Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: William D. Neese, M.D., Petitioner,
- v. -
The Inspector General.
Date: March 14, 1997
Docket No. C-95-167
Decision No. CR467
DECISION
I sustain the determination of the Inspector General (I.G.) to exclude Petitioner,
William D.
Neese, M.D., from participating in Medicare and State health care programs,
including
Medicaid programs, for a period of 10 years. I find that the I.G. is authorized
to exclude
Petitioner pursuant to section 1128(a)(1) of the Social Security Act (Act).
I find also that
the 10-year exclusion imposed by the I.G. against Petitioner is reasonable.
I. Background
On June 16, 1995, the I.G. notified Petitioner that she was excluding him from
participating
in Medicare and State health care programs. The I.G. advised Petitioner that
she was
authorized to exclude him pursuant to section 1128(a)(1) of the Act because
Petitioner
allegedly had been convicted of a criminal offense related to the Medicare program.
The
I.G. advised Petitioner that the duration of the exclusion was based on the
fact that
Petitioner had been sentenced for his crimes to a period of incarceration.
Petitioner requested a hearing. At Petitioner's request, I agreed to stay the
case until the
completion of Petitioner's prison sentence. After Petitioner had completed his
sentence, he
advised me that he wished to have the case heard and decided. Petitioner and
the I.G.
agreed that the case could be heard and decided based on the parties' written
submissions. I
established a schedule for the parties to submit proposed exhibits and briefs.
The I.G. submitted a brief and six exhibits (I.G. Exs. 1 - 6). In her brief,
the I.G. argued
that the evidence established the presence of the aggravating factor, incarceration,
that the
I.G. had alleged in her notice letter. The I.G. argued also that the evidence
established the
presence of two additional aggravating factors. These additional aggravating
factors are
that Petitioner's crimes and related conduct resulted to a loss to Medicare
of more than
$1500; and spanned a period of more than one year. Petitioner submitted a brief
and several
attachment. The attachments to Petitioner's brief are excerpts of regulations
and a copy of a
portion of an exhibit submitted by the I.G. and admitted in evidence. Petitioner
did not
assert that it was unfair for the I.G. to now assert the presence of three aggravating
factors,
as opposed to the one aggravating factor alleged in the I.G.'s notice of exclusion.
Petitioner
did not object to my receiving into evidence the I.G.'s exhibits. Therefore,
I receive into
evidence I.G. Exs. 1 - 6. I base my decision in this case on the law, the evidence,
and the
parties' arguments.
II. Issues, findings of fact and conclusions of law
The issues in this case are whether the I.G. is authorized to exclude Petitioner
pursuant to
section 1128(a)(1) of the Act, and whether the 10-year exclusion that the I.G.
imposed is
reasonable. In deciding that the exclusion is authorized pursuant to section
1128(a)(1) and
that it is reasonable, I make the following findings of fact and conclusions
of law (Findings).
I discuss each of my Findings in detail, below.
1. Section 1128(a)(1) of the Act mandates the I.G. to exclude any individual
who is convicted of a criminal offense related to the delivery of an item or
service
under Medicare or a State health care program.
2. A crime that satisfies the definition of a criminal offense stated by section
1128(a)(1) of the Act is a criminal offense within the meaning of section 1128(a)(1),
even if it might also fall within the definition of some other offense stated
in one of
the other parts of section 1128 of the Act.
3. A criminal conspiracy to defraud Medicare is a criminal offense within
the
meaning of section 1128(a)(1) of the Act.
4. The I.G. is required to exclude any individual who is convicted of a criminal
offense as defined by section 1128(a)(1) of the Act for a minimum of five years.
5. The I.G. may exclude an individual who is convicted of a criminal offense
as
defined by section 1128(a)(1) where there exists evidence of an aggravating
factor
or factors which establishes the excluded individual to be so untrustworthy
as to
necessitate an exclusion for more than five years.
