United States v. Semrau

Citation693 F.3d 510
Decision Date07 September 2012
Docket NumberNo. 11–5396.,11–5396.
PartiesUNITED STATES of America, Plaintiff–Appellee, v. Lorne Allan SEMRAU, Defendant–Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

OPINION TEXT STARTS HERE

ARGUED:J. Houston Gordon, Law Offices of J. Houston Gordon, Covington, Tennessee, for Appellant. Stuart J. Canale, United States Attorney's Office, Memphis, Tennessee, for Appellee. ON BRIEF:J. Houston Gordon, Law Offices of J. Houston Gordon, Covington, Tennessee, for Appellant. Stuart J. Canale, United States Attorney's Office, Memphis, Tennessee, for Appellee.

Before: WHITE, STRANCH, and FARRIS, Circuit Judges.

OPINION

JANE B. STRANCH, Circuit Judge.

Dr. Lorne Semrau appeals his conviction of three counts of healthcare fraud in violation of 18 U.S.C. § 1347. Among other issues, Dr. Semrau argues—on a matter of first impression in any jurisdiction—that results from a functional magnetic resonance imaging (“fMRI”) lie detection test should have been admitted to prove the veracity of his denials of wrongdoing. For the following reasons, Dr. Semrau's conviction is AFFIRMED.

I. BACKGROUND

Dr. Semrau, who holds a Ph.D. in clinical psychology, was president, owner, and CEO of two companies that provided follow-up psychiatric care to nursing home patients in Tennessee and Mississippi. These companies, Superior Life Care Services, Inc. and Foundation Life Care Services, LLC, offered services through contracting psychiatrists who submitted records describing their work to the companies. At Dr. Semrau's direction, Superior and Foundation billed these services to Medicare and/or Medicaid through private health insurance carriers CIGNA in Tennessee and CAHABA in Mississippi.

In order to facilitate processing of the millions of healthcare claims submitted each year, rendered services are categorized into various five-digit Current Procedural Terminology (“CPT”) codes, which are compiled and published by the American Medical Association (“AMA”). The Centers for Medicare and Medicaid Services (“CMS”) assigns fee schedules setting reimbursement levels for each code as well as “relative value units” corresponding to the amount of work that is typically required for each service. The fee schedules are submitted by CMS to carriers so that they may reimburse providers the appropriate amount depending on which CPT code is submitted. A CAHABA employee testified for the government that insurance companies rely on the honesty and integrity of providers to submit accurate claims because the vast majority are processed automatically without any review.

Submission of Medicare claims through a carrier requires providers to submit a “1500 Form” that includes information regarding the patient, the provider, and the services rendered, including the CPT code. The 1500 Form includes a notice stating: “Anyone who misrepresents or falsifies essentialinformation to receive payment from federal funds requested by this form may upon conviction be subject to fine and imprisonment under applicable federal laws.”

One of the psychiatrists with whom Dr. Semrau's companies contracted was Dr. Roy Barnes. At trial, Dr. Barnes testified that his standard procedure of care was to (1) review past medical history, (2) obtain an update on mental and emotional status, (3) observe and evaluate, and (4) make a treatment recommendation. He normally spent six to eight minutes with a patient “unless they had some extra problem,” in which case he would spend up to twenty minutes. Throughout the relevant time period, Dr. Barnes indicated that his services corresponded to CPT code 90862 by circling “62” on the log sheets created by and submitted to Dr. Semrau's companies.

According to a CIGNA provider manual, CPT code 90862 is intended for use by physicians who are prescribing or managing pharmacological therapy: “The service includes prescribing, monitoring the effect of the medication and adjusting the dosage. Any psychotherapy provided is minimal, usually supportive only. The physician work component ... is equivalent to 25 to 30 minutes.” From at least 1999 through 2001, Superior billed 90862 only for the type of evaluations described by Dr. Barnes for each of its contracting psychiatrists. During that time, Medicare paid about $37 per 90862 claim in Mississippi, and $24 per claim in Tennessee.

In late 2002, CIGNA began an audit of Superior's billing practices in Tennessee and concluded that Superior had been billing at a higher rate than could be justified by the services actually performed, a practice known as “upcoding.” In a letter to Superior dated January 23, 2003, CIGNA detailed its conclusion that Superior had overbilled fourteen of the eighteen claims reviewed at 90862 when it should have instead billed at 99311, which had a lower reimbursement amount. Code 90862 is for “psychiatric” treatments whereas 99311 is for “evaluation and management” services and generally describes a “basic follow-up nursing home visit” for a stable patient lasting about fifteen minutes.

