Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: William F. Middleton, Petitioner,
- v. -
The Inspector General.
DATE: December 16, 1993
Docket No. C-93-088
Decision No. CR297
DECISION
On May 7, 1993, the Inspector General (I.G.) notified Petitioner, William F.
Middleton, that he was being
excluded from participation in the Medicare program and certain State health
care programs for 10 years.
1/ The I.G. advised Petitioner 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 the Maryland Medicaid program. The I.G. advised Petitioner 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
for 10 years after
taking into consideration circumstances which were unique to his case. The unique
circumstances recited
in the notice letter included the length of time in which Petitioner engaged
in program-related crimes and
the financial loss to the Maryland Medicaid program resulting from Petitioner's
criminal activity.
Petitioner requested a hearing and the case was assigned to me for a hearing
and a decision. I scheduled an
in-person hearing to be held on October 20, 1993. The I.G. moved for summary
disposition, alleging that
there were no disputed issues of material fact in the case. Petitioner responded
to the motion. I ruled that,
while there appeared to be no disputed issue of material fact as to Petitioner's
conviction of a criminal
offense related to the delivery of an item or service under Medicaid, there
appeared to be a dispute as to
whether the 10-year exclusion imposed by the I.G. against Petitioner was reasonable.
I afforded the parties
the opportunity to have an in-person hearing on the issue of the reasonableness
of the 10-year exclusion.
At a prehearing conference which I held by telephone on October 14, 1993, both
parties advised me that
they were prepared to rely on their written presentations, in lieu of an in-person
hearing. Notwithstanding,
I gave Petitioner time to reflect on his conclusion that an in-person hearing
was not necessary, and
provided him the opportunity to file a written request for an in-person hearing,
should he change his mind
and decide that he wanted one. Petitioner did not file a request for an in-person
hearing. Based on that, I
canceled the in-person hearing which I had scheduled, but admitted into evidence
exhibits which had been
filed by the I.G. and Petitioner.
I have carefully considered the exhibits which were filed by the I.G. and Petitioner
and which I have
accepted into evidence. 2/ I have considered also the parties' arguments and
the relevant law and
regulations. I conclude that the I.G. is authorized to exclude Petitioner pursuant
to section 1128(a)(1) of
the Act. I conclude further that the 10-year exclusion which the I.G. imposed
against Petitioner is
reasonable.
ISSUES
The issues in this case are whether:
1. The I.G. has authority to exclude Petitioner pursuant to section 1128(a)(1) of the Act.
2. The 10-year exclusion imposed against Petitioner by the I.G. is reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. On February 10, 1992, Petitioner was indicted for criminal offenses under Maryland law. I.G. Ex. 1.
2. The indictment charged Petitioner with: conspiring with other individuals
to make false claims for
reimbursement from the Maryland Medicaid program; making false claims for reimbursement
from the
Maryland Medicaid program; and obstruction of justice. I.G. Ex. 1, pp. 2 - 4.
3. Count 1 of the indictment charged Petitioner with making false Medicaid
reimbursement claims for
transportation of Medicaid recipients in taxicabs which he owned and operated,
in the amount of
$74,176.80. I.G. Ex. 1, pp. 2, 10 - 21.
4. Count 1 of the indictment charged Petitioner with making false Medicaid
reimbursement claims over a
period beginning November 30, 1989 and ending on or about January 10, 1992.
I.G. Ex. 1, p. 2.
5. Count 2 of the indictment charged Petitioner with obstructing justice by
willfully withholding and
failing to produce documents that were subpoenaed from him by a grand jury.
I.G. Ex. 1, p. 3.
6. On October 13, 1992, Petitioner pled guilty to Counts 1 and 2 of the indictment.
I.G Ex. 2; I.G. Ex. 3,
p. 2.
7. Petitioner was sentenced to incarceration for a period of three years for
his crimes, two years of which
were suspended. I.G. Ex. 3, p. 2; see I.G. Ex. 2.
8. Petitioner was sentenced additionally to probation for a period of three years. I.G. Ex. 3, p. 2.
9. Petitioner was sentenced additionally to pay restitution in the amount of
$24,275 to the Maryland
Medicaid program. I.G. Ex. 3, p. 2; see I.G. Ex. 2.
10. Petitioner was convicted of a criminal offense related to the delivery
of an item or service under
Medicaid, within the meaning of section 1128(a)(1) of the Act. Findings 1 -
9; Social Security Act, section
1128(a)(1).
11. The Secretary of the Department of Health and Human Services (Secretary)
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).
12. The I.G. had authority to impose and direct an exclusion against Petitioner
pursuant to section
1128(a)(1) of the Act. Findings 1 - 11.
