SUBJECT:

Kevin T. Porter,

Petitioner,

The Inspector General

DECISION

I sustain the Inspector General's (I.G.) determination, made pursuant to section 1128(a)(1) of the Social Security Act (Act), to exclude Petitioner, Kevin T. Porter, from participation in Medicare, Medicaid, and all other federal health care programs. However, considering all of the aggravating and mitigating circumstances, I find the seven-year exclusion unreasonable, and reduce the period of exclusion to the mandatory minimum of five years.

I. BACKGROUND

Before he became a licensed physical therapist, Petitioner worked as a physical therapy (PT) aide at Rehab Fitness, Inc., a company that operated physical therapy clinics in and around Charlotte, North Carolina. On November 4, 2004, he pled guilty to one felony count of conspiring to defraud Medicare and other health insurance programs by treating patients in the absence of a supervising licensed physical therapist, and by billing insurers as though the services were provided by a licensed therapist. I.G. Ex. 2, at 1; I.G. Ex. 3, at 6; I.G. Ex. 4, at 1.

In a letter dated May 31, 2005, the I.G. notified Petitioner that he was being excluded from participation in Medicare, Medicaid, and all federal health care programs for a period of 12 years. I.G. Ex. 1. The letter explained that the I.G. is authorized to exclude Petitioner under section 1128(a)(1) of the Act because of Petitioner's conviction, in the United States District Court for the Western District of North Carolina, of a criminal offense related to the delivery of an item or service under the Medicare or state health care programs.

On June 23, 2005, Petitioner timely requested a hearing.

I held a prehearing conference on September 7, 2005, during which the parties agreed that an in-person was not necessary and that the case could be decided on the written record. Order (September 8, 2005). See 42 C.F.R. � 1005.6.

Thereafter, in a letter dated October 19, 2005, the I.G. advised Petitioner that, based on new information, the period of Petitioner's exclusion was reduced to seven years.

Both parties have submitted briefs, accompanied by documentary evidence. The I.G. filed five exhibits (I.G. Exs. 1 - 5) as part of his submission, and Petitioner filed six exhibits which I have labeled P. Exs. 1 - 6. In the absence of objection, I receive into evidence I.G. Exs. 1 - 5 and P. Exs. 1 - 6. The I.G. also submitted a reply brief.

II. ISSUE

I consider whether the I.G. had a basis upon which to exclude Petitioner from participation in the Medicare, Medicaid, and all federal health care programs, and, if so, whether a seven-year exclusion is reasonable.

III. DISCUSSION

Section 1128(a)(1) of the Act requires that the Secretary of Health and Human Services (Secretary) exclude an individual who has been convicted under federal or state law of a criminal offense related to the delivery of an item or service under Medicare or a state health care program. ⁽¹⁾ 42 C.F.R. � 1001.101. Individuals excluded under section 1128(a)(1) of the Act must be excluded for a period of not less than five years. Act, section 1128(c)(3)(B).

The Secretary has delegated to the I.G. the authority to impose exclusions. 42 C.F.R. � 1001.401(a). So long as the period of exclusion is within a reasonable range, based on demonstrated criteria, I have no authority to change it. Joann Fletcher Cash, DAB No. 1725, at 7 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

The basic facts of this case are not in dispute. While preparing for the PT licensing exam, Petitioner worked as a PT aide at Rehab Fitness, Inc. As such, he was authorized to assist with PT services, but only under the direct, on-site supervision of a licensed physical therapist. Nevertheless, at his employer's direction, he performed unsupervised PT services when a therapist was not available. I.G. Ex. 3, at 1, 5. His employer then billed Medicare and other insurers for those services as if they had been performed by a licensed therapist. Also at his employer's instruction, he "up-coded" the services he provided, that is, he entered codes for procedures he did not perform that were reimbursed at a higher rate than those that he actually performed, and he entered codes for one-on-one therapies even though he provided the treatment to multiple clients at the same time. I.G. Ex. 3, at 3-4.

On November 9, 2004, Petitioner pled guilty to one felony count of conspiracy to defraud the United States, in violation of 18 U.S.C. �� 287, 1035, and 1347. I.G. Ex. 2. He was initially sentenced to six months house arrest with work release, ordered to pay a $100 assessment, and, with his co-defendants, $281,064 in restitution ($53,022.69 payable to the Department of Health and Human Services, which administers the Medicare program). I.G. Ex. 2, at 6. The Court subsequently entered an amended judgment and correction of sentence, changing the six months of house arrest to "time served." P. Ex. 2, at 2. ⁽²⁾

A. Petitioner was convicted of a criminal offense related to the delivery of an item or service under the Medicare/Medicaid programs, within the meaning of section 1128(a)(1) of the Act. ⁽³⁾

Petitioner concedes that he pled guilty to a criminal offense related to the delivery of an item or service under the Medicare/Medicaid programs, but suggests that he was not, in fact, guilty of those charges. The regulations, however, explicitly preclude such a collateral attack on the underlying conviction.

