OCTOBER TERM, 1999
Syllabus
FISCHER
v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT
No. 99-116. Argued February 22, 2000-Decided May 15,2000
Petitioner, while president and part owner of Quality Medical
Consultants, Inc. (QMC), negotiated a $1.2 million loan to QMC from
West Volusia Hospital Authority (WVHA), a municipal agency
responsible for operating two Florida hospitals, both of which
participate in the federal Medicare program. In 1993 WVHA received
between $10 and $15 million in Medicare funds. After a 1994 audit
of WVHA raised questions about the QMC loan, petitioner was
indicted for violations of the federal bribery statute, including
defrauding an organization which receives benefits under a federal
assistance program, 18 U. S. C. § 666(a)(I)(A), and paying a
kickback to one of its agents, § 666(a)(2). A jury convicted him on
all counts, and the District Court sentenced him to imprisonment,
imposed a term of supervised release, and ordered the payment of
restitution. On appeal petitioner argued that the Government failed
to prove WVHA, as the organization affected by his wrongdoing,
received "benefits in excess of $10,000 under a Federal program,"
as required by § 666(b). In rejecting that argument and affirming
the convictions, the Eleventh Circuit held that funds received by
an organization constitute "benefits" within § 666's meaning if the
source of the funds is a federal program, like Medicare, which
provides aid or assistance to participating organizations.
Held: Health care providers such as the one defrauded by
petitioner receive "benefits" within the meaning of § 666(b). Pp.
671-682.
(a) Medicare's nature and purposes provide essential instruction
in resolving this controversy. Medicare is a federally funded
medical insurance program for the elderly and disabled. The Federal
Government is the single largest source of funds for hospitals
participating in Medicare. Such providers qualify to participate
upon satisfying a comprehensive series of statutory and regulatory
requirements, including licensing, quality assurance, staffing, and
other standards. Compliance with these standards provides the
Government with assurance that participating providers possess the
capacity to fulfill their statutory obligation of providing
"medically necessary" services "of a quality which meets
professionally recognized standards of health care." 42 U. S. C. §
1320c-5(a). Medicare attains its objectives through an elaborate
funding structure designed not only to compensate providers for the
reason-
668
Syllabus
able cost of the services actually rendered to patients, but
also to enhance health care organizations' capacity to provide
ongoing, quality services to the community at large. In the normal
course Medicare disbursements occur periodically, often in advance
of a provider's rendering services, in order to protect providers'
liquidity and thereby assist in the ongoing provision of such
services. The program, then, establishes correlating and
reinforcing incentives: The Government has an interest in making
available a high level of quality of care for the elderly and
disabled; and providers, because of their financial dependence upon
the program, have incentives to achieve program goals. Pp.
671-675.
(b) Medicare provider payments are "benefits," as that term is
used in its ordinary sense and as it is intended in § 666(b). The
Court rejects petitioner's argument that Medicare provides benefits
only to the elderly and disabled, not to participating health care
organizations. While standard definitions of the term "benefit" and
provisions of Medicare support petitioner's assertion that
qualifying patients rank as the program's primary beneficiaries,
the fact that one beneficiary of an assistance program can be
identified does not foreclose the existence of others. Section
666(b)'s language specifying that benefits can be in the form of "a
grant, contract, subsidy, loan, guarantee, insurance, or other form
of Federal assistance," coupled with § 666(a)'s broad substantive
prohibitions, reveals Congress' unambiguous intent to ensure the
integrity of organizations participating in federal assistance
programs. In removing from the statute's coverage any "bona fide
salary, wages, fees, or other compensation paid, or expenses paid
or reimbursed, in the usual course of business," § 666(c) does not
exclude the payments here at issue from the meaning of "benefits"
within § 666(b). Medicare payments are not simply compensation or
reimbursement. The payments, in contrast, assist the hospital in
making available and maintaining a certain level and quality of
medical care in both its own interests and those of the greater
community. The provider itself is the object of substantial
Government regulation, and adequate payment and assistance to the
provider is itself one of Medicare's objectives. Accordingly, the
health care provider is receiving a benefit in the conventional
sense of the term, unlike the case of a contractor whom the
Government does not regulate or assist for long-term objectives or
for purposes beyond performance of an immediate transaction. Pp.
675-681.
(c) The Court does not suggest that federal funds disbursed
under an assistance program will result in coverage of all
recipient fraud under § 666(b). Adopting a broad, almost limitless
use of the term "benefits" would upset the proper federal balance.
The statutory inquiry should examine the conditions under which the
federal payments are received. The answer could depend, as it does
here, on whether the recipient's
669
own operations are one of the reasons for maintaining the
program. The Government has a legitimate and significant interest
in prohibiting financial fraud or bribery being perpetrated upon
Medicare providers:
Such acts threaten the program's integrity and raise the risk
participating organizations will lack the resources needed to
provide the requisite level and quality of care. Pp. 681-682.
168 F.3d
1273, affirmed.
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and STEVENS, O'CONNOR, SOUTER, GINSBURG, and
BREYER, JJ., joined. THOMAS, J., filed a dissenting opinion, in
which SCALIA, J., joined,
post, p. 682.
Mark L. Horwitz argued the cause for petitioner. With him on the
briefs were Glen
J. loffredo, Jeffrey T. Green, and Kristin
G. Koehler.
Lisa Schiavo Blatt argued the cause for the United
States.
With her on the brief were Solicitor General Waxman, Assistant
Attorney General Robinson, and Deputy Solicitor General Dreeben.
*
JUSTICE KENNEDY delivered the opinion of the Court. The federal
bribery statute prohibits defrauding organizations which
"receiv[e], in anyone year period, benefits in excess of $10,000
under a Federal program." 18 U. S. C. § 666(b). We granted
certiorari to determine whether the statute covers fraud
perpetrated on organizations participating in the Medicare program.
