Healthcare Fraud—American Healthcare Management

Under 18 U.S.C. § 1347 (healthcare fraud) it is a crime for a person to knowingly and willfully execute a scheme or artifice to defraud any health care benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program. There are three levels of punishment available for a violation of section 1347: if death occurs, the individual can be punished by a fine, imprisonment for any term of years or for life, or both; if serious bodily injury occurs, the punishment can be a fine, imprisonment for up to 20 years, or both; and in all other circumstances, the punishment can be a fine, imprisonment for up to 10 years or both.

With this definition of healthcare fraud, then, it seems a bit odd that American Healthcare Management, its CEO—Robert D. Wachter—and three nursing homes pleaded guilty to “conspiracy to defraud the Medicare and Medicaid Programs, by providing inadequate staff at the nursing homes and thereby failing to provide proper care to elderly and disabled residents”^[1] but didn’t get a more serious punishment. Due to the inadequate care, residents suffered from dehydration and malnutrition, they went for extended periods of time without cleaning or bathing, and some were physically abused by staff members, with one dying as a result of the physical abuse.^[2] Even though Mr. Wachter and AHM knew that staffing was insufficient, they continued to bill Medicare and Medicaid, “enrich[ing] themselves by obtaining and retaining reimbursement for these inadequate services and to conceal the actual conditions and the true nature of care provided from Federal and State governments.”^[3] With the serious bodily injury and the death, one would have expected Mr. Wachter to receive more than the 18 months he is apparently facing and the $29,000.00 fine.^[4]

One of the keys to understanding this case is to understand that the defendants were not charged with healthcare fraud, per se, but with conspiracy under 18 U.S.C. § 371 alleging conspiracy to violate not just section 1347, but section 1035 (false statements relating to health care matters), and 42 U.S.C. § 1320a-7b(a)(2) & (3) (false statements in determining benefits and payments, and concealment of an event affecting benefits and payments).

By being charged with conspiracy, Mr. Wachter faced less jail time than if he had been charged with the actual overt act, and by negotiating a plea, he was able to take advantage of some of the mechanisms in place for people who take responsibility for their actions and plead guilty.

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[1] US Attorney’s Office, American Healthcare Management, Its CEO & Three Local Nursing Homes Plead Guilty to Conspiracy Charges Involving Failure of Care at Nursing Facilities, Oct. 10, 2006.
[2] Id.
[3] Id.
[4] Id.