6. Petitioner is a doctor of osteopathy who practiced medicine in the State
of
Florida and who controlled a corporation which operated clinics at several locations
in that State.
7. In May 1993, Petitioner was indicted on criminal charges in the United
States
District Court, Middle District of Florida, Tampa Division.
8. Petitioner was charged in the indictment with conspiring to defraud Medicare
by generating and submitting false claims for Medicare items or services.
9. On December 5, 1994, Petitioner pled guilty to Counts 1 and 16 of the
indictment. His plea included a plea of guilty to the overall conspiracy alleged
in
Count 1 of the indictment and to an act of mail fraud alleged in Count 16 of
the
indictment.
10. Petitioner's crimes caused a loss to Medicare of $600,000.
11. Petitioner perpetrated his crimes over a period beginning in July 1987
and
continuing until or through July 1989.
12. Petitioner's sentence for his crimes included two terms of imprisonment,
each for 18 months, to run concurrently.
13. The I.G. proved that Petitioner was convicted of a criminal offense within
the meaning of section 1128(a)(1).
14. The I.G. proved the existence of an aggravating circumstance in that
Petitioner's fraudulent acts caused a loss to Medicare of more than $1500.
15. The I.G. proved the existence of a second aggravating circumstance in
that
Petitioner perpetrated his fraud over a period of more than one year's duration.
16. The I.G. proved the existence of a third aggravating circumstance in that
Petitioner was sentenced for his crimes to a period of incarceration.
17. Petitioner did not prove the existence of any mitigating circumstances.
18. The evidence which relates to the aggravating circumstances establishes
Petitioner to be a highly untrustworthy individual.
19. A 10-year exclusion is reasonable.
III. Discussion
A. Governing law (Findings 1 - 5)
The I.G. excluded Petitioner pursuant to section 1128(a)(1) of the Act. Section
1128(a)(1)
mandates the I.G. to exclude any individual who is convicted of a criminal offense
related to
the delivery of an item or service under Medicare or under a State health care
program,
including a Medicaid program.
Section 1128(a)(1) is a part of a statute in which Congress conferred a range
of exclusion
authorities on the I.G. In another part of the same law, section 1128(b)(1),
the I.G. is
authorized to exclude an individual who is convicted of a criminal offense relating
to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct in
connection with the delivery of a health care item or service or with respect
to any act or
omission in a program operated by or financed in whole or in part by any federal,
State, or
local government agency. 1/
Section 1128(a)(1) specifically addresses crimes against Medicare and State
health care
programs. Section 1128(b)(1) is written broadly so as to cover crimes against
private
insurers as well as federal, State, and local programs other than Medicare or
State health
care programs. An offense which falls within the narrower reach of section 1128(a)(1)
would literally fall within the broader reach of section 1128(b)(1), inasmuch
as an offense
against Medicare or a State health care program may also be described as an
offense against
a program operated by or financed in whole or in part by any federal or State
agency.
However, the overlap between these two parts of section 1128 does not create
ambiguity.
It is evident from the structure and context of section 1128 that Congress intended
the more
stringent exclusion requirements of section 1128(a)(1), and not the less stringent
requirements of section 1128(b)(1), to apply to any case involving a criminal
offense related
to the delivery of an item or service under Medicare or a State health care
program. In
enacting section 1128, Congress decided that a crime against Medicare or a State
health
care program established the perpetrator to be so untrustworthy as to require
an exclusion.
Thus, where an offense can be characterized both as an offense within the meaning
of
section 1128(a)(1) and section 1128(b)(1), the I.G.'s exclusion authority is
to be found in
section 1128(a)(1).
There is no question that a conspiracy to defraud Medicare is a crime that
is related to the
delivery of Medicare items or services within the meaning of section 1128(a)(1).
A
necessary element of the crime is a claim for reimbursement for a Medicare item
or service.
