation and selection of actual and intended loss as adopted by the
courts in the United States in healthcare fraud cases. Losses are defined
under §2B1.1 of the United States Sentencing Commission Guidelines
Manual (“USSG”). The courts possess flexibility with regards to
interpretation and application of the USSG as they are guidelines and strict
adherence is not required. The USSG includes a specific note on calculating
intended loss for federal healthcare offenses involving government
healthcare programs which state that, in a case in which the defendant is
convicted of a Federal health care offense involving a Government health
care program, the aggregate dollar amount of fraudulent bills submitted to
the Government health care program shall constitute prima facie evidence
of the amount of the intended loss, i.e., is evidence sufficient to establish
the amount of the intended loss, if not rebutted. There are cases where the
court deviates from the USSG for computation of losses in the interest of
justice which are specified below.

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 CASE 1

Title and citation

United States v. Barnes, 979 F.3d 283, 2020 U.S. App. LEXIS
34085, 113 Fed. R. Evid. Serv. (Callaghan) 1779 (5th Cir. La.
October 28, 2020)

Facts

• Dr. Shelton Barnes, Dr. Michael Jones, Dr. Henry Evans, Paula Jones, and
Dr. Gregory Molden were each previously employed by Abide Home Care
Services, Inc., a home health agency owned by Lisa Crinel. As part of
Abide's business model, it would "provide home health services to qualified
patients and then bill Medicare accordingly."

• The government came to suspect that Abide was committing health care
fraud. Specifically, the government alleged that "Abide billed Medicare
based on plans of care that doctors authorized for medically unnecessary
home health services." According to the government, several patients who
had received home health care from Abide did not, in fact, need such
services.

• Relatedly, the government also came to suspect that Abide was "paying
doctors, directly or indirectly, for referring patients." The government
alleged that Crinel (the owner of Abide) had paid the physicians for patient
referrals. Some of these payments were "disguised as compensation for
services performed as medical directors" for Abide. The government also
alleged that Paula Jones's salary, which had doubled during her time
working for Abide, was based on her husband's referrals. This conduct, the
government alleged, constituted a violation of 42 U.S.C. §§ 1320a-
7b(b)(1), (b)(2)—the anti-kickback statute.

• Barnes, Michael Jones, Evans, Paula Jones, and Molden were each charged
with conspiracy to commit health care fraud and conspiracy to violate the
anti-kickback statute. Each physician was also charged with several counts
of substantive health care fraud. Finally, Barnes was charged with
obstructing a federal audit in violation of 18 U.S.C. §§ 2 and 1516.
According to the government, upon learning he was under audit, Barnes
falsified documents to justify his fraudulent certifications.

• The jury convicted Barnes, Michael Jones, Paula Jones, and Molden of
conspiracy to commit health care fraud and conspiracy to violate the anti-

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 kickback statute. Barnes, Evans, Michael Jones, and Molden were each
found guilty of several counts of substantive health care fraud. The jury
also convicted Barnes of obstructing a federal audit. Thereafter, each was
sentenced to a term of imprisonment.

Issues

An appeal was filed wherein the subject of computation of losses among other
subjects was discussed:

• Whether the district court erred in calculating losses?

• Whether the district court abused its discretion when it refused to admit
the proffered consent forms into evidence?

Contentions and Decision

• The court found that the actual loss resulting from Dr. Henry Evans's
scheme exceeded his intended loss; thus, actual loss would be used to
calculate his advisory range.

• It then determined that actual loss in this case included "all Medicare
payments made to both Abide and Evans for all of Evans's patients." Under
this framework, actual loss included not only Evans's fraudulent billings,
but some legitimate billings as well.

• The court cited United States v. Hebron, however, which held that "when
the government has shown that the fraud was so extensive and pervasive
that separating legitimate benefits from fraudulent ones is not reasonably
practicable, the burden shifts to the defendant to make a showing that
particular amounts are legitimate. Here, the court concluded that the fraud
was pervasive, and Evans had failed to produce evidence demonstrating
which bills were legitimate and which were fraudulent. Subsequently, the
court found that the actual loss resulting from Evans's offense totaled
$1,262,043.

• Evans contended that the district court's "refusal to hold an evidentiary

hearing on the question of loss violated his due process rights." According
to Evans, an evidentiary hearing would have allowed him to "put forth
evidence of both legitimate billings and legitimately rendered services that
could have been deducted from the total loss amount." To buttress his
argument, he pointed to the apparent contradiction between the district

Page 3 of 30
 court concluding Evans failed to produce evidence of legitimate billings and
legitimately rendered services on the one hand, and, on the other hand,
the district court's refusal to permit an evidentiary hearing at which such
evidence could have been presented.

• Evans contended that the district court substantively erred during his
sentencing. Evans argued the district court "failed to consider several
categories of evidence in determining the loss amount." Specifically, Evans
pointed to the types of evidence he would have offered at an evidentiary
hearing: (1) "additional evidence to rebut the presumption that the amount
billed accurately depicts the loss amount;" (2) "evidence of . . . legitimate
billings;" and (3) "evidence of . . . legitimately rendered services." After
considering the totality of the circumstances, though, the court believed
his sentence was substantively reasonable. Sentences within the correctly
calculated Guidelines range are afforded a presumption of reasonableness.
Here, Evans's correctly calculated advisory Guidelines range called for
between 63 and 78 months in prison. The court granted a downward
variance to 50 months in prison. This below-Guidelines sentence is afforded
a presumption of reasonableness in this court and Evans has not
sufficiently rebutted that presumption.