13. Regulations published on January 29, 1992 establish criteria to be employed
by the I.G. in determining
to impose and direct exclusions pursuant to section 1128 of the Act. 42 C.F.R.
Part 1001 (1992).
14. 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 section 1128(a)(1) of
the Act. 42 C.F.R.
1001.101, 1001.102.
15. 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 section 1128 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).
16. My adjudication of the length of the exclusion in this case is governed
by the criteria contained in 42
C.F.R. 1001.101 and 1001.102. Findings 14 - 15.
17. 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).
18. 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).
19. 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 $1500 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
incarceration.
e. The convicted party has a prior criminal, civil, or administrative sanction record.
f. The convicted party was overpaid a total of $1500 or more by Medicare or
Medicaid as a result of
improper billings.
42 C.F.R. 1001.102(b)(1) - (6) (paraphrase).
20. 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 $1500.
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).
21. Petitioner was convicted of crimes involving fraudulent Medicaid claims
in the amount of $74,176.80.
Findings 3, 6.
22. The financial loss to the Maryland Medicaid program from Petitioner's crimes
was at least $24,275.
Finding 9.
23. The crimes for which Petitioner was convicted resulted in financial loss
to the Maryland Medicaid
program in excess of $1500, which is an aggravating factor that may justify
excluding Petitioner for more
than five years. Finding 22; 42 C.F.R. 1001.102(b)(1).
24. The crimes which Petitioner perpetrated against the Maryland Medicaid program
were committed over
a period of more than two years. Findings 4, 6.
25. That the crimes for which Petitioner was convicted were committed over
a period exceeding one year's
duration is an aggravating factor that may justify excluding Petitioner for
more than five years. Finding
24; 42 C.F.R. 1001.102(b)(2).
26. The sentence imposed against Petitioner for his crimes against the Maryland
Medicaid program
included a period of incarceration. Finding 7.
27. That the sentence imposed against Petitioner for his crimes against the
Maryland Medicaid program
included a period of one year's incarceration is an aggravating factor that
may justify excluding Petitioner
for more than five years. Findings 7, 26; 42 C.F.R. 1001.102(b)(4).
28. The I.G. did not prove that the criminal acts engaged in by Petitioner
had a significant adverse
physical, mental, or financial impact on one or more program beneficiaries or
other individuals. See I.G.
Ex. 1, pp. 10 - 21.
29. That Petitioner paid restitution for his crimes is not a mitigating factor
which may be used as a basis
for offsetting aggravating factors. See Finding 9; 42 C.F.R. 1001.102(c)(1)
- (3).
30. Petitioner did not prove the presence of any mitigating factors which may
be used as a basis for
offsetting aggravating factors. See Finding 29; 42 C.F.R. 1001.102(c)(1) - (3).
31. The aggravating factors present in this case establish that Petitioner
committed serious criminal
offenses which damaged the integrity of federally financed health care programs.
Findings 21 - 30.
32. The aggravating factors present in this case establish Petitioner to be
a threat to the integrity of
federally financed health care programs. Finding 31.
33. The aggravating factors present in this case justify excluding Petitioner for 10 years. Findings 21 - 32.
34. The 10-year exclusion which the I.G. imposed against Petitioner is reasonable.
Findings 21 - 33; 42
C.F.R. 1001.102.
ANALYSIS
Petitioner does not dispute that he was convicted of a criminal offense relating
to the delivery of an item or
service under Medicaid, within the meaning of section 1128(a)(1) of the Act.
The I.G. was required to
exclude Petitioner for a minimum of five years, based on Petitioner's conviction
of a program-related
offense. Finding 17. What is at issue here is whether the 10-year exclusion
which the I.G. imposed against
Petitioner is reasonable. More specifically, the question is whether the I.G.
established sufficient
aggravating factors not offset by mitigating factors to prove that Petitioner
is so untrustworthy as to
necessitate the 10-year exclusion which the I.G. imposed.
This case is governed by regulations published in January 1992 and January
1993. 42 C.F.R. Part 1001; 42
C.F.R. 1001.1(b). These regulations establish factors which must be used to
evaluate the reasonableness
of exclusions imposed pursuant to section 1128 of the Act. The regulations provide
that, in cases involving
exclusions imposed pursuant to section 1128(a) of the Act, the reasonableness
of the length of any
exclusion imposed for a period of more than five years will be decided based
on the presence of, and the
weight assigned to, certain aggravating and mitigating factors which the regulations
identify. 42 C.F.R.
