Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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IN THE CASE OF | |
Michael D. Lawton, M.D. |
DATE: May 3, 2001 |
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The
Inspector General
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Docket No.C-00-123
Decision No. CR771 |
DECISION | |
DECISION By letter dated September 30, 1999, the Inspector General
(I.G.), United States Department of Health and Human Services (DHHS) notified
Michael D. Lawton, M.D. (Petitioner) that he would be excluded from participation
in the Medicare, Medicaid, and all federal health care programs.(1)
The I.G. imposed this exclusion pursuant to sections 1892 and 1128(b)(14)
of the Social Security Act (Act) because Petitioner failed to repay student
loans borrowed through the Health Education Assistance Loan Program (HEAL).
The I.G. informed Petitioner that this exclusion would remain in effect
until his debt had been satisfied. By letter dated June 23, 1999, Petitioner requested review
of the I.G.'s exclusion determination. The I.G. moved for summary disposition.
In an order dated February 28, 2000, I reserved my decision on whether
or not an in-person hearing was necessary and I established a briefing
schedule. On March 27, 2000, the I.G. filed an initial brief which included
26 proposed exhibits. On May 11, 2000, Petitioner filed his response brief,
including two proposed exhibits and a motion for a change of venue. On
May 31, 2000, the I.G. filed a reply brief. In an order dated August 2,
2000, I granted the parties an opportunity to submit further statements
concerning the necessity of an in-person hearing. On August 31, 2000,
the I.G. submitted a statement concerning the issues of fact in dispute.
On September 5 and 11, 2000, respectively, Petitioner's statements concerning
the need for an in-person hearing and the issues in dispute were received
by the Civil Remedies Division (CRD). On September 14, 2000, the I.G.
filed her reply to Petitioner's statements. In a ruling dated November
17, 2000, I concluded that Petitioner did not present any additional information
regarding the testimony of witnesses which warranted an in-person hearing.(2)
Because I have determined that there are no facts of decisional significance
in dispute, and that the only matters to be decided are the legal implications
of the undisputed facts, I have decided the case on the basis of the parties'
written submissions. Both parties submitted briefs and the I.G. submitted a
reply brief. The I.G. submitted 26 proposed exhibits. Petitioner objected
to the I.G.'s proposed exhibit 9. The I.G.'s proposed exhibit 9 is an
assignment of judgment dated February 24, 1999, which reflected that the
Student Loan Marketing Association (SLMA) assigned its interest on that
date to DHHS. In a response to Petitioner's objection, the I.G. submitted
an explanation of the assignment process on January 9, 2001. I find that
it has been adequately demonstrated that such document is true and accurate.(3)
I therefore accept into evidence I.G. Exhibits 1 through 26 (I.G. Exs.
1-26). In support of his case, Petitioner submitted two proposed exhibits
(P. Exs. 1 and 2). I accept these exhibits into evidence without objection. I conclude that Petitioner is subject to exclusion from
participation in the Medicare and Medicaid programs until his HEAL debt
has been satisfied and I therefore affirm the I.G.'s determination.
APPLICABLE LAW Medicare and state health care program exclusions imposed
by the Secretary as a result of a health care practitioner's failure to
repay a HEAL loan are governed by sections 1128(b)(14) and 1892 of the
Act. In 1987, Congress enacted section 1128(b)(14) as a part of the Medicare
and Medicaid Patient and Program Protection Act of 1987, Pub. L. 100-93
(MMPPPA). MMPPPA recodified and expanded the Secretary's existing authority
to exclude a provider from participation in the Medicare and Medicaid
programs including "any individual who the Secretary determines is in
default on repayments of . . . loans in connection with health professions
education made or secured, in whole or in part, by the Secretary and with
respect to whom the Secretary has taken all reasonable
steps available to the Secretary to secure repayment of such obligations
or loans . . . ." Act, section 1128(b)(14). Section 1128(b)(14) applies
to HEAL loans. Section 1892 of the Act authorizes the Secretary to enter
into an agreement with a health care practitioner who owes "a past-due
obligation to the United States" to deduct from amounts otherwise payable
to the debtor by the Medicare program "until such past-due obligation
(and accrued interest) have been repaid . . . ." If an individual does
not generate sufficient program reimbursement to satisfy the outstanding
debt, or if he or she "refuses to enter into an agreement or breaches
any provision of the agreement," the Secretary is directed by sections
1892(a)(2)(C)(ii) and 1892(a)(3)(B) of the Act to exclude the individual
from participation in the Medicare program "until such time as the entire
past-due obligation has been repaid." The Secretary's exclusion authority
under section 1892 of the Act has been delegated to the I.G.(4)
PETITIONER'S ARGUMENTS Petitioner contends that he does not owe the contested HEAL loan sums. In particular, he asserts that his debt was discharged in 1994 in a bankruptcy proceeding in United States Bankruptcy Court, Central District of California. Petitioner's Responsive Brief (P. Br.) at 3. Petitioner also maintains that the I.G. has no authority to proceed against him in an exclusion action in that such action can occur only if the individual is engaged in a healthcare profession. Id. at 12-13. Petitioner also asserts that he has in fact paid all or most of the loans and disputes the amounts owed in repayment. Id. at 4. He has submitted canceled checks and statements purporting to show some payments made in 1987 and in 1989. P. Ex. 1. He also alleges that the I.G. delayed in bringing the exclusion to his detriment, as he believes some records relating to his repayment have been lost. Id. at 16-18. Finally, Petitioner challenges the validity of the loans.
