Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Cases of: John M. Thomas, Jr., M.D.,
and
Texoma Orthopedic Associates, d/b/a Orthopedic and Sports Texas, Petitioners,
- v. -
The Inspector General
DATE: August 18, 1993
Docket Nos. C-93-030 Medicine Center of North C-93-045
Decision No. CR281
DECISION
On November 16, 1992, the Inspector General (I.G.) notified Petitioner John
Mauldin Thomas, Jr., M.D.
(Petitioner Thomas) that he was being excluded from participation in the Medicare
program and certain
State health care programs for ten years. 1/ Simultaneously, the I.G. notified
Petitioner Texoma
Orthopedic Associates d/b/a Orthopedic and Sports Medicine Center of North Texas
(Petitioner Texoma)
that it also was being excluded for ten years. The I.G. advised Petitioner Thomas
that he was being
excluded pursuant to section 1128(a)(1) of the Social Security Act (Act), based
on his conviction of a
criminal offense related to the delivery of an item or service under Medicaid.
The I.G. advised Petitioner
Texoma that it was being excluded pursuant to section 1128(b)(8) of the Act,
because an excluded
individual (Petitioner Thomas) had a direct or indirect ownership or controlling
interest of five percent or
more in Petitioner Texoma, or was an officer, director, agent, or managing employee
of Petitioner Texoma.
The I.G. advised Petitioner Thomas further that, in cases of exclusions imposed
pursuant to section
1128(a)(1) of the Act, section 1128(c)(3)(B) of the Act requires a minimum exclusion
of five years.
However, the I.G. determined to exclude Petitioner Thomas for ten years after
taking into consideration
circumstances which were unique to his case. 2/
Petitioners Thomas and Texoma requested hearings and their cases were assigned
to me for hearings and
decisions. I decided to consolidate the two requests and to hold a single hearing,
in light of the relationship
between Petitioners Thomas and Texoma. Neither Petitioner Thomas, Petitioner
Texoma, nor the I.G.
objected to my holding a consolidated hearing in these cases. 3/
On April 14, 1993, I held a hearing in Dallas, Texas. The parties submitted
posthearing briefs and reply
briefs. I have carefully considered the applicable law, the evidence and the
parties' arguments. I conclude
that the ten-year exclusions which the I.G. imposed and directed against Petitioners
are excessive. I
modify the exclusions to terms of five years.
ISSUE
The issue in this case is whether the exclusions imposed against Petitioners by the I.G. are excessive.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner Thomas is a physician who specializes in orthopedic surgery.
2. Petitioner Texoma is an entity in which Petitioner Thomas has a direct or
indirect ownership or control
interest of five percent or more, or of which Petitioner Thomas is an officer,
director, agent or managing
employee. I.G. Exhibit (Ex.) 7, pages 1 - 2; Tr. at 8.
3. On July 17, 1991, Petitioner Thomas was indicted for felonies under Texas
law. The felonies consisted
of 42 counts of Securing Execution of a Document by Deception, and eight counts
of theft in excess of
$750.00. I.G. Ex. 4; I.G. Ex. 7, page 5.
4. Petitioner Thomas was charged with falsifying medical insurance claims forms
in order to fraudulently
induce Blue Cross and Blue Shield of Texas to pay reimbursement to Petitioner
Thomas for Medicare
items or services, which Petitioner Thomas had not provided. I.G. Ex. 4.
5. On October 7, 1991, Petitioner Thomas pleaded guilty to 43 felony charges,
including one count of theft
in excess of $20,000.00, and 42 counts of Securing Execution of a Document by
Deception. P. Ex. 1,
pages 1 - 24, 71 - 139.
6. Petitioner Thomas was sentenced to incarceration of eight years, to pay
a fine of $10,000.00, and to pay
restitution in the amount of $25,103.58. P. Ex. 1, pages 39 - 58.
7. Petitioner Thomas was convicted of a criminal offense related to the delivery
of an item or service
under Medicare, within the meaning of section 1128(a)(1) of the Act. Findings
3 - 6; Social Security Act,
section 1128(a)(1).
8. Petitioner Texoma is an entity owned or controlled by an individual (Petitioner
Thomas) who has been
convicted of a criminal offense within the meaning of section 1128(a)(1) of
the Act. Findings 2, 7; Social
Security Act, sections 1128(a)(1), 1128(b)(8).
9. The Secretary of the Department of Health and Human Services (Secretary)
has delegated to the I.G. the
authority to determine, impose, and direct exclusions pursuant to section 1128
of the Act. 48 Fed. Reg.
21,662 (1983).
10. The I.G. had authority to impose and direct an exclusion against Petitioner
Thomas pursuant to section
1128(a)(1) of the Act. Findings 7, 9.
11. The I.G. had authority to impose and direct an exclusion against Petitioner
Texoma pursuant to section
1128(b)(8) of the Act. Findings 8, 9.
12. Regulations published on January 29, 1992 establish criteria to be employed
by the I.G. in determining
to impose and direct exclusions pursuant to sections 1128(a) and (b) of the
Act. 42 C.F.R. Part 1001
(1992).
13. The regulations published on January 29, 1992 include criteria to be employed
by the I.G. in
determining to impose and direct exclusions pursuant to sections 1128(a)(1)
and 1128(b)(8) of the Act. 42
C.F.R. 1001.101, 1001.102, 1001.1001.
14. On January 22, 1993, the Secretary published a regulation which directs
that the criteria to be
employed by the I.G. in determining to impose and direct exclusions pursuant
to sections 1128(a) and (b)
of the Act are binding also upon administrative law judges, appellate panels
of the Departmental Appeals
Board, and federal courts in reviewing the imposition of exclusions by the I.G.
