United States: Eleventh Circuit Affirms Order For $1.195 Million In Restitution And 48 Month Sentence In Commercial Insurance Healthcare Fraud Case

Last month, the Eleventh Circuit upheld a $1.195 million restitution order and 48-month sentence against Carlos Verdeza for three counts of healthcare fraud. See United States v. Verdeza, No. 21-10461, 2023 WL 3728960 (11^th Cir. 2023). Verdeza was a case brought by the United States against a physician assistant who produced fraudulent patient files and sought reimbursement from Blue Cross Blue Shield (BCBS) commercial healthcare insurance for physical therapy treatments that were never performed. A jury in the United States District Court for the Southern District of Florida convicted Verdeza on three healthcare fraud counts. Verdeza illustrates that prosecutors can and do prosecute healthcare fraud cases that do not involve government payors.

Background on the Conviction

Mr. Verdeza was a physician assistant working for two physical therapy clinics in South Florida. For over a year, Verdeza filed insurance claims with BCBS for prescribing and treating "patients" with physical therapy. However, neither clinic actually supplied the physical therapy to the alleged patients. Both clinics used recruiters to identify participants for their clinics, who all received kickbacks. Once recruited, physician assistants like Verdeza would see the participants, ask one or two questions, then prescribe therapy based off this limited assessment. Participants rarely returned to the clinic and most never actually received any treatment. Instead, the participants would sign forms affirming treatment, and the clinics subsequently filed the forms to seek BCBS reimbursement.

Together, the two clinics billed BCBS for $3.4 million and received roughly $1.2 million in commercial insurance reimbursement. BCBS began an investigation after noticing the unusually large number of patients the clinics claimed to be treating. BCBS denied any further claims from the clinics after requesting further documents. Independent of this BCBS investigation, the FBI also began an investigation into the clinics based on information they received from one of the clinics' billers who agreed to supply the FBI information after he was arrested in a different fraud investigation.

The United States indicted Verdeza on eight counts of healthcare fraud including conspiracy to commit healthcare, wire fraud, and substantive healthcare fraud linked to false claims for reimbursement. After a jury trial, Verdeza was convicted on three counts.

The Eleventh Circuit's Ruling on Verdeza's Appeal

On appeal, Verdeza primarily argued that the evidence at the trial was insufficient to support the convictions. However, the Eleventh Circuit ultimately affirmed the conviction rejecting the following arguments:

• Lack of Evidence He Participated in Fraud: Verdeza maintained that he did not participate in the fraud that occurred, which he argued only consisted of filling out and submitting fraudulent bills after the fact. The Court did not accept this argument for various reasons, including that Verdeza actually performed the brief examinations of the participants and prescribed the false treatment plans.
• Lack of Evidence He Aided and Abetted the Scheme; Verdeza also argued that if his actions in backdating the patient charts were to be considered fraud, these actions made him liable as an accessory-after-the-fact, not an active participant. In denying this characterization, the court pointed to 18 U.S.C. § 2, which defines aider or abettor as one who "aids, abets, counsels, commands, induces or procures [a crime's] commission" or "[w]hoever willfully causes an act to be done." The court distinguished an aider and abettor with an accessory-after-the-fact, which is one who "receives, relieves, comforts or assists the offender [to a criminal offense] in order to hinder or prevent his apprehension, trial or punishment." The court held that there was ample evidence to characterize Verdeza as an aider and abettor for several reasons, including that Verdeza continued the falsification by signing documents which alleged that the participants had returned to seek further care and that another staff member at the clinic would meet with Verdeza to ensure that the forms were filled out correctly before sending the forms to BCBS.
• Lack of Knowledge and Intent: Verdeza argued that he did not act "knowingly and willfully as 18 U.S.C. § 2 requires." However, the court ruled against Verdeza on this element because he continued to sign the patient forms, even if he had not actually examined the patient, which could suggest his state of mind. Further, he had committed a prior similar act, which led to a settlement and made his lack of knowledge argument difficult to maintain.
• Challenges to Evidentiary Rulings: Verdeza contested several evidentiary rulings made by the district court, but the Eleventh Circuit upheld all of the rulings, deferring to the district court judge.
• Sentencing Order was Incorrect: Verdeza argued that the sentencing order was decided incorrectly and that he should only be liable for the participants which he specifically treated, or that the sentence was "substantially unreasonable" since it included the wider scheme. The court referenced the Mandatory Victim Restitution Act, which requires that "district courts must order restitution in crimes against property cases equal to the value of lost property." Thus, Verdeza could be held liable for the full amount of damages as the amount of liability in the form of restitution is "based on a victim's actual loss directly and proximately caused by the defendant's offense of conviction" i.e., he could be liable for the actions of the wider scheme.

Conclusion

United States v. Verdeza demonstrates that the government can and will prosecute an individual for committing acts of healthcare fraud against a private company. Although the government did not directly suffer harm from the acts of Verdeza fraudulently filing claims with a commercial healthcare insurer, i.e., no Medicare or Medicaid claims were at issue here, the government expended significant resources to investigate and prosecute Mr. Verdeza. This case is a good reminder for the healthcare industry that while federal law enforcement efforts are mainly focused on fraud committed against federal healthcare programs, the government has the ability, resources, and motivation to prosecute cases of blatant fraud committed against private entities as well. As such, in many instances, carving out Medicare and Medicaid beneficiaries from a problematic scheme will not immunize misconduct and could be used as evidence of knowledge in a future prosecution. While clients should be particularly scrupulous when contracting with the federal government, they should also be aware of the potential legal consequences (including criminal prosecution) of committing fraud against private entities.

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