Upon consideration of the role and regulated status of hospitals as
health care providers under the Medicare program, we hold they
receive "benefits" within the meaning of the statute. We affirm
petitioner's convictions.
I
Petitioner Jeffrey Allan Fischer was president and partial owner
of Quality Medical Consultants, Inc. (QMC), a corpora-
* Lisa Kemler filed a brief for the National
Association of Criminal Defense Lawyers as
amicus curiae
urging reversal.
670
tion which performed billing audits for health care
organizations. In 1993 petitioner, on QMC's behalf, negotiated a
$1.2 million loan from West Volusia Hospital Authority (WVHA), a
municipal agency responsible for operating two hospitals located in
West Volusia County, Florida. Both hospitals participate in the
Medicare program, and in 1993 WVHA received between $10 and $15
million in Medicare funds.
A February 1994 audit of WVHA's financial affairs raised
questions about the QMC loan. An investigation revealed QMC used
the loan proceeds to repay creditors and to raise the salaries of
its five owner-employees, including petitioner. It was determined
that petitioner had arranged for QMC to advance at least $100,000
to a private company owned by an individual who had assisted QMC in
securing a letter of credit in connection with the WVHA loan. QMC,
at petitioner's directive, also committed portions of the loan
proceeds to speculative securities. These investments yielded
losses of almost $400,000. The investigation further uncovered use
of the loan proceeds to pay, through an intermediate transfer, a
$10,000 kickback to WVHA's chief financial officer, the individual
with whom petitioner had negotiated the loan in the first instance.
QMC defaulted on its obligation to WVHA and filed for
bankruptcy.
In 1996 petitioner was indicted by a federal grand jury on 13
counts, including charges of defrauding an organization which
receives benefits under a federal assistance program, 18 U. s. C. §
666(a)(1)(A), and of paying a kickback to one of its agents, §
666(a)(2). A jury convicted petitioner on all counts charged, and
the District Court sentenced him to 65 months' imprisonment and a
3-year term of supervised release. Petitioner, in addition, was
ordered to pay $1.2 million in restitution.
On appeal petitioner argued that the Government failed to prove
WVHA, as the organization affected by his wrongdoing, received
"benefits in excess of $10,000 under a Federal program," as
required by 18 U. s. C. § 666(b). Rejecting the
671
argument, the United States Court of Appeals for the Eleventh
Circuit affirmed the convictions.
168 F.3d
1273 (1999). It held that funds received by an organization
constitute "benefits" within the meaning of § 666(b) if the source
of the funds is a federal program, like Medicare, which provides
aid or assistance to participating organizations.
Id., at
12761277. Entities receiving federal funding under ordinary
commercial contracts, the court stated, fall outside the statute's
coverage.
Ibid. (citing and discussing
United States
v.
Copeland, 143 F.3d
1439 (CAll 1998) (holding that federal funds received under a
contract to construct military aircraft did not constitute
"benefits" within the meaning of § 666(b))). The court added that
its construction furthered "the statute's purpose of protecting
from fraud, theft, and undue influence by bribery the money
distributed to health care providers, and WVHA in particular,
through the federal Medicare program and other similar federal
assistance programs." 168 F. 3d, at 1277. It rejected the view that
the Medicare program provides benefits only to its "targeted
recipients," the qualifying patients.
Id., at 1278
(disagreeing with
United States v.
LaHue, 998 F.
Supp. 1182 (Kan. 1998), aff'd,
170 F.3d
1026 (CAlO 1999)).
We granted certiorari, 528 U. S. 962 (1999), and we affirm.
II A
The nature and purposes of the Medicare program give us
essential instruction in resolving the present controversy.
Established in 1965 as part of the Social Security Act, 42 U. S. C.
§ 1395
et seq. (1994 ed. and Supp. III), Medicare is a
federally funded medical insurance program for the elderly and
disabled. In fiscal 1997 some 38.8 million individuals were
enrolled in the program, and over 6,100 hospitals were authorized
to provide services to them. U. S. Dept. of Health and Human
Services, Health Care Financing Administration, 1998 Data
Compendium 45, 75 (Aug. 1998). Medi-
672
care expenditures for hospital services exceeded $123 billion in
1998, making the Federal Government the single largest source of
funds for participating hospitals. See Cowen et al., National
Health Expenditures, 1998, 21 Health Care Financing Review 165, 208
(Winter 1999) (Table 11). This amount constituted 32% of the
hospitals' total receipts.
Ibid.
Providers of health care services, such as the two hospitals
operated by WVHA, qualify to participate in the program upon
satisfying a comprehensive series of statutory and regulatory
requirements, including particular accreditation standards.
Hospitals, for instance, must satisfy licensing standards, 42 CFR §
482.11 (1999); possess a governing body to "ensure that there is an
effective, hospital-wide quality assurance program to evaluate the
provision of patient care," § 482.21; and employ a "well organized"
medical staff accountable on matters relating to "the quality of
the medical care provided to patients," § 482.22(b). Medicare's
implementing regulations also require hospitals, among many other
standards, to maintain and provide 24-hour nursing services, §
482.23; complete medical record services, § 482.24; "pharmaceutical
services that meet the needs of the patients," § 482.25; and
organized dietary services staffed with qualified personnel, §
482.28. The regulations go further, requiring hospital facilities
to "be constructed, arranged, and maintained to ensure the safety
of the patient, and to provide facilities for diagnosis and
treatment and for special hospital services appropriate to the
needs of the community." § 482.41. Compliance with these standards
provides the Government with assurance that participating providers
possess the capacity to fulfill their statutory obligation of
providing "medically necessary" services "of a quality which meets
professionally recognized standards of health care." 42 U. S. C. §
1320c-5(a). Peer review organizations monitor providers' compliance
with these and other obligations. § 1320c-3(a); 42 CFR § 466.71
(1999). Sanctions for non-
673
compliance include dismissal from the program. 42 U. s. C. §
1320c-5(b)(1).
