United States v. Davis, Thomas B.

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 05-3481

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

THOMAS BRANDON DAVIS,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Southern District of Indiana, Indianapolis Division.

No. 04 CR 67—Sarah Evans Barker, Judge.

____________

ARGUED SEPTEMBER 7, 2006—DECIDED DECEMBER 15, 2006

____________

Before RIPPLE, KANNE, and WOOD, Circuit Judges.

KANNE, Circuit Judge. The defendant was indicted for

defrauding Indiana Medicaid. The government’s case

centered on three independent methods that Davis used

to get Indiana Medicaid to pay for procedures that they

might not otherwise have paid: he billed for services that

were actually provided by other people (substitute-billing),

he billed for hours of work that nobody performed

(overbilling), and he billed for different procedures in

order to avoid pre-authorization requirements (miscod-

ing). A jury returned a general verdict of guilty. On appeal,

Davis raises four issues. He challenges two evidentiary

rulings, he challenges whether one of the three charged

methods of fraud—substitute billing—was actually pro-

2 No. 05-3481

hibited, and he challenges the indictment as duplicitous.

Because we find no error, we affirm.

I. HISTORY

Davis is a psychologist who operated two clinics in

Indiana. He was licensed as a “health service provider

in psychology” (HSPP) and enrolled as a provider under

Indiana’s Medicaid program. The relationship between

Davis and Indiana Medicaid was fruitful: Medicaid soon

accounted for the vast majority of his income, and (the

indictment alleged) by September 2002 he accounted

for more Medicaid spending than any other individual

HSPP in the entire state. After an undercover investiga-

tion into his billing practices, he was indicted for one

count of health care fraud in violation of 18 U.S.C. § 1347.1

The indictment alleged that Davis used several methods

to entice Indiana Medicaid to pay claims that it would not

otherwise have paid. When the state instituted pre-

approval requirements for some of his procedures, he

would submit claims for different procedures—procedures

that required no such pre-authorization. When Davis

billed Indiana Medicaid for neuropsychological testing, he

would frequently (and contrary to Medicaid billing manu-

als) bill for a fixed number of hours for a battery of tests,

regardless of the number of hours actually consumed by

the process. And, central to the dispute between the

1

The statute makes it a crime to “knowingly and willfully

execute[ ], or attempt[ ] to execute, a scheme or artifice: . . . (1) to

defraud any health care benefit program; or . . . (2) to obtain, by

means of false or fraudulent pretenses, representations, or

promises, any of the money or property owned by, or under the

custody or control of, any health care benefit program, in

connection with the delivery of or payment for health care

benefits, items, or services.” 18 U.S.C. § 1347.

No. 05-3481 3

parties on appeal, Davis would leave much of the admin-

istration and perhaps even the interpretation of the

psychological tests to clinic staff members with less

training than he himself had received—employees who

were not licensed psychologists or HSPPs.2

At trial, the government provided ample evidence of

all three methods of fraud, as well as evidence that could

allow a jury to infer willfulness. Among its other evidence,

the government introduced the testimony of an expert

from Indiana’s Office of Medicaid Policy and Planning

to the effect that the state of Indiana would not reimburse

for services that were actually conducted by unlicensed

staff members.

Davis’s defense at trial relied almost exclusively on

denying that he had a specific intent to defraud. He

testified in his own defense that he had believed that

all three practices were legal and in keeping with how

he had been trained to conduct neuropsychological testing.

He called only one other witness, a former employee, to

testify about a Medicaid audit that had been conducted

in the late 1990s. He unsuccessfully sought to introduce

into evidence an unpublished manuscript on neuropsych-

ological testing in order to support his argument that

he believed it was good medical practice to use technicians

to perform some of the tests. Apparently, the jury did not

buy this good faith defense because it returned a general

verdict of guilty.

On appeal, Davis raises four issues. He argues that the

testimony and jury instructions combined to allow the

jury to determine questions of law regarding which

2

As might be expected, the parties differ in how they charac-

terize the extent of this substitute-billing; yet the parties are

in agreement that at least some parts of some procedures

were completed by unlicensed staff.

4 No. 05-3481

procedures were and were not compensable from Indiana

Medicaid. He argues that the “substitute-billing” scheme

was not contrary to the law. He argues that the indict-

ment was impermissibly duplicitous and that the duplicity

was not corrected by the trial court through adequate jury

instructions. Finally, he argues that the district court’s

decision to exclude his proffered manuscript was an abuse

of discretion.

