Fifth Circuit Unconvinced by “Everyone Knew” Standard of Knowledge; United States Court of Appeals for the Fifth Circuit No. 18-31078, U.S. v. Jonathon Nora

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The Fifth Circuit reversed a jury decision and vacated a prison sentence for a defendant in a healthcare fraud case. The jury had found the defendant guilty of conspiracy to commit healthcare fraud and to pay illegal healthcare kickbacks. The government based its case on the defendant’s employment as an office manager for a home health services entity. The government asserted that the defendant’s duties—including scheduling nurse visits and physicians’ appointments, and processing vouchers for referral payments—placed him in the midst of the fraudulent activity, which included falsely certifying patients for home health services and paying illegal kickbacks for referrals. However, the court found the evidence tangential. While the defendant’s job responsibilities touched on various aspects of the fraud, the court found no evidence that he knew that physicians were falsely certifying patients for services despite a lack of medical need or that the referral payments violated the AKS. While a cooperating defendant asserted that “everyone knew” about the fraud, the court found the testimony too vague to impute knowledge to each of the entity’s 150 employees. The court also contrasted the case against others where office staff were implicated in fraud, noting that the defendant—who was hired by the defendant entity as a 22-year old with no prior experience in the healthcare industry—could reasonably attest that he was unaware of the sector’s complex regulatory scheme.

Jonathon Nora appealed his conviction on charges of conspiracy to commit healthcare fraud, conspiracy to pay or receive illegal healthcare kickbacks, and aiding and abetting healthcare fraud. Nora argued the convictions were based on insufficient evidence.

Nora was tried and convicted alongside five codefendants for his involvement in a large home health care fraud and kickback scheme in connection with his employment at Abide Home Health Care Services Inc. His codefendants filed a separate appeal of their convictions, but were unsuccessful.

According to the allegations, Dr. Shelton Barnes, Dr. Michael Jones, Dr. Henry Evans, Paula Jones, and Dr. Gregory Molden were employed by Abide, a home health agency owned by Lisa Crinel. The four physicians were house doctors, who referred patients to Abide for home healthcare services. Paula Jones worked for Abide, processing Medicare billings.

The government alleged that Abide billed Medicare for home healthcare services for beneficiaries who did not need such services, but who had been fraudulently certified to receive them. According to the government, when an estimated Medicare reimbursement was below Abide’s purported break-even point, Paula Jones would send the patient file back to the case managers to see if they could re-score the diagnosis and refer the patient for additional services. The government alleged these actions fraudulently inflated Abide’s Medicare billings.

The governments also alleged Abide paid physicians, directly or indirectly, to refer patients. The government alleged Abide disguised the payments as compensation for services and based Paula Jones’ salary, which had doubled during her employment, on the referrals of her husband, defendant Michael Jones.

The government indicted 23 individuals in connection with the scheme, many of whom pleaded guilty, including Crinel, Abide’s owner. As part of her plea bargain, Crinel agreed to cooperate with the government’s investigation and to testify against the remaining co-defendants.

During her testimony, Crinel explained that Nora worked for Abide as an office manager, up through the date the government executed a number of search warrants. In this role, Nora coordinated new patient intake and admissions. His tasks included fielding calls, verifying insurance coverage, assigning nurses to conduct evaluations and make home health visits, and helping with data entry.

Nora also contacted potential patients identified by recruiters to ascertain their interest and eligibility for home healthcare services. If a patient expressed interest in home health services, but her doctor did not approve it, Nora would inform the patient that she would have to see a different physician to obtain approval. If the patient remained interested in Abide’s services notwithstanding her own doctor’s recommendation, Nora would offer to assign the patient to one of Abide’s house doctors for a separate evaluation of her eligibility.

Nora’s responsibilities entangled him in various aspects of the kickback scheme. First, Nora connected prospective patients with the “house doctors” who referred patients to Abide for home health services. The government alleged that this made Nora complicit in the scheme. The government also alleged that Nora processed the patient referral payments, which it characterized as illegal kickbacks.

Finally, the government alleged that Abide falsified patient records to ensure that patients continued to receive home health services and that Abide could continue billing for them. Medicare generally approves patients for one 60-day episode of home health services. While patients can be recertified for an additional 60-day period, home health is intended to be a temporary benefit and Medicare will flag a patient that is certified too many times in a row.

To avoid raising any red flags, Abide would continue providing services to a home health patient, but not submit any billings to Medicare. This meant that the patient experienced no change in services, while Abide could later recertify the patient for another 60-day benefit period or more. The court found Nora’s role in this scheme unclear, although the evidence suggested he knew that patients were discharged from home health services, yet continued to receive them. Nora also handled the schedules of the nurses who visited the patients who received free home health services.

As an example, the government presented evidence of a specific but anonymized patient who received home health services despite not being eligible for them. The owner of a group home testified that when she wanted to refer a patient, including this one, to Abide, she would call Nora to make the referral. Nora would then send a nurse to assess the patient and refer the patient to Dr. Michael Jones. Nora also distributed payments for the referrals.

At the conclusion of the government’s case-in-chief, Nora moved for a judgment of acquittal, which the district court denied without particularizing evidence of Nora’s knowledge of the unlawfulness of Abide’s practices. After he was convicted, Nora renewed his motion for judgment of acquittal, and in the alternative, moved for a new trial. The district court denied the motion, again without pointing to particularized evidence of Nora’s knowledge of the unlawfulness of Abide’s practices. After receiving his sentence, Nora appealed.