Medicare attains its objectives through an elaborate funding
structure. Participating health care organizations, in exchange for
rendering services, receive federal funds on a periodic basis. §§
1395g,
1395l. The amounts received reflect the "reasonable
cost" of services rendered, defined as "the costs necessary in the
efficient delivery of needed health services to individuals covered
[by the program]." § 1395x(v)(1)(A). Necessary costs are not
limited to the immediate costs of an individual treatment
procedure. Instead they are defined in broader terms: "Necessary
and proper costs are costs that are appropriate and helpful in
developing and maintaining the operation of patient care facilities
and activities." 42 CFR § 413.9(b)(2) (1999). Allowable costs
include amounts which enhance the organization's capacity to
provide ongoing, quality services not only to eligible patients but
also to the community at large. By way of example, amounts incurred
for "certain educational programs for interns and residents, known
as [graduate medical education] programs, are 'allowable cost[s]'
for which a hospital (a provider) may receive reimbursement."
Regions Hospital v.
Shalala, 522 U. S. 448, 452 (1998)
(citing 42 CFR § 413.85(a) (1996)); see also § 413.85(b) (1999);
Thomas Jefferson Univ. v.
Shalala, 512 U. S. 504, 507-508
(1994) (describing regulation of education programs). "These
programs," the Medicare regulations explain, "contribute to the
quality of patient care within an institution and are necessary to
meet the community's needs for medical and paramedical personnel.
... [M]any communities have not assumed responsibility for
financing these programs and it is necessary that support be
provided by those purchasing healthcare. Until communities
undertake to bear these costs, the program will participate
appropriately in the support of these activities." 42 CFR §
413.85(c) (1999). Medicare also permits, indeed encourages, these
providers to deposit the amounts of reim-
674
bursements received for depreciation costs and other cash into
sinking funds called "funded depreciation accounts." § 413.134(e).
Investment income earned on these funds does not operate to reduce
a provider's interest expense, § 413.153(b)(2)(iii), creating
incentives to maintain modern medical equipment and facilities.
The Medicare regulations, furthermore, afford certain provider
organizations "special treatment," intended to ensure the ongoing
availability of medical services for qualifying patients. See 42
CFR pt. 412G (1999). Providers qualifying as "Medicare-dependent,
small rural hospital[s]," for instance, are entitled to additional,
"lump sum" payments to compensate for significant declines in
demand for patient care. § 412.108. The additional funds enable a
provider to "maintai[n] [its] necessary core staff and services"
and to satisfy its "fixed (and semi-fixed) costs." §§
412.108(d)(3)(A), (B). So too does the Medicare program authorize
"special treatment" for, among other providers, "sole community
hospitals," "renal transplantation centers," and "hospitals that
serve a disproportionate share of low-income patients." See §§
412.92,412.100,412.106. The subsidies assist providers in
satisfying those financial obligations necessary to continue as
going concerns in accordance with the program's requirements. See,
e. g., § 412.92(d)(2).
In the normal course Medicare disbursements occur on a periodic
basis, often in advance of a provider's rendering services, 42 U.
S. C. § 1395g(a); 42 CFR §§ 413.60, 413.64 (1999). The payment
system serves to "protect providers' liquidity,"
Good Samaritan
Hospital v.
Shalala, 508 U. S. 402, 406
(1993), thereby assisting in the ongoing provision of services. 42
CFR § 413.5(b)(1) (1999) (requiring reimbursement method to "result
in current payment so that institutions will not be disadvantaged,
as they sometimes are under other arrangements, by having to put up
money for the purchase of goods and services well before they
receive reimbursement"); § 413.5(b)(6) (reimbursement system must
oper-
675
ate under "recognition of the need of hospitals and other
providers to keep pace with growing needs and to make
improvements"). The program, then, establishes correlating and
reinforcing incentives: The Government has an interest in making
available a high level of quality of care for the elderly and
disabled; and providers, because of their financial dependence upon
the program, have incentives to achieve program goals. The nature
of the program bears on the question of statutory coverage.
B
Section 666 of Title 18 of the United States Code prohibits acts
of theft and fraud against organizations receiving funds under
federal assistance programs. The statute in relevant part provides
as follows:
"(a) Whoever, if the circumstance described in subsection (b) of
this section exists-
"(1) being an agent of an organization, or of a State, local, or
Indian tribal government, or any agency thereof-
"(A) embezzles, steals, obtains by fraud, or otherwise without
authority knowingly converts to the use of any person other than
the rightful owner or intentionally misapplies, property that-
"(i) is valued at $5,000 or more, and
"(ii) is owned by, or is under the care, custody, or control of
such organization, government, or agency; or
"(B) corruptly solicits or demands for the benefit of any
person, or accepts or agrees to accept, anything of value from any
person, intending to be influenced or rewarded in connection with
any business, transaction, or series of transactions of such
organization, government, or agency involving anything of value of
$5,000 or more; or
"(2) corruptly gives, offers, or agrees to give anything of
value to any person, with intent to influence or re-
676
ward an agent of an organization or of a State, local or Indian
tribal government, or any agency thereof, in connection with any
business, transaction, or series of transactions of such
organization, government, or agency involving anything of value of
$5,000 or more; "shall be fined under this title, imprisoned not
more than 10 years, or both.
"(b) The circumstance referred to in subsection (a) of this
section is that the organization, government, or agency receives,
in anyone year period, benefits in excess of $10,000 under a
Federal program involving a grant, contract, subsidy, loan,
guarantee, insurance, or other form of Federal assistance.
"(c) This section does not apply to bona fide salary, wages,
fees, or other compensation paid, or expenses paid or reimbursed,
in the usual course of business."
Liability for the acts prohibited by subsection (a) is
predicated upon a showing that the defrauded organization
"receive[d], in anyone period, benefits in excess of $10,000 under
a Federal program." § 666(b). Those benefits can be in the form of
"a grant, contract, subsidy, loan, guarantee, insurance, or other
form of Federal assistance."