II. ANALYSIS

A. The Legality of Substitute-billing

Because much of this appeal turns on the question of

whether substitute-billing is illegal under Indiana’s

Medicaid regulations, we address this question first.

Whether the Indiana statute allows substitute-billing is

a question of law that we consider de novo. United States

v. Jones, 372 F.3d 910, 911-12 (7th Cir. 2004) (citing Olson

v. Risk Mgmt. Alternatives, Inc., 366 F.3d 509, 511 (7th

Cir. 2004)). Whether a conviction should be reversed

when it is claimed for the first time on appeal that the

conviction rested on an impermissible ground is a ques-

tion we review for plain error. United States v. McKinney,

954 F.2d 471, 475 (7th Cir. 1995). Davis argues that his

substitute-billing scheme falls within a broad reading

of the word “provided.” The government argues that

“provided” must be read to require that the services be

“personally” provided by the HSPP.

At the outset, we should note that Davis’s defense at

trial did not appear to rely in any way on a theory that

substitute-billing was actually allowed under Indiana’s

Medicaid rules. In the instances where the issue arose,

it was solely within the context of whether Davis might

have erroneously believed that the regulations allowed

him to do what he did. Tr. 117-19, May 9 (defense opening

No. 05-3481 5

statement); Tr. 187, May 9 (redirect of witness Bowen);

Tr. 686-88, May 11 (admission of other laws to show

whether defendant “believed” that substitute billing is

permitted); Tr. 900-01, May 12 (defense closing argu-

ment). Generally, issues raised for the first time on ap-

peal are reviewed for plain error. See United States v.

McClellan, 165 F.3d 535, 551-52 (7th Cir. 1999). “Neither

a general objection to the evidence nor a specific objection

on other grounds will preserve the issue for review.”

United States v. Wynn, 845 F.2d 1439, 1442 (7th Cir. 1988)

(citing United States v. Laughlin, 772 F.2d 1382, 1391-92

(7th Cir. 1985)).

Indiana’s rules for Medicaid reimbursement for mental

health services are contained in Title 405, Indiana Ad-

ministrative Code, § 5-20-8. That section states that

“Medicaid reimbursement is available for outpatient

mental health services provided by psychologists en-

dorsed as a health service provider in psychology (HSPP).

Outpatient mental health services rendered by a[n] HSPP

are subject to the following limitations.” 405 Ind. Admin.

Code § 5-20-8 (2002). One of the limitations is: “Subject

to prior authorization by the office or its designee,

Medicaid will reimburse for neuropsychological and

psychological testing when provided by a physician or an

HSPP.” 405 Ind. Admin. Code § 5-20-8(5) (2002). Davis’s

claim on appeal is that he “provided” the substitute-

billed services that his staff conducted because—even

though the tests were administered by other people—he

paid the rent and utilities, trained the staff, and ac-

quired the various licenses under which the clinics oper-

ated. He urges us to read the word “provided” as synony-

mous with “furnished.” We decline to do so.

Although Davis is accused of committing the federal

crime of health care fraud, the allegation turns on whether

he executed a “scheme to defraud a health care benefit

program.” Because the question of whether substitute-

6 No. 05-3481

billing is a method to execute a scheme to defraud a

health care benefit program depends on which procedures

Indiana Medicaid will reimburse, our analysis requires us

to interpret Indiana law. The court is unable to locate, and

the parties have not pointed us toward, any authority

that indicates how Indiana courts have interpreted this

statute. It appears to be a question of first impression

in this circuit and in the courts of Indiana.

When interpreting statutes, “we give words their plain

meaning unless doing so would frustrate the overall

purpose of the statutory scheme, lead to absurd results, or

contravene clearly expressed legislative intent.” United

States v. Vallery, 437 F.3d 626, 630 (7th Cir. 2006). In this

case, the plain meaning of the words—that “Medicaid

will reimburse for . . . testing when provided by . . . an

HSPP”—is that the HSPP must be the person who is

actually engaged in the conduct of performing the tests.

Any other reading would “lead to absurd results.” Id. The

logic of the argument made on appeal would have al-

lowed Davis to pre-pay the rent, license the tests, staff

the clinics with minimum wage technicians, and then fly

to a tropical paradise3 and watch the money flow in. He

would, arguably, still be “providing” the services that

Medicaid was buying from him, if “providing” were simply

a synonym for “furnishing.” This cannot be the plain

meaning of the statute.

