Because Medicare and Medicaid pay health care providers promptly and without any inquiry into the probity of the claim health insurance fraud is a fairly easy crime to commit with little chance of being arrested or convicted. Perhaps that is the reason why the extent of health insurance fraud is counted in billions of dollars.

In United States of America v. Eddie Wayne Louthian, No. 13-4231 (4th DCA, June 23, 2014), [enhanced version available to lexis.com subscribers], the Fourth Circuit Court of Appeal was faced with an attempt by a convicted health insurance criminal to avoid a 48 month sentence of forfeiture of nearly $1 million of his assets.

Eddie Wayne Louthian, Sr., was convicted in the Western District of Virginia of multiple offenses arising from a health care fraud scheme. On appeal, Louthian challenged each of his convictions, as well as the district court’s forty-eight-month sentence and forfeiture order.

Between 2005 and 2011, Louthian was President and Business Manager of the Saltville Rescue Squad, Inc. (the “Squad”), headquartered in Saltville, Virginia. The Squad provided ambulance transport for medical emergencies and non-emergency transportation for dialysis patients. The Squad billed Medicare and certain private insurers, including Anthem Blue Cross/Blue Shield (“Anthem”), for its services.

The Medicare system provides insurance coverage for ambulance transportation to and from dialysis centers when conveyance by other means would endanger a patient’s health. Before authorizing payments for recurring, non-emergency transports, Medicare requires the issuance of a physician certification statement, also known as a Certificate of Medical Necessity (“CMN”).

The Medicare system is administered to ensure that claims for dialysis transports are paid to providers as quickly as possible. When such a claim is filed electronically, it must be paid within fifteen days of receipt. If a claim is filed on paper, it must be paid within twenty-nine days. Because of the large volume of such claims for Medicare payments, little or no inquiry is made into the validity of claims as they are received. If a paid claim is ultimately suspected of having been fraudulently submitted, the authorities will investigate and pursue an appropriate reimbursement, in addition to potential criminal charges.

In April 2008, the Medicare Fraud Control Unit of the Virginia Attorney General’s Office (the “Fraud Unit” or the “Unit”) began investigating the Squad’s activities. The Fraud Unit suspected that the Squad was engaged in a scheme to falsely bill Medicare and private insurers for services that were not medically necessary. The Unit’s investigation focused on the Squad’s billings for services to three dialysis patients. The Squad provided round-trip ambulance transportation for those patients, up to three times per week, between their Saltville homes and a dialysis center in Abingdon, Virginia, about twenty miles away. For each such transport, the Squad billed Medicare approximately $1,200 to $1,500. The Squad would also bill Anthem, which was a secondary insurer for each of the three patients.

The Unit, working with the United States Attorney unearthed evidence that Louthian and other Squad employees had forged, altered, and lied about the three patients’ medical conditions on documents submitted to support the Squad’s requests for payments.

On January 17, 2012, Louthian, Squad employee Monica Hicks, and the Squad itself were indicted by the grand jury. The jury trial of Louthian and the Squad, which began in Abingdon on September 10, 2012, lasted for about ten days.

The jury was presented evidence that at Louthian’s direction Squad employees and volunteers engaged in a pattern of forging and altering CMNs, recording false information on call sheets, and making other material misrepresentations that Louthian hoped would get the transports paid.

Several Squad employees testified that they were instructed by Louthian to embellish call sheets with fabricated details. Squad employees were instructed to use words like “non-ambulatory,” even when the patients could walk, and that Louthian told her to report that one patient was “partially blind,” even though the employee had seen the patient driving her own vehicle.

Louthian was convicted on seven counts. A sentencing hearing was based on a presentence report (“PSR”) that grouped his seven convictions and calculated a total offense level of 32 with a criminal history category of I. As a result, Louthian’s advisory Guidelines range was 121 to 151 months of imprisonment. Louthian objected to most of the findings. The district court rejected each of Louthian’s objections and adopted the PSR.

The court varied downward from the advisory Guidelines range and imposed seven concurrent prison terms of forty-eight months each. On March 21, 2013, the court entered its criminal judgment, incorporating the preliminary order of forfeiture.

ANALYSIS

An appellate court will sustain a guilty verdict if there is substantial evidence, taking the view most favorable to the Government, to support it. Substantial evidence exists if there is evidence that a reasonable finder of fact could accept as adequate and sufficient to support a conclusion of a defendant’s guilt beyond a reasonable doubt. The appellate court always defers to the jury’s determinations of credibility and resolutions of conflicts in the evidence, as they are within the sole province of the jury and are not susceptible to judicial review.

In order to prove the conspiracy to commit health care fraud the government was required to show an unlawful agreement between Louthian and at least one other person to commit health care fraud. The substantive health care fraud offense required proof that Louthian had knowingly and willfully executed a scheme to defraud any health care benefit program; or to obtain, by means of false or fraudulent representations any of the money of any health care benefit program in connection with the delivery of or payment for health care benefits, items, or services. Finally, the four false statement charges required proof that Louthian knowingly and willfully made materially false or fraudulent statements in connection with the delivery of or payment for health care benefits, items, or services.

Louthian was not convicted of providing services to individuals who did not qualify for insurance reimbursements. His convictions were based upon false and fraudulent statements to Medicare and Anthem to secure payments for the dialysis transports. Louthian and those under his supervision falsely advised Medicare and Anthem that at least three patients needed ambulance transportation because they were bedridden. The trial evidence was more than sufficient to support the jury’s finding that such representations were untrue. The prosecution presented video, photographic, and testimonial evidence illustrating that the Squad’s dialysis transport patients were able to stand, walk, drive, shop, garden, and perform manual labor, among other things.

Louthian also challenged his below-Guidelines sentence of forty-eight months as being excessive, in view of his age, poor health, and lack of a criminal history. The trial court considered Louthian’s request for a downward departure under the Guidelines, but concluded that none was appropriate. Because the court understood its authority, but declined to exercise it on the facts of this case, Louthian cannot contest on appeal the court’s failure to depart downward.

To the extent that Louthian challenged his sentence as otherwise unreasonable, the appellate court was unmoved. A criminal forfeiture of tainted assets in a health care fraud proceeding is mandatory. See 18 U.S.C. § 982(a)(7) that provides that “[T]he court . . . shall order the person to forfeit property, real or personal, that constitutes, or is derived, directly or indirectly, from gross proceeds traceable to the commission of the offense.” In this situation, it is apparent that the prosecution and the court adhered to the applicable procedures.

ZALMA OPINION

Health insurance fraud is rampant across the United States. Prosecutors are underfunded and limit their investigations of health insurance, Medicare and Medicaid fraud to major cities with less populous areas being free of investigation and prosecution.

Since the convictions and $1 million forfeiture only related to three patients Louthian there is a high probability that more patients were fraudulently transported and the amount stolen was a great deal greater than the amount taken and Louthian had sufficient assets to pay counsel to go forward with this appeal.

This case is evidence that Medicare, Medicaid and insurers should not pay all claims presented promptly without some investigation or, before accepting a person or entity as a provider, a thorough investigation of the provider. If not, the crime will continue successfully until the government programs and insurance companies run out of money to pay them.

   By Barry Zalma, Attorney and Consultant

Reprinted with Permission from Zalma on Insurance, (c) 2013, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.

Mr. Zalma can be contacted at Barry Zalma or zalma@zalma.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.

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