42 C.F.R. 1001.1(b); 58
Fed. Reg. 5617, 5618 (1993).
15. My adjudication of the length of the exclusions in this case is governed
by the criteria contained in 42
C.F.R. 1001.102 and 1001.1001. Finding 14.
16. An exclusion imposed pursuant to section 1128(a)(1) of the Act must be
for a period of at least five
years. Social Security Act, sections 1128(a)(1), 1128(c)(3)(B); 42 C.F.R. 1001.102(a).
17. An exclusion imposed pursuant to section 1128(a)(1) of the Act may be for
a period in excess of five
years if there exist aggravating factors which are not offset by mitigating
factors. 42 C.F.R. 1001.102(b),
(c).
18. Aggravating factors which may form a basis for imposing an exclusion in
excess of five years against
a party pursuant to section 1128(a)(1) of the Act may consist of any of the
following:
a. The acts resulting in a party's conviction, or similar acts, resulted in
financial loss to Medicare and
Medicaid of $1,500.00 or more.
b. The acts that resulted in a party's conviction, or similar acts, were committed
over a period of one
year or more.
c. The acts that resulted in a party's conviction, or similar acts, had a
significant adverse physical,
mental or financial impact on one or more program beneficiaries or other individuals.
d. The sentence which a court imposed on a party for the above mentioned conviction
included a period
of incarceration.
e. The convicted party has a prior criminal, civil or administrative sanction record.
f. The convicted party was overpaid a total of $1,500.00 or more by Medicare
or Medicaid as a result
of improper billings.
42 C.F.R. 1001.102(b)(1) - (6) (paraphrase).
19. Mitigating factors which may offset the presence of aggravating factors
may consist of only the
following:
a. A party has been convicted of three or fewer misdemeanor offenses, and the
entire amount of
financial loss to Medicare and Medicaid due to the acts which resulted in the
party's conviction and similar
acts, is less than $1,500.00.
b. The record in the criminal proceedings, including sentencing documents,
demonstrates that the court
determined that, before or during the commission of the offense, the party had
a mental, emotional, or
physical condition that reduced that party's culpability.
c. The party's cooperation with federal or State officials resulted in others
being convicted of crimes, or
in others being excluded from Medicare or Medicaid, or in others having imposed
against them a civil
money penalty or assessment.
42 C.F.R. 1001.102(c)(1) - (3) (paraphrase).
20. An exclusion imposed against an entity pursuant to section 1128(b)(8) of
the Act ordinarily must be
for the same length of time as that imposed against the individual whose relationship
with the entity is the
basis for the exclusion. 42 C.F.R. 1001.1001(b)(1).
21. Petitioner Thomas was convicted of felonies involving fraudulent Medicare
claims of at least
$17,000.00. I.G. Ex. 7a; Tr. at 71 - 73.
22. That the acts which resulted in Petitioner Thomas' conviction resulted
in financial loss to Medicare of
$1,500 or more is an aggravating factor that may justify excluding Petitioner
Thomas for more than five
years. Finding 21; 42 C.F.R. 1001.102(b)(1).
23. Petitioner Thomas' sentence to a period of incarceration of eight years
is an aggravating factor that
may justify excluding Petitioner Thomas for more than five years. Finding 6;
42 C.F.R. 1001.201(b)(4).
24. In February, 1991, Petitioner Thomas was convicted of a criminal offense
for failure to keep an
inventory of a controlled substance. Tr. at 96 - 97.
25. Petitioner Thomas' conviction in February 1991 of another criminal offense
is a prior conviction which
is an aggravating factor that may justify excluding Petitioner Thomas for more
than five years. Finding 24;
42 C.F.R. 1001.102(b)(5).
26. Petitioner Thomas offered to surrender his license to practice medicine
in Texas during the pendency
of an investigation by the Texas State Board of Medical Examiners into allegations
that Petitioner Thomas
illegally diverted controlled substances to third parties between July and November
1990 and failed to keep
complete and accurate records of his purchases and distributions of controlled
substances (including
approximately 6885 dosage units of Dilaudid 4 mg., a Schedule II controlled
substance) between January
1, 1990, and January 30, 1991. I.G. Ex. 11, pages 2 - 5.
27. On December 3, 1991, the Texas State Board of Medical Examiners revoked
Petitioner Thomas'
license to practice medicine in Texas. I.G. Ex. 11.
28. Petitioner Thomas' surrender of his license to practice medicine to the
Texas Board of Medical
Examiners during the pendency of an investigation concerning his possible illegal
activity is a prior civil
administrative sanction which is an aggravating factor that may justify excluding
Petitioner Thomas for
more than five years. Findings 26 - 27; 42 C.F.R. 1001.102(b)(5).
29. On January 31, 1992, the Texas Department of Human Services notified Petitioner
Thomas that it was
excluding him from participation in the Texas Medicaid program and other State
health care programs,
effective December 3, 1991. I.G. Ex. 12.
30. The Texas Department of Human Services' exclusion determination was predicated
on Petitioner
Thomas' surrender of his license to practice medicine in Texas to the Texas
Board of Medical Examiners.
I.G. Ex. 12, page 1.
31. The Texas Department of Human Services' exclusion of Petitioner Thomas
is a prior civil
administrative sanction which is an aggravating factor that may justify excluding
Petitioner Thomas for
more than five years. Findings 29 - 30; 42 C.F.R. 1001.102(b)(5).