• The district court did not abuse its discretion when it refused Evans's
request for an evidentiary hearing. Evans had ample opportunity prior to
sentencing to present evidence relevant to the loss calculation.

• The court affirmed Dr. Evans’s sentence.

• In similar manner, the court held that in the case of Dr. Michael Jones, the
district court's factual finding survives clear-error review. The district
court's well-reasoned statement from the bench adequately justified its
decision to hold Jones accountable for $3,106,954 in actual losses. The
district court noted that "Jones participated in all of Abide billings, including
fraudulent billings;" (2) "her awareness of the fraud was much more
extensive" than she alleges; and (3) "her agreement to jointly undertake
criminal activity extended to the entire reach of the conspiracy." As
previously outlined, these conclusions find adequate support in the record.
The district court's factual findings were thus plausible on the current
record.

• Despite Jones's contentions, the factual findings that formed the basis of
the district court's loss-calculation methodology are not clearly erroneous.

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 • For the same reasons, the district court's restitution order survived
appellate review.

CASE 2

Title and Citation

United States v. Anieze-Smith, 923 F.3d 565 (9th Cir. 2019).

Facts

• Anieze-Smith (“Defendant”) and her co-defendant, Abdul King Garba

(together “Defendants”), owned and operated International Trade &
Consulting, LLC ("ITC"), a durable medical equipment ("DME") supply
company located in Van Nuys, California.

• On April 5, 2013, a federal grand jury returned an indictment charging the

Defendants with seven counts of health care fraud. The gravamen of the
indictment alleged that the Defendants fraudulently billed Medicare for
medically unnecessary power wheelchairs.

• The indictment alleged that, between January 10, 2006, and September
15, 2009, ITC submitted to Medicare fraudulent claims totaling
approximately $ 1,890,433 for DME that was not medically necessary, and
that was sometimes never provided.

Procedural History

The present is an appeal from the United States District Court for the Central
District of California. A jury convicted the Defendants on all five counts charged.
In the Presentence Investigation Report (“PSR”) the following were reported:

1. The fraud scheme was dated from January 2006 to September 2009.
2. Total loss to Medicare- $897,726.91.
3. Total billed amount to Medicare- $1,890,433.82 (“Intended Amount”).
4. Recommended restitution for the amount i.e., $897,726.91.

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 1
Issue

• Whether the loss calculation in the PSR was correct?

- The Defendant challenged the PSR stating that the intended loss
amount should be only 80 percent of the amount billed as she was
aware that she will only be paid 80% on the bills that she submitted
to Medicare.

Decision

The district court found that the intended loss amount was 80 percent of
Medicare’s allowed amount for a total of $1,011,666.96.

With regards to the PSR the district court held that:

“I find that the revised presentence report is accurate and correct except to the
extent that it does not reflect the revised intended loss amount figure which
affects the total offense level. I, therefore, adopt . . . the presentence report in
its material aspects except as noted”.

1
Only issues relevant to our study of calculation of applicable losses for HCF cases by
courts as per USSC are exhibited in all of the listed case laws. It is to be noted that more
issues (than what are been exhibited) maybe raised in these cases.

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 CASE 3

Title and Citation

United States v. Mirando, 768 Fed. Appx. 596, 2019 U.S. App.
LEXIS 10468, 2019 WL 1531461 (9th Cir. Cal. April 9, 2019)

Facts and procedural history

• Defendant-Appellant Michael Mirando was convicted in 2017 of

fifteen counts of health care fraud .

• At trial, through an FBI Special Agent, the government presented

evidence to indicate that Mirando had billed $8.4 million
fraudulently.

• In total, the insurance companies paid approximately $3 million on

these fraudulent claims.

Issue

Whether the loss calculated by the district court based on the intended
loss to Medicare was correct?

- The district court made a finding of the intended "loss amount" from
the fraud. Mirando argues that this was calculated incorrectly.
Since, the Defendant rebut the presumption of the government by
testifying that he knew he would never receive a full reimbursement
of the amount billed.

Decision

The prosecution did not show by clear and convincing evidence that
Mirando intended a loss in the full amounts billed. Thus, the district court
erred when it concluded that by clear and convincing evidence the amount
Mirando billed represented his intended loss.

Ratio Decidendi

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 The court in this case relied upon the case of U.S. v. POPOV2 and
acknowledged that amount billed to the insurer" is "prima facie evidence
of an intended loss for sentencing purposes," but this a rebuttable
presumption. Parties may introduce additional evidence to support
arguments that the amount billed overestimates or understates the
defendant's intent.

2
United States v. Popov, 742 F.3d 911, 2014 U.S. App. LEXIS 2589 (9th Cir. Cal. February
11, 2014).

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 CASE 4

Title and Citation

United States v. Mahmood, 820 F.3d 177, 2016 U.S. App. LEXIS 6798
(5th Cir. Tex. April 14, 2016)

Facts

• Mahmood (“Defendant”) was a licensed physician who owned a number of

Texas hospitals, each of which was an authorized Medicare and Medicaid
provider.