Ibid. All agree Medicare is a
federal assistance program, see 42 CFR § 400.200 (1999), and that
WVHA, as the organization defrauded by petitioner's actions,
received in excess of $10,000 in payments under the program. The
sole point in contention is whether those payments constituted
"benefits" within the meaning of subsection (b).
Petitioner argues that the Medicare program provides benefits to
the elderly and disabled but not to the health care organizations.
Provider organizations, in petitioner's view, do no more than
render services in exchange for compensation. Under petitioner's
submission the Medicare program envisions a single beneficiary, the
qualifying patient. The Government, in opposition, urges that a
determination
677
whether an organization receives "benefits" within the meaning
of § 666(b) turns on whether the Federal Government was the source
of the payment. Funds received under a federal assistance program,
the Government asserts, can be traced from federal coffers, often
through an intermediary or carrier, to the health care provider.
Under its view, the "federal-program source of the funds" satisfies
the benefits definition. Brief for United States 11.
We reject petitioner's reading of the statute but without
endorsing the Government's broader position. We conclude Medicare
payments are "benefits," as the term is used in its ordinary sense
and as it is intended in the statute. The noun "benefit" means
"something that guards, aids, or promotes well-being: advantage,
good"; "useful aid"; "payment, gift [such as] financial help in
time of sickness, old age, or unemployment"; or "a cash payment or
service provided for under an annuity, pension plan, or insurance
policy." Webster's Third New International Dictionary 204 (1971).
These definitions support petitioner's assertion that qualifying
patients receive benefits under the Medicare program. It is
commonplace for individuals to refer to their retirement or health
plans as "benefits." So it ought not to be disputed that the
elderly and disabled rank as the primary beneficiaries of the
Medicare program. See 42 U. S. C. §§ 1395c, 1395j; 42 CFR § 400.202
(1999) (defining "beneficiary" as the "person who is entitled to
Medicare benefits");
Shalala v.
Guernsey Memorial
Hospital, 514 U.
S. 87, 91 (1995) ("Under the Medicare reimbursement scheme ...
participating hospitals furnish services to program beneficiaries
and are reimbursed by the Secretary through fiscal
intermediaries");
Good Samaritan Hospital, 508 U. S., at 404
(same).
That one beneficiary of an assistance program can be identified
does not foreclose the existence of others, however. In this
respect petitioner's construction would give incomplete meaning to
the term "benefits." Medicare operates with a purpose and design
above and beyond point-of-sale patient
678
care, and it follows that the benefits of the program extend in
a broader manner as well. The argument limiting the term "benefits"
to the program's targeted or primary beneficiaries would exclude,
for example, a Medicare intermediary (such as Blue Cross and Blue
Shield), a result both parties disavow. For present purposes it
cannot be disputed the providers themselves derive significant
advantage by satisfying the participation standards imposed by the
Government. These advantages constitute benefits within the meaning
of the federal bribery statute, a statute we have described as
"expansive," "both as to the [conduct] forbidden and the entities
covered."
Salinas v.
United States, 522 U. S. 52, 56
(1997).
Subsection (b) identifies several sources as providing benefits
under a federal program-"a grant, contract, subsidy, loan,
guarantee, insurance, or other form of Federal assistance." 18 U.
S. C. § 666(b). This language indicates that Congress viewed many
federal assistance programs as providing benefits to participating
organizations. Coupled with the broad substantive prohibitions of
subsection (a), the language of subsection (b) reveals Congress'
expansive, unambiguous intent to ensure the integrity of
organizations participating in federal assistance programs.
Subsection (c) of the statute bears on the analysis. The
provision removes from the statute's coverage any "bona fide
salary, wages, fees, or other compensation paid, or expenses paid
or reimbursed, in the usual course of business." § 666(c).
Petitioner argues that the subsection operates to exclude the
payments in question because they are either "compensation" or
"expenses paid or reimbursed," or some combination of the two, and
that the payments are made in the "usual course of business." We
disagree.
The subsection provides that the specified sorts of payments are
not ones to which the section applies. One inference from this
formulation is that the described payments would have been benefits
but for the subsection (c) exemp-
679
tion. We need not go so far. Even assuming the examples of
subsection (c) bear upon the definition of benefits, statutory
examples of nonapplicability do not necessarily give rise to the
inference that absent the enumeration the statute would otherwise
apply. To define all subsection (c) payments as exempted benefits
would go well beyond the ordinary meaning of the word. On the other
hand, the statute is not written to say: "The term 'benefits' does
not include bona fide salary, wages, fees, or other compensation
paid, or expenses paid or reimbursed, in the usual course of
business." We must construe the term "benefits," then, in a manner
consistent with Congress' intent not to reach the enumerated class
of transactions. See S. Rep. No. 98-225, p. 370 (1984) ("[N]ot
every Federal contract or disbursement of funds would be covered
[under § 666]. For example, if a government agency lawfully
purchases more than $10,000 in equipment from a supplier, it is not
the intent of this section to make a theft of $5,000 or more from
the supplier a Federal crime").
We do not accept the view that the Medicare payments here in
question are for the limited purposes of compensating providers or
reimbursing them for ordinary course expenditures. The payments are
made for significant and substantial reasons in addition to
compensation or reimbursement, so that neither these terms nor the
usual course of business conditions set forth in subsection (c) are
met here. The payments in question have attributes and purposes
well beyond those described in subsection (c). These attributes and
purposes are consistent with the definition of "benefit." While the
payments might have similarities to payments an insurer would remit
to a hospital quite without regard to the Medicare program, the
Government does not make the payment unless the hospital complies
with its intricate regulatory scheme. The payments are made not
simply to reimburse for treatment of qualifying patients but to
assist the hospital in making available and maintaining a certain
level and qual-
680
ity of medical care, all in the interest of both the hospital
and the greater community.