32. A conviction of a party or the imposition of a civil administrative sanction
against a party is a "prior"
conviction or civil administrative sanction under applicable regulations if
it occurs prior to the date of the
I.G.'s determination to exclude that party. 42 C.F.R. 1001.102(b)(5); see Findings
26 - 31.
33. Petitioner Thomas was not denied due process by the I.G.'s failure to advise
him in the notice of
exclusion, dated November 16, 1992, of all of the aggravating factors that are
relevant to determining the
length of Petitioner Thomas' exclusion.
34. The aggravating factors present in this case establish that Petitioner
Thomas engaged in conduct which
jeopardized the integrity of federally-financed health care programs and which
could have jeopardized the
well-being and safety of program beneficiaries and recipients. Findings 21 -
31.
35. In the absence of any offsetting mitigating factor, the aggravating factors
present in this case would
establish Petitioner Thomas as a threat to the integrity of federally-financed
health care programs and to the
well-being and safety of program beneficiaries and recipients. Finding 34.
36. In the absence of any offsetting mitigating factor, the aggravating factors
present in this case would
justify excluding Petitioner Thomas for more than five years. Findings 34 -
35; 42 C.F.R. 1001.102(b)(1)
- (6).
37. The record of the criminal proceedings in which Petitioner Thomas pled
guilty to criminal offenses
related to the delivery of items or services under Medicare demonstrates that
the court determined that,
during the commission of his offense, Petitioner Thomas had a mental condition
that reduced his
culpability. I.G. Ex. 1, page 2; I.G. Posthearing Brief at 1 - 2; P. Ex. 1,
pages 32 - 34, 60 - 62; see P. Ex. 2;
Tr. at 180.
38. Petitioner Thomas' mental condition during the commission of his offenses
is a mitigating factor which
may serve to offset the presence of aggravating factors. Finding 37; 42 C.F.R.
1001.102(c)(2).
39. Petitioner Thomas has suffered since his childhood from a mental illness,
consisting of a bipolar
disorder, cyclic type. P. Ex. 1, page 60 - 61; Tr. at 102, 121, 136.
40. A bipolar affective disorder is a biological illness with behavioral ramifications. P. Ex. 1, page 61.
41. Individuals who suffer from bipolar affective disorders experience chemical
imbalances in their brains
which cause them to behave in ways which are, at least partially, beyond their
ability to control. P. Ex. 1,
page 61.
42. Petitioner Thomas' bipolar disorder has manifested both manic and depressed
phases. P. Ex. 1, page
60; Tr. at 102, 124.
43. Petitioner Thomas' manic episodes have been characterized by excessive
energy, grandiose behavior,
and impaired judgment. P. Ex. 1, pages 60 - 61; Tr. at 103 - 104.
44. It was during a manic phase of Petitioner Thomas' illness which began in
early 1990 that he engaged in
the unlawful conduct which resulted in: his convictions in February and October,
1991; the loss of his
license to practice medicine in Texas; and his exclusion by the Texas Department
of Human Services. P.
Ex. 1, pages 60 - 61; Tr. at 126 - 129.
45. The unlawful conduct in which Petitioner Thomas engaged beginning in early
1990 was a
consequence of the impaired judgment he experienced during the manic phase of
his bipolar disorder. P.
Ex. 1, page 61; Tr. at 121 - 128; Finding 43.
46. Petitioner Thomas has received treatment for his bipolar disorder, consisting
of therapy and
medication. Tr. at 105 - 107, 126.
47. Petitioner Thomas has adhered faithfully to his treatment regime. Tr. at 105 - 107.
48. It is unlikely that Petitioner Thomas will again experience uncontrolled
manic episodes like the one he
experienced beginning in early 1990. Tr. at 105 - 111, 115, 129; see Tr. at
140.
49. There is little likelihood that Petitioner Thomas will, in the future,
engage in unlawful conduct. Tr. at
110 - 116, 126, 139.
50. An exclusion of more than five years is not necessary to protect the integrity
of federally-financed
health care programs or the welfare and safety of program beneficiaries and
recipients from future
unlawful conduct by Petitioner Thomas. Findings 48 - 49.
51. In this case, the aggravating factors which would otherwise justify an
exclusion of Petitioner Thomas
for more than five years are offset by the mitigating factor of Petitioner's
bipolar affective disorder.
Findings 21 - 50; 42 C.F.R. 1001.102(b), (c).
52. When the aggravating factors in these cases are weighed in conjunction
with the mitigating factor, the
ten year exclusion which the I.G. imposed against Petitioner Thomas is excessive.
Finding 51.
53. A five year exclusion of Petitioner Thomas will meet the remedial purposes
of the Act and is justified.
Findings 21 - 52; Social Security Act, 1128(a)(1), (c)(3)(B); 42 C.F.R. 1001.101,
1001.102.
ANALYSIS
Petitioners do not dispute that Petitioner Thomas was convicted of a criminal
offense related to the delivery
of an item or service under Medicare within the meaning of section 1128(a)(1)
of the Act. They do not
dispute that the Act requires that Petitioner Thomas be excluded for a minimum
of five years, based on his
conviction of a program-related offense. Nor do they dispute that Petitioner
Thomas owns and controls
Petitioner Texoma within the meaning of section 1128(b)(8) of the Act, and that
Petitioner Texoma must
be excluded for the same period of time as is Petitioner Thomas.
What is at issue here is whether the 10 year exclusions which the I.G. imposed
against Petitioners Thomas
and Texoma are excessive. The I.G. contends that the exclusions are justified,
citing applicable
regulations. Petitioners contend, among other things, that the exclusions which
the I.G. imposed against
them are not justified by the regulations relied on by the I.G.