Section 1128(c)(3)(B) of the Act requires that an exclusion imposed pursuant
to section
1128(a)(1) be for a minimum of five years. Implicitly, the Act authorizes the
I.G. to exclude
for more than five years an individual who is convicted of a criminal offense
as defined by
section 1128(a)(1) if the circumstances warrant an exclusion of more than five
years.
Section 1128 of the Act, of which section 1128(a)(1) is a part, is a remedial
statute. Its
purpose is not to punish individuals, but to protect federally funded health
care programs
and their beneficiaries and recipients from individuals who are established
to be
untrustworthy. An exclusion imposed pursuant to section 1128 or any of its parts
is
reasonable if it relates reasonably to the legislative purpose of the Act. Congress
concluded
that an individual who is convicted of a program-related criminal offense within
the meaning
of section 1128(a)(1) has established by his or her criminal misconduct that
he or she is so
untrustworthy as to necessitate an exclusion of at least five years. But, Congress
also
recognized the possibility that such an individual may be so untrustworthy as
to require an
exclusion of more than five years.
The Secretary of the United States Department of Health and Human Services
(the
Secretary) has published regulations which establish the criteria for evaluating
the
trustworthiness of those individuals who are excluded under any of the parts
of section 1128
of the Act, including section 1128(a)(1). These regulations are contained in
42 C.F.R. Part
1001. The regulation which specifically applies to exclusions imposed pursuant
to section
1128(a)(1) is 42 C.F.R. § 1001.102.
This regulation establishes the exclusive criteria which may be used to evaluate
the
trustworthiness of an individual who is excluded pursuant to section 1128(a)(1).
The
regulation provides that, under section 1128(a)(1), an exclusion of more than
five years may
be reasonable if there exists evidence in an individual's case establishing
the presence of any
factors defined by the regulation to be aggravating which is not offset by evidence
establishing the presence of any factors defined by the regulation to be mitigating.
42
C.F.R. § 1001.102(b)(1) - (6), (c)(1) - (3).
I may not consider evidence which does not relate to one of the defined aggravating
or
mitigating factors in deciding whether an exclusion imposed pursuant to section
1128(a)(1)
is reasonable. In effect, 42 C.F.R. § 1001.102 is the Secretary's conclusion
of what evidence
may be relevant to establishing trustworthiness.
However, evidence which establishes the presence of aggravating or mitigating
factors is
only the starting point in deciding whether an exclusion imposed pursuant to
section
1128(a)(1) is reasonable. The regulation authorizes an exclusion of more than
five years
where there exist aggravating factors that are not offset by mitigating factors.
It does not
direct that an exclusion of more than five years, or of any particular length
in excess of five
years, be imposed in such a case. The determination of what is reasonable is
left to the
judgment of the administrative law judge in a hearing concerning an exclusion
of more than
five years imposed pursuant to section 1128(a)(1) of the Act.
In order to evaluate the reasonableness of an exclusion imposed pursuant to
section
1128(a)(1), I must decide how any evidence that relates to an aggravating or
mitigating
factor defines the trustworthiness of an excluded individual. Evidence that
meets the test of
one of the aggravating or mitigating factors may show that an individual is
relatively
trustworthy or relatively untrustworthy.
For example, an aggravating factor is established pursuant to 42 C.F.R. §
1001.102(b)(1), if
the evidence proves that the acts resulting in an individual's conviction of
a program-related
offense, or similar acts, resulted in financial loss to Medicare or to a State
health care
program of $1500 or more. Assuming that evidence which proves the existence
of this
factor exists in a case, I would look at that evidence as a gauge of the excluded
individual's
trustworthiness to provide care. Proof that an individual caused a financial
loss greatly in
excess of $1500 would be evidence that the individual is a highly untrustworthy
individual.
By the same token, evidence that an individual caused a financial loss of $1500
or only
slightly more than that amount, while establishing an aggravating factor, might
not by itself
prove the individual to be so untrustworthy as to require more than the minimum
five-year
exclusion.
