Former Psychiatrist Gets Judgment, Jail Time for Fraud

Nancy A. Melville

January 20, 2012

January 20, 2012 — A former Idaho psychiatrist was ordered to pay nearly $95,000 in a legal judgment this week, adding to a prison sentence of up to 5 years, which he received in November for obstruction and falsifying records relating to Medicaid fraud.

The judgment, obtained by the US Attorney's Office against Michael Applebaum, MD, of Nampa, Idaho, involved a civil lawsuit in which he was accused of submitting false Medicare and Medicaid claims for undocumented and ineligible services from 2004 through 2009.

Prosecutors claimed Dr. Applebaum failed to properly document services for approximately 502 claims, including falsifying service dates on 49 claims to make them appear eligible for reimbursement under Medicaid's rule of submitting claims within 12 months of the date of service.

The lawsuit was filed under the False Claims Act, which holds violators liable for a civil penalty of up to $11,000 for each violation, plus 3 times the loss sustained by the United States.

"The judgment was for 3 times the amount of the loss, but the federal government didn't pursue the penalties because the judgment would have amounted to millions for just $30,000 in fraud," Kendal A. McDevitt, Lead Deputy Attorney General of Idaho and director of the state's Medicaid Fraud Control Unit, told Medscape Medical News.

Criminal Conviction

In August, a jury convicted Dr. Applebaum of 2 felony counts of fraud and 2 counts of obstruction of an investigation for the filing of false Medicaid claims relating to the treatment of a severely disabled child who could not communicate.

The child, who had a severe seizure disorder, had been referred to Dr. Applebaum for the medical management of various medications, but prosecutors claimed the physician also billed Medicaid for individual psychotherapy services.

"The billing code for individual psychotherapy suggests the patient actually understands and can communicate in some fashion, but the child didn't have the cognitive ability to speak, so that was the fraud," McDevitt said.

The billing in that particular case amounted to only about $3,000; obstruction occurred when Dr. Applebaum was asked to present to investigators medical records relating to the claims.

The child's mother had alerted authorities upon discovering discrepancies in benefit explanations. When investigators went to Dr. Applebaum's office to evaluate the records, they became suspicious because of an apparent stalling in presenting the files.

"After a morning of waiting, the investigator flatly asked the doctor if the delays were because he was writing up the reports, and he simply said 'yes,' " McDevitt said.

"[Dr. Applebaum] was looking at what he had billed to Medicaid and then writing conduct reports that would justify the billing right while the investigator was in the office waiting. That was what we found most offensive."

The Defense

Dr. Applebaum's defense was that part of the definition for the code for individual psychotherapy includes behavior modification, and in providing medical management, he was providing behavior modification, McDevitt said.

The former psychiatrist admitted to additional charges of billing an employee's work as his own.

Dr. Applebaum, whose medical license was revoked by the Idaho State Board of Medicine in May, had a previous felony conviction for diverting drugs at a clinic in the 1990s and had lost his prescribing privileges for 10 years. It is likely that the previous felony was a factor in his receiving a prison sentence for the convictions, McDevitt noted.

The prosecutor added that Scott Summer, Dr. Applebaum's attorney in the criminal case, is appealing the conviction. Summer did not respond to Medscape Medical News' request for an interview.

As the government steps up its crackdown on Medicare fraud nationwide, the Department of Health and Human Services (HHS) reports that the efforts of its Medicare Fraud Strike Force, established in 2007, resulted in the filing of charges against 283 individuals or entities in fiscal year 2011, leading to 184 convictions.

Mental health and psychiatry services were involved in numerous cases, including perhaps the most notorious — a massive fraud scheme in Florida involving several owners of the American Therapeutic Corporation.

In the case, the now-defunct corporation was used to bill Medicare for mental health services that either were not necessary or not provided. The owners were ordered to pay more than $87 million in restitution.

One of the owners, Lawrence Duran, received a 50-year prison sentence, the longest sentence ever imposed in a Medicare Fraud Strike Force Case, according to an HHS news release.


According to Ellen Jaffe, who is with the Healthcare Systems and Financing Department of the American Psychiatric Association (APA), psychiatrists tend to unfairly get drawn into the spectrum of higher scrutiny when such cases involving mental health services gain notoriety.

"For a while, authorities in Florida, due to the fraud, were performing prepayment audits on all mental health and psychiatry claims in Miami-Dade County. and we had to work to have psychiatrists taken off the list," Jaffe told Medscape Medical News.

If anything, however, the cases should underscore the importance of diligent record keeping, she said.

"We're always reminding our doctors that they need to document everything. I think most professionals understand that. In the old days of psychotherapy, there may have been reluctance to really document in a medical way, but I don't think that's happening anymore."

Jaffe noted that Dr. Applebaum was not an APA member. She said his offense appeared to go well beyond sloppy record-keeping.

"I think this guy's problem is he tried to cover it up. Here in DC, it's commonly said that it's not necessarily the crime but the cover-up. It appears he was obstructing justice, and that's probably why he got the jail time."