Even if the plain meaning of the statute were not

clear, we are convinced that a thorough reading of the

requirement in the context of the rest of the Medicaid

reimbursement statute supports this conclusion. The

3

Or, perhaps, less tropical Canada—his country of birth. The

indictment alleged that he billed Medicaid for at least $11,745

worth of services while he was in Vancouver in the Summer

of 2002.

No. 05-3481 7

Indiana legislature has demonstrated that when it

chooses to allow so-called “mid-level practitioners” to

perform some of the tasks that are billed by a supervis-

ing provider it knows how to make this clear in the law.

In the context of outpatient psychotherapy, the state

specifies various types of mental health workers who

may render billable services under the direct supervi-

sion of a psychiatrist. See Ind. Admin. Code § 5-20-8(2)

(2002). This rule does not help Davis. Billing for the

services of mid-level practitioners in outpatient psycho-

therapy is subject to pre-approval by Medicaid, and the

range of allowable mid-level practitioners recognized in

§ 5-20-8(2) are all vastly more qualified than the employ-

ees that Davis had hired and trained to administer the

tests in his clinic.4 Id.

Davis also asks this court to read the presence of the

word “directly” found in Medicaid regulations for physi-

cians at 405 Ind. Admin. Code § 5-25-1 (2006) and the

absence of such a modifier from the psychologists’ regula-

tions to imply a legislative intent to allow psychologists

the freedom to bill for psychological testing that was

conducted by unlicensed staff. This we are not willing to

do, because it would not only require that we equate

the words “directly” and “personally” but would also

require that we assume that the legislative intent be-

hind a portion of the statute governing Medicaid billing

4

The mid-level practitioners who are specifically listed as being

allowed to practice in outpatient psychotherapy are: licensed

psychologists, licensed independent practice school psychologists,

licensed clinical social workers, licensed marital and family

therapists, licensed mental health counselors, and persons

holding a master’s degree in social work, marital and family

therapy, or mental health counseling. 405 Ind. Admin. Code § 5-

20-8(2) (2002).

8 No. 05-3481

by physicians must be the same as the legislative intent

behind the regulations for psychologists.

In sum, in the face of plain language that allowed

Davis to bill for only those testing services that he, as an

HSPP, provided to the patients, we find nothing to sug-

gest that Indiana intended him to use college students to

do the lion’s share of his work while still billing Medicaid

as if he had performed the tests himself. In those few

instances where Indiana is willing to allow mental health

services to be administered by third-parties under the

direct supervision of the HSPP or physician, Indiana

made it clear that such billing was allowed, required

that such a billing procedure be approved ahead of time,

and restricted it to particular licensed mental health

professionals. 405 Ind. Admin. Code § 5-20-8(2) (2002).

Because we find as a matter of law that the convic-

tion could not have rested on an impermissible ground,

there was no error to be examined under plain error

review. See United States v. Donaby, 349 F.3d 1046, 1049

(7th Cir. 2003).

B. The Admission of the Expert Testimony

We turn to the evidentiary errors that Davis ascribes to

the trial court. Davis argues that it was reversible error for

the trial court to allow, over defense counsel objection, the

admission into evidence of the testimony of Kathy Bowen,

who was an employee of Indiana Medicaid and an expert

in reimbursement for mental health services. We review

the trial court’s decision to admit expert testimony for

abuse of discretion. Kempner Mobile Elec., Inc. v. Sw. Bell

Mobile Sys., 428 F.3d 706, 712 (7th Cir. 2005). Legal

conclusions made by the trial court in reaching the deci-

sion to admit expert testimony are reviewed de novo. Id.

No. 05-3481 9

In relevant part, the direct examination of Ms. Bowen

proceeded:

Q: And how does the Indiana Medicaid program in-

terpret whether the HSPP has to personally per-

form this service?

...

Q: Must the HSPP personally perform the service?

A: Yes. And I say yes because it says—it lists services

that are reimbursed when provided by a psychologist

endorsed as an HSPP, and that is our intent, and it’s

the policy that we have shared with the providers.

Tr. 188, May 9.

The defense had objected to Ms. Bowen’s testimony.

After establishing that the expert had never had a conver-

sation with the defendant about this provision of the law

(apparently to support the defense argument that Dr.