1001.102(b)(1) - (6), (c)(1) - (3). 3/
Section 1128 is a remedial statute, and the regulations' intent is to implement
the Act's remedial purpose.
The remedial purpose of the Act is to protect the integrity of federally-financed
health care programs, and
the welfare of program beneficiaries and recipients, from parties who have been
shown to be
untrustworthy. 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. Robert Matesic, R.Ph., d/b/a Northway Pharmacy,
DAB 1327, at 7 - 8
(1992); John M. Thomas, Jr., M.D. and Texoma Orthopedic Associates, d/b/a Orthopedic
and Sports
Medicine Center of North Texas, DAB CR281, at 11, 19 - 23 (1993).
One consequence of the regulations is to limit the factors which I may consider
as relevant to an excluded
party's trustworthiness to provide care. Under the standard for ascertaining
trustworthiness established in
Matesic and now superseded by the regulations, evidence which was relevant to
deciding a party's
trustworthiness to provide care (for example, evidence as to a party's remorse
or rehabilitation) would have
been admissible. However, the regulations direct that, if evidence does not
conform to an aggravating
factor or a mitigating factor identified by the regulations, I may not consider
it. Thomas at 13.
In any case in which the reasonableness of an exclusion is at issue, I am obligated
to decide, using the
regulatory factors, whether an exclusion of a particular length is reasonably
necessary to protect the
integrity of federally financed health care programs and the welfare of the
programs' beneficiaries and
recipients. Thomas at 14 - 18. The regulations contain no formula for assigning
weight to aggravating and
mitigating factors once the presence of any of such factors is proven by a party.
However, it is apparent
both from the regulations themselves, and from the Act's remedial purpose, that
I must explore in detail,
and assign appropriate weight to, those factors which are aggravating or mitigating.
In the present case, the I.G. proved the existence of these three aggravating
factors: Petitioner was
convicted of a program-related offense involving a financial loss to the Maryland
Medicaid program in
excess of $1500; the crimes engaged in by Petitioner were perpetrated by him
over a period of time in
excess of one year; and his sentence included a period of incarceration. Findings
23, 25, 27; 42 C.F.R.
1001.102(b)(1), (2), (4).
The notice letter which the I.G. sent to Petitioner mentioned only two aggravating
factors, consisting of the
financial impact of Petitioner's crimes, and the duration of his criminal activity.
I have accepted evidence
concerning Petitioner's incarceration, even though it was not mentioned in the
notice letter, because the I.G.
provided Petitioner adequate notice of the intent to assert this additional
factor as an aggravating factor,
and Petitioner was given the opportunity to rebut the evidence and arguments
which the I.G. made
pertaining to this factor. An exhibit which described the conditions of Petitioner's
incarceration was
offered as evidence by the I.G. I.G. Ex. 3. The I.G. argued Petitioner's incarceration
as an additional
aggravating factor, both in the brief which the I.G. filed in support of summary
disposition and in a
supplemental brief.
The I.G. alleged the existence of a fourth aggravating factor. The I.G. contended
that Petitioner's crimes
had an adverse effect on program recipients. See 42 C.F.R. 1001.102(b)(3). The
basis for this contention
is that Petitioner's crimes involved false reimbursement claims for transporting
Medicaid recipients in
taxicabs operated by him. However, while the record establishes that Petitioner
made false claims for the
transportation of Medicaid recipients, it does not contain any evidence that
these individuals were affected
adversely, either by the transportation provided by Petitioner, or by the false
claims he made concerning
that transportation. Therefore, the I.G. failed to prove that Petitioner's crimes
adversely affected program
recipients.
Petitioner did not prove the existence of any mitigating factors. Petitioner
argued that the exclusion should
be reduced because he paid restitution to the State of Maryland. However, the
payment of restitution is not
a mitigating factor identified in the regulations which I may consider. See
42 C.F.R. 1001.102(c)(1) - (3).
4/
Petitioner offered an exhibit, P. Ex. 2, to show that the State of Maryland
was considering debarring him
for a period of five years, based on his conviction. It is not entirely clear
from this exhibit what Petitioner
intends it to prove. Apparently, Petitioner is asserting that the I.G.'s authority
to exclude him should not
permit an exclusion of a greater duration than a State debarment. Alternatively,
Petitioner may be asserting
that the State of Maryland considers him to be untrustworthy for only five years.
From that he may be
contending that I should infer that he will be trustworthy after five years.
