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Client Alert: Fourth Circuit Reverses Medicaid Fraud Convictions in U.S. v. Davis: A Reminder That Pattern Evidence Is Not a Substitute for Count-Specific Proof

Case Summary

In an unpublished opinion issued April 24, 2026, a divided Fourth Circuit panel reversed two convictions under 18 U.S.C. § 1347, holding that evidence of a generally questionable billing practice could not, on its own, establish that the specific claims charged in the indictment were false.

Key Points

• Defendant: Former owner and clinical director of a therapeutic day treatment company serving at-risk youth and reimbursed by Medicaid. As clinical director, Mr. Davis was responsible for ensuring company-wide compliance with Medicaid billing guidelines.
• Why the convictions failed: The government did not prove that the specific claims charged on April 30, 2018 and May 9, 2018 were false as testimony established only a general "max billing" practice, not that the counselors at issue billed for services they did not provide on those dates.
• Takeaway: When an indictment charges separate Section 1347 counts by date or claim, evidence of a fraudulent billing scheme can support but cannot replace proof of specific fraudulent billing for the specific dates charged.

Case Details

On April 24, 2026, a divided panel of the U.S. Court of Appeals for the Fourth Circuit reversed the federal healthcare fraud convictions of Richard Davis, the owner and clinical director of a Virginia mental health counseling company, on grounds of insufficient evidence. While the opinion is unpublished and, therefore, not binding precedent in the circuit, it is useful to show the line between proof of a fraudulent scheme and proof that any particular charged claim was false.

Background

Mr. Davis owned and directed Innovative Family Services, LLC ("Innovative"), a Medicaid-funded provider of therapeutic day treatment for at-risk youth. Under Virginia Department of Medical Assistance Services rules, providers could bill Medicaid for face-to-face counseling, individualized planning and care coordination for each recipient whose care was being coordinated. Reimbursement is structured in units, with three units, which is the maximum, requiring at least five hours of reimbursable work in a day. Time spent on documentation, transporting recipients and monitoring behavior is not reimbursable.

After a 2019 audit, a federal grand jury returned a six-count indictment under 18 U.S.C. § 1347, with each count tied to a specific date on which Mr. Davis allegedly caused false claims to be submitted. Following a bench trial, the district court acquitted Mr. Davis on four of the six counts but convicted him on the two counts at issue on appeal, which involved specific claims submitted on April 30, 2018, and May 9, 2018.

The Majority's Sufficiency Analysis

Chief Judge Diaz, writing for the majority and joined by Judge Heytens, framed the question narrowly. Reviewing the sufficiency of the evidence de novo, the court held that to sustain a conviction under Section 1347, the government had to prove not only that Mr. Davis knowingly and willfully executed a scheme to defraud but also that he caused false claims to be submitted on the two dates charged in the indictment. Internal timekeeping records at Innovative may well have contained inaccuracies, the majority acknowledged, but “[t]here’s only fraud if the bills submitted to Medicaid reflect ‘false or misleading claims for payment.’” The relevant inquiry was whether the claims actually submitted to Medicaid, three units of service for each charged date, were unsupported by at least five hours of reimbursable work.

For count three (April 30, 2018) of the indictment, the counselor testified about her typical schedule, including three to four hours of face-to-face treatment in the afternoon and two-and-a-half hours of care coordination and planning during the midday period. But the government never asked her how much time she actually spent on counseling on April 30, nor whether she in fact completed reimbursable work during the midday period that day. Her progress notes did not document care coordination, but the government failed to establish that she did not perform it. As the majority concluded, “[t]he voids in the proof” were “too great.”

For count four (May 9, 2018) of the indictment, the second counselor held a daytime teaching position that prevented her from completing two full hours of care coordination. But she documented four hours of afternoon therapy and was available to do some Innovative work during breaks and lunch. The government showed only that she could not have completed the full two hours of care coordination, not that she failed to complete the one hour that, combined with her documented afternoon therapy, would have supported the three units billed.