1. These cases are governed by regulations published on January 29, 1992 and January 22, 1993.
These cases are in some respects cases of first impression because they involve
the first use of regulations
adopted by the Secretary on January 29, 1992 as standards for adjudication of
the legitimacy of the length
of an exclusion of more than five years under section 1128(a)(1) of the Act,
and of the length of an
exclusion under section 1128(b)(8) of the Act. Therefore, I find it necessary
to discuss the history of these
regulations and the standards for adjudication which they contain.
a. The standard of adjudication prior to January 22, 1993
The standard for adjudication concerning the reasonableness of an exclusion
in effect prior to the adoption
of the January 22, 1993 regulations allowed parties to address fully the excluded
party's trustworthiness to
provide care. Evidence as to trustworthiness was admissible even if it pertained
to events which were not
related directly to the offense which was the basis for the exclusion, and even
if not considered by the I.G.'s
agents in making their exclusion determination.
Hearings before administrative law judges as to the reasonableness of exclusions
are de novo, and not
appellate, hearings. Bernardo G. Bilang, M.D., DAB 1295 (1992); Eric Kranz,
M.D., DAB 1286 (1991).
Under the Act, the burden of proof is on the I.G. to establish that the length
of any exclusion imposed
against a party is reasonable. An excluded party has the statutory right to
rebut evidence presented by the
I.G.
Appellate panels of the Departmental Appeals Board (Board) and administrative
law judges delegated to
hear cases under section 1128 of the Act have held consistently that section
1128 is a remedial statute.
Exclusions imposed pursuant to section 1128 (including exclusions of more than
five years imposed
pursuant to section 1128(a)(1)) have been found reasonable only insofar as they
are consistent with the
Act's remedial purpose, which is to protect federally-financed health care programs
and their beneficiaries
and recipients from providers who are not trustworthy to provide care. Robert
Matesic, R.Ph., d/b/a
Northway Pharmacy, DAB 1327, at 7 - 8 (1992).
In Matesic, a Board appellate panel discussed the kinds of evidence which should
be considered by
administrative law judges in hearings as to the reasonableness of exclusions.
The appellate panel
concluded that any evidence which related to an excluded party's trustworthiness
to provide care was
relevant to the issue of reasonableness. Matesic, DAB 1327, at 12.
b. Publication of the 1992 regulations and their applicability to administrative
law judges'
adjudications of the length of exclusions
On January 29, 1992, the Secretary published regulations which, at 42 C.F.R.
Part 1001, established
criteria for the I.G. to apply in determining, imposing, and directing exclusions
pursuant to section 1128 of
the Act. Administrative law judges held in several decisions issued after January
29, 1992 that these
regulations do not establish criteria for adjudication of the length of exclusions.
Bertha K. Krickenbarger,
R.Ph., DAB CR250 (1993); Sukumar Roy, M.D., DAB CR205 (1992); Steven Herlich,
DAB CR197
(1992); Stephen J. Willig, M.D., DAB CR192 (1992); Aloysius Murcko, D.M.D.,
DAB CR189 (1992);
Charles J. Barranco, M.D., DAB CR187 (1992). The Herlich decision held explicitly
that section 1001.102
of the regulations, governing the I.G.'s exclusion determinations for exclusions
of more than five years
under section 1128(a)(1) of the Act, which is at issue here also, did not apply
in administrative hearings
concerning such exclusions.
The decisions in these cases were based on two conclusions. First, the Part
1001 regulations were not
intended by the Secretary to strip parties retroactively of rights vested prior
to January 29, 1992.
Therefore, the Part 1001 regulations did not apply to any cases arising from
exclusion determinations made
prior to that date. Behrooz Bassim, M.D., DAB 1333, at 5 - 9 (1992) 4/. Second,
the Secretary did not
intend part 1001 of the regulations to establish criteria for administrative
hearings as to the length of
exclusions.
The reasons for finding that the Secretary did not intend the Part 1001 regulations
to establish criteria for
adjudication of the length of exclusions are stated in detail in the decisions
cited above. It is unnecessary to
restate those reasons here, except to note that, among other things, the decisions
concluded that the Part
1001 regulations, if applied as standards for adjudication, would serve to bar
parties from presenting
evidence which addresses fully the excluded party's trustworthiness to provide
care.
On January 22, 1993, the Secretary published new regulations. These regulations
state unequivocally that
the exclusion determination criteria contained in 42 C.F.R. Part 1001 must be
applied by administrative
law judges in evaluating the length of exclusions imposed by the I.G. 58 Fed.
Reg. 5617, 5618 (to be
codified at 42 C.F.R. 1001.1(b)).
The regulations were made applicable to cases which were pending on January
22, 1993, the regulations'
publication date. 58 Fed. Reg. at 5618. The present cases are "pending
cases" inasmuch as at both the
exclusion determinations and the hearing requests were made after January 29,
1992 and prior to January
22, 1993.
c. The applicable standard of adjudication
I must now apply to Petitioner Thomas' case the criteria contained in 42 C.F.R.
1001.101 and 1001.102.
I must now apply to Petitioner Texoma's case the criteria contained in 42 C.F.R.
1001.1001. The standard
for adjudication contained in 42 C.F.R. 1001.101 mandates that, in cases of
exclusions imposed pursuant
to section 1128(a)(1), the minimum exclusion imposed must be for no less than
five years. This
incorporates into the regulations the minimum exclusion period mandated by section
1128(c)(3)(B) of the
Act for exclusions imposed pursuant to section 1128(a)(1). The standard for
adjudication contained in 42
C.F.R. 1001.102 provides that, in appropriate cases, exclusions imposed pursuant
to section 1128(a)(1)
may be for more than five years. Such exclusions may be appropriate where there
exist aggravating factors
(identified by 42 C.F.R. 1001.102(b)) that are not offset by mitigating factors
(identified by 42 C.F.R.