Here, as we have explained, the provider itself is the object of
substantial Government regulation. Medicare is designed to the end
that the Government receives not only reciprocal value from
isolated transactions but also long-term advantages from the
existence of a sound and effective health care system for the
elderly and disabled. The Government enacted specific statutes and
regulations to secure its own interests in promoting the well being
and advantage of the health care provider, in addition to the
patient who receives care. The health care provider is receiving a
benefit in the conventional sense of the term, unlike the case of a
contractor whom the Government does not regulate or assist for
long-term objectives or for significant purposes beyond performance
of an immediate transaction. Adequate payment and assistance to the
health care provider is itself one of the objectives of the
program. These purposes and effects suffice to make the payment a
benefit within the meaning of the statute.
The structure and operation of the Medicare program reveal a
comprehensive federal assistance enterprise aimed at ensuring the
availability of quality health care for the broader community.
Participating health care organizations, as our above discussion
shows, must satisfy a series of qualification and accreditation
requirements, standards aimed in part at ensuring the provision of
a certain quality of care. See 42 CFR pt. 482 (1999). By
reimbursing participating providers for a wide range of costs and
expenses, including medical treatment costs, overhead costs, and
education costs, Medicare's reimbursement system furthers this
objective. This scheme is structured to ensure that providers
possess the capacity to render, on an ongoing basis, medical care
to the program's qualifying patients. The structure, moreover,
proves untenable petitioner's assertion that Congress has no
interest in the financial stability of pro-
681
viders once services are rendered to patients. Payments are made
in a manner calculated to maintain provider stability. § 413.5(b);
Good Samaritan Hospital, 508 U. S., at 406. Incentives are
given for long-term improvements, such as capital costs and
education. §§ 413.85, 413.134(e), 413.153(b)(2)(iii). Subsidies,
defined as "special treatment," are awarded to certain providers.
Id., pt. 412G. In short, provider organizations playa vital
role and maintain a high level of responsibility in carrying out
the program's purposes. Medicare funds, in turn, provide benefits
extending beyond isolated, point-of-sale treatment transactions.
The funds health care organizations receive for participating in
the Medicare program constitute "benefits" within the meaning of 18
U. S. C. § 666(b).
Our discussion should not be taken to suggest that federal funds
disbursed under an assistance program will result in coverage of
all recipient fraud under § 666(b). Any receipt of federal funds
can, at some level of generality, be characterized as a benefit.
The statute does not employ this broad, almost limitless use of the
term. Doing so would turn almost every act of fraud or bribery into
a federal offense, upsetting the proper federal balance. To
determine whether an organization participating in a federal
assistance program receives "benefits," an examination must be
undertaken of the program's structure, operation, and purpose. The
inquiry should examine the conditions under which the organization
receives the federal payments. The answer could depend, as it does
here, on whether the recipient's own operations are one of the
reasons for maintaining the program. Health care organizations
participating in the Medicare program satisfy this standard.
The Government has a legitimate and significant interest in
prohibiting financial fraud or acts of bribery being perpetrated
upon Medicare providers. Fraudulent acts threaten the program's
integrity. They raise the risk participating organizations will
lack the resources requisite to provide the
682
level and quality of care envisioned by the program. Cf.
Salinas, 522 U. S., at 61 (stating that acceptance of bribes
by an official of a jail housing federal prisoners pursuant to an
agreement with the Government "was a threat to the integrity and
proper operation of the federal program").
Other cases may present questions requiring further examination
and elaboration of the term "benefits." Here it suffices to hold
that health care providers such as the one defrauded by petitioner
receive benefits within the meaning of the statute. The judgment of
the Court of Appeals is affirmed.
It is so ordered.
JUSTICE THOMAS, with whom JUSTICE SCALIA joins, dissenting.
In my view, the only persons who receive "benefits" under
Medicare are the individual elderly and disabled Medicare patients,
not the medical providers who serve them. Payments made by the
Federal Government to a Medicare health care provider to reimburse
the provider for the costs of services rendered, rather than to
provide financial aid to the hospital, are not "benefits." I
respectfully dissent.
I
The jurisdictional provision of 18 U. S. C. § 666(b) requires
that an "organization, government, or agency receiv[e], in anyone
year period, benefits in excess of $10,000 under a Federal program
involving a grant, contract, subsidy, loan, guarantee, insurance,
or other form of Federal assistance." As the Court notes, an
organization is not a beneficiary of a federal program merely
because the organization receives federal funds.
Ante, at
677, 681. Rather, as the Court admits, a "benefit" is something
that "guards, aids, or promotes well-being"; "useful aid"; or a
"payment, gift [as] financial help in time of sickness, old age, or
unemployment." Webster's Third New International Dictionary 204
(1971).
683
Therefore, the Court acknowledges, an organization "receives ...
benefits" within the meaning of § 666(b) only if the federal funds
are designed to guard, aid, or promote the well-being of the
organization, to provide useful aid to the organization, or to give
the organization financial help in time of trouble. In my view,
payments made by the Federal Government to a Medicare health care
provider as part of a market transaction are not "benefits." 1
The statutory and regulatory scheme governing Medicare
reimbursements leaves no doubt that hospitals do not receive
"benefits" from the Federal Government within this meaning of the
term, but merely receive payments for costs pursuant to a market
transaction. Although the Medicare reimbursement scheme is quite
complex, it suffices to point out a few critical components.2
Under the "reasonable cost" reimbursement provisions relied on
by the Court,
ante, at 673-675, the Federal Government
reimburses providers for "the cost actually incurred, excluding
therefrom any part of incurred cost found to be unnecessary in the
efficient delivery of needed health serv-
1 Even if I thought that, under a reading of § 666(b) standing
alone, a market exchange of payment for services might amount to
"benefits," § 666(c) would eliminate that doubt. Section 666(c)
makes clear that "bona fide ... expenses paid or reimbursed, in the
usual course of business," are not covered by the statute. As
discussed below, Medicare payments to health care providers are
precisely this type of payment.
