Fischer v. United States – Oral Argument – February 22, 2000

Media for Fischer v. United States

Audio Transcription for Opinion Announcement – May 15, 2000 in Fischer v. United States

del

William H. Rehnquist:

We’ll hear argument next in No. 99-116, Jeffrey Allan Fischer v. the United States.

Mr. Horwitz.

Mark L. Horwitz:

Mr. Chief Justice, and may it please the Court:

The question here is does the payment to a hospital for treatment of Medicare patients constitute receipt of benefits under a Federal program involving Federal assistance.

I submit the answer is no.

Under section 666, the Federal statute that extends bribery and theft to what would otherwise be local governments and local organizations, the plain language of the statute here, I submit, would define benefits as that entity or that product that is being administered or cared for by a surrogate of the Federal Government, which was why this legislation was passed.

And the Eleventh Circuit in this case equated benefits with payment.

William H. Rehnquist:

Mr. Horwitz, the… the section is quite lengthy.

Is there some particular section, a subsection you want us to focus on?

Mark L. Horwitz:

Yes.

Subsection (b), Your Honor, which provides that an… subsection (b) is the jurisdictional section for–

William H. Rehnquist:

B as in buzz or D as in does?

Mark L. Horwitz:

–B as in boy, Your Honor.

William H. Rehnquist:

Boy, okay.

Mark L. Horwitz:

Subsection (a) sets out the prohibited activity, basically theft in subpart (1), then bribery or soliciting a bribe.

Subpart (b) is the jurisdictional limitation of the statute… B as in boy… which says that the statute applies to organizations that receive benefits in excess of $10,000 under a Federal program involving grant, contract, insurance, or other form of Federal assistance.

So, that’s… that subsection (b) is the jurisdictional element which is… I submit under the legislative history, was included along with subsection (c) so as to not extend this Federal jurisdiction into what would and should be otherwise State law enforcement activity.

David H. Souter:

Isn’t the difficulty of your position, just based on what you’ve just quoted, the statute refers to the Government as getting the benefits?

So, I suppose it follows from what you’re saying that the statute would never have any application to a Medicare or Medicaid… a government that gives money to a Medicare or Medicaid provider in… under its contract obligations.

Mark L. Horwitz:

The… the answer–

David H. Souter:

Is that right?

Mark L. Horwitz:

–The answer to that would be yes, Your Honor.

And the reason is that… that the Medicare system as seen in… in the legislation and in the Code of Federal Regulation makes clear that the providers are simply providing a service.

The benefit here is to the patient, the Medicare recipient, in getting services, and–

David H. Souter:

Okay.

Sandra Day O’Connor:

Well, but in a way the benefit goes to the provider as well because we’re dealing here with Medicare services by a hospital when they weren’t getting paid anything for people who couldn’t afford to pay.

So, Medicare was enacted, and now all of a sudden, a hospital can get paid for doing something that it was getting saddled with without pay before.

And in a sense, the hospital benefits.

Mark L. Horwitz:

–Your Honor, in the sense of benefits in the sense of a… a verb, anyone who receives largesse, any company that receives a payment from the Government benefits.

And benefits in the sense of a noun in the sense of what… in looking at the legislative history, the Del Toro, Hinton, and Mosley cases and which arose and why Congress passed this law before the Dixson case sort of reigned those in, those three cases all involved the administration of assets of the Federal Government through a surrogate.

Mark L. Horwitz:

And if we take the contention of the Government, that is, assistance payments and those who assist… receive assistance payments is the test, then I think Congress would have said that.

You know, they would have said, anyone who receives assistance payments… their organization will be subject to this statute.

David H. Souter:

Yes, but that does seem to be what it… it says when it… when it refers to… under subsection (b), when it refers to benefits under a program involving a grant, contract, subsidy, and so on.

It sounds… I mean, the immediate… most immediate reading of that language says, oh, whatever the… whatever the organization gets under the grant, program, subsidy, and so on, is… is what the statute is referring to as a benefit because that’s the only kind of benefit that… that organizations get.

That seems to be the… the natural reading of the statute.

Mark L. Horwitz:

The benefit… and again, getting back to the difference between a noun and verb, Your Honor, the… the purpose, as seen in the legislative history, is to protect the funds that surrogates of the Federal Government are administering.

There’s no… once that hospital is paid for these services, it’s no longer accountable for how it spends its money, nor does the Federal Government have any interest in how it spends its money.

David H. Souter:

Well, it isn’t with respect to a given item of charge, but that doesn’t mean that the Government’s concern is… is somehow over because the Government may have a… a broader, systemic concern even though a particular item of charge has already been paid, and in that respect, it’s no longer the Government’s business.

Mark L. Horwitz:

It might, but I would submit that if that’s what Congress wanted, they would have said anyone who receives assistance payments.

If not–

David H. Souter:

Well, the… Congress could have… could have said that.

But there’s… there’s one other thing that… that bothers me about your position, and that is, why would Congress have wanted to except Medicare and Medicaid from the… from the protections that this… for the… for the public fisc and the public welfare that this statute is obviously aimed at?

Why would it have a Medicare and Medicaid exception?

Mark L. Horwitz:

–I don’t think there is, Your Honor, a exception for Medicaid–

David H. Souter:

But there is.

You’ve admitted that there is on your analysis because on your analysis the benefit… the person benefitted, the one who gets the benefit, is always the patient at the end of the… at the end of the line.

And so, it does seem to read the statute out of the… out of the Medicare/Medicaid–

Mark L. Horwitz:

–Your Honor, the Medicare benefits are subject to the protection as long as they stay within the program funds.

For example, if someone in the intermediary were to solicit a bribe for making a cost determination that was beneficial to the hospital, that intermediary receives the benefits and disburses those benefits and helps disburse those benefits and is acting as a surrogate for the Government to protect that.

David H. Souter:

–So… so, benefit would include ill gotten gain.

Mark L. Horwitz:

No.

David H. Souter:

Is that what you’re saying?

Mark L. Horwitz:

No, Your Honor.

I’m saying that the benefits here is the resources that are being utilized in the Medicare system to provide the beneficiary… that is, the patient… with its services.

When the hospital is paid, that ends it.