1001.102(c)). The regulation specifically states those factors which may be
classified as aggravating and
those factors which may be classified as mitigating. Under the regulatory scheme,
evidence which relates
to factors which are not among those specified as aggravating and mitigating
is not relevant to adjudicating
the length of an exclusion and cannot be considered. 5/
The standard for adjudication contained in 42 C.F.R. 1001.1001(b)(1) for exclusion
of entities pursuant to
section 1128(b)(8) of the Act directs that an entity excluded pursuant to that
section generally must be
excluded for the same length of time as is the individual who owns or controls
that entity. This section
therefore mandates that Petitioner Texoma be excluded for whatever length of
time Petitioner Thomas is
excluded.
The regulation governing exclusions imposed pursuant to section 1128(a)(1)
contains no formula for
assigning weight to aggravating and mitigating factors once such factors are
established by the parties. I
expressed concern at the hearing that 42 C.F.R. 1001.102 might leave me without
standards by which to
adjudicate the length of exclusions in cases of exclusions imposed pursuant
to section 1128(a)(1) of the Act
for periods of more than five years. 6/ Upon further reflection, however, I
find that this regulation and the
Act, when read together, provide ascertainable standards for adjudicating the
length of exclusions. See
Patchogue Nursing Center v. Bowen, 797 F.2d 1137 (2d Cir. 1986).
While the regulation limits the factors which I may consider in evaluating
the reasonableness of an
exclusion for more than five years imposed pursuant to section 1128(a)(1), it
requires that I explore in
detail, and assign appropriate weight to, those factors which are aggravating
or mitigating. Ultimately, I
must still decide, using the regulatory factors, whether an exclusion in a particular
case is reasonably
necessary to protect the integrity of federally-financed health care programs
and the welfare of the
programs' beneficiaries and recipients.
The I.G. argues that the regulation requires me to defer to the I.G.'s judgment
in deciding whether an
exclusion is reasonable. Petitioners argue that, because the regulation contains
no formula by which to
measure the length of an exclusion, and because the regulation states that aggravating
and mitigating
factors "may" be used to increase or decrease the length of an exclusion,
essentially I have unbridled
discretion to decide what is reasonable. Both sides overstate the degree of
discretion which the regulation
gives to adjudicators to modify exclusions.
My authority in hearing and deciding cases pursuant to section 1128 of the
Act remains de novo authority.
I am not charged with an appellate review of the I.G.'s actions, nor am I directed
to conduct an inquiry as to
whether the I.G.'s agent has discharged his or her duty competently in a particular
case. Thus, the
regulation does not suggest that I should defer to the I.G.'s discretion in
any case where the length of an
exclusion is at issue. On the other hand, the regulation requires me to evaluate
exclusions de novo, using
the same criteria employed by the I.G.'s agents, to decide whether exclusions
are reasonable. The
regulation does not suggest that I have unbridled discretion to modify an exclusion.
I must sustain an
exclusion if, based on an independent review, I conclude it comports with the
regulation's criteria and the
Act. I must modify an exclusion if, based on an independent review, I conclude
that it does not comport
with the criteria contained in the regulations and with the Act.
There are two broad principles which govern application of the regulation.
7/ First, the regulation must be
applied as written. Second, the regulation must be applied consistent with the
Act's remedial purpose as
expressed by the Board's appellate panels in Matesic and in other decisions,
to the extent that can be done
without contravening the regulation's explicit directions.
As a general matter, regulations should be applied to produce a result which
is consistent with that required
by the underlying statute. Furthermore, the Secretary has made it plain that
the regulations in 42 C.F.R.
Part 1001 are to be applied consistent with the Act's remedial purpose:
The primary purpose of an exclusionary sanction is remedial, not punitive.
When the . . . [I.G.] imposes
an exclusion under section 1128 of the Act, it is simply carrying out Congress'
intent to protect the
Medicare and Medicaid programs from individuals or entities who have already
been tried and convicted
of a criminal offense . . . .
57 Fed. Reg. at 3300.
The plain meaning of 42 C.F.R. 1001.102 is that the only factors which may
be considered as relevant to
adjudicating the length of exclusions imposed pursuant to section 1128(a)(1)
are those which are identified
in the regulation as being aggravating or mitigating. Therefore, I may not accept
evidence as to factors
which, in the past, may have been found by the Board's appellate panels and
administrative law judges to
be relevant to a party's trustworthiness to provide care, but which are not
identified by the regulation as
aggravating or mitigating. For example, two of the factors which the Board's
appellate panel identified in
Matesic as being relevant to determining whether the length of any exclusion
is necessary to accomplish
the Act's remedial purpose were a party's remorse for past misconduct, and the
extent to which that party
has been rehabilitated. DAB 1327, at 12. The regulation does not identify either
of these as mitigating
factors; consequently I may not now consider them (or receive evidence relevant
to them) in adjudicating
the length of exclusions.
I issued a ruling in this case that I would receive evidence relevant to the
factors in Matesic, and I
permitted the parties to offer such evidence at the hearing. For example, Petitioners'
counsel asked several
witnesses the general question whether they considered Petitioner Thomas as
being "trustworthy" to
provide care, based on their knowledge of his character, and without regard
to any specified aggravating or
mitigating factors. I permitted Petitioners' counsel to ask witnesses whether
they knew if Petitioner
Thomas had expressed remorse for his unlawful conduct. I made my ruling at a
time when I was uncertain
as to the implications and application of the regulations. I now reject that
evidence as irrelevant.