2 In 1993, the year relevant to the instant case, Medicare
consisted of two separate programs, Parts A and B. Part A provides
insurance for certain elderly or disabled persons to cover the
costs of inpatient hospital care, nursing facility care, home
health services, and hospice care. See generally 42 U. S. C. §§
1395c to 1395i-4. Part B is a voluntary program that provides
supplemental benefits to elderly or disabled Medicare participants
to cover the costs of, among other things, physician services,
laboratory and diagnostic tests, ambulance services, and
prescription drugs. See generally §§ 1395j to 1395w-4. The
Government did not present evidence at petitioner's trial regarding
which provisions of Medicare accounted for the payments made to the
West Volusia Hospital Authority in 1993.
684
ices." 42 U. S. C. § 1395x(v)(1)(A). The Social Security Act
that created Medicare instructed the Secretary of Health and Human
Services to promulgate regulations establishing the methods of
determining "reasonable costs" and specifically directed the
Secretary to consider, among other things, reimbursement methods
used by private insurers.
Ibid. See also
Shalala v.
Guernsey Memorial Hospital, 514 U. S. 87, 91-92
(1995).
Under these regulations, the Federal Government reimburses
medical providers based upon the lower of the provider's reasonable
cost of furnishing these services to beneficiaries or the
provider's customary charges for the services. 42 CFR § 413.1(b)
(1999). The regulations are designed to provide reimbursement for
the actual cost of providing care to elderly and disabled Medicare
beneficiaries. See § 413.5(a) ("Thus, the application of this
approach, with appropriate accounting support, will result in
meeting actual costs of services to beneficiaries"). The
regulations make clear that the Federal Government will reimburse
hospitals only for the costs of providing medical care to Medicare
patients, as opposed to nonbeneficiary patients. § 413.80(d)
("Under Medicare ... costs of services provided for other than
beneficiaries are not to be borne by the Medicare program"); §
413.9(a) ("All payments to providers of services must be based on
the reasonable cost of services covered under Medicare and related
to the care of beneficiaries"); § 413.9(c)(3) ("The determination
of reasonable cost of services must be based on cost related to the
care of Medicare beneficiaries").
Although these reimbursement provisions permit hospitals to
recover capital costs, such as the cost of maintaining building
facilities, § 413.9(c), the allowable reimbursement for these
expenditures is only the amount reasonably attributable to Medicare
patients as opposed to general maintenance of the facilities. See §
413.9(b) ("The objective is that under the methods of determining
costs, the costs with respect to
685
individuals covered by the program will not be borne by
individuals not so covered, and the costs with respect to
individuals not so covered will not be borne by the program").
The "prospective payment system" adopted by Congress in 1983 to
increase efficiency and reduce costs operates somewhat differently
from the "reasonable cost" provisions but is also designed to
reimburse hospitals for the cost of providing care to Medicare
beneficiaries. 42 U. S. C. § 1395ww; 42 CFR pt. 412 (1999). Under
this system, the Medicare program pays hospitals a fixed price for
each case based on the patient's diagnosis related grouping (DRG),
which is assigned based on the patient's diagnosis, age, and sex,
among other things. 42 U. S. C. § 1395ww(e); 24 CFR § 412.60
(1999). The DRG figure represents the average cost of treating
patients within the DRG. 42 U. S. C. § 1395ww(d)(2); 49 Fed. Reg.
251 (1984). Significantly, because hospitals are paid fixed amounts
based on the DRG, the hospital, like any other private contractor,
bears the risk of higher costs. See Kinney, Making Hard Choices
under the Medicare Prospective Payment System: One Administrative
Model for Allocating Medical Resources under a Government Health
Insurance Program, 19 Ind. L. Rev. 1151, 11511152 (1986).
Thus, the statute and regulations make clear that medical
providers are entitled only to reimbursement for the actual or
estimated cost of services rendered to Medicare patients and that
individual elderly and disabled patients-not hospitals-are the
beneficiaries of the Medicare program. Indeed, the Social Security
Act explicitly says so. See 42 U. S. C. § 1395a(b)(5) (1994 ed.,
Supp. III) ("The term 'medicare beneficiary' means an
individual who is entitled to benefits" (emphasis added)).
The Act repeatedly refers to Medicare "benefits" as assistance
provided to individual participants, rather than to medical
providers. See,
e. g., § 1395a ("Any individual
entitled to insurance benefits under this subchapter"); § 1395b-2
("Such notice shall be mailed an-
686
nually to individuals entitled to benefits under part A or part
B of this subchapter and when an individual applies for benefits
under part A of this subchapter or enrolls under part B of this
subchapter"); § 1395b-4(a) ("health insurance coverage to
individuals who are eligible to receive benefits under this
subchapter"); § 1395b-4(b)(2)(A)(i) ("information that may assist
individuals in obtaining benefits"). In contrast, the Act commonly
refers to "payments" to providers of medical services. See,
e. g., § 1395g(a) ("no such payments shall be made to
any provider unless it has furnished such information as the
Secretary may request"); § 1395f(a) ("payment for services
furnished an individual may be made only to providers of
services"); § 1395n(a) (1994 ed. and Supp. III) ("payment for
services ... furnished an individual may be made only to providers
of services which are eligible"). This terminology, and the
Medicare regulations defining allowable costs, reflect the fact
that Medicare is a program for providing "financial help" to
individual elderly and disabled patients rather than to the health
care providers who treat them. Medicare's provisions for
reimbursing providers' costs do nothing more than establish a
market exchange of payment for services, and so cannot be said to
provide "benefits" within the meaning of 18 U. S. C. § 666(b).