• The events leading to Mahmood's run-in with the law focus on Medicare
and Medicaid's billing procedure and Mahmood's efforts to persuade
employees at his hospitals to manipulate those procedures to increase
insurance reimbursements.

• A key part of Medicare's reimbursement process involves the manner in

which hospitals communicate to Medicare what services the hospital has
rendered to patients. Part of this process involves hospital employees
known as "coders." Coders cull through a patient's medical record and
document the condition that treating physicians have labeled as a patient's
principal diagnosis.

• More complex primary diagnosis codes often trigger increased

reimbursements from Medicare.

• Mahmood executed a scheme to defraud Medicare by inappropriately

resequencing diagnosis codes on Medicare claim forms submitted on behalf
of the patients.

• The district court calculated the total loss caused by the Defendant’s fraud
to be $599,128.02, which was the aggregate amount that insurance
companies reimbursed Defendant’s hospitals.

Procedural History

• It is to be noted that in the PSR the total loss was calculated to be or

$1,978,531.33, which the Defendant argues to be wrongly calculated.
Instead, the Defendant argued that the loss should be reduced to
$599,128.02, which was the portion of the amounts billed that Mahmood's
hospitals expected to be reimbursed.

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 - The court found that the PSR's loss calculation overstated Defendant’s
intended loss and therefore reduced the loss amount to $599,128.02.

Issue

Whether district court’s non-allowance of credit for the fair market value of
services that the Defendant’s hospital rendered to its patients was correct as per
the USSG?

Decided

• The precedents and the USSG required the district court to credit Mahmood
for the fair market value of legitimate health care services that his hospitals
rendered to patients.

• Because this procedural error affected the applicable Guidelines-sentencing

range on Mahmood's conspiracy and health care fraud convictions, we
vacate the sentence imposed on those convictions and remand for
resentencing. Thus, the court allowed the credit.

Ratio Decidendi

• The court acknowledged that as per § 2B1.1 comment. (n. 3(E)(i), and the
cases listed below, the amount of loss must account for “the fair market
value of the services rendered, by the defendant or other persons acting
jointly with the defendant, to the victim before the offense was detected.

1. United States v. Isiwele3,

2. United States v. Klein4,

• Taking into account the following case, the court also acknowledged that
Medicare receives “value” within the meaning of U.S.S.G. § 2B1.1
comment. (n. 3(E) (i)) when its beneficiaries receive legitimate health care
services for which Medicare would pay but for a fraud.

1. United States v. Jones5.

3
United States v. Isiwele, 635 F.3d 196, 203 (5th Cir. 2011).
4
United States v. Klein, 543 F.3d 206, 2008 U.S. App. LEXIS 20069 (5th Cir. Tex.
September 18, 2008).
5
United States v. Jones, 664 F.3d 966, 2011 U.S. App. LEXIS 24979 (5th Cir. Miss.
December 15, 2011).

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 CASE 5

Title and Citation

United States v. Moran, 778 F.3d 942, 2015 U.S. App. LEXIS 2357, 96
Fed. R. Evid. Serv. (Callaghan) 1065, 25 Fla. L. Weekly Fed. C 893 (11th
Cir. Fla. February 17, 2015)

Facts

• Biscayne Milieu Health Center Inc, Florida, (a certified Community Mental

Health Center) offered a partial hospitalization program (“PHP”) for
patients with mental illness.

• A PHP provides intensive outpatient treatment for patients with acute

mental illness who are sufficiently ill that they would otherwise require
inpatient hospitalization. Medicare covers partial hospitalization programs
providing treatment for mental illness, but only does so subject to a variety
of conditions.

• The scheme

To carry out the scheme, the owners and operators of Biscayne Milieu:

5. submitted false and fraudulent claims to Medicare for PHP services for
patients who were not eligible for PHP treatment, for PHP services that
were not medically necessary, for PHP services that were not eligible for
Medicare reimbursement, and for PHP services that were not actually
provided by Biscayne Milieu;

6. offered, paid, or received kickbacks and bribes for recruiting Medicare

beneficiaries to attend Biscayne Milieu;

7. paid kickbacks and bribes to patients to ensure the attendance of ineligible

Medicare beneficiaries at Biscayne Milieu;

8. concealed the submission of false and fraudulent claims to Medicare, the

receipt and transfer of the proceeds from the fraud, and the payment of
kickbacks and bribes to patient recruiters and Medicare beneficiaries;

9. diverted proceeds of the fraud for personal use; and

10. Provide services to patient not eligible for PHP.

• Defendants

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In this case there were 7 individual defendants, including Rafael Alalu, Sandra
Huarte and Antonio Macli and one corporate defendant i.e., Biscayne Milieu
Health Center, Inc.

Issue

Whether calculation of loss amount based upon billed amount to Medicare instead
of the actual amount paid by Medicare was correct?

- Defendants Antonio Macli and Huarte submitted evidence demonstrating

that they had been aware of Medicare's lower reimbursement rate and had
projected future revenue in accordance with that rate.

Decision

Defendants Antonio Macli and Huarte submitted evidence demonstrating that

they had been aware of Medicare's lower reimbursement rate and had projected
future revenue in accordance with that rate. Based on that evidence, the district
court concluded that defendants Antonio Macli, Jorge Macli, and Huarte had
intended to receive only the amounts paid by Medicare over the course of the
conspiracy, totaling approximately $11.4 million, rather than the amounts billed,
totaling $57,689,700.