Therefore, I did not rely on it in reaching my decision in this case. The specific
aggravating and mitigating
factors on which I received evidence, and the conclusions I reached concerning
those aggravating and
mitigating factors, are identified and described in Findings 21 - 49.
Thus, the regulation's limitation of the evidence which is admissible as to
the length of exclusions prohibits
administrative law judges from admitting evidence relating to the full range
of factors which the Board's
appellate panels previously have identified as being relevant to the issue of
trustworthiness. The
"trustworthiness" analysis which I must now perform is truncated and
may not fully answer the question of
whether a party in a given case is trustworthy to provide care.
On the other hand, the regulation is intended to comport with the Act's remedial
purpose. Therefore, in
each case, I must continue to weigh those factors which the regulation now directs
me to consider with an
eye towards determining at what point the excluded party may be trusted to provide
care. The fact that my
analysis in a given case may not be as complete as the appellate panel held
would be appropriate in Matesic
is a consequence of the regulation's proscriptions, but I must nevertheless
analyze that evidence which
remains relevant under these regulations in accord with the Act's remedial purpose.
The presence of an aggravating or mitigating factor in a case may permit inferences
about a party's
trustworthiness. But far more may be revealed by evidence which explains and
develops an aggravating or
mitigating factor. The regulation does not proscribe admission of such evidence,
and its admission is
consistent with the requirement that exclusions be remedial. It is consistent
also with the requirement for
de novo hearings.
The comments to 42 C.F.R. Part 1001 support my conclusion that the parties
should be permitted to
develop evidence which explains and develops aggravating and mitigating factors.
For example, the
comments pertaining to a party's mental state as of the time that party committed
an offense note that:
this factor will not be considered as mitigating if there is an ongoing problem
that has not been resolved,
such that the program(s) and their beneficiaries continue to be at risk.
57 Fed. Reg. at 3315. This comment requires the adjudicator to accept evidence
about a party's mental
state beyond evidence which shows only that the sentencing judge found that
the party's culpability was
diminished by his mental condition. 8/ Rather, a full explication of evidence
concerning a party's mental
condition is required (assuming that the evidence proves that the party's mental
condition meets the
regulation's definition of a mitigating factor) in order to decide how that
party's mental condition impinges
on his or her trustworthiness to provide care. 9/
The record of these cases provides examples of how this analysis works in practice.
For example, the I.G.
proved that Petitioner Thomas was sentenced to a period of incarceration as
a result of his pleading guilty
to program-related crimes. Petitioner Thomas' sentence is admissible evidence
as to his trustworthiness
because it conforms to one of the aggravating factors identified by the regulations.
42 C.F.R.
1001.201(b)(4). However although inferences can be drawn about Petitioner Thomas'
trustworthiness by
the fact that he was sentenced to incarceration, even more can be inferred by
considering the length of his
sentence. What is most relevant about Petitioner Thomas' incarceration is that
he was sentenced to a term
of imprisonment of eight years. The length of the sentence underscores the seriousness
of the crimes to
which Petitioner Thomas pled guilty and leads to the inference that, at least
as of the time of his conviction,
Petitioner Thomas was a highly untrustworthy individual.
2. The exclusions which the I.G. imposed against Petitioners Thomas and Texoma are excessive.
No remedial purpose would be served by excluding Petitioner Thomas for ten
years. While it is obvious
that he engaged in egregiously unlawful and reckless conduct, his culpability
for that conduct was
diminished by a mental illness that affected his judgment and self-control.
Section 1128(a)(1) of the Act and 42 C.F.R. 1001.101 mandate a minimum five-year
exclusion period.
Petitioner Thomas proved that his unlawful activities were the direct result
of his bipolar affective disorder.
Petitioner Thomas proved that the therapy and medication he is receiving for
his illness should bring that
illness within control well within the minimum five-year exclusion period. He
will then be trustworthy to
provide care to program beneficiaries and recipients. Given this proof, an exclusion
of Petitioner Thomas
for more than five years would be punitive and excessive. The exclusion against
Petitioner Texoma also
must be reduced to five years.
The I.G. introduced evidence which proved that Petitioner Thomas' case manifested
several elements
which 42 C.F.R. 1001.102 identifies as aggravating factors. Petitioner Thomas
pleaded guilty to
program-related crimes involving fraudulent claims in excess of $17,000.00.
Finding 21; 42 C.F.R.
1001.102(b)(1). He was sentenced for these crimes to a period of eight years'
incarceration. Findings 6,
23; 42 C.F.R. 1001.102(b)(4). The I.G. proved, additionally, that Petitioner
Thomas has a prior record of
criminal convictions and administrative sanctions. In February 1991, he was
convicted of a criminal
offense for failure to keep an inventory of a controlled substance. Finding
24; 42 C.F.R. 1001.102(b)(5).
In December 1991, Petitioner Thomas surrendered his license to practice medicine
in Texas in the face of
an investigation into the circumstances surrounding his February 1991 conviction.