II
Although the statutory provisions and regulations cited above
demonstrate that Medicare operates as a reimbursement scheme with
respect to health care providers, and not as a means of providing
them "useful aid" or "financial help," the Court finds in the
statute and regulations evidence that health care providers are,
along with the individual elderly and disabled patients, also
target beneficiaries of the program. I think that the Court's
reasoning is both unpersuasive and boundless; any funds flowing
from a federal assistance program could be deemed "benefits" under
the Court's rationale, notwithstanding the Court's concluding
disclaimer
687
of such a result. Thus, although the Court purports to reject
the Government's argument that "benefits" means "funds that
originate in a federal assistance program," the Court, in practice,
adopts it.
A
First, the Court describes Medicare's elaborate funding
structure and notes that Medicare's reasonable cost recovery system
allows recovery of certain capital costs and the costs of education
and training.
Ante, at 673-674. These provisions of Medicare
do not establish that hospitals receive "benefits." To the
contrary, the capital costs recoverable under those provisions of
Medicare are the costs tied to the treatment of Medicare patients.
See
supra, at 684-685. In this sense, the cost provisions of
Medicare expressly defeat any suggestion that they are meant to
provide a "benefit" to the hospital. These provisions are not
designed to provide financial assistance to the hospital; they are
designed to ensure that Medicare beneficiaries receive quality
medical care. And again, the Medicare program picks up only the
portion of the costs attributable to the care of Medicare
beneficiaries. 42 CFR §§ 413.50, 413.85 (1999). In fact, the Court
does not grapple with the evidence that Medicare systematically
under-compensates health care providers, evidence that would
further undermine the notion that hospitals are receiving some form
of financial assistance from the program. See Utz, Federalism in
Health Care: Costs and Benefits, 28 Conn. L. Rev. 127, 138-139
(1995).
Second, the Court relies on the numerous obligations imposed on
health care providers participating in Medicare.
Ante, at
672-675. The Court notes that health care providers must satisfy
licensing standards, provide a laundry list of particular health
care services, and ensure an effective quality-assurance program. I
assume, however, that the same could be said of most Government
contractors. The defense contractor who agrees to build the
military's equip-
688
ment is, no doubt, subject to an extensive list of statutory and
regulatory requirements, not because the Government intends to
provide "benefits" to the contractor, but because the Federal
Government intends to place controls on the expenditure of federal
dollars. See
United States v.
Copeland, 143 F.3d
1439, 1442 (CAll 1998) (discussing regulatory burdens on
defense contractors). Similarly, private insurers no doubt impose
various requirements on those who receive reimbursements from them.
In requiring hospitals to meet certain standards, the Federal
Government is no different from these private insurers, except that
the Federal Government exercises vastly greater market power. In
other words, the imposition on health care providers of an
intricate regulatory scheme is irrelevant to the question whether
funds paid pursuant to that scheme are benefits.
Third, the Court contends that some health care providers
receive "special treatment" in the form of lump sum payments
designed to ensure the providers' ability to satisfy financial
obligations.
Ante, at 674. This feature of Medicare is also
insufficient to show that any "benefits" were received by West
Volusia Hospital Authority. These payments, which are part of the
prospective payment system, see
supra, at 685, are based on
estimated costs of providing services to Medicare beneficiaries.
See,
e. g., 42 CFR § 412.108 (1999). Like the
standard reimbursement schemes outlined above, this payment system
does not subsidize the hospital, it pays the hospital prospectively
for performing a service.
Finally, the Court concludes, based on its observations of
Medicare, that "Medicare operates with a purpose and design above
and beyond point-of-sale patient care," namely, "ensuring the
availability of quality health care for the broader community."
Ante, at 677, 680. According to the Court, Medicare
guarantees that "providers possess the capacity to render, on an
ongoing basis, medical care to the program's qualifying patients."
Ante, at 680. In other words, Medicare exists to guarantee
patients' access to quality medical
689
care. Quality medical care is available only if medical
providers remain financially viable. Medicare payments create
demand for medical services and, therefore, provide "benefits" to
health care providers. This syllogism, however, amounts to nothing
more than the self-evident point that Medicare aims to ensure that
the beneficiaries of the program-patients-are able to receive the
program's intended benefits. It does not establish that Medicare
exists to put hospitals on the dole.
In short, none of the components of Medicare cited by the Court
establishes that benefits flow to hospitals. It is significant
that, although the Court repeatedly invokes, mantra-like, its
conclusion that Medicare exists for a purpose above and beyond
reimbursing hospitals for treating Medicare patients, see,
e. g., ante, at 677-678, 679, 680, 681, when
the Court comes around to actually identifying this purpose, it can
only state: "The structure and operation of the Medicare program
reveal a comprehensive federal assistance enterprise aimed at
ensuring the availability of quality health care for the broader
community."
Ante, at 680. The Court cannot bring itself to
say, as it must, that Medicare exists for the
hospital.3
3 And even if I were to accept that some provisions of
Medicare-the special treatment provisions, for example-provide a
benefit to health care providers, there is no evidence in the
record that West Volusia Hospital Authority received any such
payments. Without such evidence, the Court's reliance on special
provisions to uphold petitioner's conviction is improper. Title 18
U. S. C. § 666(b) is, after all, a jurisdictional provision that
allows federal prosecution only if the specific organization at
issue received more than $10,000 in "benefits." The Court treats
the provision as window dressing. It is not necessary, under the
Court's view, to show that
this organization received
benefits. It is sufficient to show that some hospitals receive
them.
This approach is particularly inappropriate because § 666(b), or
some similar jurisdictional provision, is constitutionally
required. Section 666 was adopted pursuant to Congress' spending
power, Art. I, § 8, cl. 1. We have held that the spending power
requires, at least, that the exercise of federal power be related
"to the federal interest in particular national
690
B
Although the Court disclaims the Government's argument that
"benefits" means only funds provided under a federal assistance
program, the Court, in practice, adopts it. The Court's expansive
rationale could be applied to any federal assistance program that
provides funds to any organization. This result is inconsistent
with the plain meaning of the statute. If Congress had meant to
apply § 666 to any organization that receives "funds" totaling more
than $10,000 per annum, it would have said so. Cf. 18 U. s. C. §
665 ("Whoever, being ... connected in any capacity with any agency
or organization receiving financial assistance or any funds under
[a certain federal program] knowingly enrolls an ineligible
participant, embezzles, willfully misapplies, steals, or obtains by
fraud any of the moneys, funds, assets, or property which are the
subject of a financial assistance agreement or contract pursuant to
such Act shall be [punished]"). Congress, for that matter, could
have omitted the word "benefits" from the statute and provided
simply that any organization that "receives, in anyone year period,
in excess of $10,000 under a Federal program involving a ... form
of federal assistance" is covered by the statute. That Congress did
not do so suggests that the word "benefits" has a
projects or programs."