He maintains that such loans are not valid and enforceable because the
SLMA did not make the required insurance payments and thus such loans
are unenforceable under 42 U.S.C. � 292f(a). Id. at 4. He also
maintains that such loans did not comply with Federal Truth in Lending
requirements. Id. at 8. He also questions the validity of the loans
as certain information was not completed on the loans' documentation and
his name was misspelled on a relevant loan document. Id.
FINDINGS OF FACT AND CONCLUSIONS OF LAW 1. Petitioner attended the University of Iowa Medical
School from 1979 through 1982. I.G. Exs. 1-3. 2. On November 23, 1979, Petitioner executed a borrower's
agreement and promissory note for a HEAL loan in the amount of $7,130
. I.G. Ex. 4. 3. On June 15, 1981, Petitioner executed a borrower's
agreement and promissory note for a second HEAL loan in the amount of
$10,000. I.G. Ex. 5. 4. On April 13, 1982, Petitioner executed a borrower's
agreement and promissory note for a third HEAL loan in the amount of $10,000.
I.G. Ex. 6. 5. DHHS records indicate that Petitioner owed over $50,000
on his loans in 1992. I.G. Ex. 17. 6. On June 15, 1992, the Superior Court, County of Orange,
State of California entered a default judgment against Petitioner in favor
of the SLMA in the amount of $57,467.03. I.G. Ex. 8. 7. SLMA formally assigned the June 15, 1992 judgment against
Petitioner to DHHS, Debt Management Branch on February 24, 1999. I.G.
Ex. 9. 8. Commencing in 1993 and continuing until at least 1998,
DHHS contacted Petitioner to request that he enter into a repayment agreement
or offset agreement to satisfy his unpaid HEAL loans. I.G. Exs. 17, 22. 9. Petitioner has not entered into a repayment agreement
or other arrangement to satisfy the outstanding debt. 10. On December 22, 1994, the United States Bankruptcy
Court, Central District of California issued a Discharge of Debts order
which listed Petitioner's debt to DHHS in the amount of $57,085 for his
defaulted HEAL loans as "fixed and liquidated." I.G. Ex. 12. 11. The "Discharge of Debts" order of the United States
Bankruptcy Court has no effect in exclusion proceedings initiated by the
I.G. under section 1128 of the Act. 12. Petitioner's HEAL loans remain in "default" status.
13. On September 30, 1999, the I.G. notified Petitioner
of his exclusion, under section 1128(b)(14) of the Act, from participation
in the Medicare and Medicaid programs, which would remain in effect until
his HEAL loans were satisfied. I.G. Ex. 24. 14. Petitioner's unpaid HEAL loans are "loans" within
the scope of section 1128(b)(14) of the Act. 15. The Secretary has taken all reasonable steps available
to secure repayment of Petitioner's HEAL loans. 16. The Secretary has delegated to the I.G. the authority
to determine and impose exclusions pursuant to section 1128(b) of the
Act. 17. The I.G. properly excluded Petitioner under section
1128(b)(14) of the Act from participation in the Medicare and Medicaid
programs for an indefinite period, lasting until such time as Petitioner
satisfies the past-due indebtedness.
DISCUSSION I find that the evidence establishes that Petitioner was
enrolled as a student at the University of Iowa Medical School and that,
beginning in 1979, he borrowed a total of $27,130 from the HEAL program
to finance his medical education. He received a $7,130 loan, secured by
a promissory note executed on November 23, 1979; a $10,000 loan, secured
by a note executed on June 15, 1981; and a $10,000 loan, secured by a
note executed on April 13, 1984. I.G. Exs. 1-6. Each promissory note detailed
the interest rate, amount borrowed, and the date on which interest began
to accrue. According to the terms of the promissory notes, Petitioner
promised to repay the loans in periodic installments beginning the first
day of the tenth month after he either ceased being a full-time student
at a HEAL-recognized school or ceased being an intern or resident in an
accredited program. Id. The amount of money repaid would include
an interest amount based on the terms of the individual promissory notes.