Unlike defendants Antonio Macli and Huarte, defendant Alalu neither identified
evidence establishing that he knew the rate of reimbursement by Medicare nor
that he intended for Biscayne Milieu to receive only the amounts paid by
Medicare, rather than the amounts billed. Therefore, the district court found that
defendant Alalu was responsible for $14.5 million, the amount for which Medicare
was billed.

Ration Decidendi

The court reduced the loss amount from the billed amount to the actual amount
for the defendants who were able to provide evidence of their knowledge of the
lower capped amount (actual amount) that they will receive.

The intended amount of the defendant who ignored providing any evidence
showing his intention to only receive the actual amount was calculated on the
billed amount.

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 CASE 6

Title and Citation

United States v. Popov, 742 F.3d 911, 2014 U.S. App. LEXIS 2589 (9th
Cir. Cal. February 11, 2014)

Facts

• Egiazarian owned all or part of the three health care clinics.

• Even though neither Popov nor Prakash (“Appellants”) ever examined or

met a patient, they visited Egiazarian’s office in Los Angeles, California, on
a near weekly basis to sign patient charts, Medicare claim forms, and blank
Medicare Redetermination Request forms. The Appellants applied for and
received Medicare provider identification numbers for the clinic and opened
bank accounts in their own names to receive Medicare payments.

• The clinic submitted claims under Popov’s provider number in the amount
of $1,079,862.22. The allowed amount for these claims was $361,994.25,
of which Medicare paid $283,660.26, slightly less than eighty percent of
the allowed amount.

• The total amount billed to Medicare under Prakash’s provider number was
$1,156,470.66. The allowed amount was $385,967.06 and the amount
paid was $302,770.46,

Procedural History

• On May 20, 2010, Popov and Prakash were indicted, along with nine co-
defendants, on one count of conspiracy to commit health care fraud and
several counts of health care fraud.

• On January 12, 2012, the district court sentenced Popov to 97 months of

imprisonment, the low end of the applicable advisory guideline range,
followed by three years of supervised release. The court also ordered Popov
to pay $607,456.80 in restitution.

Issue

Whether the intended loss calculated as per § 2B1.1 of U.S. Sentencing

Guidelines Manual were correct?

Page 13 of 30
 - Appellants argue that the district court erred in finding that the intended
loss was the amount billed to Medicare, rather than the amount Medicare
actually paid.

Decision

The record below leaves us uncertain as to what the district court understood the
law to be with respect to calculating intended loss for sentencing purposes and
there is evidence suggesting that Popov and Prakash may have been aware that
Medicare only pays a fixed amount, we vacate Popov’s and Prakash’s sentences
and remand for resentencing on this issue consistent with the standard set forth
above. The court may utilize all evidence presented at trial and sentencing. The
parties may present additional evidence for resentencing on the issue of intended
loss.

Ratio Decidendi

The court took into account the precedent of burden shifting framework set by
its sister circuits in the cases of:

3. United States v. Isiwele6,

4. United States v. Miller,7 and
5. United States v. Singh8.

And as per 2011 amendment to USSG (Note 3 to § 2B1.1) acknowledged the

principle that a district court may rely on the amount billed to Medicare and
Medicaid in a health care fraud case as prima facie evidence of the loss the
defendant intended to cause. However, the amount billed is not conclusive
evidence of intended loss. Parties may introduce additional evidence to support
their positions that the amount billed either exaggerates or understates the
defendant’s intent.

The parties may introduce additional evidence to support arguments that the
amount billed overestimates or understates the defendant’s intent.

6
Ibid, 3.
7
United States v. Miller, 316 F.3d 495, 504 (4th Cir. 2003).
8
United States v. Singh, 390 F.3d 168, 194 (2d Cir. 2004).

Page 14 of 30
 CASE 7

Title and citation

United States v. McKenzie, 550 Fed. Appx. 221, 2013 U.S. App.
LEXIS 25573, 2013 WL 6729450 (5th Cir. La. December 23, 2013)

Facts

• Shedrick O. McKenzie pleaded guilty to two counts of conspiracy related to

a scheme to defraud Medicare. The charges involved his ownership and
operation of McKenzie Healthcare Solutions ("McKenzie Healthcare"), a
company that supplied durable medical equipment 1 ("DME") to patients
at three locations in Mississippi and Louisiana.

• McKenzie admitted that he paid patient recruiters for the names and billing
information of Medicare beneficiaries, and for "corresponding prescriptions
for medically unnecessary DME, which, when coupled with the Medicare
billing information, allowed McKenzie to submit false and fraudulent claims
through McKenzie Healthcare to Medicare."

• McKenzie admitted to paying physicians to refer patients to McKenzie

Healthcare to be supplied with DME. He admitted that, between January
2005 and October 2010, McKenzie Healthcare submitted approximately
$9.1 million in claims to Medicare. Medicare reimbursed McKenzie
Healthcare approximately $4.2 million.

• The Probation Office determined that the actual amount of loss attributable
to McKenzie was the $4.2 million that Medicare paid McKenzie Healthcare.
McKenzie objected that the $4.2 million figure assumed that all claims
McKenzie Healthcare submitted were fraudulent, when in fact "a significant
number" were legitimate.