But when the intermediary is administering those funds, then they are still subject to the protection of section 666.

David H. Souter:

So, there is a distinction between benefit and funds from which benefits ultimately will be paid, and that’s what you rely on.

Mark L. Horwitz:

There is a distinction between cost of buying a service, at which point the administration of the Federal funds ends, and the individual or company at that point or State, whoever supplies that service, then has the funds to do it as they wish.

Under the definition of benefits equals Federal assistance, there’s a whole parade of horribles that can be imagined, even a… paying a farm company not to grow crops.

When they receive those funds, it’s over.

Mark L. Horwitz:

The… the Federal Government no longer has an interest in administering those funds.

Under the receipt of benefits analysis, somebody… an employee who steals a tractor has now committed a Federal offense because the farm company has received assistance in the sense of it hasn’t planted crops.

Ruth Bader Ginsburg:

Mr. Horwitz, before we go on to your parade of horribles, I take it from what you’ve said distinguishing the fiscal intermediary from the provider, that all hospitals that administer Medicare that receive… that receive the actual dollars, they are out from under the statute.

So, could… the Government could go after the fiscal intermediary, but could not go after the hospital that actually receives the Federal dollars.

Mark L. Horwitz:

If the hospital is receiving those Federal dollars, for example, under a program where it is administering rather than just getting paid–

Ruth Bader Ginsburg:

I’m talking about the… the program that we have before us, the Medicare program.

The hospital you said gets paid.

It doesn’t get aid.

Mark L. Horwitz:

–Yes, Your Honor.

And… and I would say that when the hospital is paid for the service, that… the coverage of 666 is ended.

The… the Government, as it… as it mentioned in its brief in opposition to the petition for certiorari, recognized that there are many other statutes passed that specifically protect the Medicare system.

So, there’s not a necessity to protect… to… to interject the Federal Government under 666 into how the hospital spends its money after it is paid for its service when the Government has no interest in how it spends its money.

Antonin Scalia:

Well, and the hospital is normally not going to be the defendant here.

I mean, it’s usually going to be somebody who stole money from the hospital.

Right?

I mean, the… the hospital can acquire as much ill gotten gains as it wishes and it wouldn’t be caught by this statute.

Mark L. Horwitz:

Your Honor, if the hospital were to bribe the intermediary, it would be covered.

Antonin Scalia:

Oh, yes.

No, no.

But I’m saying if you say that the… if, as the Government says, the hospital itself falls under this statute… never mind the intermediary, the hospital itself… the hospital would not normally be the person who… who would be prosecuted.

It would… the person prosecuted would be somebody stealing from the hospital.

Mark L. Horwitz:

Yes, Your Honor.

Antonin Scalia:

Not the hospital by reason of its stealing from somebody else–

Mark L. Horwitz:

It–

Antonin Scalia:

–a Medicare recipient or anybody else.

Mark L. Horwitz:

–It is the question of how far does the jurisdictional element go.

How far does the Federal Government go into what should and has traditionally been State law enforcement.

Antonin Scalia:

We’re not keeping hospitals honest here.

That’s… that’s not what the issue is.

Mark L. Horwitz:

The issue is how far does the jurisdiction travel.

Mark L. Horwitz:

Does… does it go to all employees of a hospital simply because the hospital is paid for providing a service?

Does it go to the driver who delivers food in the hospital truck or picks it up if he decides to steal the truck?

Are we going to put that into Federal court as a crime?

And… and the legislative history, I would submit, read fairly, would indicate that Congress was not intent in covering those commercial transactions, and that’s why subsection (b)–

Antonin Scalia:

Of course, you could… you could get an employee of the intermediary for stealing a truck.

Right?

Mark L. Horwitz:

–Unfortunately, I would say yes.

Antonin Scalia:

I mean, you know, the stealing a truck hypothetical has a lot of–

Mark L. Horwitz:

If… if–

Antonin Scalia:

–a lot of appeal, but… but you have to acknowledge that somebody’s theft of a truck is going to be covered by this.

Right?

Mark L. Horwitz:

–If the… if the intermediary has a car and an employee steals that car, it’s covered, Your Honor, yes.

Anthony M. Kennedy:

You were talking about subsection (c).

It seems to me that that doesn’t altogether help you because the terms are… the section doesn’t apply to salary, wages, fees, or other compensation paid.

And I take it you claim that this is other compensation paid?

Mark L. Horwitz:

This is reimbursement of expenses, Your Honor, which is also covered in subsection (c).

Anthony M. Kennedy:

Even reimbursement of expenses.

If a hospital sends me a bill for its x ray and I pay it, I’m not reimbursing its expenses and… and… nor am I paying compensation in the usual sense of… of a salary.

Mark L. Horwitz:

Well, Your Honor–

Anthony M. Kennedy:

So, I–

Mark L. Horwitz:

–Sorry.

Anthony M. Kennedy:

–I’m not sure (c) helps… is completely helpful to you.

Mark L. Horwitz:

Well, Your Honor, the… the reason why I think it’s helpful is this.

The… this statute was passed before the Court came down with its decision in Dixson to attempt to alleviate the perceived problem in Del Toro, Hinton, and Mosley, which was bribery of a… by an… a local agency administering funds.

Section 201 was the statute that was attempted to be applied in that setting, and if one looks at section 201, there is no equivalent of subsection (c) in section 201.

You don’t need subsection (c) to… to modify the prohibited activity.

You never have a good faith, corrupt bribe.

You never have a good faith, corrupt solicitation of a bribe, and you never have a good faith theft.

You may, however, have a… as… in the Congressional Record cited in the briefs where they say Congress said it wasn’t… the Senate report… excuse me… said it’s not intended to cover the purchase of, say, a copy machine.

So, if you… if you have a good faith purchase of a copy machine for $10,000, you’re not going to subject all the employees of that company to Federal jurisdiction, but if it’s not a good faith purchase of a copy machine and therefore it is a type of theft or bribe, then it would cover it.

Mark L. Horwitz:

So, I think that subsection (c)… it’s interesting that it is not in section 201.

There is something somewhat similar to other provisions of section 201, but there is no subsection (c) there.

William H. Rehnquist:

Mr. Horwitz, a moment ago you referred to a Dixson case.