When the exclusion is based on the existence of a criminal conviction . . . where the facts were adjudicated and a final decision was made, the basis for the underlying conviction . . . is not reviewable and the individual or entity may not collaterally attack it either on substantive or procedural grounds in this appeal.

42 C.F.R. � 1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000); Chander Kachoria, R.Ph., DAB No. 1380, at 8 (1993) ("There is no reason to 'unnecessarily encumber the exclusion process' with efforts to reexamine the fairness of state convictions."); Ira Katz, Little Five Points Pharmacy, DAB CR1044 (2003). Petitioner "[s]imply cannot challenge the facts relating to his criminal conviction . . . ." See Jose Grau, DAB CR930, at 12 (2002).

Having found a basis for exclusion, I next consider whether seven years falls within a reasonable range.

B. Considering the aggravating and mitigating factors in this case, I find that a seven-year exclusion does not fall within a reasonable range. 42 C.F.R. � 1001.102(b)(2).

By regulation, the Secretary established the criteria for determining the length of exclusions imposed under section 1128 of the Act. 42 C.F.R. � 1001.102. Evidence that does not pertain to one of the aggravating or mitigating factors specified in the regulation is not relevant and may not be used to decide whether an exclusion of a particular length is reasonable.

The following factors may serve as bases for lengthening the period of exclusion: (1) the acts resulting in the conviction, or similar acts, resulted in a financial loss to Medicare and the state health care programs of $5,000 or more; (2) the acts that resulted in the conviction, or similar acts, were committed over a period of one year or more; (3) the sentence imposed by the court included incarceration; and 4) the convicted individual or entity has been the subject of any other adverse action by any federal, state or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion. 42 C.F.R. � 1001.102(b). The presence of an aggravating factor or factors not offset by any mitigating factor or factors justifies lengthening the mandatory five-year period of exclusion.

Here, the I.G. cites three factors as bases for extending the period of Petitioner's exclusion beyond the mandatory five-year minimum: (1) Petitioner's actions resulted in a program financial loss in excess of $5,000; (2) his actions were committed over a period of more than one year; and (3) the sentence imposed by the court included incarceration.

The I.G. has shown that Petitioner's actions resulted in program financial loss in excess of $5,000, and that his actions were committed over a period of more than one year. The Court ordered him to pay restitution to the administrator of the Medicare Program (the Department of Health and Human Services) of $53,022, which I consider persuasive evidence of program financial loss. I do not doubt that his employers, rather than Petitioner himself, directly profited from the scheme, but the regulation refers only to program loss, and does not require the I.G. to show that Petitioner himself pocketed those funds. With respect to the duration of his illegal activity, Petitioner pled guilty to criminal conduct that began "on or about January 1, 2002," and continued until "on or about March 31, 2003," which is more than one year. I.G. Ex. 3, at 6.

1. The sentence imposed by the Court did not include incarceration.

With respect to incarceration, the I.G. has not convinced me that the sentence imposed by the court included incarceration. Petitioner was initially sentenced to house arrest, and I agree that "house arrest" falls within the meaning of "incarceration." 42 C.F.R. � 1001.2. However, on January 5, 2005, the Court issued its "amended judgment" which it characterized as a "correction of sentence by sentencing court." P. Ex. 2, at 1. On its face, the judgment shows that the Court did not "modify" or "reduce" the earlier sentence; it "corrected" the sentence to eliminate house arrest. I therefore reject the I.G.'s unsupported suggestion that the Court issued the amended judgment because it determined that Petitioner no longer required home detention. ⁽⁴⁾

Rule 35(a) of the Federal Rules of Criminal Procedure allows a court to "correct" a sentence within seven days for "clear error." ⁽⁵⁾ This amended judgment, issued about eight weeks after initial sentencing, does not fall within that provision. Rule 35(b) allows the Court to reduce a sentence "for substantial assistance" provided to the prosecution within one year of sentencing. But the Court plainly did not intend to reduce for substantial assistance under Rule 35(b) because it did not check off that option on the face of the amended judgment. Moreover, at the time of the original sentencing, Petitioner had already provided his substantial assistance, as the Court was well aware. The prosecutor asked the Court to depart downward from sentencing guidelines, pointing out that Petitioner's cooperation was "certainly instrumental" in compelling his employer's guilty plea. P. Ex. 4, at 3.

