FEDERAL BRIBERY — WHAT CONSTITUTES A BENEFIT?
Case: Fischer v. United States
Issue: Does Title 18 U.S.C. § 666(b), which prohibits the defrauding of "organizations" receiving "in any one year period benefits in excess of $10,000 under a federal program," cover fraud perpetrated on hospitals participating in the Medicare program?
Facts: Fischer, as president and part owner of Quality Medical Consultants, Inc. ("QMC"), negotiated a $1.2 million loan to QMC from West Volusia Hospital Authority ("WVHA"). WVHA operates two Florida hospitals, both of which receive funding from the federal Medicare program. An audit of QMC revealed that the loan was illegally used to repay creditors and raise the salaries of its five owners. The loan also went to pay a private individual who helped WVHA secure the loan and to fund a kickback to WVHA’s chief financial officer. QMC eventually defaulted on the loan and filed for bankruptcy.
Fischer was convicted on several counts of federal bribery, including defrauding an organization which receives benefits under a federal assistance program pursuant to 18 U.S.C. §666(a)(1)(A). On appeal, the United States Court of Appeals for the Eleventh Circuit rejected Fischer’s argument that WVHA did not receive benefits from the Medicare program.
Holding: A health care provider participating in the Medicare program receives "benefits" within the meaning of 18 U.S.C. §666(a)(1)(A).
Reasoning: The federal bribery statute at issue in this case makes it a federal crime to commit acts of theft or fraud against organizations which benefit in excess of $10,000 from a Federal program involving a "grant, contract, subsidy, loan, guarantee, insurance or other form of Federal assistance."
To determine if Medicare payments to participating hospitals are included in this statute, the Court began by reviewing the basic structure of the federal Medicare program. It noted that participating hospitals are subject to extensive regulations and receive funds beyond "the immediate costs of an individual treatment procedure." Medicare funds are also given to help develop and maintain the "operation of patient care facilities and activities," to expand a hospital’s capacity to provide on-going services to the community at large, and to fund educational programs for interns and residents. Given the necessary compliance with government regulations and the breadth of hospital expenditures that Medicare funds cover, the Court held that payments to participating hospitals go beyond simply reimbursing the hospital for the cost of treating Medicare patients. Give this, the hospitals receiving the funds were indeed beneficiaries of Medicare.
The Court thus based its decision on the finding that Medicare payments to hospitals constitute federal benefits. In doing so, it rejected Fischer’s argument that hospitals are simply reimbursed for their costs of treating Medicare patients. (The Court, however, explicitly declined to endorse the government’s position that any payment whose source is a federal program satisfies the definition of benefit.) Thus, under the Court’s holding, it is not enough that an organization receive federal funding. To fall under 18 U.S.C. §666(a)(1)(A), the payment must be a benefit within the ordinary sense of the word. According to Webster’s New Third International Dictionary, the noun "benefit" means "something that guards, aids or promotes well-being: advantage, good, useful aid." Because Medicare operates "with a purpose and design above and beyond point-of-sale patient care," payments to participating hospitals extend in a broader manner as well and serve to benefit the hospitals and community at large.
Other Opinions: Justice Thomas, joined by Justice Scalia, dissented. Thomas argued that all Medicare payments to participating hospitals simply recover the cost of providing care to individual Medicare patients, who are the sole beneficiaries of Medicare. The fact that payments can be used to cover capital costs such as the development and maintenance facilities or educational programs is merely a recognition that providing services to Medicare patients necessarily impacts these costs as well. Thus, hospitals can only recover from Medicare that portion of their capital costs which can reasonably be assigned to the burden of treating Medicare patients. As such, payments to hospitals should be seen as a reimbursement and not a federal benefit. Thomas also argued that under the Court’s broad definition of benefits, any organization which receives funds from the federal government, such as a grocery store that accepts food stamps, is covered by 18 U.S.C. §666(a)(1)(A). The majority’s expansive view of 18 U.S.C. § 666(b) also runs afoul of the rule of lenity, according to the dissent.
Comment: The Court’s opinion cuts against the grain of many recent decisions restricting the reach of federal criminal statutes. The majority noted that federal assistance programs will have to be judged on a case-by-case basis in order to determine whether they receive "benefits" under U.S.C. § 666. This highlights the fact-intensive nature of the majority’s reasoning, and is inconsistent with the goal of certainty in criminal law adjudication.