• He asserted that the DME billed to Medicare included "oxygen supplies,

diabetic supplies, braces and orthotics, as well as the wheelchairs that were
a major source of the fraud involved in the prosecution." The Probation
Office responded that it obtained the $4.2 million figure from Medicare, the
victim, and would defer to the district court to make the appropriate
determination regarding restitution.

Procedural History and Issues

• At sentencing, an expert in Medicare billing, Theresa Comeaux, testified on

behalf of McKenzie.

Page 15 of 30
• She testified that she had reviewed an Excel spreadsheet provided by the
Government that contained information about all 10,538 claims that
McKenzie Healthcare submitted to Medicare between 2005 and 2010.

• According to Comeaux, the spreadsheet contained data for some claims

that were filed multiple times. She said that if Medicare denies a claim
initially, providers will sometimes file the same claim a second or third time
in an attempt to cure whatever the problem is.

• However, the spreadsheet was missing data in fields that would have
allowed Comeaux to determine if Medicare had denied the claims that
appeared multiple times. As a result, she could not determine if McKenzie
Healthcare's resubmission of the same claim was in response to a Medicare
denial (and, by implication, an attempt to cure a problem with the claim,
rather than an attempt to get reimbursed multiple times for the same
claim). This "affected the reliability of the $9.1 million figure" in the PSR.

• Comeaux also "reviewed the PSR as it relates to the gross paid amount" of
$4.2 million. She testified that she did not receive information concerning
subsequent adjustments Medicare made to the payments it gave McKenzie
Healthcare. She explained that, in the "normal course of business,
Medicare is in a back and forth relationship with a provider," sometimes
informing the provider that a previous claim was paid incorrectly and either
requesting reimbursement or reducing subsequent payments accordingly.

• She noted that in reviewing the limited business records for McKenzie
Healthcare available to her, she saw instances where McKenzie Healthcare
"had sent money back, and there would be a claims control, or a
correspondence control number on the check that they were returning,
meaning, there was a back and forth relationship with Medicare." Comeaux
testified that she did not know how much should be deducted from the
$4.2 million to account for adjustment claims. She also did not know by
what amount the figures might be "askew" because "we weren't provided
the information necessary to make that kind of judgment."

• Comeaux testified that other information was missing, as well: some claims
in the spreadsheet listed a billed amount of zero, no beneficiary name, no
date of birth, or no address. She stated that "the spreadsheet information
was very deficient." As a result, she could not determine the reliability of
the $4.2 million figure.

Page 16 of 30
• John B. Casey, a special agent for the FBI who investigated the case,
testified that he interviewed the Medicare beneficiaries who "appeared in
the majority of" the claims submitted by McKenzie Healthcare, as well as
their primary care physicians. The interviewees stated that the DME
provided by McKenzie Healthcare was medically unnecessary. Special
Agent Casey testified that the Medicare contractor provided all the data for
the case, including the intended and actual loss amounts.

• McKenzie's counsel conceded that the Government had made a prima facie
showing of a $4.2 million actual loss, but argued that he had rebutted the
showing with Comeaux's testimony that the $4.2 million figure did not
account for adjustments made by Medicare. The district court noted
Comeaux's inability to quantify the amount of the adjustments, but
McKenzie argued that the Government bore the burden of proving the loss
amount.

• The Government agreed that the $4.2 million figure did not accurately
represent the actual loss, and called Special Agent Casey to testify a second
time regarding McKenzie Healthcare's bank records. According to Special
Agent Casey, between January 2007 and September 2010—only a portion
of the conspiracy period, but the time frame for which the Government had
McKenzie Healthcare's financial records—$3.1 million in payments from
Medicare was deposited into McKenzie Healthcare's bank account. Special
Agent Casey noted that the Government did not have records of Medicare
payments made during the two years before January 2007.

• Considering all the evidence, the district court admitted that it "may be
making a stab," but concluded that "this loss is closer to the $3.1 million
figure than it is to the $4.2 million figure." The court found that the small-
value DME items that McKenzie Healthcare billed to Medicare between
January 2007 and September 2010 were likely legitimate claims, since
such "minor items that didn't rake in the big bucks would hardly be worth
the effort" of committing fraud. The court, therefore, deducted $100,000
from the $3.1 million figure to account for these items and concluded that
the actual loss amounts attributable to McKenzie was $3.0 million.

• The court ordered restitution in this amount "due immediately," jointly and
severally with four co-defendants, but it waived McKenzie's fine after
finding that he did not have the ability to pay it. The court sentenced
McKenzie to concurrent prison terms of 72 and 60 months, below the
guidelines range of 121 to 151 months, along with a two-year term of
supervised release. McKenzie timely appealed.

Page 17 of 30
Discussion

McKenzie’s assertions included:

• $3.0 million restitution award "is not supported by competent evidence"

because it is incomplete and "based upon unaudited information supplied
from a contractor."

• $3.0 million figure "fails to include adjustment claims"—when McKenzie

Healthcare returned money to Medicare or Medicare withheld subsequent
payments—and as a result, "could be off . . . by millions.

• McKenzie argues that the Government's data "failed to account for

compensation that would have occurred in the absence of a crime.

Decision

All claims made by McKenzie were found unpersuasive by the court and the
restitution award and actual loss amount rather than the billed amount was
considered.