B. The relevant facts (Findings 6 - 12)
Petitioner is a doctor of osteopathy who practiced medicine in the State of
Florida. I.G. Ex.
1 at 1. Petitioner controlled and operated a corporation, Doctors Diagnostic
and Medical
Centers, Inc., which operated health care clinics at a variety of locations
in the State of
Florida. Id.
In May 1993, Petitioner was indicted on criminal charges in the United States
District
Court, Middle District of Florida, Tampa Division. I.G. Ex. 1; I.G. Ex. 3 at
1. Count 1 of
the indictment charged that, from July 1987 through on or about July 24, 1989,
Petitioner
conspired to defraud the United States by impeding, obstructing, and defeating
the lawful
operations of the Medicare Part B insurance program. I.G. Ex. 1 at 3 - 4. The
indictment
charged that Petitioner conspired with others to defraud Medicare by: inducing
Medicare
beneficiaries to undergo unnecessary medical tests; performing tests that were
not medically
indicated or necessary; falsifying medical documentation which made these tests
appear to
be necessary; and presenting fraudulent reimbursement claims for tests. Id.
at 4 - 8. Count
16 of the indictment charged Petitioner additionally with one count of mail
fraud in
perpetrating his conspiracy against Medicare. Id. at 13 - 14.
In December 1994, Petitioner pled guilty to Counts 1 and 16 of the indictment.
I.G. Ex. 4
at 1. Petitioner entered his plea of guilty pursuant to a plea agreement. I.G.
Ex. 5. In
agreeing to plead guilty, Petitioner admitted that he had caused losses to Medicare
of
$600,000. Id. Petitioner agreed to pay restitution in the amount of $600,000.
I.G. Ex. 4 at
5. Petitioner was sentenced to a term of imprisonment of 18 months for each
of the two
counts of the indictment to which Petitioner pled guilty, with the two sentences
to run
concurrently. Id. at 2.
Petitioner asserts that he has provided information to, and cooperated with,
prosecuting
authorities. He has not offered corroborating evidence to substantiate this
assertion. For
purposes of this decision, however, I accept as true Petitioner's assertions
of cooperation.
There is no evidence to show that any cooperation or information that Petitioner
provided
to prosecuting authorities led to the indictment of and conviction of other
individuals or
entities or the imposition of civil remedies against other individuals or entities.
C. Evaluation of the evidence (Findings 13 - 19)
1. The I.G.'s authority to exclude Petitioner (Finding 13)
As I hold at Part III.A. of this decision, section 1128(a)(1) of the Act requires
the I.G. to
exclude any individual who is convicted of a criminal offense related to the
delivery of an
item or service under Medicare. The evidence in this case establishes that Petitioner
was
convicted of such an offense. Petitioner pled guilty to conspiring to defraud
Medicare. His
crime was related directly to Medicare items or services.
Petitioner argues that his conviction was of an offense within the meaning
of the generic
fraud provisions of section 1128(b)(1) of the Act. It is true that Petitioner's
conviction
could be described as an act of financial misconduct directed against a federally
funded
health care program. But, as I hold at Part III.A., the authority to exclude
lies under section
1128(a)(1) of the Act where the crime is related to the delivery of an item
or service under
Medicare, even if that crime could be described also as a crime as is defined
under section
1128(b)(1). Petitioner's crimes were directed at Medicare. There is no doubt
that the
I.G.'s authority to exclude lies under section 1128(a)(1).
2. The length of the exclusion (Findings 14 - 19)
I find that the 10-year exclusion that the I.G. imposed against Petitioner
is reasonable. The
evidence in this case establishes Petitioner to be a highly untrustworthy individual.
An
exclusion of 10 years is reasonably necessary to protect federally funded health
care
programs and beneficiaries and recipients of these programs from Petitioner.