Id. The record further reflects that Petitioner did not fully
repay the sums owed under the HEAL loan agreements. Petitioner disputes
the amount of the debt owed and has submitted documentation to show that
in fact he paid some installments in 1987 and in 1989. P. Exs. 1, 2. The
I.G. concedes that Petitioner made payments in the amount of $14,933.69.
Nevertheless, Petitioner's failure to fully repay the debt resulted in
a default judgment against him in the amount of $57,467.03 in the Superior
Court of California, County of Orange, on June 15, 1992. I.G. Ex. 8. The
record therefore establishes that this was the amount owed in June 1992,
which has since grown due to interest. Pursuant to the arrangement between
DHHS and private lenders specified in the HEAL applications, Petitioner's
defaulted HEAL debt was assigned to DHHS in State court and subsequently
in federal court on February 24, 1999. DHHS made numerous attempts to
obtain repayment including offering Petitioner repayment options and the
opportunity to arrange an offset agreement. I.G. Exs. 7, 15-22. There
is no evidence that Petitioner ever responded or repaid the debt. Section 1128(b)(14) of the Act requires that the Secretary
or his delegate take "all reasonable steps available to the Secretary
to secure repayment" of the loans before excluding Petitioner from participation
in the Medicare and Medicaid programs. "The term 'all reasonable steps
available' means all reasonable and legitimate means of debt collection.
In attempting to collect a debt, the Secretary must be reasonable only
in the sense that she should not insist on repayment arrangements which
are palpably unfair." James F. Cleary, D.D.S., DAB CR252 at 12-13
(1993). The "reasonableness" standard also does not require the
Secretary to excuse individuals from repayment obligations because of
financial status, accept financial arrangements which do not accomplish
the objective of repayment, or enter into relationships that are not in
the public interest. Id. at 13; see also Rikantar
Majauskas, D.O., DAB CR441 (1996). The Secretary has also interpreted
the phrase "all reasonable steps available" by regulation which provides
that "all reasonable administrative steps available to secure repayment"
of a HEAL debt will have been achieved where the debtor has been offered
a Medicare offset arrangement. 42 C.F.R. � 1001.1501(a)(2). Although an
offset agreement is not a necessary element of "all reasonable administrative
steps" it is conclusive proof that all reasonable steps have been taken
by the Secretary. Charles K. Angelo, Jr., M.D., DAB CR290 at 12
(1993). I find that the record establishes that Petitioner was
accorded all reasonable opportunities to repay his HEAL debt. On June
15, 1992, the Superior Court for the State of California, County of Orange,
issued a default judgment finding that Petitioner's HEAL loan was in default.
I.G. Ex. 8. Thereafter, beginning on January 11, 1993, DHHS notified Petitioner
that his HEAL debt was delinquent and that payment arrangements had to
be made to resolve the debt. I.G. Ex. 5. Several additional notices followed.
I.G. Exs. 7, 16-22. On nine occasions, DHHS presented Petitioner with
the option of entering a repayment agreement. See I.G. Exs. 7,
15-22. On four occasions, DHHS offered Petitioner the option of executing
an offset agreement whereby his Medicare/Medicaid reimbursements would
be directly applied to his outstanding loan debt. See I.G. Exs.
7, 17, 21, 22. In each instance, however, Petitioner did not avail himself
of any of these options and instead allowed his HEAL loan to grow to its
present level. In his defense, Petitioner, citing 42 U.S.C. � 292f, asserts
that the I.G. has no jurisdiction to exclude him unless he is actively
practicing his profession. P. Br. at 5. I find that such contention is
in error. The exclusion provision of section 1128 of the Act applies to
all individuals and entities without regard to whether they have been
practicing as health care providers. Petitioner also asserts that his HEAL debt was discharged
in the bankruptcy action and thus there is no basis for an exclusion action.
In considering whether a basis for the exclusion exists, I must determine
whether Petitioner's loan is in default. The record reflects that the
loan was never fully repaid. The regulations under 42 C.F.R. �
1001.1501 do not exempt one who has had such debt discharged in bankruptcy.
On such basis, Petitioner's bankruptcy is irrelevant. Moreover, even considering
the effect of the bankruptcy, dischargeability of a HEAL loan debt is
governed by 42 U.S.C. � 292f(g). This statute permits
discharge of the HEAL debt if three criteria are met: (1) seven years
have passed from the date that repayment begins; (2) the bankruptcy court
finds that non-discharge would be unconscionable; and (3) the court finds
that the Secretary will not have waived his right to apply subsection
(f) to the borrower and the discharged debt. See Hines v. United
States, 63 B.R. 731, 734 (Bankr. D.S.D. 1986). Petitioner has not established that he satisfied the second
criterion. "The burden on initiating an inquiry into the dischargeability
of a HEAL loan under section 292f(g) falls upon the debtor, not the creditor."
