The U.S. Fifth Circuit recently reversed a former home health agency employee’s conviction and vacated his sentence related to three counts of healthcare fraud and abuse. Jonathan Nora was convicted by the trial court of conspiracy to commit health care fraud, aiding and abetting healthcare fraud, and several violations of the Federal Anti-Kickback Statute (AKS) alongside five codefendants, all employed by home health agency Abide Home Care Services, Inc. (“Abide”). This reversal comes soon after a separate Fifth Circuit panel denied an appeal from Nora’s codefendants, as previously discussed in a Nov. 2020 FCA Insider post.

United States v. Nora, No. 18-31078, 2021 WL 716628 (5th Cir. Feb. 24, 2021), concerned Nora’s separate appeal apart from the other defendants. As discussed in our prior alert, Nora’s codefendants were not successful in appealing their convictions related to Abide. The government had indicted 23 individuals with conspiracy to commit health care fraud, conspiracy to violate the AKS, and several counts of substantive health care fraud. In the previous appellate decision, Barnes, the Fifth Circuit found a reasonable juror could have convicted the defendants. Here, by contrast, the Fifth Circuit agreed that there was insufficient evidence that Nora “willfully” acted with knowledge with respect to each count of fraud and abuse.

Central to the charges and convictions were Medicare’s regulatory requirements that skilled services for “homebound” patients be certified by the patient’s physician. Such physician certification is necessary to receive reimbursement for home healthcare services and requires that a physician review an in-home assessment completed by a nurse and approve a plan of care using forms, which are then submitted to Medicare. Patients require recertification every sixty days.  Payment for home health services varies depending on the complexity of the patient’s diagnosis, with more complex diagnoses receiving higher Medicare reimbursements. Medicare also anticipates this care will not be long-term, meaning that too many recertifications of a patient in a row raises a “red flag” to Medicare.

The Government alleged that the codefendants committed fraud by billing Medicare for medically unnecessary home health services, which included diagnoses that were not medically supported, making payments when a referral successfully resulted in a new patient for Abide, and “ghosting” or pausing patient billing for a short period so that a “red flag” was not identified with respect to a long-term homebound patient and other improper arrangements.  The defendants included Nora, formerly employed Abide “house doctors,” and a spouse of one of the physician-defendants who served as a biller for Abide. In his role, Nora engaged in patient recruiting efforts, as well as patient screenings and scheduling that were central to the Government’s case that patients were improperly recertified.  Despite his objections that he lacked knowledge of the unlawfulness of Abide’s practices, the jury convicted Nora and the district court sentenced Nora to a concurrent sentence of 40 months’ imprisonment on each count followed by one year of supervised release, and ordered Nora to pay $12,921,797 in restitution to Medicare.

What distinguishes Nora’s conviction from the other defendants, according to the Fifth Circuit, was his level of knowledge as to the healthcare fraud.  Nora was hired as a full-time data entry clerk earning $13 an hour as a 22-year old with a high school diploma and a few college credits.  Nora was eventually promoted to a salaried office manager without any alleged improper referral bonuses.  Nora was responsible for assigning doctors, patients and nurses for certification and recertification for home health services, and, as such, “the Government contended [he] was complicit in this practice.”

On appeal, the Fifth Circuit disagreed, finding that Nora’s role “entangled” him in practices that were central to Abide’s fraud and kickback schemes, but that there was not evidence sufficient to prove that Nora understood Abide’s practices were unlawful or fraudulent. Therefore, the Government failed to prove that Nora acted with “bad purpose” in carrying out his responsibilities at Abide.  Evidence that Nora “received training on compliance, Medicare, and home health” was not sufficient to support the Government’s contention that Nora was alerted to the unlawful nature of Abide’s practices absent information about what the training entailed.  Nor could testimony that Abide had a pervasive culture of disregard for healthcare regulations impute “bad purpose” to every single employee working there. Some employees may be mere “pawns” being manipulated by other conspirators because they do their job “without asking questions.” While the Fifth Circuit had previously held that “proximity to fraudulent activities” can support an inference of knowledge of unlawfulness, when the proximity was “devoid of specifics” and did not include evidence that Nora “directly observed” or “deliberately closed his eyes to” fraudulent behavior, the Government did not present sufficient evidence to support a conviction.

Even with his conviction vacated, Nora’s prosecution provides a cautionary tale on the wide net cast when fraud and abuse is suspected. Such net may catch or “entangle” employees in any enforcement actions when such employee did not have significant authority or knowledge of the prosecuted fraud.  Abide’s owners entered a plea deal and testified against their former employees. Companies need to develop a culture of compliance, both to avoid a court finding that they had a pervasive culture of disregard for the rules and also to protect their employees. Here, even with Nora’s success, other codefendants part of the Abide scheme face significant criminal penalty from the Government’s successful prosecution.