The I.G. proved the existence of three aggravating factors. First, the I.G.
proved that the
acts resulting in Petitioner's conviction, or similar acts, resulted in financial
loss to Medicare
of more than $1500. 42 C.F.R. § 1001.102(b)(1). Petitioner admitted to
having caused loss
to Medicare in the amount of $600,000. I.G. Ex. 5.
Second, the I.G. proved that the acts that resulted in Petitioner's conviction,
or similar acts,
were committed by Petitioner over a period of more than one year. 42 C.F.R.
§
1001.102(b)(2). Count 1 of the indictment, to which Petitioner pled guilty,
elaborates a
criminal conspiracy of approximately two years' duration. I.G. Ex. 1 at 3 -
4.
Third, the I.G. proved that Petitioner was sentenced to incarceration for his
crimes. 42
C.F.R. § 1001.102(b)(4). Petitioner was sentenced to two 18-month periods
of
incarceration, to run concurrently. I.G. Ex. 4 at 5.
I do not find that Petitioner proved the existence of any mitigating factors.
Petitioner would
have proved the presence of a mitigating factor had he proved that his cooperation
with
prosecuting authorities resulted in others being convicted of criminal offenses
or led to the
imposition of civil remedies against others. See 42 C.F.R. § 1001.102(c)(3).
But,
Petitioner did not prove the necessary elements of this mitigating factor. Although
I accept
as true Petitioner's assertions that he has cooperated with, and provided information
to,
prosecuting authorities, I find no credible evidence to prove that any cooperation
he
provided, or any information he supplied, led to the conviction of others or
to the imposition
of civil remedies against others.
The evidence which relates to the aggravating factors proved by the I.G. establishes
Petitioner to be a highly untrustworthy individual. It shows that, for a two-year
period,
Petitioner presided over a criminal enterprise which defrauded Medicare of $600,000.
The
elaborate nature of Petitioner's criminal scheme, its widespread operations
in several clinics,
and the size of Petitioner's fraud, all contribute to a picture of Petitioner
as an individual
who is capable of planning and executing systematic crimes against federally
funded health
care programs, without regard to the adverse consequences to these programs
or to the
beneficiaries and recipients of program funds. Given that, a 10-year exclusion
is reasonable.
Although I do not find that Petitioner established a mitigating factor in this
case, I would
sustain the 10-year exclusion that the I.G. imposed, even if Petitioner had
proved that his
cooperation had led to the conviction of, or the imposition of civil remedies
against, others.
I would not find the overwhelming evidence that Petitioner is untrustworthy
to be negated
by evidence that Petitioner provided cooperation to prosecuting authorities
after they had
detected and exposed Petitioner's criminal enterprise even if Petitioner's cooperation
resulted in convictions of others or the imposition of civil remedies against
others.
IV. Conclusion
I conclude that the I.G. is authorized to exclude Petitioner pursuant to section
1128(a)(1) of
the Act. I conclude that the 10-year exclusion imposed against Petitioner by
the I.G. is
reasonable.
______________________
Steven T. Kessel
Administrative Law Judge
* * * Footnotes * * *
1. Prior to July 1996, section 1128(a)(1) mandated an exclusion of any individual
who is convicted of an offense within the meaning of that section. Section 1128(b)(1)
gave
the I.G. discretion to exclude any individual who is convicted of an offense
within the
meaning of that section. The mandatory minimum exclusion period for an individual
excluded under section 1128(a)(1) was five years, whereas there was no statutory
minimum
exclusion period for an individual excluded under section 1128(b)(1). In July
1996,
Congress amended the mandatory exclusion requirement of section 1128(a) to include
the
offenses that formerly were described in section 1128(b)(1). Act, section 1128(a)(3).
The
exclusion in this case was imposed prior to the effective date of the July 1996
amendment,
and the I.G. does not argue that the amendment applies retroactively to this
case.
(..continued)