Page 18 of 30
 CASE 8

Title and Citation

United States of America v. Anthony Francis Valdez, No. 12–50027.

United States Court of Appeals, Fifth Circuit. Aug. 12, 2013.

Facts

The Defendant Anthony Valdez (“Defendant”), a psychiatrist, was convicted in

the United States District Court for the Western District of Texas of money
laundering, conspiracy to commit health care fraud, health care fraud, and
engaging in monetary transactions in property derived from unlawful activity,
was sentenced to 300 months in prison, and ordered to pay $13,356,645.44 in
restitution to federal and state insurance programs and private insurers.

Issues

Whether loss calculation based on the gross amount of fraudulent claims

submitted by the Defendant to the programs were correct?

- The Defendant objected to the loss calculation at sentencing and argued to

the district court that the evidence showed that he did not subjectively
intend to cause the loss of the full amount that he billed the Programs. The
Defendant used his office managers statement as evidence: “Those are our
rates, which are usually based on three times on [sic] what Medicare
covers, that’s pretty much standard practice.’’

Decision

Based on the clear guidance in the precedents, the court found that it was error
for the district court to calculate the intended loss without considering the
evidence in the record that rebutted the prima facie evidence of intended loss.

Ratio Decidendi

Again, in this case, the court acknowledged the principles stated in the
precedents of:

1. United States v. Isiwele,9 and

2. United States v. Singh10.

9
Ibid, 3.
10
Ibid, 8.

Page 19 of 30
In the health care fraud context, the amount fraudulently billed to
Medicare/Medicaid is prima facie evidence of the amount of loss [the defendant]
intended to cause, but the amount billed does not constitute conclusive evidence
of intended loss; the parties may introduce additional evidence to suggest that
the amount billed either exaggerates or understates the billing party’s intent.

In health care fraud cases, this court has explained that ‘‘our case law requires
the government [to] prove by a preponderance of the evidence that the
defendant had the subjective intent to cause the loss that is used to calculate his
offense level.’’

Page 20 of 30
 CASE 9

Title and citation

United States v. Isiwele, 635 F.3d 196 (5th Cir. 2011)

Facts

• Appellant Enitan Isiwele (“Appellant”) was the owner of a durable medical

equipment (“DME”) supply company called Galaxy Medical Supply
(“Galaxy”), which was a supplier to both Medicare and Medicaid.

• In an effort to meet urgent medical needs in the wake of Hurricanes Katrina

and Rita, Medicare eliminated certain documentary requirements for the
replacement of any power wheelchairs lost or damaged in those hurricanes.

• Galaxy used this waiver to bill Medicare and Medicaid a total of

$587,382.65 for power wheelchairs and related accessories and was
reimbursed a total of $297,381.04. The beneficiaries of these wheelchairs
either didn’t need wheelchair or were not eligible for the waiver by Medicare
or Medicaid.

Issue

• Whether calculation of loss amount based on the amount billed by

Appellant to Medicare/Medicaid, rather than the actual amount paid by
Medicare/Medicaid is correct?

- The Appellant alleged that he knew he would receive lower capped

amounts than what he billed Medicare/Medicaid (as per the fixed fee
schedule), and that he therefore did not have the subjective intent
to cause a loss equal to the amount he billed.

Discussion

• The district court determined the loss amount in this case to be

$587,382.65. In making this determination, the district court measured
the amount of intended loss by the amount that the Appellant billed to
Medicare/Medicaid, rather than the lower amount that Medicare/Medicaid
allowed and paid for the wheelchairs.

Page 21 of 30
 • The court held that “Although it may be theoretically possible to intend a
loss that is greater than the potential actual loss, our case law requires the
government [to] prove by a preponderance of the evidence that the
defendant had the subjective intent to cause the loss that is used to
calculate his offense level.”

Decision

There is some evidence in the record on the basis of which the court could have
concluded that Appellant intended to receive only the lower capped amount. The
determination of the factual predicate for the Appellants sentence is best made
by the district court in the first instance. We remand for resentencing on this
issue consistent with the standard set forth. The district court may take additional
evidence if it deems it necessary.

Ratio Decidendi

United States v. Sanders11

“prima facie evidence of the amount of loss [the defendant] intended to cause,”
but “the amount billed does not constitute conclusive evidence of intended loss;
the parties may introduce additional evidence to suggest that the amount billed
either exaggerates or understates the billing party’s intent.”

11
United States v. Sanders, 343 F.3d 511, 527 (5th Cir. 2003).

Page 22 of 30
 CASE 10

Title and citation

United States v. Klein, 543 F.3d 206, 2008 U.S. App. LEXIS 20069 (5th
Cir. Tex. September 18, 2008)

Facts

• Ira Klein, a physician, treated a number of patients who had contracted

Hepatitis C. A jury convicted him of eighteen counts of mail fraud in
violation of 18 U.S.C. § 1341 and twenty-six counts of health care fraud in
violation of 18 U.S.C. § 1347 for submitting false claims for many of those
Hepatitis C treatments.

• When billing for the medications he distributed, Klein did not claim the
wholesale price of the drug. A particularly egregious example involved his
purchase from the manufacturer of kits that packaged interferon and
Ribavirin together. These kits were intended to allow patients easily to self-
administer the drugs at home. Instead of claiming the wholesale price of
the kit, Klein broke the kits down, distributed the components, and charged
the insurance companies for the separate prices of the components.

