United States 7th Circuit Court of Appeals Reports
STATES v. DAVIS, 05-3481 (7th. cir. 12-15-2006) UNITED
STATES OF AMERICA, Plaintiff-Appellee, v. THOMAS BRANDON
DAVIS, Defendant-Appellant. No. 05-3481. United States
Court of Appeals, Seventh Circuit. Argued September 7,
2006. Decided December 15, 2006.
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division. No. 04
CR 67 — Sarah Evans Barker, Judge.
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 (over billing), and he billed for
different procedures in order to avoid pre-authorization
requirements (miscoding). 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 prohibited, and he
challenges the indictment as duplicitous. Because we find
no error, we affirm.
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 investigation into his billing
practices, he was indicted for one count of health care
fraud in violation of 18 U.S.C. Â§ 1347.[fn1]
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 manuals) 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 parties on
appeal, Davis would leave much of the administration 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.[fn2]
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 neuropsychological
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
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 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 indictment 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
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 question
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 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 argument). Generally,
issues raised for the first time on appeal 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, Â§ 5-20-8. That section states
that” Medicaid reimbursement is available for outpatient
mental health services provided by psychologists endorsed 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 Â§
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 Â§ 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 acquired the various
licenses under which the clinics operated. He urges us to
read the word “provided” as synonymous 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
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 allowed
Davis to pre-pay the rent, license the tests, staff the
clinics with minimum wage technicians, and then fly to a
tropical paradise[fn3] 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 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 supervising 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 supervision of a psychiatrist. See Ind. Admin. Code
Â§ 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 Â§ 5-20-8(2) are all
vastly more qualified than the employees that Davis had
hired and trained to administer the tests in his
Davis also asks this court to read the presence of the word
“directly” found in Medicaid regulations for physicians at
405 Ind. Admin. Code Â§ 5-25-1 (2006) and the absence
of such a modifier from the psychologists’ regulations 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 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 suggest that
Indiana intended him to use college students to do the
lion’s share of his work while still billing Medicaidas 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 Â§ 5-20-8(2) (2002).
Because we find as a matter of law that the conviction
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.
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
decision to admit expert testimony are reviewed de novo.
In relevant part, the direct examination of Ms. Bowen
Q: And how does the Indiana Medicaid program interpret
whether the HSPP has to personally perform 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
Tr. 188, May 9.
The defense had objected to Ms. Bowen’s testimony. After
establishing that the expert had never had a conversation
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
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
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 Evidence 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. 30F.3d 898, 900-01 (7th Cir.
1994). True, when two competing 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 comply with regulations,
and how they ensure that the public knows about regulations.
Admission of this testimony 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 decision
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
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
of1987 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 practice to
use other people to conduct his tests. The question 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 Medicaid 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
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 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
defendant 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 correct 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 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 indictments 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 evidentiary 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
specified that the jury needed to unanimously agree on a
specific execution of the scheme. This argument was 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 instructions
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 unanimous if it found the defendant
guilty. Jury Instruction 13informed 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.
For the foregoing reasons, the conviction is AFFIRMED.
[fn1] 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. Â§ 1347.
[fn2] As might be expected, the parties differ in how they
characterize 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.
[fn3] 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.
[fn4] 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 Â§ 5-20-8(2) (2002).