Is that a decision of this Court?

Mark L. Horwitz:

Yes, Your Honor.

William H. Rehnquist:

Is it cited in your brief?

If not–

Mark L. Horwitz:

It is cited in the Salinas case, Your Honor, which talks about… which is the only other case discussed… discussing this section 666 in the statute.

William H. Rehnquist:

–Do you have a citation for Dixson?

If not, just say so.

Mark L. Horwitz:

I don’t have it very handy, Your Honor, but it is cited in the Salinas case.

And the Dixson case was the case that really was the appeal of… the appeal of the Hinton case to the Supreme Court is… is one and the same as Dixson.

And so, the–

Anthony M. Kennedy:

It seems to me at least it could be argued that (c) is rather narrow.

It talks about compensation in the sense of a salary and not a contract payment.

Mark L. Horwitz:

–Well–

Anthony M. Kennedy:

And the very fact that it’s there indicates that if it weren’t there, benefit could otherwise be interpreted as including compensation, which is not helpful to your position.

Mark L. Horwitz:

–Well, Your Honor, it… it could if… depending on how benefit is described in subpart (a).

That is described as corruptly benefit, and corruptly has been determined to have a significant meaning.

Any bribe or solicitation is modified by the term corruptly, which I would submit does away with the necessity of subpart (c).

And what we… there’s another part that I want to bring the Court’s attention here, and that is the Medicare system, when this statute was passed, comes into a series of… of… the legislation itself, which clearly talks about hospitals being providers, who are being recompensed for the costs of the services, where the beneficiaries are the patients.

The C.F.R., the Code of Federal Regulations, also talks about that.

Anthony M. Kennedy:

Well, let… let me put it this way.

Do… do we have to interpret (c) in order to rule in your favor?

Mark L. Horwitz:

No, Your Honor.

I think it’s not necessary.

I think (c) is just a further indication of the congressional intent and this… the plain words of the statute itself.

But benefits, in the sense of a noun rather than a verb, that is, to… to allow the Federal Government to have an interest in… in vindicating through its criminal laws those surrogates who are administering the benefits, this package of Federal benefits, until it gets to the end of the road and is distributed, at which point the Federal Government has no further interest in it.

And in this case, there… there was no further interest in what and how a hospital spends its money because the auditing procedures, as set forth on the Code of Federal Regulations, make it clear that costs… only those costs in relation to patient care are allowable.

And if there’s a false attempt by a hospital to be reimbursed for an investment loss or a bad investment, that can be vindicated through a false cost report or false statements to the Government under the various statutes.

Mark L. Horwitz:

So, the… the issue here that… that seems to be looming is, under the Eleventh Circuit interpretation, how… how far is the end.

And there is no end if we take benefits and define them as receiving Federal assistance because then–

Ruth Bader Ginsburg:

Mr. Horwitz, are you… are you distinguishing Salinas on that basis, and in Salinas it was the municipal unit that had the jail that is administering the Federal funds?

Is that–

Mark L. Horwitz:

–Well, Your Honor, Salinas specifically did not address the issue of what constitutes benefits under 666.

So, Salinas talked about whether the bribe had to directly affect the Federal funds.

Ruth Bader Ginsburg:

–And the answer is no.

Mark L. Horwitz:

The answer is no.

That’s not… we’re here to determine whether the entity itself is receiving benefits so as to subject its employees to bribes.

Ruth Bader Ginsburg:

Well, would you answer that question?

In the Salinas case, was the organization itself receiving benefits?

Mark L. Horwitz:

From reading the case, Your Honor, I can’t give you a specific answer, but it would appear that the… the benefits are to the Federal Government in a continuing basis to care for its prisoners.

So, in that sense it still has an interest in the administration of those funds and the administration of the program to which it is giving, i.e., the sheriff’s jail facility.

So, there is–

Antonin Scalia:

I thought they were getting money from the Federal Government.

Mark L. Horwitz:

–Yes, they are.

Antonin Scalia:

My recollection of the case.

Mark L. Horwitz:

I wasn’t… Your Honor, I wasn’t intending to zero in on the money, but rather whether the money that was received was received with the understanding that the jail had to administer it under a continuing program and be accountable to the Government as to how it dealt with the Government’s prisoners.

So, therefore, the benefit is… was not–

Antonin Scalia:

–There has to be some kind of accountability in your theory?

Why?

I mean, I thought the only issue would be whether the jail was being reimbursed for services provided to the prisoner or not.

And I gather it wasn’t being reimbursed for any… any debt that the prisoner owed.

I mean, it’s remarkable to think that besides being kept in jail, you owe money for your keeping.

Maybe they did that once upon a time.

It would be a good idea, but nobody thinks that–

Mark L. Horwitz:

The… the payment is by the marshal’s service, as I understand it, in Salinas to the county or to the sheriff for the purpose of assisting the marshal in keeping prisoners in the local facility.

And… and so, the payment there… the benefit is to the continued operation of the jail under the parameters that the marshal seems appropriate.

Anthony M. Kennedy:

–Well, as… as I recall Salinas, there was a payment per day for each prisoner, but there was also a grant to improve the jail generally.

Mark L. Horwitz:

Right, and… and the record, from what I could read of the case, doesn’t seem to answer the question of what other provisions might be involved in the marshal’s office in determining whether there was some obligation by the jail to satisfy the marshal in the way these funds were administered, rather than simply I’m going to pay you so much a day to keep a prisoner and we don’t care how you do it.

Anthony M. Kennedy:

Well, if we had the Salinas question before us and if the only thing the Feds… the Federal Government paid were a per day reimbursement for each Federal prisoner housed in the facility, then it might be like your case.

Mark L. Horwitz:

Yes, Your Honor, with… I assume that your… your question also has within it the presumption that the marshal has no interest in how the jail spends the money and how it takes care of the prisoners because then I think it starts to move it into more of a program being administered by the jail.

You know, if marshal wanted, they could build their own jail and… and take care and control of the prisoners.

Anthony M. Kennedy:

Well, if the Federal Government had certain standards for how patients should be cared for in the hospitals, that would change it?

Mark L. Horwitz:

No, not… not how they should be cared for.