• In addition to claims for self-administered medications and for above-

wholesale drug prices, Klein "up-coded" for certain procedures.

Issue

• Did the court abuse its discretion and fail on the third prong of the test. In
regards to the amount of loss, the district court adopted the Presentence
Report, which accepted an investigator's calculation that did not offset the
amount of loss by the value of the drugs dispensed as directed by U.S.
Sentencing Guidelines Manual § 2B1.1, cmt., application n. 3(E)(i).

Contentions and opinions

• Klein contended that the probation officer, in preparing the PSR, and the
court, in adopting it, erred in their calculation of the amount of loss suffered
by the victims, the insurance companies

Page 23 of 30
 • The government conceded that the amount of loss adopted by the court
does not give Klein credit for the value of the drugs his patients self-
administered. The government, however, characterizes the loss amount as
a finding of fact that they ought to review for clear error. Furthermore, it
contended that the court need only have made "a reasonable estimate of
the loss."

• The government argued that it was a violation of state law for Klein to
dispense drugs as he did, and he ought not to get the benefit of a reduction
in the amount of intended loss for his illegal behavior.

Decision

• The Court held that a straightforward application of the guidelines requires

discounting the actual loss by the value of the drugs dispensed. The failure
to do so resulted in an improper guidelines calculation, which is a
procedural error under Gall, 128 S. Ct. at 59712, that constitutes an abuse
of discretion.

• The district court's failure to discount the actual loss by the value of the
drugs dispensed resulted in an improper U.S. Sentencing Guidelines
calculation, which was a procedural error that constituted an abuse of
discretion. Regarding the restitution order, the district court's failure to
consider the victims' loss influenced that order and was an abuse of
discretion.

• Thus, the district court’s previously considered gross amount was incorrect
for the facts stated above and the actual amount was to be recalculated
after accounting for the errors made previously.

• Therefore, Klien’s sentence and the restitution order were vacated, and the
case was remanded for resentencing.

12
Gall v. United States, 128 S. Ct. 586, 552 U.S. 38, 169 L. Ed. 2d 445, 2007 U.S. LEXIS
13083, 76 U.S.L.W. 4009, 21 Fla. L. Weekly Fed. S 11 (U.S. December 10, 2007)

Page 24 of 30
 CONCLUSION

• The amendment of 2011 to USSG which included commentary note

3 to §2B1.1 provides a rebuttable presumption that the intended loss
equals the amount the defendant billed a government agency.
Therefore, both the parties to a health care fraud case possess the
ability to prove that the intended loss is either understated or
overstated.

• Keeping the above amendment in mind and taking into account the
above case studies done and the related and relevant cases exhibited
it could be concluded that the courts yet don’t have a specific settled
standard in loss calculation as per the USSG in health fraud cases.
Instead, courts apply the directive guidelines (USSG) on a case-to-
case basis and interpret USSG upon available information and
evidence.

• Although the most recent cases being United States v. Karie13, United
States v. Bikundi14 (In this case, the principle of actual loss instead
of intended loss was not applied as the defendants did not make any
efforts to rebut the intended loss claimed by the Government. The
principle was acknlowledged), United States v. Emordi (as cited
above), etc. the courts took the awarded intended losses interpreting
the relevant sections of USSG strictly.

• In the case of United States v. Fisher15, the court strictly held that
"When calculating loss for sentencing purposes, the district court
looks to the greater of actual loss or intended loss." This precedent
was taken from United States v. Willis16.

• Cases as follows are still in courts awaiting judgement, these cases

as and when their judgments come would provide a more clear view
of the courts on the matter:

1. U.S. v. Rickey Delancey, Jr., Case No. 21-20471,

2. United States v. Edward Pizzi, Case No. 21-20467
3. United States v. Mayara Gonzalez Chaviano, Case No. 21-20468-CR
4. United States v. Liliana Liseth Duarte, Case No. 21-20469-CR-Bloom

13
United States v. Karie, 976 F.3d 800, 804 (8th Cir. 2020).
14
United States v. Bikundi, 926 F.3d 761, 797–98 (D.C. Cir. 2019).
15
United States v. Fisher, Case No. 3:19cr76-MCR (N.D. Fla. Mar. 1, 2020)
16
United States v. Willis, 560 F.3d 1246, 1250 (11th Cir. 2009).

Page 25 of 30
5. United States v. Mayra De La Paz, Case No. 21-20474-CR-Bloom
6. United States v. Jason Kashou, Case No. 21-60245-CR-Dimitrouleas
7. United States v. Greisy Rosario Varona Docasal, Case No. 21-20439-
CR-Cooke
8. U.S. v. Angel Pimentel, Case No. 21-20420-CR-King.

Page 26 of 30
 OTHER RELATED AND RELEVANT CASES17

CASE 1

In the following case, the Defendants contended that the district court
miscalculated the loss amount attributable to him, resulting in an offense
level and a guidelines range that was higher than they should have been.
The Defendant relied upon the case of United States v. Moran18.

Although the court in this case discussed and in detail stated the reasons
why the Moran case can’t be applied. This non-application was due to
factual and evidential differences in these cases.