That gap was dispositive. As Chief Judge Diaz put it, “a whiff of fraud in the air isn't enough.” The convictions on counts three and four were reversed, and the case was remanded with instructions to enter a judgment of acquittal.

The Dissent

Judge Wilkinson dissented, arguing that the majority had usurped the role of the trier of fact and demanded a level of granular proof that would prove difficult to meet in many healthcare fraud prosecutions. In his view, the broader pattern of conduct, including what one witness described as a “max billing” practice and what the trial court found to be a systematic direction to log uniform midday hours regardless of the work performed, was sufficient to support an inference that the specific claims at issue were fraudulent. The majority, he wrote, demanded proof so exact that “factfinders” would be unable “to draw particular inferences even from a pervasive general practice.”

The dissent raised several additional points with practical implications. First, it highlighted the paradox inherent in the majority’s reasoning: even if the counselors had spent their midday hours coordinating A.J.’s and J.R.’s care, Innovative would still have falsely billed a third unit of service for every other child they counseled that day. Under the majority’s framework, however, Davis could escape conviction by claiming that, for any given child, the midday hours were spent on that child’s care, which would leave the government unable to prove which specific children were the subject of false claims despite clear evidence of systematic overbilling.

Second, citing United States v. Johnson, 319 U.S. 503, 517–18 (1943), the dissent warned that requiring meticulous proof in cases of “elaborately concealed illegal business” would be “tantamount to holding that skilful concealment is an invincible barrier to proof.” The dissent also noted that Medicaid recovers roughly $1 billion per year from fraud prosecutions and that the majority’s evidentiary standard could meaningfully impair those recovery efforts. Finally, the dissent invoked United States v. Elfenbein, 144 F.4th 551, 568 n.14 (4th Cir. 2025), for the proposition that “fraud defendants [do not] benefit from Chevron-like safe harbors” when Medicaid regulations are arguably ambiguous — rejecting Davis’s argument that he believed group billing for planning was permissible.

What the Decision Suggests for Healthcare Providers

Although unpublished, the opinion reinforces key elements of healthcare fraud investigations and prosecutions that providers should keep in mind. Section 1347 punishes the execution of a scheme to defraud and pattern evidence is admissible (and often essential) to establish the existence and contours of that scheme. But when the government charges separate substantive counts tied to specific dates of service, each count should be treated as a discrete event requiring specific proof. Generalized testimony about how a practice billed, without testimony or records establishing that the specific claim charged was unsupported by reimbursable services, may leave those counts vulnerable to dismissal or appellate review.

Notably, the court did not reach Mr. Davis’s remaining legal arguments because it resolved the case on sufficiency grounds. Those arguments, including that the district court failed to apply a specific-intent mens rea, erroneously found that he “knowingly” committed fraud and improperly relied on group billing practices to support the convictions.

For the defense, the decision underscores the value of focused cross-examination regarding the precise dates and patients identified in the indictment. Counts charged with date-and-claim specificity must be defended with the same specificity. Where the government's witnesses cannot recall the day in question or where the documentary record does not foreclose the possibility that reimbursable work occurred, those evidentiary voids matter.

For Medicaid providers, the decision is not a license to rely on documentation gaps to defeat a fraud case. The dissent's observation that few witnesses can credibly reconstruct a particular two-hour period years after the fact cuts both directions in that the government's burden of proof remains, but compliance programs that rely on sound contemporaneous documentation will be in a meaningfully stronger position than those that do not. Internal timekeeping records that materially overstate covered services remain a serious operational and regulatory exposure, including potential liability under the civil False Claims Act, administrative exclusion and overpayment recovery efforts, regardless of how they are eventually treated in any criminal prosecution.

Davis is unlikely to be the last word on these issues in the Fourth Circuit. The dissent flags concerns that may animate future treatment of similar facts, and the U.S. Department of Justice's ongoing focus on Medicaid behavioral health enforcement ensures that the questions raised by the case will continue to be tested.

Whiteford's healthcare defense practice is following these developments closely. Providers facing audits, civil investigative demands or grand jury subpoenas and related enforcement efforts are encouraged to reach out to discuss specific matters.

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