Health Law Daily Wrap Up, FRAUD AND ABUSE—7th Cir.: Juror’s ‘research’ did not have a prejudicial effect on the verdict; the trial evidence supported use of the ‘ostrich’ instruction, (Aug 31, 2026)

By Jeffrey H. Brochin, J.D.

Although under the Remmer presumption, any private communication with a juror about the matter pending before the jury is deemed presumptively prejudicial, that presumption can be overcome where contact with the juror was harmless to the verdict outcome.

The United States Court of Appeals for the Seventh Circuit has affirmed the decision of the District Court which denied a new trial to a Provider who was convicted of multiple counts of Medicare fraud. The Provider argued that under the Remmer presumption, a juror’s outside research as to organizing and charting jury deliberations warranted a new trial; however, the District Court correctly found that there was no reasonable possibility that the verdict was affected by the juror’s conduct. As to the allegedly improper ostrich instruction given to the jury, the District Court did not abuse its discretion in giving that instruction because the government had provided sufficient evidence that the Provider deliberately avoided the truth despite warnings from staff and consultants (United States of America v. Musselman, Nos. 25-2173 & 25-2494 (7th Cir. Aug. 27, 2026)).

Three-part fraud scheme. In September 2022, a federal grand jury indicted an Illinois chiropractor, Dr. Musselman, doing business as Preferred Care, (or Provider) with engaging in a scheme to defraud Medicare from May 2016 to November 2018. The scheme involved three types of improper billing practices: billing under incorrect provider classifications and name; billing an adhesive pain-relieving device under a code meant for surgically implanted devices; and billing sublingual allergy drops under a code meant for injections.

The Provider employed both chiropractors and mid-level medical providers (such as nurse practitioners and physician assistants) and the mid-level providers could provide limited medical services under the supervision of a collaborating physician, who was not required to be on-site for patient treatment. Notably, for Medicare billing, services provided by a physician are paid at a higher rate (roughly 15% higher) than those provided by a mid-level provider.

‘Incident To’ billing. Although Medicare regulations allow certain claims to be submitted in the name of the physician—even where the service is actually provided by the mid-level provider—this type of billing, known as “Incident To” billing, requires that the physician: (1) provide the initial service to the patient; (2) play an active role in the treatment; (3) be physically present in the same facility when the mid-level provider is delivering the service; and (4) be immediately available to intervene.

Three physicians, Dr. Ahearn, Dr. Kivisto, and Dr. Bellar, were rarely physically in the same facility as the mid-level providers who were delivering the services, and therefore the Provider was required to bill the services provided by the mid-level providers under their own names rather than take advantage of the “Incident To” billing option. But starting in June 2016, Preferred Care continued to bill exclusively under physicians’ names for more than two years.

Improper device billing. In August 2016, Preferred Care began offering neurostimulators to treat chronic pain. The devices were placed on a patient’s ear via an adhesive, and contained tiny needles that intermittently punctured the skin and delivered electrical stimulation for roughly seven days before detaching. Preferred Care billed Medicare (again under physicians’ names) for the device under code L8679—a billing code for implantable devices that are intended to remain implanted continuously for a period of 30 days or more. The neurostimulator devices were highly profitable for Preferred Care because on average, Medicare reimbursed Preferred Care $6,500 per device, while each device cost Preferred Care only $500 or less.

Sublingual drops billing. In the summer of 2018, Preferred Care added a treatment option for allergies: injections or sublingual drops under the tongue. The Provider encouraged employees to schedule allergy testing for all patients, and all participating patients opted for the drops; however, Preferred Care billed Medicare under the code for injections. This erroneous billing occurred even though the vendor had stated in a training, at which Dr. Musselman was present, that she could not recommend billing Medicare at all for the drops. But Dr. Musselman told her biller at the time, “We’re just gonna go ahead and do it and not, not say anything.” After the biller did her own research on the subject, she emailed Dr. Musselman that they should not be offering Medicare patients the drops because it would be a “huge red flag” in an audit if they were billing for injections but giving only drops. However, nothing changed even after that email.

Conviction and post-trial issues. The jury convicted Dr. Musselman on the Medicare fraud charge and five of the ten wire fraud charges, and each juror who was polled individually confirmed that those were their verdicts. Dr. Musselman was sentenced to 20 months in prison for each count (running concurrently) and ordered to pay more than $2 million in restitution.

After trial, the District Court informed the parties that a one-page document had been found in the jury room, titled “JURY DELIBERATIONS” and it contained a section labeled “ROADMAP FOR OUR WORK.” The jury foreperson had done outside research and located an article giving guidelines as to jury deliberations. Based on this outside research, Dr. Musselman moved for a new trial—which the District Court denied after determining that the conduct did not affect the verdict. In addition, Dr. Musselman cited the court’s “ostrich” instruction as further grounds for a new trial, which the District Court also denied.

The Remmer presumption. At the heart of Dr. Musselman’s argument was the case of Remmer v. United States, 347 U.S. 227 (1954), out of which came the “Remmer presumption” which provides as follows: (1) any private communication, contact, or tampering directly or indirectly, with a juror during a trial about the matter pending before the jury is, for obvious reasons, deemed presumptively prejudicial, and (2) the burden rests heavily upon the government to establish, after notice to and hearing of the defendant, that such contact with the juror was harmless to the defendant. Here, the Appeals Court found that the Remmer presumption was sufficiently rebutted because the District Court found that there was no reasonable possibility that the verdict was affected by the contact: first, the concerning portion of the researched article was not included in the typed document the foreperson took into the jury room; second, the foreperson had written down that the group should “keep talking” if they disagreed—which was consistent with the court’s instructions about unanimity; and third, the article was unrelated to the facts of the case, and therefore was less likely to prejudice the jury’s evaluation of the central issues in the case. The Appeals Court concluded that the District Court properly denied the motion for a new trial as it pertained to the foreperson’s research.

‘Ostrich’ instruction. The purpose of the ostrich instruction is to inform jurors that the legal definition of “knowledge” includes the deliberate avoidance of knowledge. In other words, “a defendant cannot avoid criminal liability by sticking his head in the sand to purposefully avoid the knowledge that he is involved in criminal dealings.” Dr. Musselman opened the door to such a jury instruction by mounting a defense that she was not aware of the illegality of the billing practices at the time they occurred.

The jury could reasonably conclude that Dr. Musselman—who owned the business, was a chiropractor herself, and oversaw the billing—had a “heightened obligation” to investigate red flags, as it was her business and career on the line. Furthermore, the jury could find plenty of red flags here: Dr. Musselman saw documents from insurance companies showing that claims were being billed in the names of physicians who never treated the patients; she was warned by her consultant about the “Incident To” requirements; she was told she could not use Dr. Ahearn’s provider number; she was made aware that the “bill as” function in the billing software would indicate under whose name the claim should be billed yet she instructed her biller to input physician names. Accordingly, the Appeals Court found that there was no abuse of discretion by the District Court in permitting the “ostrich” instruction to the jury, even though the District Court had acknowledged that the ruling was a “close call.”

Based on the foregoing, the Appeals Court affirmed the District Court’s denial of the motion for a new trial.

The case is Nos. 25-2173 & 25-2494.

Judge: Maldonado, A.

Attorneys: Katherine Virginia Boyle, Office of the U.S. Attorney, for the U.S. Andrianna D. Kastanek (Jenner & Block LLP) for Carrie Musselman.

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