Section 1128 is a federal statute and it neither states nor suggests that the
I.G. must defer to State
authorities in determining the length of an exclusion. That the State of Maryland
may choose to debar
Petitioner for five years does not serve to estop the I.G. from excluding Petitioner
for a longer period, if
there exists a legitimate remedial reason to do so. Furthermore, the fact that
the State of Maryland may
consider Petitioner to be untrustworthy for a period of five years only is not
a mitigating factor under the
regulations which I may consider in deciding whether the exclusion imposed by
the I.G. is reasonable. See
42 C.F.R. 1001.102(b)(1), (c)(1) - (3).
The fact that there exist aggravating factors in this case and no mitigating
factors does not resolve the issue
of whether the exclusion imposed by the I.G. is reasonable. The I.G. suggested
originally that, as a matter
of discretion, the I.G. had unreviewable authority to impose an exclusion of
any length in excess of five
years where aggravating factors existed and where there were no mitigating factors.
However, the I.G.
modified this contention to assert that, in such a case, the administrative
law judge must weigh the
aggravating factors in order to decide whether the exclusion imposed by the
I.G. comports with the Act's
remedial purpose.
I agree with the I.G.'s modified position. The presence of aggravating factors
in a given case, not offset by
mitigating factors, means that an exclusion of more than five years may be appropriate.
However, any
exclusion imposed for more than five years under section 1128(a)(1) of the Act
and 42 C.F.R.
1001.102(b) and (c) must still comport with the remedial purpose of establishing
protection against
untrustworthy parties. Thus, the aggravating factors established in a given
case must be weighed carefully
to decide whether they support a conclusion that a party is sufficiently untrustworthy
as to merit an
exclusion of a particular length.
A 10-year exclusion is reasonable here. The evidence offered by the I.G. which
pertains to aggravating
factors identified in the regulations shows Petitioner to be a highly untrustworthy
individual. Petitioner
engaged in a carefully planned and executed scheme to defraud the Maryland Medicaid
program. Findings
2 - 6. Petitioner executed his scheme over a protracted period of time, approximately
two years, and he
succeeded in his criminal enterprise to the extent that he extracted unlawfully
thousands of dollars from the
Maryland Medicaid program. The court which sentenced Petitioner for his offenses
found them to be of
such severity as to merit incarceration.
There is some dispute about the precise financial impact of Petitioner's crimes
on the Maryland Medicaid
program. The I.G. contends that Petitioner's crimes resulted in unlawful reimbursement
to Petitioner in
excess of $74,000. Petitioner, noting that he paid restitution of about $24,000,
contends that the impact of
his crimes was less than that alleged by the I.G. I cannot conclude from the
evidence before me that
Petitioner defrauded the Maryland Medicaid program of more than $74,000, as
is asserted by the I.G. The
criminal charge to which Petitioner pled guilty asserts that Petitioner made
false claims in excess of
$74,000. It does not recite how much Petitioner actually received by virtue
of these false claims. On the
other hand, Petitioner agreed to pay restitution of more than $24,000 to the
State of Maryland. His
agreement constitutes an admission that his crimes resulted in compensation
to him for false claims of at
least that amount.
However, I find that Petitioner's admitted theft of more than $24,000, coupled
with evidence showing that
Petitioner schemed deliberately to defraud the Maryland Medicaid program and
executed that scheme over
a protracted period, is sufficient to prove that Petitioner is a highly untrustworthy
individual. In this case, a
10-year exclusion is justified because the evidence which I received proves
that Petitioner is an individual
who is capable of executing a deliberate and well-planned scheme to defraud
federally financed health care
programs.
CONCLUSION
I conclude that the I.G. had authority to exclude Petitioner pursuant to section
1128(a)(1) of the Act. I
conclude further that the 10-year exclusion which the I.G. imposed against Petitioner
is reasonable.
____________________________
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. The exhibits offered by the I.G. in support of the I.G.'s motion, and which
I have received into
evidence, are I.G. Exhibits 1 through 4, referred to hereafter as "I.G.
Ex. (number), (page number)." The
exhibits offered by Petitioner in response to the motion, and which I have received
into evidence, consist of
communications between Petitioner and the Maryland Board of Public Works. I
have identified and
received these exhibits as P. Ex. 1 and 2.
3. I describe the permissible aggravating factors in Finding 19. I describe
the permissible mitigating
factors in Finding 20.
4. Arguably, evidence as to whether an excluded party paid restitution might
have been considered to be
relevant to that party's trustworthiness to provide care under Matesic, because
the payment of restitution
might suggest that the excluded party showed remorse for his or her offenses
or had been rehabilitated.
That is not to say that I necessarily would find that to be so in every case
or even in this case. The fact that
a party is directed by a court to pay restitution for a crime may say very little
about that party's remorse or
rehabilitation.