Findings 26 - 28; 42
C.F.R. 1001.102(b)(5). In January 1992, Petitioner Thomas was excluded from
participation by the
Texas Medicaid program, based on his surrender of his license to practice medicine
in Texas. Finding 29;
42 C.F.R. 1001.102(b)(5).
The I.G. offered evidence which shows that Petitioner Thomas admitted to fraud
against insurers other than
Medicare in an amount exceeding $7000.00. I admitted that evidence. However,
that evidence does not
appear to fall within any of the factors identified in the regulation as aggravating,
and therefore, I may not
consider it as evidence of Petitioner Thomas' lack of trustworthiness to provide
care. Accordingly, I give
no weight to that evidence. The regulation permits evidence which proves that
acts which are "similar" to
those resulting in conviction of a program-related offense resulted in financial
loss to "Medicare and State
health care programs of $1500 or more." 42 C.F.R. 1001.102(b)(1). Although
the I.G. proved that
Petitioner Thomas engaged in acts which are "similar" to those for
which he was convicted, the I.G. did not
prove that these acts resulted in financial loss to Medicare or to State health
care programs. However, even
had the I.G. proved that Petitioner Thomas has committed offenses similar to
those to which he pled guilty,
within the meaning of 42 C.F.R. 1001.102(b)(1), I would have concluded that
such aggravating evidence
was offset by mitigating evidence.
Petitioner Thomas' conviction for an offense involving a controlled substance,
his license surrender, and
his Medicaid exclusion were not identified by the I.G. as aggravating circumstances
in the exclusion notice
sent to Petitioner Thomas. I permitted the evidence to be offered, because the
hearing before me is de
novo and because adequate notice of these circumstances was provided by the
I.G. to Petitioners in the
exchange of proposed exhibits made more than two weeks prior to the hearing.
Petitioners also objected to
my receiving evidence concerning Petitioner Thomas' license revocation and the
exclusion by the Texas
Medicaid program on the ground that these events occurred after the date of
Petitioner Thomas' conviction
for a program-related offense. Therefore, according to Petitioners, these were
not prior convictions or
administrative sanctions within the meaning of 42 C.F.R. 1001.101(b)(5). I do
not conclude that the term
"prior" as used in this section relates to events occurring prior
to the conviction on which the exclusion is
based. It is apparent from the context of this language that "prior"
means events occurring prior to the date
of the exclusion. Finding 32.
The aggravating circumstances, singly and together, establish Petitioner Thomas
to have been a highly
untrustworthy individual. Indeed, during the period when these offenses occurred
(early 1990), he can be
characterized as a person who was totally without control of his impulses and
who was motivated to
engage in conduct that caused great harm to federally-financed health care programs.
Furthermore, he can
be characterized as a person who had a propensity to engage in conduct which
could have jeopardized the
safety and welfare of program beneficiaries and recipients. I would have had
no difficulty in sustaining a
ten year exclusion against Petitioner Thomas in the absence of any mitigating
evidence.
However, in this case, there is offsetting mitigating evidence. In the notice
letter and in the posthearing
brief, the I.G. concedes that the record in the proceedings of Petitioner Thomas'
guilty plea to program-
related offense demonstrates that the court determined that, during the commission
of his offense,
Petitioner Thomas had a mental illness that diminished his culpability. Finding
37; 42 C.F.R.
1001.102(c)(2).
Petitioners offered the unrebutted testimony of three psychiatrists, who testified
that Petitioner Thomas has
suffered from a bipolar disorder since his childhood, manifesting both manic
and depressed phases.
During his manic phases, Petitioner Thomas has suffered extreme loss of self-control
and judgment.
Finding 43. Petitioner Thomas' manic phases are typified by grandiose behavior.
Id. The unrebutted
evidence offered by Petitioners proved that all of the conduct which I have
identified as aggravating in this
case transpired during a period in 1990 when Petitioner Thomas was in a manic
state. Finding 44. His
unlawful conduct was the consequence of his mental illness. Finding 45.
Petitioners proved that, since 1991, Petitioner Thomas has been undergoing
treatment for his disorder,
consisting of both medication and therapy. The prognosis for his condition is
good. The experts who have
examined and treated Petitioner Thomas opined that he is unlikely to exhibit
extreme behavior in the
future, or to engage in unlawful conduct. All of the experts concurred that,
at some point in the near
future, Petitioner Thomas would be trustworthy to provide care. Findings 48,
49.
The I.G. offered no evidence at the hearing of these cases to rebut the testimony
of psychiatrists whom
Petitioner called as witnesses. The I.G. has now offered an excerpt from a treatise
on psychiatric disorders
(DSM III-Revised), as an attachment to the I.G.'s reply brief, which the I.G.
asserts rebuts that testimony.
10/ Petitioners object to my receiving that treatise excerpt. Petitioners contend
that the proffer is untimely,
and that they would be prejudiced if I were to accept the treatise excerpt as
evidence in these cases.
The I.G. argues that, inasmuch as the excerpt is from a learned treatise, I
can take notice of it without
admitting it into evidence. The I.G.'s argument begs the question of whether
I should be considering the
excerpt in deciding these cases. The issue, as far as I am concerned, is not
whether the treatise excerpt is
evidence admissible under various rules of evidence or evidence of which I might
take judicial notice. The
issue is whether Petitioners would be prejudiced if I accepted the treatise
excerpt now, several months after
the hearing.
By offering the excerpt now, the I.G. would foreclose Petitioners the opportunity
to attack its relevance and
probative value. It would be prejudicial to Petitioners for me to now accept
and consider the treatise
excerpt offered by the I.G. For that reason, I decline to consider it. The I.G.
knew well in advance of the
hearing that Petitioners intended to call psychiatrists to testify on Petitioner
Thomas' behalf. The I.G. also
knew that the subject of these psychiatrists' testimony was to be Petitioner
Thomas' mental state at the time
he committed his crimes and the prognosis of his condition. The I.G. therefore
had ample opportunity to
propose rebuttal evidence, including the DSM III-Revised excerpt which the I.G.
now offers, and to offer
that evidence at the April 14 hearing.