United States v. Wood, 925 F.2d 1580, 1583 (7th Cir.
1991). To initiate an inquiry into the dischargeability of a HEAL debt
in Chapter 7 bankruptcy, Petitioner must first file an adversarial complaint
to determine dischargeability of the HEAL loan. Id.; see
also 42 C.F.R. � 60.35(g)(1). Where there is no adversarial inquiry
filed, DHHS does not make an appearance in the bankruptcy proceeding in
defense of the HEAL debt exemption from the general discharge. Such an
appearance is not necessary. The dischargeability requirements for HEAL
debts are self-executing. Where an individual seeking discharge of his
or her HEAL debt fails to obtain a special finding by the bankruptcy judge
that non-discharge would be unconscionable, the HEAL debt will be unaffected
by the general discharge and the individual will remain liable for the
debt. Wood, 925 F.2d at 1583. A bankruptcy court's general discharge,
which lists DHHS as a creditor whose claim has been liquidated by the
discharge order, has no effect on the HEAL debt if the bankruptcy judge
has made no special findings. Id. at 1582-83. Petitioner has not
shown that such special finding was made in his case. Petitioner also challenges other aspects of the validity
of the debt. Petitioner maintains that he did not default because there
was "no insurance policy in effect." P. Br. at 4, 5. Under the regulations,
there may be a one-time charge to the lender for default insurance, which
charge may be passed on to the borrower. 42 C.F.R. � 60.14(a)(2). Such
action does not affect the validity of the loan or the borrower's obligations.
Petitioner also maintains that the loans did not comply with Federal Truth
in Lending requirements and that the forms were not completely or correctly
filled out. P. Br. at 4, 8. Petitioner's claims as to these issues lack
legal or factual basis. Moreover, insofar as Petitioner sought to discharge
these debts in the 1994 bankruptcy proceeding, he conceded the validity
of the claim. Finally, Petitioner maintains that he has been disadvantaged
by the I.G.'s delay in bringing the exclusion action. P. Br. at 7. The
I.G. has discretion to determine when to impose an exclusion. Laurence
Wynn, M.D., DAB CR344 (1994). Petitioner has not demonstrated that
such delay was unreasonable as Petitioner was afforded many opportunities
to repay his debt over this period. Moreover, to establish estoppel by
laches, a party must establish that he changed his position to his detriment
and prejudice through reliance upon the unreasonable delay in instituting
actions against him. Akers v. State Marine Lines, Inc., 344 F.2d
217 (5th Cir. 1965). Petitioner has not demonstrated that he
has been harmed. Finally, it has been held that estoppel lies against
the government, if at all, only if the party can show affirmative misconduct
by the government. INS v. Hibi, 414 U.S. 5 (1973). Petitioner has
not made such showing.
CONCLUSION I therefore find that the I.G. properly excluded Petitioner under section 1128(b)(14) of the Act from the Medicare and Medicaid programs. See Mohammad H. Azarpira, D.D.S., DAB CR372 (1995) (exclusion is reasonable where petitioner failed to respond to instructions on how to enter into repayment agreement; failed to provide information necessary to enter into an offset agreement; made his first payment only after exclusion; and never made payments large enough to pay even the accruing interest on his HEAL loans). The regulations provide that an exclusion remains in effect until the default is cured or the obligations have been resolved to Public Health Service's satisfaction. 42 C.F.R. � 1001.1501(b). The debt remains unpaid and Petitioner has not entered into a repayment or offset agreement. The exclusion, therefore, is proper and remains in effect. |
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JUDGE | |
Joseph K. Riotto Administrative Law Judge |
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FOOTNOTES | |
1. In this decision, I use the term "Medicaid" to include any State health care program which receives federal funds as defined by section 1128(h) of the Social Security Act. 2. In my November 17, 2000 ruling, I also denied Petitioner's request for issuance of subpoenas duces tecum and addressed his assertions that I was not competent to hear and decide this case. 3. On such basis, I therefore deny Petitioner's December 27, 2000 "Application for Order Compelling Production of Documents concerning I.G. Ex. 9" and I deny his "Motion to Dismiss Due to Outrageous Misconduct by the I.G." based on his claim that I.G. Ex. 9 was fraudulent. 4. My decision here does not address Petitioner's exclusion under section 1892 of the Act for two reasons. First, I have found Petitioner's exclusion to be authorized under section 1128(b)(14) of the Act, and I need not consider whether it is also authorized under section 1892. Second, it is not clear whether I have the authority to review an exclusion imposed by the I.G. under section 1892. See Rikantar (Rik) Majauskas, D.O., DAB CR441 (1996). | |