Davis had a good faith belief that his activities were legal)

defense counsel entered “a continuing objection . . . to

witnesses, such as this one, interpreting laws. I think

it invades the province of the jury. That’s for the jury to

determine what the law says and whether or not this law

was broken.” Tr. 187, May 9. The court corrected defense

counsel:

I understand your objection, but it’s got an erroneous

premise because the witness is not going to testify

to what the law means. I instruct on the meaning of

the law, but she can testify to how it’s enforced, how

it’s interpreted, how it’s distributed to people in the

form of manuals and so forth.

Tr. 187, May 9.

Experts are permitted to testify regarding how their

government agency applies rules as long as the testimony

does not incorrectly state the law or opine on certain

ultimate legal issues in the case. Fed. R. Evid. 704; United

10 No. 05-3481

States v. Turner, 400 F.3d 491, 499 (7th Cir. 2005). For

example, we have held that expert testimony is allowed to

the effect that financial transactions did not comply with

regulations and appeared to be fraudulent. United States

v. Owens, 301 F.3d 521, 526-27 (7th Cir. 2002) (noting

that Fed. R. Evid. 704 partially displaces the “old ultimate

issue rule” in a case such as this where the only major

issue at trial was the mental state of the defendant).

There are cases where such expert witness testimony

would be an abuse of discretion under the Rules of Evi-

dence for being more prejudicial than probative. Fed R.

Evid. 401, 403. This is not such a case. Davis cites to

Bammerlin v. Navistar Int’l Transp. Corp., where we

held it an abuse of discretion to allow a “battle of the

experts” to opine about whether a seat belt assembly

passed federal safety standards when the experts were

unable to even agree on what the applicable laws were. 30

F.3d 898, 900-01 (7th Cir. 1994). True, when two compet-

ing experts offer differing opinions that are based on fact

and law, the jury should not be left adrift to consider the

credibility of the experts to come to a conclusion about

the law. But this is not the case here. We have held before,

and hold today, that experts are allowed to testify about

how they enforce regulations, whether transactions com-

ply with regulations, and how they ensure that the

public knows about regulations. Admission of this testi-

mony was not error, and therefore was not an abuse of

discretion.

C. The Exclusion of the Unpublished Manuscript

The defendant also challenges the district court’s deci-

sion to exclude an unpublished manuscript from the

evidence. As with the testimony above, we review for abuse

of discretion. United States v. Gant, 396 F.3d 906, 908 (7th

Cir. 2005). We find that the district court did not abuse

No. 05-3481 11

its discretion in excluding the evidence, although we

base that decision on reasons other than those cited by

the district court. See United States v. Fazzini, 871 F.2d

635, 639-40 (7th Cir. 1989).

The proffered document appears to be a photocopied

course-pack from a psychology class during the Winter of

1987 to 1988 entitled “Manual for the Administration

of Neuropsychological Test Batteries for Adults and

Children, Norms.” The title page credits Dr. Ralph M.

Reitan as the author, and indicates that it was being used

in a course taught by somebody named “Fischer”. Dr. Davis

argues that the course-pack was vital to his defense,

because it supported that he did not have the requisite

mens rea—his ultimate defense. Specifically, he argued

at the time that he intended to use the manuscript to

show that he thought it was the best psychological prac-

tice to use other people to conduct his tests. The ques-

tion of whether “substitute-testing”—for lack of a better

term—is advisable for medical reasons is irrelevant to

the question of whether substitute-billing of Medicaid is

illegal. Fed. R. Evid. 701. Likewise, evidence that tends

to prove or disprove whether the defendant believed

that substitute-testing was advisable is irrelevant to

whether the defendant believed that he could bill Medi-

caid for the procedure. There are presumably plenty of

good ways to practice medicine that Indiana will choose

not to reimburse through the Medicaid program. This

appears to be one of them.

The exclusion of the course-pack would also be within

the discretion of the district judge purely on the grounds of

reliability. A photocopied, unsigned, fifteen-year-old report

could have been misinterpreted by the jury to imply that

this was some sort of learned treatise or standard of care

within the field. The court allowed Davis to testify as to

his belief that he had been trained to use technicians for

the tests and this accomplished what he had hoped for by

12 No. 05-3481

offering the manuscript into evidence. This balancing of

the probative and prejudicial nature of the evidence does

not rise to the level of an abuse of discretion. We find no

error.