In his appeal, Nora argued that his convictions are not supported by sufficient evidence. The court found it undisputed that Nora worked at Abide during the period covering the alleged scheme. However, the parties disputed whether Nora knew that his work was unlawful and whether, legally, there was sufficient evidence introduced at trial to allow a reasonable juror to conclude that Nora acted willfully to defraud Medicare.

Nora argued throughout his trial and on appeal that he did not have the intent, knowledge, nor awareness of an illegal health care fraud scheme or illegal health care kickbacks at Abide required to convict him. For example, Nora argued that while he may have understood that Abide made referral payments for new patients, there was no evidence at trial that proved that he knew these payments constituted unlawful kickbacks. He made similar arguments about his role in the various practices that constituted Abide’s fraud on Medicare and with respect to Abide’s treatment of the individually identified patient above.

The Fifth Circuit agreed, finding the evidence presented at trial did not prove that Nora understood Abide’s various practices and schemes to be fraudulent or unlawful, and thus there was insufficient evidence to conclude that Nora acted with “bad purpose” in carrying out his responsibilities at Abide.

Further, the court found that the evidence that purportedly suggested his understanding failed on close inspection. For example, the government argued that Nora received training on compliance, Medicare, and home health, with the implication being that this training alerted him to the unlawful nature of Abide’s practices. However, the court found the evidence consisted of two pieces of paper with limited probative value.

The first piece of evidence was a one-page certificate stating that Nora had completed the “2013 Palmetto GBA Home Health Workshop Series” sponsored by the “HomeCare Association of Louisiana” which is described as an approved provider of continuing nursing education. The government presented a witness who stated that the training was specific to home health services, but the court found no evidence of what the training entailed or that it discussed any healthcare law or regulation, let alone regulations about kickbacks and improper billing practices.

The second piece of evidence was an Abide form signed by Nora, which stated that Nora “participated with the compliance program” and had “been briefed on compliance.” The paper also stated that Nora had been advised to report any fraudulent behavior as soon as possible. Again, the court found no description of what the compliance program entailed.

The government also asserted that Nora attended regular staff meetings, during which staff discussed changes to Medicare regulations, but the court again found no supporting evidence of the content of these meetings or discussions.

The court found this evidence insufficient. According to the court, a juror would have to make a speculative leap about the content of these trainings and meetings—that they somehow alerted Nora to the unlawfulness of Abide’s practices and the actions he took to support them. The court found this insufficient to support a finding that Nora acted willfully.

The court acknowledged that Nora could have learned of the schemes from his colleagues who were involved in it. The government presented two witnesses who testified about their understanding of the various schemes. However, while both provided details of the schemes, neither testified that Nora understood the unlawful or fraudulent purpose behind Abide’s practices. Neither testified that she had had a conversation with Nora about avoiding red flags, or the illicitness of referral payments, or that the house doctors unlawfully approved medically unnecessary plans of care.

While one witness testified that “everyone” knew about the home health services scheme, she provided no other details. The court could not determine whether everyone in the office knew about the practice, or whether everyone knew the practice violated Medicare regulations. The court acknowledged that the practice of providing services while not billing Medicare was inherently suspicious. However, even if a reasonable person in Nora’s shoes should have known (or at least suspected) that this practice was unlawful, the court reasoned that would only make Nora guilty of negligently participating in a fraud. It did not prove that Nora acted “willfully” in facilitating the practice or the fraud.

Similarly, while Crinel testified that Abide’s “culture” was that the company needed to hold on to its patients to make payroll, regardless of medical necessity, the court found this insufficient. While testimony that “everyone knew” about misconduct can support a finding that an individual acted willfully, the court found Crinel’s statements too general, especially when referencing a business in the healthcare industry, which operates via a complex system of laws and regulations. The court found the government could not impute knowledge to each of Abide’s 150 employees, merely because “everyone knew” about the company’s practices.

The court compared this case to others in which office staff were held liable for fraudulent activity. In contrast to a case where a highly experienced office manager was deeply involved in the fraud, the court noted that Nora was a 22-year old high school graduate when he was hired by Abide and that he never handled billing. The court found no evidence that Nora knew that Abide’s patients did not require home health services or that he knew that he assigned patients to physicians who would falsify eligibility.

Though she cooperated with the government, Crinel never testified that she had conversations with Nora about the schemes. The court found it telling that the government had the cooperation of the schemes’ ringleader but never obtained testimony directly implicating Nora, who remained a defendant.

The government argued that, given Nora’s years of employment with Abide, it was difficult to believe that he had no knowledge of the fraud. However, while the court acknowledged that proximity to fraud can lead to an inference of knowledge, it found the evidence lacking. Specifically, the evidence did not show that Nora directly observed, or deliberately closed his eyes to, fraudulent behavior such that a rational juror could infer that he knew about Abide’s fraud.

Even under an extremely deferential review of jury verdicts, the court found insufficient evidence to support a finding that Nora knowingly violated Medicare regulations and the Anti-Kickback Statute. The court therefore reversed Nora’s convictions and vacated his sentence.

FCA - US v Nora