DECISION

It is my decision to sustain the determination of the Inspector General (I.G.) to exclude Gerald David Austin (Petitioner) from participating in the Medicare, Medicaid, and all other federal health care programs, for a period of five years. I base my decision on the documentary evidence, the applicable law and regulations, and the arguments of the parties. It is my finding that Petitioner was convicted of a criminal offense related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.

This case is before me pursuant to a request for hearing filed on January 8, 2004 by Petitioner.

By letter dated November 28, 2003, the I.G. notified Petitioner that he was being excluded from participation in the Medicare, Medicaid, and all other federal health care programs as defined in section 1128B(f) of the Social Security Act (Act) for a period of five years. The I.G. informed Petitioner that his exclusion was imposed pursuant to section 1128(a)(4) of the Act (42 U.S.C. � 1320a-7(a)). The exclusion imposed was due to Petitioner's felony conviction as defined in section 1128(i) of the Act (42 U.S.C. � 1320a-7(i)) in the Superior Court of California, County of Santa Clara, San José Facility, of a criminal offense related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.

I conducted a prehearing telephone conference on March 8, 2004. The parties agreed that the case could be decided based on written arguments and documentary evidence, and that an in-person evidentiary hearing was unnecessary. On April 28, 2004, the I.G. submitted its initial brief (I.G. Br.) and proposed exhibits. The I.G. filed two proposed exhibits. These have been identified as I.G. Exhibits (I.G. Exs. 1-2). On June 14, 2004, Petitioner filed his response brief (P. Br.). Petitioner did not submit any proposed exhibits with his brief. On June 28, 2004, the I.G. submitted her reply brief (I.G. Reply). Petitioner did not file anything further. Petitioner did not make objections to the I.G.'s proposed exhibits. Therefore, I admit into evidence I.G. Exs. 1-2.

The only issue is whether the I.G. had a basis upon which to exclude Petitioner from participation in the Medicare, Medicaid, and all other health care programs.

Section 1128(a)(4) of the Act authorizes the Secretary of the Department of Health and Human Services (Secretary) to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act), any individual convicted under federal or State law, of a criminal offense relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. An exclusion under section 1128(a)(4) of the Act must be for a minimum period of five years. Act, section 1128(c)(3)(B). Aggravating factors can serve as a basis for lengthening the period of exclusion. 42 C.F.R. � 1001.102(b). If aggravating factors justify an exclusion longer than five years, mitigating factors may be considered as a basis for reducing the period of exclusion to no less than five years. 42 C.F.R. � 1001.102(c).

Pursuant to 42 C.F.R. � 1001.2007, a person excluded under section 1128(a)(4) of the Act may file a request for hearing before an administrative law judge (ALJ).

The I.G. argues that Petitioner was excluded from participation for a period of five years, pursuant to section 1128(a)(4) of the Act, based on his conviction in Santa Clara County Superior Court of an offense related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. The I.G. further argues that section 1128(c)(3)(B) of the Act mandates a minimum exclusion period of five years and, therefore, the reasonableness of the period of exclusion is not an issue before the ALJ. I.G. Br. at 3.

Petitioner contends that his exclusion from participation violates the basic principles of federalism in that Petitioner was not considered to be "convicted" under California law. P. Br. at 3-4. Petitioner asserts that under California law, once a guilty plea is entered, a convicted individual is given a program of recovery to pursue and some fees to pay to support his participation in the program. Id. at 2. The person convicted is never sentenced and given deferred entry of judgment for an 18-month period. If he remains crime-free, the guilty plea is automatically withdrawn, the case is dismissed, and the record is sealed against all inquiry. Id.

The findings of fact and conclusions of law noted below in italics are followed by a discussion of each finding.

Petitioner was a licensed podiatrist in the State of California. I.G. Ex. 2. On or about May 29, 2002, Petitioner was arrested while attempting to obtain a Schedule III controlled substance while using a false prescription. I.G. Ex. 2. On January 14, 2003, Petitioner pled guilty to one count of obtaining a narcotic drug using a false prescription (in violation of Cal. Health & Safety Code � 11368 (2002)), a felony, and one count of possession of a controlled substance without a prescription (in violation of Cal. Bus. & Prof. Code � 4060 (2002)), a misdemeanor. I.G. Ex. 1. Petitioner's guilty plea was accepted by the Santa Clara County Superior Court. Petitioner was ordered to pay $200 in restitution and placed in a Deferred Entry of Judgment (DEJ) Program for an 18-month period. I.G. Ex. 1, at 4; I.G. Br. at 4; P. Br. at 2.

I find that Petitioner's conviction met the definition of a section 1128(a)(4) conviction. Section 1128(a)(4) of the Act requires that any individual or entity "convicted of a felony criminal offense relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance" be excluded from all federal health care programs. An individual is considered to have been "convicted" within the meaning of the statute if his plea of guilty or nolo contendere "has been accepted by a Federal, state, or local court" (Act, section 1128(i)(3)), or he has "entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld." Act, section 1128(i)(4).