If they have certain standards on how the hospital is to administer the money that it is given, if the hospital has an obligation to the Government to spend or not spend its money under the Government’s programs so that it has continued to… to care for the Government’s funds in its continuing effort under the program.

Anthony M. Kennedy:

Does the hospital in your case have to be certified by the Federal Government to receive these monies as meeting certain standards?

Mark L. Horwitz:

The hospital has to be certified by the Federal Government, but that doesn’t… that’s not the… in question.

It has to be certified and it has to have at least a decent enough reputation in the community that patients want to go to it.

If no patients go to it, you don’t get paid.

Anthony M. Kennedy:

Well, then the Government is interested in how it spends its money.

Mark L. Horwitz:

The… no.

The Government is interested in the ultimate cost, and they protect that interest through the cost analysis that goes on in a routine, continuing basis to determine what is the price that’s paid.

And… however, the Government does not have an interest in how the hospital spends its money.

The hospital might go out and in this case lose its money on a bad loan, a fraudulent loan.

Stephen G. Breyer:

Well, it has a tremendous interest in how it spends the Medicare money, and don’t they have like 500,000 pages of regulations on it?

Mark L. Horwitz:

The… the Government has 5… I don’t know the number, Your Honor.

Stephen G. Breyer:

I don’t either.

I’m making that up.

[Laughter]

Mark L. Horwitz:

But… but the Government has an interest in how the money is spent only to the extent that, under the Code of Federal Regulations, it will reimburse only those reasonable costs related to health care and providing health care to the beneficiaries.

The Government does not have an interest in other non health care related assets.

Stephen G. Breyer:

Nobody says… they may not, but why isn’t it enough to be a beneficiary, that the Government’s whole program is aimed at getting money to the hospital to reimburse them for these costs?

I mean, obviously, they… they think that the patients are beneficiaries and they obviously also think the hospitals are beneficiaries.

Don’t they?

I mean, why not?

Why can’t both be intended beneficiaries of Government largesse, one through the other?

Mark L. Horwitz:

The… the answer to that again gets back to whether they are a beneficiary in the sense of a noun or a verb.

Does the hospital receive a benefit from dealing with… with Medicare patients?

Stephen G. Breyer:

Yes.

Mark L. Horwitz:

Yes, they do.

But is that the kind of benefit that was a problem in Del, Hinton, Mosley and–

Stephen G. Breyer:

Maybe not, but that’s my question.

Why not?

So what?

Antonin Scalia:

Mr. Horwitz, do you think that these regulations, 5,000 pages or however many pages… do you think that they prohibit the… the hospital from spending more on patient services than the hospital will be reimbursed?

They surely say we’ll only reimburse you for, you know, these particular procedures.

If the hospital is extravagant and in fact expends much more money on a particular procedure, do you think that the Government cares?

Mark L. Horwitz:

–My point exactly, Your Honor.

They don’t care.

Antonin Scalia:

It doesn’t.

So, the… the hospital can really ride itself into bankruptcy as far as the Government is concerned.

Mark L. Horwitz:

A hospital–

Antonin Scalia:

But the argument is here that the Government is terribly concerned about the hospital being defrauded into bankruptcy.

Mark L. Horwitz:

–I don’t think the hospital… the Government is any more concerned about what happens with the hospital’s money, whether it is in the form of defrauding it, spending it wisely or unwisely.

Antonin Scalia:

I don’t think so either.

Mark L. Horwitz:

That’s… that’s the difference that I see.

And, Justice Breyer, I think that goes back to your answer.

They are not… the Government has no interest in whether the hospital is properly making investment decisions.

It has an interest in whether those costs… only costs that are related to the care and treatment of Medicare patients is included in those costs to the Government, and the false statement and Medicare cost provisions ensure to protect that.

David H. Souter:

Well, the Government at… at least is… is interested to the extent of making sure that it gets what it pays for with… with its money.

Mark L. Horwitz:

And–

David H. Souter:

And… and my point… my point is, as I understand from the briefs the reimbursement scheme, the reimbursement scheme is that the Government, in fact, makes quarterly payments, and then at the end of the year they settle up.

So, in point of fact, some of what the Government is paying for in any quarter may not necessarily have… have yet been earned by the hospital.

And I suppose the Government at least has an interest in making sure that the hospital remains solvent and functioning long enough to… to use up the money properly that it has been paid.

So, I suppose the Government does have a continuing interest.

Mark L. Horwitz:

–There… there’s no interest in… if there was, I would submit that the rules and regulations would be different.

Many times the hospital is owed money at the end of the time period.

It’s… it is a cost… reimbursement for costs.

David H. Souter:

Well, sometimes it goes one way, and sometimes it goes another.

Mark L. Horwitz:

The point is the hospital is reimbursed for a cost of providing services.

Whether it’s paid in advance or after is determined later when they do a… an audit for that period.

So, the… the Government still does not have an interest in how the… how the hospital spends its money, whether it does so wisely or not, for to do that would put the Federal Government into a situation that Congress did not envision because it could have simply said something else like we’re going to watch how you get all your Federal assistance.

I’d like to reserve the remaining time.

William H. Rehnquist:

Very well, Mr. Horwitz.

Ms. Blatt, we’ll hear from you.

Lisa Schiavo Blatt:

Thank you.

Mr. Chief Justice, and may it please the Court:

Medicare payments to hospitals are covered by section 666 because hospitals directly receive Federal benefit funds under an assistance program.

The text of section 666(b) applies to recipients of benefits under a Federal program involving Federal assistance.

Antonin Scalia:

What do you respond to the contention of the petitioner that if that is true, the local grocery store is also a beneficiary and any theft from the corner grocery store becomes a Federal… a Federal crime under this provision?

Lisa Schiavo Blatt:

The… the question of whether the grocery–

Antonin Scalia:

By… by reason of the food stamp program I’m talking about.

Lisa Schiavo Blatt:

–Right.

And the question would be whether section 666 would apply to the grocery store by virtue of the fact that it receives the coupons.

The coupons actually go to the customer who would then turn it in to the store.

Antonin Scalia:

Right, and the store is reimbursed for what the store provides to the customer.

Right?

Lisa Schiavo Blatt:

Right.

Antonin Scalia:

By a Federal program.

