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United States v. Orillo

United States Court of Appeals, Seventh Circuit

October 23, 2013

UNITED STATES of America, Plaintiff-Appellee,
Merigrace ORILLO, Defendant-Appellant.

Argued Feb. 26, 2013.

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Scott A. Verseman, Attorney, Office of the United States Attorney, Rockford, IL, for Plaintiff-Appellee.

Mark D. Olson, Attorney, Sawyier & Williams, LLP, Chicago, IL, for Defendant-Appellant.

Before EASTERBROOK, ROVNER, and WILLIAMS, Circuit Judges.

ROVNER, Circuit Judge.

On April 20, 2012, Merigrace Orillo pled guilty in a written plea agreement to one count of healthcare fraud pursuant to 18 U.S.C. §§ 1347 and 2, and one count of paying kickbacks to physicians for patient referrals under a federal health care program in violation of 42 U.S.C. § 1320a-7b and 18 U.S.C. § 2. She was sentenced to 20 months' imprisonment. The district court determined that the loss amount for the healthcare fraud count was $744,481 and ordered her to pay that amount in restitution. On appeal, Orillo challenges the loss calculation that led to that sentence and restitution determination, and asserts that she has not waived a challenge to the sentence on the kickback count.

Orillo, her husband, and a third person co-owned a business known as Chalice Health Services, Inc. (" Chalice" ), which was a home health care provider. Orillo and her husband, a doctor, managed Chalice and supervised its daily operations. Chalice provided nurses, nurse aides, physical therapists, and occupational therapists to care for patients in the patients' homes. Beginning in October 2004, Chalice was an enrolled provider with Medicare and could seek reimbursement of home health care through that program. Medicare restricted payments for home health care to those services that were medically necessary, which included only services required because of disease, disability, infirmity or impairment, to a homebound person. Prior to submitting a claim, the home health care provider, such as the treating nurse, with Chalice was required to complete a Comprehensive Adult Nursing Assessment with Outcome and Assessment Information Set (" OASIS" ) form on the patient. The OASIS form was utilized to establish whether the patient was homebound, the severity of the patient's symptoms, and the reimbursement rate for Chalice. If a patient required services beyond a 60-day period, the Medicare program required Chalice to submit a Recertification/Follow-Up Assessment form (" Recertification" ) completed by that home health care provider to determine the patient's continued eligibility for such services.

Once the home care provider completed those forms, Chalice was required to enter that information into a software program that would determine the rate of reimbursement that Medicare would provide. By manipulating the information on those forms, Chalice could therefore impact the amount provided by Medicare. Orillo supervised the submission of those claims to Medicare, requiring that all forms be sent to her office and personally reviewing the OASIS and Recertification forms. In the plea agreement, she admitted that she falsified those forms by altering the codes and information on the forms that had been completed by the Chalice nurses to make the patient's condition appear worse and the health care needs greater than the actuality. Those alterations caused the

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Medicare software program to generate different reimbursement rates, which increased the reimbursement amounts paid to Chalice— a sequence also known as upcoding. Orillo acknowledged in the plea agreement that she made those alterations in two ways— by marking the changes on the forms submitted by the Chalice nurses, often forging their initials next to the alterations, and by replacing entire pages with falsified pages manufactured by Orillo herself. Orillo also admitted that she aided her husband in paying kickbacks to a Chicago doctor in return for referrals of Medicare patients.

As to the healthcare fraud count, Orillo conceded that the loss to Medicare caused by her health care fraud scheme exceeded $400,000, and agreed to the entry of a $500,000 forfeiture judgment. The amount of restitution was left to the district court's determination. Orillo now appeals the calculation of loss and the restitution amount as to that healthcare fraud count.

The district court adopted the amount of $744,481 determined by the Probation Officer in the Pre-Sentence Investigation Report. That amount was determined after an extensive statistical analysis undertaken by Eric Vasiloff of Trust Solutions, LLC, which was a government contractor charged with auditing Chalice's medical records to determine the loss to the Medicare program. Brian Cody, a registered nurse assigned to medical review for Trust Solutions, conducted a review of a random sample of the medical records for claims submitted by Chalice between January 1, 2007 and March 31, 2010. He reviewed records for 177 episodes of care delivered by Chalice to homebound Medicare patients out of 3,400 total episodes attributable to Chalice during that time period. Cody testified that he examined the records to determine whether the items on the OASIS forms were consistent with supporting documentation such as the plan of care, nurse's notes, or therapy notes. Where the OASIS items were internally inconsistent or where they were inconsistent with that supporting documentation, Cody would determine what OASIS items were properly supported by those records and input the correct information. He then generated the correct Medicare codes and the corresponding reimbursement rates using those proper OASIS items. As a result of that analysis, Cody uncovered overpayments totaling $47,444 for those 177 episodes of care. He found no evidence of underpayments in that sample. In the spreadsheet that he compiled in his review, Cody separated the overpayments into two categories: those related to OASIS items on which alterations had been written, and those attributable to OASIS items in which no alterations were apparent but which were nevertheless inconsistent with the underlying documentation.

At the outset, it is important to note what Orillo does not challenge in this appeal. She does not contest the reliability of the extrapolation based on established statistical methods, nor the random sample used. She does not contend that Cody improperly determined when the coding was inaccurate in determining overpayments, nor does she challenge the amount of overpayments that were found. In fact, she raises no challenge at all to the determination as to the amount of overpayments. Her sole argument is that the court erred in attributing all of the overpayments to criminal conduct, and that in assessing the loss and restitution amounts, the court should have relied only on overpayments relating to visibly altered items and not on any overpayments related to items ...

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