South Dakota v.
Dole,
483 U. S. 203,
207 (1987) (internal quotation marks omitted). See
id., at
213 (O'CONNOR, J., dissenting). Arguably, if Congress attempted to
criminalize acts of theft or bribery based solely on the fact
that-in circumstances unrelated to the theft or bribery-the victim
organization received federal funds as payment for a market
transaction, this constitutional requirement would not be
satisfied. Without a jurisdictional provision that would ensure
that in
each case the exercise of federal power is related
to the federal interest in a federal program, § 666 would
criminalize routine acts of fraud or bribery, which, as the Court
admits, would "upse[t] the proper federal balance."
Ante, at
681. Cf.
United States v.
Lopez, 514 U. S. 549, 561 (1995)
("[Section] 922(q) contains no jurisdictional element which would
ensure, through case-by-case inquiry, that the firearm possession
in question affects interstate commerce").
691
meaning separate and apart from the words "under a Federal
program involving a ... form of federal assistance." I am doubtful
that the Court's interpretation gives any meaning at all to the
word "benefits" in § 666(b) because, under the Court's rationale,
any organization that receives $10,000 under a federal program
involving federal assistance receives "benefits" in such an
amount.
This expansive construction of § 666(b) is, at the very least,
inconsistent with the rule of lenity-which the Court does not
discuss. This principle requires that, to the extent that there is
any ambiguity in the term "benefits," we should resolve that
ambiguity in favor of the defendant. See
United States v.
Bass, 404 U.
S. 336, 347 (1971) ("In various ways over the years, we have
stated that when choice has to be made between two readings of what
conduct Congress has made a crime, it is appropriate, before we
choose the harsher alternative, to require that Congress should
have spoken in language that is clear and definite" (internal
quotation marks omitted)).
C
I doubt that there is any federal assistance program that does
not provide "benefits" to organizations under the Court's expansive
rationale, but will illustrate my point with just one example
employed by two lower courts. See
United States v.
Wyncoop, 11 F.3d
119, 123
(CA9 1993); United States v.
LaHue, 998
F. Supp. 1182, 1187 (Kan. 1998), aff'd,
170 F.3d
1026 (CAlO 1999). Many grocery stores accept more than $10,000
per annum in food stamps distributed to individual beneficiaries as
part of the Federal Food Stamp and Food Distribution Program. Like
Medicare providers, stores participating in the Food Stamp Program
are required to satisfy a comprehensive series of statutory and
regulatory requirements. See 7 CFR pt. 278 (1999). For example,
stores are qualified to participate only if they sell an adequate
percentage of staple foods such as meat, cereal, and dairy
products. § 278.1(b)(1). Stores must document an
692
ability to attract food stamp business and demonstrate the
business integrity and reputation of the store owners and managers.
§§ 278.1(b)(2)-(3). Like Medicare, the Food Stamp Program monitors
the providers' compliance with the program's requirements. See §
278.1(n). Like Medicare, the Food Stamp Program sanctions
noncompliance with dismissal from the program. § 278.1(l). And, the
Food Stamp Program is like Medicare in that it can be described as
having "a purpose and design above and beyond point-of-sale" of
food.
Ante, at 677. Undoubtedly, the Food Stamp Program
helps to address the "grocery gap," that is, the lack of
availability of reasonably priced nutritional foods in some
lowincome and rural areas. See Note, Food Stamp Trafficking:
Why Small Groceries Need Judicial Protection from the Department
of Agriculture (And from Their Own Employees), 96 Mich. L. Rev.
2156, 2176-2177 (1998); Department of Agriculture, Office of
Analysis & Evaluation, Food Retailers in the Food Stamp
Program: Characteristics and Service to Program Participants 15
(Feb. 1997) (Table 6). There is ample evidence on the face of the
statute and regulations that Congress and the agency had in mind
the need to ensure that low-income communities have access to
grocery stores. See 7 U. S. C. § 2021(a) (1994 ed., Supp. IV)
(requiring the Secretary to consider hardship to the community in
making disqualification determinations); 7 CFR § 278.1(b)(1)(ii)(C)
(1999) (listing availability of food stores in the community as a
factor relevant to a firm's application to participate in the
program). It could be said, therefore, that the grocery store's
"own operations are one of the reasons for maintaining the
program."
Ante, at 681.
To my mind, the reason that a corner grocery does not receive
"benefits" is simply that it merely receives payment from the
Government in a market transaction. I fail to see, however, how the
Court could reach the same conclusion that I would. Although the
Court assures us that its holding today is narrow and factbound,
depending on the "structure,
693
operation, and purpose" of Medicare,
ibid., the
consequences of the Court's reasoning are far reaching. In fact,
the Court candidly acknowledges that its interpretation is
expansive when it reads 18 U. s. C. § 666(b) to suggest that
"Congress viewed
many federal assistance programs as
providing benefits to participating organizations."
Ante, at
678 (emphasis added). In contrast, I think that the plain language
of § 666(b) reflects a congressional intent to reach only those
organizations that are
themselves the beneficiaries of
"useful aid" or "financial help in time of sickness, old age, or
unemployment," rather than organizations that merely receive funds
as part of a market transaction for goods or services.
***
For the foregoing reasons, I respectfully dissent.
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