USA. v. Universal Rehabilitation Serv., 97-1412

• Decision Date: 22 May 1998
• Docket Number: No. 97-1414,Nos. 97-1412 and 97-1414,No. 97-1467,No. 97-1412,No. 97-1413,97-1412,97-1413,97-1467,97-1414,s. 97-1412 and 97-1414
• Citation: 205 F.3d 657
• Parties: (3rd Cir. 2000) UNITED STATES OF AMERICA, v. UNIVERSAL REHABILITATION SERVICES (PA), INC., Appellant in UNITED STATES OF AMERICA, v. ATTILA HORVATH, Appellant inCross-Appellee inNot a party to the En Banc Proceeding UNITED STATES OF AMERICA v. RICHARD J. LUKESH, Appellant in Argued: Friday,
• Court: U.S. Court of Appeals — Third Circuit

Page 657

205 F.3d 657 (3rd Cir. 2000)

UNITED STATES OF AMERICA, v. UNIVERSAL REHABILITATION SERVICES (PA), INC., Appellant in No. 97-1412

UNITED STATES OF AMERICA, v. ATTILA HORVATH, Appellant in No. 97-1413 Cross-Appellee in No. 97-1467 Not a party to the En Banc Proceeding

UNITED STATES OF AMERICA v. RICHARD J. LUKESH, Appellant in No. 97-1414

Nos. 97-1412 and 97-1414

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: Friday, May 22, 1998

Argued En Banc: November 8, 1999

Decided March 14, 2000

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Nos. 94-cr-00147-1, 94-cr-00147-2 and 94-cr-00147-3) District Judge: Honorable Robert F. Kelly Thomas C. Carroll (Argued) Carroll & Cedrone 6th & Chestnut Street Public Ledger Building Suite 940 Philadelphia, PA 19106, Attorney for Appellants Universal Rehabilitation Services (PA), Inc. and Richard J. Lukesh

Michael R. Stiles United States Attorney Walter S. Batty, Jr. Assistant United States Attorney Chief of Appeals Valli F. Baldassano Suzanne B. Ercole Robert A. Zaumzer (Argued) Assistant United States Attorney Office of the United States Attorney 615 Chestnut Street Philadelphia, PA 19106, Attorneys for Appellee

BEFORE: ROTH, McKEE and GARTH, Circuit Judges

BEFORE: BECKER, Chief Judge, SLOVITER, MANSMANN, GREENBERG, SCIRICA, NYGAARD, ALITO, ROTH, McKEE, RENDELL, BARRY and GARTH, Circuit Judges

OPINION OF THE COURT

GARTH, Circuit Judge:

We have granted en banc review to resolve a conflict in our court's jurisprudence that has surfaced following the publication of United States v. Cohen, 171 F.3d 796 (3d Cir. 1999), United States v. Gaev, 24 F.3d 473 (3d Cir. 1994), and United States v. Gambino, 926 F.2d 1335 (3d Cir. 1991), on the one hand, and United States v. Thomas, 998 F.2d 1202 (3d Cir. 1993), on the other.¹ In the instant matter, the District Court permitted the government, pursuant to Federal Rule of Evidence ("Federal Rule") 403, to introduce both the plea agreements and guilty pleas of two witnesses notwithstanding a representation by defense counsel that they would not challenge the credibility of such witnesses. The jury convicted all three defendants on a sole count of mail fraud. The panel majority reversed. We granted the government's petition for rehearing and vacated the panel decision.²

We will now affirm the convictions entered against defendants Universal Rehabilitation Services (PA), Inc., and Richard Lukesh.

I

Universal Rehabilitation Services (PA), Inc. ("Universal") is engaged in the business of providing various rehabilitative services, especially speech therapy, to elderly Medicare patients living in nursing homes. Universal would enter into contracts with several local nursing homes, and would thereafter send its speech therapists to treat patients on site. Rather than submit its bills directly to Medicare, Universal employed Independence Blue Cross ("IBC") as an intermediary processor. Under this arrangement, Universal would submit its claims to IBC, which would process and organize such claims before sending them to Medicare.

Both federal law and the regulations promulgated by the Secretary of Health & Human Services authorize the Medicare program to pay only those claims that are deemed to be medically reasonable and necessary. In determining whether this criteria have been met with specific reference to speech therapy services, the Medicare program generally looks to four separate criteria: (1) the therapy must be safe and effective for treating the patient's condition; (2) the services provided must be sufficiently complex insofar as only a certified speech pathologist can provide such services; (3) if restorative treatment were ordered, the pathologist must expect that the services would improve the patient's condition significantly in a reasonable amount of time; and (4) the frequency and duration of the services must bear a reasonable and necessary relation to the patient's condition. In this criminal matter, the government contends that both Universal and its representatives intentionally altered the claims it submitted to IBC in order to meet these criteria.