Although far from crystal clear, review of the sentencing transcript suggests that the Court intended to grant defense counsel's request for the "least form of punishment" allowable under the circumstances. The federal prosecutor told the Court that "in order to keep his job, it's the government's opinion that [Petitioner] pretty much had to do what [his employers] said. It's our opinion that he's the least culpable." The prosecutor also told the Court that "I don't think a lot would be served by keeping this young man in jail." P. Ex. 4, at 4. His attorney agreed: "No question but that this young man does not need to be imprisoned." P. Ex. 4, at 6. The Court seemed to agree. In the absence of a more credible explanation, I consider it most likely that the Court intended to impose the most lenient sentence, and learned after sentencing that it was not required to impose any form of imprisonment. The Court thus later "corrected" its error.

The Court reduced Petitioner's sentence to "time served." The I.G. has not challenged Petitioner's assertion that, in his case, "time served" consisted solely of the twenty minutes it took to process his arrest. I do not consider that time spent in detention prior to conviction falls within the regulatory definition of "incarceration."

Having found two aggravating factors which could serve as bases for lengthening the period of exclusion beyond the mandatory five-year minimum, I now consider whether any mitigating factors offset those aggravating factors.

2. Petitioner's level of cooperation resulted in others being convicted and offsets the aggravating factors.

The regulations consider mitigating just three factors: (1) a petitioner was convicted of three or fewer misdemeanor offenses and the resulting financial loss to the program was less than $1,500; (2) the record demonstrates that a petitioner had a mental, physical, or emotional condition that reduced his culpability; and (3) a petitioner's cooperation with federal or state officials resulted in others being convicted or excluded, or additional cases being investigated, or a civil money penalty being imposed. 42 C.F.R. �1001.102(c). Here, the parties agree that Petitioner cooperated with federal authorities, that his cooperation resulted in his employer's felony conviction, and that such level of cooperation offsets the aggravating factors. The sole question is the degree of the offset.

The regulations do not prescribe the weight to be given any particular factor; rather, the applicable factors should be applied, based on what they show of the individual's trustworthiness. Sheila E. Novin, DAB CR1368 (2005). Here, Petitioner committed a serious error, for which he has paid a significant price. However, even the federal prosecutor felt that he was the least culpable of those involved and that he acted at the direction of his employer "in order to keep his job." P. Ex. 4, at 4. As the I.G. concedes, his full and immediate cooperation with prosecutors justifies a significant reduction in his period of exclusion. Based on all of these factors, I find that his continuing participation presents no serious risk to health care programs, and consider a seven-year exclusion unreasonable.

C. The statute mandates a five-year minimum period of exclusion.

An exclusion under section 1128(a)(4) must be for a minimum mandatory period of five years. As set forth in section 1128(c)(3)(B) of the Act:

Subject to subparagraph (G), in the case of an exclusion under subsection (a), the minimum period of exclusion shall be not less than five years . . . .

Petitioner must therefore be excluded for five years. 42 C.F.R. � 1001.2007(a)(2).

IV. CONCLUSION

The I.G. was authorized, under section 1128(a)(1), to exclude Petitioner from participation in Medicare, Medicaid, and all other federal health care programs, and the statute mandates a minimum exclusion of five years. Based on the aggravating and mitigating factors, I find the seven-year exclusion unreasonable. Although Petitioner's criminal conduct occurred over a period of about 15 months, and resulted in significant financial loss to the Medicare program, his sentence did not include incarceration. He fully and completely cooperated with prosecutors, and his cooperation resulted in the conviction of his employer, who was significantly more culpable. I therefore conclude that his level of cooperation offsets the aggravating factors.

Carolyn Cozad Hughes

Administrative Law Judge

1. The term "state health care program" includes a state's Medicaid program. Section 1128(h)(1) of the Act; 42 U.S.C. � 1320a-7(h)(1).

2. I am troubled that the I.G. did not himself bring to my attention (or explain his failure to bring to my attention) this significant change in Petitioner's sentencing, particularly since Petitioner is not represented by counsel.

3. I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding, in italics, as a separate hearing.

4. The I.G. also points to paragraph 23 under "additional conditions" in support of his assertion that, notwithstanding the amended judgment, the Court always meant to impose home detention. That paragraph says that "the defendant shall serve six (6) months home detention with EMS. The defendant shall remain at his home during his home detention, but may be allowed to attend church services. If the defendant shall require any medical emergency, he shall call his United States Probation Officer within 24 hours." That paragraph was obviously intended to define the terms of Petitioner's home detention. Since the sentence was changed, and Petitioner did not serve six months of home detention, that paragraph is irrelevant to Petitioner's sentence. It appears that staff failed to omit from the amended judgment this irrelevant paragraph.

5. Rule 35 was amended effective April 26, 2004. The Court appears to use a judgment form that reflects the earlier rule.