Lisa Schiavo Blatt:

Yes, and our position–

Antonin Scalia:

The same thing as happens here with the hospital.

The hospital provides the services, is reimbursed by the Federal Government.

Lisa Schiavo Blatt:

–Our position is that the grocery store, who is approved for participating in the food stamp program, would be covered by the statute.

However, Justice Scalia, there’s distinctive features about the Medicare program.

All money flows directly to the hospital.

No money goes to the–

Antonin Scalia:

But that’s… but that’s not crucial to your case.

I mean, if your case is right, the local grocery store is covered and every… every stickup of a… of a corner supermarket is a… is a Federal crime.

Lisa Schiavo Blatt:

–No, that’s not correct.

Lisa Schiavo Blatt:

The theft applies to only agents.

So, if there is an employee who’s stealing $5,000–

Antonin Scalia:

Okay.

Lisa Schiavo Blatt:

–from the grocery store, that employee could also be stealing the food stamp program or could be receiving bribes in connection with the program, and the Government would have an interest in the integrity of those officials at the store.

But I–

William H. Rehnquist:

It doesn’t apply to a third person that just comes in and sticks up someone at the cash register in the grocery store hypothesis?

Lisa Schiavo Blatt:

–That’s correct.

It applies… what… what section 666 does is protect the integrity of program funds by assuring the integrity of the agents of the organization that received them, and the types of officials who could be either on the take or involved in transactions over $5,000 could mishandle Federal money.

Antonin Scalia:

And you think the Government was really concerned with… with the financial stability of local grocery stores so that it wanted to be sure that nobody is embezzling money from local grocery stores because, after all, these local grocery stores are in the food stamp program.

Lisa Schiavo Blatt:

The prototypical financial assistance program Congress had in mind is no different than the Medicare program, in which what the Government does is give benefit monies to… to organizations who turn around and use that money to provide services or other assistance to beneficiaries.

Antonin Scalia:

No.

They’re… they’re two different things.

In… in some situations, the money is provided to the organization, and the organization is told, go provide the services.

That is what is done to the intermediaries under Medicare.

Lisa Schiavo Blatt:

It’s–

Antonin Scalia:

But it’s quite something else to say when you have provided services to somebody, we will reimburse you after the fact for those services you’ve provided.

It seems to me that’s fundamentally different and that the Federal Government doesn’t have any concern about the financial stability of that organization so long as the services have been provided of a quality that the Government is… desires.

Lisa Schiavo Blatt:

–Well, there are two responses to that, Justice Scalia.

Medicare does not work differently than a lot of programs in which what the Government does is either reimburse or compensate an entity for providing services.

Antonin Scalia:

I know.

Lisa Schiavo Blatt:

And… but they’re still financial assistance programs and the Government does have an interest in the integrity of those funds.

If a hospital is either filled with corrupt officials, two things can be happening.

The first is that the hospital is less likely to provide care… quality patient care to Medicare beneficiaries, and that directly hurts the program.

Antonin Scalia:

Well, you have regulations that prevent that directly and immediately.

Lisa Schiavo Blatt:

The… well, the regulations or criminal statutes deal with fraud in connection with the program.

They don’t act prophylactically to protect the institution from having corrupt officials.

The other thing that this does is the official that was bribed in this case was the chief financial officer.

He just as well could have been taking bribes to refer patients to unnecessary medical services or to purchase unnecessary medical supplies or to undergo unnecessary procedures.

Antonin Scalia:

And that would have been picked up under the regulations governing the program.

Lisa Schiavo Blatt:

Yes.

Antonin Scalia:

Right?

Lisa Schiavo Blatt:

Well, it would have… yes.

But this official in this case was taking a bribe in connection, was just taking the hospital’s money and making a bogus loan.

And that threatened this institution’s capacity to service Medicare beneficiaries, and that hurts the Medicare program–

Antonin Scalia:

Just as the local grocery store won’t be able to sell groceries.

I know not a swallow falls from the air that the Government… the Federal Government isn’t concerned about it, but do you really think that this… this statute was directed at assuring the solvency of the local grocery store or… or the local hospital?

What does the Government care so long as the services are provided at the cost that the Government considers reasonable?

Lisa Schiavo Blatt:

–Because this is an assistance program in which the whole point of which was to provide federally funded services to needy individuals who qualified under the program.

And if the hospital has corrupt officials, something is going to give with respect to the hospital.

Either the hospital is going to cut its staff or its going to stop providing… performing certain procedures, and that hurts the program.

This was a lot of money–

Antonin Scalia:

A swallow falling from the air.

I mean, you could say the same about the grocery store.

God, Don’t start.

The next thing you know they’ll be selling rotten beets and so forth.

[Laughter]

Lisa Schiavo Blatt:

–Well, this case involves a… a Medicare program and the Medicare program depends upon the solvency of hospitals and the… and the integrity of the officials who work there.

Again, this was a… a relatively small hospital serving a rural area where a lot of people were Medicare beneficiaries in the community, and the Government saw an interest in this case in prosecuting the… the petitioner who bribed the chief financial officer of the hospital for making a million dollar loan.

We also–

Stephen G. Breyer:

You think here in any event… I mean, it seems to me Medicare is about $200 billion or more, isn’t it?

Lisa Schiavo Blatt:

–It’s $300 billion.

Stephen G. Breyer:

$300 billion, and I think isn’t the Federal Government aware that giving $300 billion to hospitals makes a big difference as to whether the hospitals are stable or not?

I mean, it seems to me that I’ve seen cases in which the Medicare regs are… give more money to the… to the hospital’s capital costs or you give less money depending on whether they’re teaching hospitals, on whether the hospital needs it because in the absence of the extra money… contribution to capital, the hospital will fail or would be unlikely to be able to provide a teaching service or certain other services, et cetera.

It seems to me I’ve seen arguments like that in cases.

Am I misremembering them?

Lisa Schiavo Blatt:

No.

I mean, there’s… there’s no question that the Medicare Act has a lot of features which subsidize the hospital to make sure it can survive.

Most hospitals are dependent on Medicare to assure their financial survival.

Stephen G. Breyer:

If that’s so, then isn’t this unlike the food stamp program, whatever the merits of the food stamp program are or are not vis a vis the statute?