Pursuant to a physician's orders, a Universal therapist would evaluate a patient's needs in order to determine initially whether treatment was necessary, and if so, propose a program of treatment. Once a physician approved the evaluation, this evaluation became a vitally important document for Medicare purposes insofar as it provided an assessment that the treatment was medically necessary for the patient. Indeed, Medicare reviewers specifically considered the evaluation in rendering reimbursement decisions.

Once treatment of a particular patient commences, Medicare requires that a physician certify each thirty days that continued treatment was medically necessary. Further, Medicare will only pay for such continued treatment so long as the patient is progressing towards the goals referenced in the initial evaluation, and as such, Universal therapists would write notes concerning the patient's progress. Universal would meet the thirty-day recertification requirement by having a physician sign a Medical Information Form ("MIF ") that contained a summary of the previous thirty days of treatment and the prescribed course of treatment for the thirty days to come.

Universal would submit its Medicare claims to IBC electronically for IBC's review. According to Universal, IBC's requirements for the proper processing of its claims were elaborate, detailed, and extremely difficult with which to comply. For this reason, Universal and IBC often differed as to the proper interpretation of the Medicare regulations, and, indeed, the ultimate decision as to whether Medicare would reimburse a particular claim. Pursuant to a random auditing system, IBC ultimately requested Universal to provide documentation in support of certain claims that Universal had submitted. Irregularities in this documentation led IBC to investigate further, an investigation that uncovered the very "rewriting" scheme that is at issue in this criminal matter.

The government alleges that between the summer of 1988 and September 21, 1991, Universal and its representatives altered and rewrote certain Medicare claims in order to ensure that the Medicare program would reimburse such claims. Universal admits that this occurred, but claims that such rewriting had two forms: (1) honestly inserting omitted information so as to comply with Medicare regulations; and (2) altering initial evaluations, medical information forms, and progress certifications so as to reflect either the need for medical treatment or to certify that the patient was progressing because of treatment already provided.

As for this latter form of rewriting, the government contends that initial evaluations were altered so as to provide the "appearance" that speech therapy was medically necessary for the patient, medical information forms were made to appear as if a physician actually had reviewed the patient's progress and recommended that the speech therapy continue, and finally, the therapists' personal progress notes concerning the patient were modified to provide the appearance that the patient was improving. In order to obtain the required physician's signature, Universal and its representatives would photocopy the physician's signature on the initial form and paste this photocopy on the altered form. Only after the rewriting occurred would the claims be submitted to IBC for review. All of these efforts, of course, were intended to increase the likelihood that Medicare would reimburse Universal for the speech therapy services Universal claimed to have rendered.³

On March 31, 1995, a federal grand jury indicted appellants Universal, Universal's Vice-President and Director of Finance, Attila Horvath ("Horvath"), Universal's Director of Operations, Richard Lukesh ("Lukesh"), and three other defendants⁴ on seventeen counts of mail fraud, in violation of 18 U.S.C. S 1341, and twenty-one counts of false claims, in violation of 18 U.S.C. S 287. Prior to trial, Julia Blum Bonjo ("Bonjo") and Penny Martin ("Martin") pled guilty to a sole count of mail fraud in connection with the scheme described above.⁵ Universal, Horvath, and Lukesh also prior to trial, filed motions in limine with the District Court, attempting to prevent the government, pursuant to Federal Rule 403, from introducing such guilty pleas and plea agreements into evidence. At the same time, Universal, Horvath, and Lukesh each represented that they would not affirmatively challenge the credibility of either Bonjo or Martin during cross-examination.⁶ The District Court held extensive oral argument on this issue, and reserved its ruling until after the trial had commenced and the government was prepared to call Bonjo as a witness. Citing to our opinion in United States v. Gaev , 24 F.3d 473 (3d Cir. 1994), the District Court then denied the motions in limine and permitted the government to introduce both Bonjo and Martin's guilty pleas and plea agreements as part of its principal case. In particular, the District Court stated that

if [Bonjo and Martin] testify the jury is going to certainly wonder whether or not they have been charged. It's going to wonder perhaps what they have been promised by the prosecutor if anything and what they may be getting in return for their testimony.

I think in weighing all of those factors with the possible prejudice that I am going to allow the Government to bring out the fact of the guilty plea and the fact of the guilty plea agreement.

App. at 1768.

After the government had introduced the evidence of Bonjo's plea and concomitant plea agreement, the District Court immediately instructed the jury as follows:

Members of the jury, you've just heard . . . evidence that this witness has plead [sic] guilty to a charge of mail fraud and which involved matters of some of the things that she has...