The mitigating factor present in these cases offsets the aggravating factors
established by the I.G. The
unrefuted expert testimony presented by Petitioners has demonstrated that all
of the misconduct engaged in
by Petitioner Thomas emanated from Petitioner's bipolar affective disorder.
I find Petitioner's bipolar
affective disorder to be a mental illness that diminished the culpability of
Petitioner for his unlawful
activities. Findings 37 - 39, 51. Indeed, all of the aggravating factors cited
by the I.G. emanated from
Petitioner's bipolar affective disorder, a disorder which I find to be a mitigating
factor. Id. I conclude from
the expert psychiatric testimony offered by Petitioners that it is highly likely
that Petitioner Thomas'
bipolar affective disorder, the condition that caused him to act unlawfully,
will be brought under control
within the five year exclusion period. Given that, there is no need for an exclusion
longer than the five
year minimum prescribed by law.
The exclusion against Petitioner Texoma must be reduced correspondingly to
an exclusion of five years.
The exclusion of that entity derives from the exclusion of Petitioner Thomas
and must be for the same
length of time as that which has been imposed against Petitioner Thomas. 42
C.F.R. 1001.1001(b). 11/
CONCLUSION
I conclude that the ten year exclusions which the I.G. imposed against Petitioners
Thomas and Texoma are
excessive. The exclusions against both Petitioners are modified to terms of
five years.
_______ ____________________________
Steven T. Kessel
Administrative Law Judge
1. "State health care program" is defined by section 1128(h) of the
Social Security Act to cover three
types of federally-financed health care programs, including Medicaid. Unless
the context indicates
otherwise, I use the term "Medicaid" hereafter to represent all State
health care programs from which
Petitioner was excluded.
2. These were identified as follows:
1. Financial damage to the Medicare and Medicaid programs resulting from Petitioner
Thomas'
criminal activity amounted to $25,461.00.
2. Petitioner Thomas was sentenced to a term of incarceration of eight years.
3. The court which accepted Petitioner Thomas' plea to program-related criminal
offenses determined
that he had a mental, emotional or physical condition, before or during his
commission of his crimes, that
reduced his criminal culpability.
3. Petitioner Thomas filed a hearing request which appeared to be in response
to the I.G.'s notice to
Petitioner Texoma. I concluded from the language of the request that Petitioner
Thomas intended that the
request be for a hearing concerning his exclusion. However, the request also
arguably pertained to the
exclusion of Petitioner Texoma. At the April 14, 1993 hearing, counsel for Petitioners
stipulated that
Petitioner Texoma is owned by Petitioner Thomas. He stipulated further that
any exclusion found to be
applicable to Petitioner Thomas would be applicable equally to Petitioner Texoma.
Transcript (Tr.) at 8.
4. Both Petitioners Thomas and Texoma filed a request for hearing after January
29, 1992. Therefore,
neither case involves an issue of retroactive application of regulations.
5. I describe the permissible aggravating factors in Finding 18. I describe
the permissible mitigating
factors in Finding 19.
6. Petitioners contend that 42 C.F.R. 1001.102 provides no guidance as to what
length exclusions ought
to be, assuming that aggravating factors are present in a given case which are
not offset by mitigating
factors. They contend that no exclusion of more than five years can be sustained,
because there exists no
mechanism in the regulation to measure an exclusion's reasonableness. I conclude
that, for the reasons
stated in this Analysis, the regulations do provide principles by which the
length of an exclusion can be
adjudicated.
7. The narrow issue in these cases is the application of 42 C.F.R. 1001.102
in cases involving
exclusions of more than five years imposed pursuant to section 1128(a)(1) of
the Act. However, this
regulation's identification of factors which may be considered in evaluating
the length of an exclusion is
part of a regulatory scheme in 42 C.F.R. Part 1001 which identifies aggravating
and mitigating factors that
relate to all types of exclusions that may be imposed under section 1128. My
holding concerning the
application of 42 C.F.R. 1001.102 may be applicable broadly to the other regulations
in 42 C.F.R. Part
1001.
8. Arguably, this comment might be interpreted as suggesting that no evidence
should be accepted as to
a party's mental impairment unless the impairment resolves completely prior
to the date of the hearing.
Consistent with the Act and the regulations, I conclude that the comment should
be read to mean that a
mental impairment should never be considered to be mitigating unless it can
be expected to resolve
completely within whatever exclusion period is decided to be reasonable.
9. The requirement that the threshold conditions identified by the regulation
be met first is critical. The
regulation provides that a party's mental condition can be considered as a mitigating
factor only if:
The record in the criminal proceedings, including sentencing documents, demonstrates
that the court
determined that the individual had a mental, emotional or physical condition
before or during the
commission of the offense that reduced the individual's culpability; . . .
42 C.F.R. 1001.102(c)(2). I may not consider as "mitigating," evidence
concerning a party's mental state
and culpability unless this threshold condition is first proved by an excluded
party.
10. For purposes of maintaining the record, I have identified this document as I.G. Ex. 13.
11. Petitioners made a number of legal arguments concerning the interpretation
of 42 C.F.R. 1001.102:
whether the regulation was ultra vires the Act or the Administrative Procedure
Act, the constitutionality of
the regulation, and whether the exclusion violated Petitioners' due process
rights. My conclusions
concerning the interpretation of 42 C.F.R. 1001.102 are subsumed in my analysis
of how the regulation
should be applied, at part 1 of this Analysis. I do not address Petitioner's
other legal and constitutional
arguments. It is not necessary for me to do so here. Furthermore, I do not have
the authority to declare a
regulation to be ultra vires the Act, or to find it to be unconstitutional.
42 C.F.R. 1005.4(c)(1).