D. The Duplicity of the Indictment

Davis also argues that the indictment is impermissibly

duplicitous and that the duplicity was not adequately

corrected by the trial court. We review a challenge to an

indictment that was not preserved by objection before

trial for plain error. United States v. Hammen, 977 F.2d

379, 382 (7th Cir. 1992).

An indictment that charges more than one offense in a

single count is duplicitous. Fed. R. Crim. P. 8(a); United

States v. Tanner, 471 F.2d 128, 138 (7th Cir. 1972). An

indictment is not duplicitous if it charges a single offense

carried out through many different means. United States

v. Berardi, 675 F.2d 894, 897-98 (7th Cir. 1982). The

dangers of a duplicitous indictment are that the defen-

dant may not understand the charges against him, might

be convicted by less than a unanimous jury, may be

prejudiced by evidentiary rulings at trial, or may be

subjected to double jeopardy. Id. at 899.

The indictment alleged a single count of health care

fraud. It specified that the count was carried out through

three separate schemes, and that each of those schemes

was carried out on numerous occasions. Davis is cor-

rect that an indictment can be duplicitous if numerous

discrete instances of criminal conduct are lumped into a

single count. Such was the case in Tanner, where the

indictment alleged several instances of criminal conduct,

involving multiple defendants, multiple locations, and

multiple dates. Tanner, 471 F.2d at 138-39. But contrary

to Davis’s argument, this is not an absolute rule. Where

No. 05-3481 13

the indictment “fairly interpreted” alleges a “continuing

course of conduct, during a discrete period of time,” the

indictment is not prejudicially duplicitous. Berardi, 675

F.2d at 898. “The line between multiple offenses and

multiple means to the commission of a single continuing

offense is often a difficult one to draw. The decision is

left, at least initially, to the discretion of the prosecution.”

Id. (citing Tanner, 471 F.2d at 138).

We are convinced that this indictment, fairly interpreted,

is closer to Berardi than Tanner. The indictment sets out

an ongoing and continuous course of conduct, accomplished

through three different methods, that were repeated on

numerous (likely daily) occasions over several years. The

indictment alleges only one crime: health care fraud.

Unlike the indictment at issue in Tanner, the crime

charged here was fairly straightforward, involved only one

defendant, one victim, and one criminal statute. It seems

that the prosecution’s decision to charge only one count

falls well within its discretion as explained in Berardi, and

that the dangers otherwise inherent in duplicitous indict-

ments are not present here. If the indictment confused the

defendant, the proper time to raise that objection was

before trial, allowing the court an opportunity to correct

the error and allowing the government to seek a

superceding indictment. If the indictment raised the

specter of double jeopardy, the defendant has made no

such claim on appeal. Because, as we held above, the

challenged evidentiary decisions were correct, there is no

danger that the alleged duplicity led to prejudicial eviden-

tiary decisions.

All that remains is the defendant’s argument that the

indictment, coupled with inadequate jury instructions,

allowed him to be convicted by less than a unanimous jury.

The defense would prefer that the instructions had speci-

fied that the jury needed to unanimously agree on

a specific execution of the scheme. This argument was

14 No. 05-3481

not made at trial. In fact, defense counsel affirmatively

endorsed the jury instructions. Tr. 970-72, May 12. We

review jury instructions as a whole and as long as they

fairly and adequately represent the issues we will not

interfere with them on appeal. See United States v.

Patrick, 542 F.2d 381, 389 (7th Cir. 1976). We review

forfeited arguments regarding jury instructions for plain

error. See United States v. Suggs, 374 F.3d 508, 517-18

(7th Cir. 2004).

Taking the jury instructions as a whole, the instruc-

tions fairly and adequately represented the issues and

informed the jury that they must unanimously find at

least one scheme proved beyond a reasonable doubt. Jury

Instruction 8 clearly spelled out the elements of the alleged

crime and informed the jury that it must find

every element proved beyond a reasonable doubt. Jury

Instruction 31 informed the jury that it must be unani-

mous if it found the defendant guilty. Jury Instruction 13

informed the jury that the government need not prove

every scheme that it had alleged, but that it must prove

one of them beyond a reasonable doubt. Taken in con-

text, the jury was adequately informed of the need for

unanimity and that all elements—and at least one

scheme—be proved beyond a reasonable doubt. The jury

instructions and the inclusion of multiple schemes in a

single count did not deprive the defendant of a unanimous

jury.

III. CONCLUSION

For the foregoing reasons, the conviction is AFFIRMED.

No. 05-3481 15

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—12-15-06