That this statute foresees as one of its objectives a funneling a lot of money to hospitals so that they, in fact, can maintain the services that they previously provided or might think of providing, et cetera.

Stephen G. Breyer:

Or is that an unfair characterization?

Lisa Schiavo Blatt:

No.

I think that’s fair.

Hospitals are dependent on the Medicare program and the Medicare program is dependent on hospitals.

Antonin Scalia:

It may be fair, but has the Government established that in this case?

I mean, to be sure, all that (b) says is the circumstance referred to… is that the organization receives in any 1-year period benefits in excess of $10,000.

Now, you’re now saying that indeed the hospitals may receive some other Federal benefits in excess of $10,000.

Lisa Schiavo Blatt:

Our position–

Antonin Scalia:

I thought the only thing you were relying upon was the fact that it’s reimbursed for the services that it provides to Medicare recipients in excess of $10,000.

Wasn’t that the only reliance–

Lisa Schiavo Blatt:

–No.

Our position is that the Medicare funds that are paid to hospitals are indisputably Federal benefit funds that are received by the hospital.

Antonin Scalia:

–Right.

That… those are the only funds you’re relying upon is under (b).

Lisa Schiavo Blatt:

Well, to the extent that there’s some requirement that the hospitals be considered in and of themselves aided, we think that criteria is met.

But we don’t think the statute requires it.

It doesn’t require that the recipient be an administrator.

That word doesn’t appear anywhere in the statute.

Antonin Scalia:

You may think it’s met, but did you establish that it was met below?

Lisa Schiavo Blatt:

Oh, yes.

We established that $10 to $15 million in Medicare payments went to this hospital.

Antonin Scalia:

I mean aside from Medicare payments.

You’re now saying you take the position that even if Medicare payments don’t count, the hospital is still a beneficiary under some other Federal program.

Lisa Schiavo Blatt:

That’s correct.

The only–

Antonin Scalia:

Did you establish that below?

Lisa Schiavo Blatt:

–Yes, I think you’re correct.

The only thing in the record is that the… the finance officer said that most health organizations are dependent on funds that come from the Federal Government.

But our primary position is… was that under the plain language of this statute, the term benefit is talking about either benefit money or other things of value that… that are provided under a Federal program involving Federal assistance.

Medicare is a… is a quintessential Federal assistance program that provides the benefit funds to the hospitals that turn around and use this money to provide federally funded medical services.

Ruth Bader Ginsburg:

Ms. Blatt, I’d like to come back to the horribles.

And I gather from footnote 12 on page 31 in your brief you often see these, the grocery store example.

Lisa Schiavo Blatt:

We would take the position that a grocery store that participates in the food stamp program receives the money.

However, Justice Ginsburg, it raises the question of whether the statute would extend to earmarked funds that go to the recipient only through an indirect relationship.

That question is not posed at all under the… by a hospital receiving money under Medicare.

The–

Ruth Bader Ginsburg:

Do you make the same distinction with respect to the… the Government insured tuition?

Lisa Schiavo Blatt:

–Actually I don’t think our theory covers student loans at all because the Federal assistance doesn’t ever make its way to the school.

The Federal assistance under the loan program are interest rate subsidies and the guaranteed loan that goes to the bank.

So… but… but the… so, it’s not at all like the Medicare program in which all the Federal money goes straight to the hospital.

There is nothing the beneficiary can do to direct the money to go to him or herself, and the hospital cannot bill the patient for Medicare services.

Ruth Bader Ginsburg:

Mr. Horwitz made some distinction between patient assigned benefits and payments that would go directly to the hospital that aren’t dependent on a patient assignment and said that there was no showing here that the direct payment rather than the assigned benefit applies.

Lisa Schiavo Blatt:

There is no such distinction under the statute.

So, it’s true that the record didn’t reflect how… whether this hospital… all the money was under part A or part B. But this Court… Court will recall from all its Medicare cases, what the hospital does, it takes all its costs and tells the Government what they were under this very complicated system, and all the money goes to the hospital.

So, what… no matter what the service is that the hospital is providing, the federally funded service, all money flows to the hospital.

The patient can’t say, well, I want the money to go to myself and then I’ll pay the hospital.

And that is somewhat significant because the hospital gets a huge advantage from that system in that.

They don’t… the hospital doesn’t have to rely on the solvency or the good will of the patient.

The money goes to the hospital.

Antonin Scalia:

Well, that’s true, but ultimately when… when the books are balanced, the only thing that the hospital gets is… is reimbursement for the cost of services it has provided to the… reasonable cost of services it has provided to the patient.

Lisa Schiavo Blatt:

And essentially, Justice Scalia, that is no different than the prototypical financial assistance programs Congress had in mind when it passed this statute.

The Model Cities program, the CETA program were all instances in which all the Government did was give money to an organization to provide the cost and expenses for providing services to needy individuals under those assistance programs.

Antonin Scalia:

Yes, but what… but they gave the money to the organization to give it away.

Lisa Schiavo Blatt:

They didn’t give money away.

They gave job training, career counseling, and other kinds of community development.

There are a lot of garden variety assistance programs in which what the Government does is gives a grant to an organization to turn around and provide counseling or training or educational services to intended beneficiaries.

We reimburse States for immunization programs so they can provide preventative health services to needy citizens.

Antonin Scalia:

But that’s as if–

Lisa Schiavo Blatt:

It’s a reimbursement system.

Antonin Scalia:

–That’s as if in this case there were an entity that received money and… and held it until the hospital submitted a… a bill.

Antonin Scalia:

And that entity, that fiscal intermediary, it seems to me might well be covered by the statute because it’s holding funds in order to disburse them to another entity that then performs services.

Lisa Schiavo Blatt:

Well, yes.

The hospitals are paid–

Antonin Scalia:

But here in this question, the hospital itself performed the service.

Lisa Schiavo Blatt:

–Right, the hospital is paid in advance.

Secondly, under the Model Cities program, as this Court pointed out in Salinas, it had to first spend the money and then seek a… a funding request from the Government.

And the State immunization programs work the same way.

You reimburse the States.

Antonin Scalia:

The question isn’t just whether there’s reimbursement.

The question is whether it is reimbursement for a debt that somebody else owes.