CIGNA demanded reimbursement of the overpayment upon finding Superior to be “not ‘without fault’ in causing the over-payments because articles were published ... that explained the requirements for Medicare coverage and the documentation needed to support services billed.” The letter cited a CIGNA produced “Medicare Bulletin” from July/August 2001 that explained that 90862 “is not intended to refer to a brief evaluation of the patient's state or simple dosage adjustment of long term medication.” In February 2002, Superior added a “311” code to its Tennessee log sheets and soon began billing under 99311 for its patient evaluations in that state. However, claims in Mississippi—which were not subject to the CIGNA audit—continued to be billed at the higher code 90862 even though the services were identical.

In January 2003, Superior began billing a new, higher code in Tennessee: 99312. The Tennessee log sheets were updated in March 2003 to replace the “311” code with “312.” Code 99312 was defined as follows in the AMA's CPT code book:

Subsequent nursing facility care per day for the evaluation and management of a new or established patient which requires at least two of these three key components: An expanded problem focused interval history, an expanded problem focused examination, and medical decision-making of a moderate complexity.

Counseling and/or coordination of care with other providers or agencies are provided consistent with the nature of the problems and the patient's and/or family's needs. Usually, the patient is responding inadequately to therapy or has developed a minor complication. Physicians typically spend 25 minutes at the bedside [and] on the patient's facility floor or unit.

On July 1, 2003, Medicare reduced its Mississippi payment for code 90862 from $37 per claim to $23 per claim. Twenty days later, Superior began billing the higher code 99312 for the first time for its Mississippi claims. Because 99312 paid $45 per claim in Mississippi, Superior's change to this code resulted in an increased payment of $8 per claim from the previous 90862 rate instead of a reduced payment of $14 per claim at the new 90862 rate, for a net gain of $22 per claim. Although the Mississippi log sheets were revised shortly thereafter to include “312,” Drs. Barnes and Thomas Walden continued circling only “62”; Drs. Colin Kelley and Joseph Guyton circled either “62” or “312” on their log sheets. On August 8, 2003, Dr. Semrau instructed his billing staff to bill all services indicated as 90862s as 99312s. Dr. Ana Sarasti, who began contracting with Dr. Semrau in June 2003, was instructed to circle “62” for certain services even though 99312 was being billed.

For the next year and a half, nearly every service indicated as 90862 on the log sheets completed by the physician performing the service was billed at the higher 99312 rate in both Tennessee and Mississippi. Dr. Barnes testified that he did not know what a 99312 was during the time in question and “would have been concerned” to know this code was being billed for services for which he had indicated a different code. This practice continued until four days after a grand jury subpoena was served on Dr. Semrau and his companies on December 17, 2004, after which time code 90862 was billed when indicated on the log sheets.

On June 18, 2008, a federal grand jury returned an indictment against Dr. Semrau. The Second Superseding Indictment filed later that year charged him with sixty counts of healthcare fraud in violation of 18 U.S.C. § 1347, twelve counts of money laundering in violation of 18 U.S.C. §§ 1956 and 1957, and one count of criminal forfeiture. The healthcare fraud counts charged that Dr. Semrau “submitted and caused to be submitted an electronic claims form 1500 ... claiming that the psychiatrists ... of Superior provided a service described in CPT code 99312, when in truth and in fact as [Semrau] well knew the treating psychiatrists had circled CPT code 90862.”

Dr. Semrau's defenses were generally that (1) the codes were sufficiently equivalent that submitting code 99312 was objectively reasonable, (2) any improper billing was unintentional and despite his good faith attempts to be compliant because of the complicated and confusing nature of the codes, and (3) CPT codes do not have the force of law and cannot result in criminal penalties from misuse. He testified that he relied on advice from CIGNA's toll-free provider support phone line, which confirmed that his billing decisions were legitimate. To corroborate this claim, he unsuccessfully attempted to introduce three pieces of evidence: CIGNA telephone records that would purportedly prove he had called the support number, two reports that showed carrier support telephone lines sometimes gave inaccurate information, and results of a fMRI lie detector test that found he was generally truthful when, during the test, he said his billing decisions were...

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