Title and Citation

United States v. Moss, 2022 U.S. App. LEXIS 13722, F.4th, 2022
WL 1597447 (11th Cir. Ga. May 20, 2022)

• The district court found that Moss (“Defendant”) was accountable

for a loss amount of $6,031,046.70 (“Intended Loss”).

• The Defendant intentionally billed in a way that would maximize the

money he received from Medicare.

• “While Moss may not have expected that Medicare . . . would

reimburse him at a rate of 100 percent, it is apparent that he
manipulated his billings to maximize his profits. The Court finds this
evidence credible”

• If the schedule says $100 and the physician’s claim says $60,
Medicare will pay $60. But if the schedule says $100 and the
physician’s claim says $120, Medicare will pay $100. By billing more
than the scheduled amount, Moss ensured that he always got the
full amount Medicare would pay.

• Our Moran decision does not help Moss. Those defendants had
“submitted evidence demonstrating that they had been aware of
Medicare’s lower reimbursement rate and had projected future

17
In this section, we won’t be conducting a case study, but would be explaining the
relevance of the cases.
18
United States v. Moran, 778 F.3d 942, 2015 U.S. App. LEXIS 2357, 96 Fed. R. Evid.
Serv. (Callaghan) 1065, 25 Fla. L. Weekly Fed. C 893 (11th Cir. Fla. February 17, 2015).

Page 27 of 30
 revenue in accordance with that rate. Those defendants had
“submitted evidence demonstrating that they had been aware of
Medicare’s lower reimbursement rate and had projected future
revenue in accordance with that rate.

• The Defendant has not pointed to any evidence, such as revenue

projections based on the actual reimbursable amount, to show that
he was not trying to obtain anything beyond the amount he was
entitled to receive under the schedules.

Ratio Decidendi

• Intended loss is “pecuniary harm that the defendant purposely

sought to inflict” and also “includes intended pecuniary harm that
would have been impossible or unlikely to occur.”

• A district court need not make a precise determination of loss

amount, but only a reasonable estimate of it given the available
information. The estimate must be based on “reliable and specific”
facts, and the court cannot “speculate about the existence of facts
that would result in a higher sentence.” Instead, it must make
factual findings about the loss amount “based on evidence heard
during trial, undisputed statements in the PSI, or evidence
presented during sentencing.

Note

It is also to be noted that in this particular case the court strictly

interpreted the USSG § 2B1.1 cmt. n.3(A), in the absence of strong
evidence from the Defendant and in the light of intention of the Defendant
to gain maximum pecuniary benefit from the fraud scheme.

The court in the absence of specific evidence and based upon the available
information determined the loss amount as the intended amount.

Page 28 of 30
 CASE 2

Title and Citation

United States v. Emordi, 959 F.3d 644, 647, 2020 U.S. App.
LEXIS 15567, *1, 2020 WL 2488181 (5th Cir. Tex. May 14, 2020)

• The four defendants were indicted for conspiracy to engage in

Medicare and Medicaid fraud in their operation of a home healthcare
business, continuing over a period of three years and causing over
$3.5 million in losses. All four were convicted after a jury trial.

• Okwilagwe objected to the enhancement under Section

2B1.1(b)(1)(J) of the Guidelines for an intended loss between $3.5
million and $9.5 million.

• Okwilagwe argued that he overcame the presumption that the

amount billed to Medicare and Medicaid was the intended loss.
During sentencing though, Okwilagwe argued that he had no
burden to produce evidence Elder Care had rendered legitimate
services. Okwilagwe offered no evidence to show that the amount
billed overstated his intent.

• Okwilagwe argued that because Elder Care provided at least some

appropriate medical services to patients, the district court erred by
not subtracting the value of these services from its total loss
calculation. He relies on a precedent in which we held a district
court erred by not discounting the fair market value of dispensed
medications from its loss calculation.

• Okwilagwe analogized to another case where the district court erred

by not reducing the loss calculation by the value of legitimate
services. United States v. Mahmood, 820 F.3d 177 (5th Cir. 2016).
"Medicare would have reimbursed the defendant's hospitals
$430,639 if the claims had been submitted without the defendant's
fraud." Id. at 194. The court recognized that if Medicare had known
of the defendant's fraud, it "would not have paid for the services
that the defendant's hospitals rendered to patients," and if that had
been the case, then the defendant would have been "entitled to no
such credit" for the fair market value of those services. Id. at 193-
94.

Page 29 of 30
• The court held that because Medicare only pays for treatments that
meet its standards, and services rendered by unlicensed personnel
do not meet those standards, Medicare receives no value from
those services. United States v. Jones, 664 F.3d 966, 984 (5th Cir.
2011). Similarly, because of the exclusions, Elder Care's services
were not legitimate because it did not meet Medicare's and
Medicaid's standards, and they would not have paid the claims but
for the fraud. So, the district court did not err in its loss calculation.

Note

• The court did not err in calculating losses since Okwilagwe offered
no evidence to show that the amount billed overstated his intent.

• It was noted that even though Okwilagwe actually provided services

and claimed that the court did not consider the same while
calculating the losses, the court disregarded his contention and
upheld its calculation since Medicare only pays for treatments that
meet its standards, and services rendered by unlicensed personnel
do not meet those standards, Medicare receives no value from
those services.

• Therefore Okwilagwe was not entitled to any reductions.

• It is to be noted that computation of losses may vary depending

upon the facts and circumstances of the case.

Page 30 of 30