That’s the crucial distinction here.

In those other programs, there is no debt that these people who were provided these services owed to the Model Cities or anybody else.

But here there is a debt that the person who got the medical services owes to the hospital, and all the Federal Government is doing is picking up that debt.

Lisa Schiavo Blatt:

Right.

Antonin Scalia:

That’s a world of difference from… from another benefit program.

Lisa Schiavo Blatt:

There are a lot of benefit programs in which the service provider could have charged the fee, but what the Government is doing is providing a Federal… Federal funding, a benefit program, by providing funds to the organization to turn around and use those funds to… to provide the services.

William H. Rehnquist:

Ms. Blatt, you said a moment ago that the hospitals are paid in advance.

Lisa Schiavo Blatt:

Yes.

William H. Rehnquist:

How do we know that?

Lisa Schiavo Blatt:

We know that from the… the statute, the regulations, and in Good Samaritan actually the Court concerned this very payment structure to preserve the hospital’s liquidity.

What the statute and the regulations do is provide an advance funding mechanism that tries to estimate what the… the services the hospital will perform, and then there’s the quarterly adjustments throughout the year.

William H. Rehnquist:

Was that established in this case, that this is the mechanism?

Lisa Schiavo Blatt:

It’s required by the statute that that’s how they have to be paid.

But, no, it’s not in the record.

That’s correct.

Antonin Scalia:

In advance of what?

In advance of the provision of the services or in advance of the submission by the hospital of the actual accounting for the services?

Do we actually know that the… that there… you know, that there’s a time lapse?

The Government gets the… the hospital gets the money for it’s actually provided services?

Lisa Schiavo Blatt:

I don’t think it matters.

Lisa Schiavo Blatt:

What the… what the statute does or how the program works is that they’re paid twice a month based on what they think they’re going to be paid for the whole year.

And so, whether or not the service has been provided or a claim has been submitted, the hospital gets the money.

But it–

Antonin Scalia:

Yes, but I think it’s misleading to say it’s paid in advance.

It… it’s paid in advance of… of actually figuring out how much they… they had expended, but I don’t think anybody knows whether in fact they’re a little bit behind or a little bit ahead at any one point.

Lisa Schiavo Blatt:

–That’s correct.

The fact… but whether or not they provided the services is irrelevant.

They still get the money.

William H. Rehnquist:

But–

Lisa Schiavo Blatt:

Sorry.

William H. Rehnquist:

–what Justice Scalia just said is your present position now, that sometimes they could be behind and sometimes they could be ahead?

It’s a–

Lisa Schiavo Blatt:

That’s correct.

William H. Rehnquist:

–bimonthly thing.

Lisa Schiavo Blatt:

It’s a bimonthly thing, and so the… the hospitals are advanced the money until there’s been a reconciliation to see whether they’re ahead or behind.

But our fundamental point is not that they get the money beforehand or they get the money after.

The fundamental point is that when there is corruption by hospital officials, the Medicare program suffers.

Stephen G. Breyer:

Well, I can understand that.

And don’t agree with me if you think I’m wrong.

Lisa Schiavo Blatt:

Okay.

Stephen G. Breyer:

But it just seems to me you’re going on the theory, hey, kid, here’s a quarter, buy some bubble gum.

All right?

That’s one kind of program.

But it would be naive to think this is that kind of program.

I mean, this is thousands of pages of regulations that go into negotiated costs with the hospital, including capital costs and everything under the sun.

And all you have to do is put down a book of HHS regulations and you’ll see it.

And that to me is not a program that’s just like, hey, reimburse the guy for some bubble gum he gave the kid.

Lisa Schiavo Blatt:

No.

What our–

Stephen G. Breyer:

I mean, this is a… this is a very complex, cost focusing, negotiated system of what is repaid, what isn’t, and how does that affect the hospital.

Stephen G. Breyer:

But don’t agree.

Say I’m wrong if I’m wrong.

Lisa Schiavo Blatt:

–I think the best way to look at it is that Medicare is essentially a grant to hospitals that is calibrated to the cost of providing the federally funded services.

It is true the beneficiaries are the patients… the program beneficiaries.

But that is no different than the prototypical financial assistance programs Congress had in mind when it passed this statute, and whether in the Model Cities program they said to an organization, here’s $1 million, please improve the life of… of city residents or they say to a hospital, here’s $1 billion or $100 billion, provided federally funded medical services to elderly people who are qualified to get those services under the program.

But you wouldn’t say that the food stamp program is essentially a program with grant to grocery stores, would you?

Lisa Schiavo Blatt:

I think the food stamp program works… works differently because the Federal benefit is the coupon which is essentially like cash, although it’s earmarked cash because it can only be spent at the grocery store.

But if the individual burns his coupon or it gets stolen or he loses it, that’s it.

And in the hospital case, all the money flows.

There’s just no interference by or interruption by the beneficiary, the elderly patient.

He or she goes in for a procedure.

The hospital gets paid.

And again, this is… this is so much like the garden variety assistance program where what Congress does is compensates an entity for providing services.

And this is the Model Cities program.

It was to improve the… the living conditions of the city residents.

Under the CETA program, which was at issue in the Mosley case, it was job training, career counseling.

And in the Community Development Block program, the beneficiaries were people who needed housing assistance and what they did was rehabilitate people’s homes.

William H. Rehnquist:

If we take–

Antonin Scalia:

–the… the dispensers of the job training or whatever in those programs charge people for the… for the services, do you think they would get any… you know, any… any takers if they… if they charged for the services?

Lisa Schiavo Blatt:

They might.

There are lots of organizations now that provide career counseling or even drug counseling services, but they still get grants under the Federal Government to do those same kinds of services.

Anthony M. Kennedy:

They get grants, but… but the Federal Government is not… is not paying a debt that somebody else owes them.

Lisa Schiavo Blatt:

Yes, they are.

If that person… if I went in for drug counseling or drug rehabilitation, presumably I’d have to pay for the service.

They’re not giving it to me for free.

Anthony M. Kennedy:

That–

Lisa Schiavo Blatt:

My parents or I might have trust fund that covers it, but if it’s done under a Federal grant, then it’s… it’s a benefit to me, but the institution that’s providing those services are receiving the benefit funds.