Under Cal. Penal Code � 1000 (2002), if an eligible offender, such as Petitioner, "enters a plea of guilty or no contest," the state criminal court may consider whether the offender is eligible to participate in a Deferred Entry of Judgment (DEJ) Program, and the offender may elect to enter into a DEJ program. Upon successful completion of the program, "the arrest upon which the judgment was deferred shall be deemed to have never occurred." Cal. Penal Code � 1000.4(a).

Petitioner argues that he was not "convicted" within the meaning of section 1128(a)(4) of the Act. He argues that, under California state law, there can be a conviction only when judgment has been entered. P. Br. at 3. Petitioner further asserts that, since successful completion of the DEJ program, the slate was in essence wiped clean and, thus, there is no conviction. Id.

I reject Petitioner's arguments. Cal. Penal Code � 1000 plainly creates a "deferred entry of judgment" and a "program where judgment of conviction has been withheld." Under the state statute, if an eligible offender enters a plea of guilty or no contest, the court may stay all criminal proceedings. By staying the proceeding after the entry and acceptance of a plea, the court defers the adjudication of the charges and withholds a judgment of conviction. What occurs next turns on whether the offender successfully completes the rehabilitation plan. If the offender fails to comply with the rehabilitation plan, the prosecutor (or the court on its own motion) may file a motion for entry of judgment and, after notice to the defendant, the court shall hold a hearing to determine whether judgment should be entered. Cal. Penal Code � 1000.3 (2002). On the other hand, if the person successfully completes his/her period of rehabilitation, the court may dismiss the case and the record sealed. Cal. Penal Code � 1000.4 (2002). In either case, the requirements of section 1128(i)(4) are met, i.e., an adjudication has been deferred and a judgment of conviction withheld. In Travers v. Shalala, 20 F.3d 993, at 996 - 999 (9^th Cir. 1994), the court explained that this is precisely the type of program encompassed by the plain language of section 1128(i)(4). In Travers, the court distinguished between deferred prosecution procedures and deferred adjudication procedures. Under deferred prosecution, the parties agree to defer prosecution and withhold initiation of charges. If the defendant subsequently fails to abide by the terms of the parties' agreement, the defendant may then plead not guilty and proceed to trial. In contrast, Cal. Penal Code � 1000 provides for an adjudication of guilt based on the earlier plea if the defendant fails to comply with the rehabilitation plan. The California program therefore falls within the plain meaning of section 1128(i)(4). See Carl Jeffrey Boyette, DAB CR1165 (2004), citing Victoria L. Winterhalter, DAB CR1114 (2003); Handel J. Roberts, M.D., DAB CR911 (2002).

Congress broadly defined the term "conviction" in order "to ensure that exclusions from federally-funded health care programs would not hinge on state criminal justice policies," so the fact that a court's adjudication is not a "conviction" under state law is not controlling. Carolyn Westin, DAB No. 1381, at 3 (1993). In Westin, the petitioner participated in a deferred adjudication program, and her plea of nolo contendere was dismissed nunc pro tunc (now for then). She argued, accurately, that she had not been convicted under the state law. Nevertheless, the Departmental Appeals Board (Board) recognized that the federal statute controls, and concluded that her participation in the deferred adjudication program fell within the statutory definition of a conviction. See Travers at 996. Here, Petitioner pled guilty before the Santa Clara County Superior Court, and the court accepted Petitioner's plea. P. Br. at 1-2.

On April 27, 2003, the I.G. notified Petitioner that he was being excluded from participation in the Medicare, Medicaid, and all federal health care programs for a minimum period of five years. I.G.'s Imposition Notice dated August 27, 2003. The I.G.'s action was taken pursuant to section 1128(a)(4) of the Act due to his conviction as defined in section 1128(i)(3) of the Act. An exclusion under section 1128(a)(4) must be for a mandatory minimum period of five years as set forth in section 1128(c)(3)(B) of the Act which states:

When the I.G. imposes an exclusion for the mandatory five-year period, the issue of the length of such exclusion is not considered. 42 C.F.R. � 1001.2007(a)(2).

Petitioner also suggests that his exclusion violates the principle of federalism in that the federal government does not have the authority to come forward and reinvent the state's statutory definition of "conviction." P. Br. at 4.

The I.G. contends that, based upon the Supremacy Clause of the Federal Constitution, Petitioner's exclusion is not precluded by "the California court's failure to render a judgment against Petitioner." I.G. Reply at 3. 42 C.F.R � 1001.207(a)(1) grants me the authority to review exclusions of individuals from participation in Medicare and all other federal health care programs. However, that regulation provides that I may only review whether a basis for the exclusion exists and the reasonableness of the length of the exclusion. My review is further limited by section 1005.4(c)(1) which provides that in reviewing exclusions, civil money penalties, and assessments, an ALJ "does not have the authority to . . . [f]ind invalid or refuse to follow Federal statutes or regulations or secretarial delegations of authority." 42 C.F.R. � 1005.4(c)(1). Therefore, under this express limitation, I lack authority to examine and address Petitioner's federalism argument.

For the reasons set forth above, I conclude that the I.G. properly excluded Petitioner from participation in Medicare, Medicaid, and all other federal health care programs, and I sustain the five-year exclusion.