Posted and filed under OIG Files.

Actual Loss is defined as “reasonably foreseeable pecuniary harm that resulted from the offense.”  Intended Loss is defined as “the pecuniary harm that the defendant purposefully sought to inflict.”  For us that do not have a law degree, what does this all mean?

In the federal criminal system, a defendant’s potential prison exposure is based on a host of factors that relate directly back to the United States Sentencing Guidelines.  The Guidelines, which were created in the late 1980’s, were intended to foster a system of uniformity across the federal judicial system with respect to the sentencing of defendants.

The US Probation Office prepares a Presentencing Investigation Report (PSI) that relies on among other things, calculations that are done using the Guidelines.  A complex set of calculations are completed, and, for healthcare fraud cases, the “loss” that is identified is used in that calculation. 

Prior to being a Senior Special Agent at the OIG, I was a US Probation Officer, and prepared PSIs for federal sentencing purposes.  Depending on the case and prosecution, these calculations can be challenging. 

As an agent, the loss amounts that I typically provided to the Assistant US Attorney were based on the amount that was paid to the provider, and not the amount billed by the provider.  The Guidelines allow for the use of billed amounts, as the Guidelines provide language that indicates that if an “intended loss” can be identified, that number may be used. 

This, however, is where there is considerable argument and discussion.  There is case law that suggests and supports the use of billed amounts, but I still take issue with this premise.  Again, I am not a lawyer, and my position is one of reasonableness.  I believe that in the healthcare claims world, there are very few instances when the submission of claim results in the actual payment of that amount. 

In pharmacy, for example, claims are point of sale driven, and reimbursements are known and typically the direct result of the same amount billed and paid (there are going to be exceptions, so this is a more generalized conversation). 

When a provider that is in network, and particularly with Medicare, providers fully understand that the number that is on the claim form for reimbursement, is likely nowhere near the amount that will be paid.  That being the case, can it reasonably be argued that the amount billed is the intended loss, when that amount is not actually believed to be paid?

I have often stated that in many instances, the billed amount is made up “out of the ether,” meaning that the provider is submitting a claim or the highest amount that could possibly be billed for that item, service or procedure, knowing that the chances of getting that amount are only going to be under some very specific, and likely rare instances.  For Medicare, however, that number is not even close to what is expected to be paid. 

My quick example will always be as follows:  someone who steals a bank ATM card, and goes to the ATM machine to steal $500, intends on stealing $500.  The criminal did not know that the limit was $300; the criminal wanted $500 and reasonably believed that $500 was attainable.  When a healthcare provider submits a claim for $1,000 for an office visit that has historically paid $100, the provider is participating with Medicare and knows what the fee schedule is, has absolutely no belief that Medicare will be paying $1,000.  The provider never intended to get $1,000 from Medicare. 

In my time as an OIG Agent, working in one specific district, the Chief of the Healthcare Fraud Unit was very specific that paid amounts were the reasonable method of calculating the loss amount to be used for guideline calculation purposes.  In my consulting capacity, I testified at the sentencing of a defendant in a widely publicized case involving medical necessity relative to stents placed by an interventional cardiologist.

The US Attorney’s Office took what I thought was an aggressive approach to the loss amounts, and sought to hold the cardiologist responsible for ALL charges submitted under a Diagnostic Related Group (DRG) for patients that were admitted to the hospital, which included items, services and procedures that the interventional cardiologist had no direct or indirect involvement with causing to be provided (such as an MRI related to neurological tests).  The cardiologist was being held accountable for tests and procedures that took place days, if not weeks, prior to him even meeting or treating the patient. 

As those of you who work in this space know, the amounts billed, particularly in the DRG setting, can be a fraction of what is paid in the Medicare world.  Anyone who reasonably perceives that they will be paid what they bill, is either new to healthcare, or new to the planet.  I have had countless conversations about this very topic, and I do think it is going to get more convoluted with time. 

For those keeping up, between price transparency and the surprise billing rules that are now out there, the discussion of billed and paid will be ever more present.  As someone who spent their professional career in the fraud, waste and abuse space, I am perplexed how anyone also working in this space can reasonably believe that the billed amount is the “intended” amount to be paid by anyone.  I am not sure if I have ever met anyone who, when posed with the same question, can reasonably articulate (and specifically with Medicare) that the billed amount is what a healthcare provider truly believes will be paid. 

I will be writing a few posts going forward on this topic, as there has been some narrowing of the definitions and scope to which loss amounts are calculated. 

Fear not, there is hope of reasonableness.

By Eric Rubenstein, MSCJ, CFE