The plain language of the statute applies to recipients of… of benefits, and that’s talking about the benefit funds or other items of value.

And there’s just no question that Medicare is a classic Federal assistance program.

It directly provides those benefit funds to the hospitals that turn around and use those funds to provide assistance to individuals.

Lisa Schiavo Blatt:

Before Medicare was enacted, a lot of people got these services for free.

And what Medicare did was… was say, we don’t want elderly people to have to pay for the cost of hospitalization when they’re over 65 because it could ruin them financially.

So, this is just a… a quintessential assistance program where the hospital is receiving the benefit funds.

If I could turn briefly to subsection (c), which the petitioner also relies on, our position is that what subsection (c) does is it prevents a routine commercial payment… excuse me… that is referring to routine commercial compensation payments to individuals.

That section talks about bona fide salary or wages or other forms of compensation or reimbursement–

Anthony M. Kennedy:

–Doesn’t the word corruptly already handle that?

Lisa Schiavo Blatt:

–And it’s significant that the word corruptly was added to the statute at the same time subsection (c) was added to make absolutely clear that the types of payments to individuals described in subsection (c) would not be prosecuted as corrupt payments.

Anthony M. Kennedy:

I think the fact that they were right at the same time makes it worse rather than better.

Corruptly would have done the job.

It suggests that (c)… (c) means something else.

How can you possibly corruptly solicit or demand anything of value which would not automatically come within (c)?

Does not apply to bona fide salary, wages–

Lisa Schiavo Blatt:

Right.

The same thing could be said of the bank bribery statute which subsection (c) was lifted verbatim from.

That is, 18 U.S.C. 215(c) is the bank bribery provision.

That provision also prohibits the corrupt payments of individuals.

Congress added the word corrupt at the same time it added subsection (c) and identical language.

The same thing happened a year later with this section, section 666(c), and the legislative history is… is unambiguous on this point, that… that section 666 prohibits the corrupt payment and not these routine kinds of commercial payments to individuals.

And another problem with petitioner’s reading… and this is similar to our point on the… on the subsection (b)… is that to exclude any kind of compensation or reimbursement or expenses paid to an organization would exclude the very kinds of assistance programs Congress had in mind when it passed this statute.

It’s completely inconsistent with the word contract in subsection (b) which shows that Congress obviously contemplated the Federal Government would get consideration in exchange for providing benefit funds to organizations.

And the last point I want to leave the Court with is it’s very significant that this statute applies to organizations, governments, and agencies.

It doesn’t apply to individuals.

The jurisdiction applies to the entities.

The criminal defendant is an individual, but the jurisdiction reaches organizations, governments, and agencies, even though the beneficiaries of most assistance programs are in fact individuals.

And that is because what Congress was trying to do is when you have corruption directed at the recipient that provides the services, the beneficiaries of the program are hurt.

Antonin Scalia:

–So, at least it won’t hit the mom and pop grocery store.

We… we can get the… that gets the mom and pop grocery store off, I mean, if it’s not incorporated.

Lisa Schiavo Blatt:

Yes, it has… right.

It has to be an organization, government, or agency, and it also has to be a transaction involving $5,000 or more.

If there are no further questions, we would ask that the judgment be affirmed.

William H. Rehnquist:

Thank you, Ms. Blatt.

Mr. Horwitz, you have 3 minutes remaining.

Mark L. Horwitz:

Thank you, Your Honor.

Anthony M. Kennedy:

Mr. Horwitz, I… I assume that if Blue Cross got this money or some fiscal intermediary and was holding it and then paid the hospital, if it was just holding funds, that the statute would apply to Blue Cross.

Mark L. Horwitz:

It would apply to Blue Cross and, Your Honor, it would apply–

Anthony M. Kennedy:

Okay.

Why doesn’t it apply to your hospital if your hospital received funds in advance and simply has to wait in order to draw down on them?

Mark L. Horwitz:

–The hospital… I think the key–

Anthony M. Kennedy:

Or wait… or has to wait in order to make a legitimate claim to them even though it can draw down.

Mark L. Horwitz:

–I’ll try to answer this briefly with the Government’s contention here… and it was stated, even in the argument… is simply this is still Federal money.

They want to say this is still Federal money.

This is a grant.

In all those thousands of pages of C.F.R.’s they never once talk about this money as a grant.

It’s a payment for services to the provider.

And whether the provider is paid 1 day in advance or 1 day behind, it’s still payment for services.

It’s not Federal money.

All of the… Mosley, Hinton, Del Toro cases all talk about administering Federal funds.

William H. Rehnquist:

You don’t challenge that, Mr. Horwitz, Ms. Blatt’s statement that sometimes it may be a little bit ahead, sometimes it may be a little bit behind so far as the actual accounting is concerned?

Mark L. Horwitz:

That may very well be, Your Honor, and I don’t think that’s… it’s… in any event, the C.F.R. makes clear that what the hospital is getting is cost reimbursement and they may have to adjust that cost later.

Antonin Scalia:

What do you do about the argument that that’s what’s happening in the Model Cities program?

Job training.

You’re getting the… the company that gets the money or the organization that gets the money is being reimbursed for the cost of providing job training.

Mark L. Horwitz:

Because the question still is, is that all that is involved?

The Government wants to equate this with a grant, and a grant indicates there’s some providing of ultimate service.

If a… if a local entity is given money to administer a service and, say, that’s hand out methadone treatment, the service… the benefit has still not been handed out.

The Government has an interest in making sure that that person doesn’t… isn’t bribed to hand out a methadone pill to somebody who doesn’t deserve it.

That’s different from simply paying for the service.

And, yes, Medicare is complicated.

There are thousands of pages of regulations, but not one time does the regulations say this is a grant, this is a gift, this is anything other than we’re going to pay you for services.

We may have to fight with you about what the cost of those services are.

Mark L. Horwitz:

But it is clearly not Federal money, and the Government wants to treat it as Federal money.

Stephen G. Breyer:

Well, it is Federal money.

Mark L. Horwitz:

Your Honor, if it is–

Stephen G. Breyer:

My question… well, maybe I’ll–

William H. Rehnquist:

Thank you, Mr. Horwitz.

The case is submitted.