Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Neil R. Hirsch, M.D.,
Petitioner,
- v. -
The Inspector General.
DATE: November 27, 1995
Docket No. C-95-001
Decision No. 1550
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION
The Petitioner, Neil R. Hirsch, M.D., appealed a June 2,
1995 decision
by Administrative Law Judge (ALJ) Joseph K.
Riotto. Neil R. Hirsch,
M.D., DAB CR379 (1995) (ALJ
Decision). In his decision, the ALJ
affirmed the
Inspector General's (I.G.) exclusion of Petitioner for
a
period of five years from participation in the title
XVIII (Medicare),
the title XIX (Medicaid), the Maternal
and Child Health Services Block Grant,
and the Block
Grants to States for Social Services programs.
As described more fully below, the ALJ found that
Petitioner had pled
guilty to three felony offenses
concerning his participation in the ownership
and
management of Health Care Providers of Arizona, Inc.
(HCPA); that HCPA
was a prime contractor with the Arizona
Health Care Cost Containment System
(AHCCCS), Arizona's
program for providing medical assistance to
low-income
people; that HCPA was reimbursed by AHCCCS on a capitated
basis
for providing services to AHCCCS enrollees; that
Arizona had a title XIX
State plan; and that AHCCCS
received federal funding from title XIX as
a
demonstration project approved under section 1115 of the
Social Security
Act (the Act).
Based on the record, the ALJ concluded that Petitioner
had been convicted
of a criminal offense related to the
delivery of an item or service under a
State health care
program and that, consequently, sections 1128(a)(1)
and
1128(c)(3)(B) of the Act mandated his five-year
exclusion.
Because the ALJ determined that there were no
facts of decisional
significance genuinely in dispute, he
granted the I.G.'s motion for summary
disposition and
decided the case on the basis of the parties'
written
submissions.
Petitioner appealed the ALJ Decision. Petitioner's
principal
challenges concern: (1) whether AHCCCS, as a
section 1115 demonstration
project, was a "State health
care program" as defined by section 1128(h)(1);
(2)
whether the nature of Petitioner's offenses and the fact
that HCPA was
reimbursed on a capitated, rather than fee-
for-service basis, mean that
Petitioner's conviction was
not "related to the delivery of an item or
service" as
required by section 1128(a)(1); and (3) whether the ALJ
was
prejudiced against Petitioner and erroneously
admitted exhibits concerning
Arizona's title XIX State
plan and section 1115 waivers.
Based on the analysis below, we conclude that the ALJ
correctly determined
that the I.G.'s exclusion of
Petitioner was mandated by sections 1128(a)(1)
and
1128(c)(3)(B). However, we also conclude that several of
the
ALJ's Findings of Fact and Conclusions of Law (FFCLs)
should be modified
based on Petitioner's arguments and
the record before us. We affirm and
adopt, as modified,
those FFCLs. Below, first we describe the
applicable
law, then we list the undisputed FFCLs, and finally we
discuss
Petitioner's arguments and exceptions and our
modifications of certain
FFCLs.
Applicable Law
Section 1128(a) of the Act mandates the exclusion of
certain individuals
from participation in Medicare and
State health care programs.
Petitioner's exclusion is
based on section 1128(a)(1), which provides for
the
exclusion of "[a]ny individual or entity that has been
convicted of a
criminal offense related to the delivery
of an item or service under Title
XVIII or under any
State health care program." Section
1128(c)(3)(B)
provides that such a section 1128(a)(1) exclusion must
be
for a minimum of five years.
Section 1128(h) defines "State health care program."
It
provides:
Definition of a State health care program.
For
purposes of this section . . . the term
"State
health care program" means--
(1) a State plan
approved under title
XIX,
(2) any program
receiving funds under title
V
or from any
allotment to a state under
such
title, or
(3) any program
receiving funds under title
XX
or from any
allotment to a State under
such
title.
Title XIX of the Act establishes the Medicaid program,
which is a
cooperative federal/state program for medical
assistance to low income
people. In order to establish a
Medicaid program, a state must have a
title XIX State
plan which has been approved by the Secretary of
the
Department of Health and Human Services (DHHS). Sections
1901,
1903. The State plan requirements for the Medicaid
program are set
forth in section 1902 of the Act. Once a
state has an approved State
plan, it is entitled to
federal financial participation in its medical
assistance
expenditures under that plan. Section 1903.
While section 1902 sets forth requirements for title XIX
State plans,
those requirements may be waived under
certain circumstances. Section
1115 of the Act allows
the Secretary of the Department of Health and
Human
Services to establish "demonstration projects" by waiving
State plan
requirements for a variety of public
assistance programs, including the
Medicaid program under
title XIX, while continuing to fund the project
with
program appropriations. Section 1115 provides:
(a) In the case of any
experimental, pilot, or
demonstration project which,
in the judgment of the
Secretary, is likely to
assist in promoting the
objectives of title . . .
XIX . . . in a State or
States--
(1) the
Secretary may waive compliance
with
any of the
requirements of section . . . 1902
. . . to the extent
and for the period he
finds
necessary to
enable such State or States
to
carry out such
project, and
(2) costs
of such project which would
not
otherwise be
included as expenditures
under
section . . .
1903 . . . shall, to
the
extent and for the
period prescribed by
the
Secretary, be
regarded as expenditures
under
the State plan
or plans approved under
such
title, or for
administration of such State
plan
or plans, as may
be appropriate.
Background
The following FFCLs from the ALJ Decision were not
contested: 1/
2. Under section 1115 of the Act, a State's
experimental, pilot, or
demonstration project which, in
the Secretary's judgment, is likely to
promote the
objectives of Title XIX, may receive a waiver from
the
Secretary from compliance with any of the requirements of
section 1902
of Title XIX to the extent necessary to
enable the State to carry out its
project. Act, section
1115(a).
3. If the Secretary grants a section 1115 waiver, the
costs of the
State's project which would not otherwise be
included as expenditures under
section 1903, and which
would not otherwise be included as part of the cost
of
projects under section 1110, shall be regarded as
expenditures under
the State plan or plans approved under
Title XIX. Act, sections
1115(a)(1) and (2).
4. On October 1, 1982, the State of Arizona implemented
the Arizona
Health Care Cost Containment System (AHCCCS),
a demonstration project
approved under section 1115 of
the Act. 2/ P. Ex. 3; I.G. Br. at 6; P.
Br. at 2.
5. AHCCCS received a section 1115 waiver from the
Secretary, which
waived compliance with certain Title XIX
requirements. See P. Ex. 1;
FFCL 2.
6. The costs of the AHCCCS program which would not
otherwise be
included as expenditures under section 1903
of the Act, and which would not
be included as part of
the costs of projects under section 1110, shall, to
the
extent and for the period prescribed by the Secretary, be
regarded as
expenditures under Arizona's Title XIX State
plan. Act, section 1115;
FFCL 1-5.
7. AHCCCS contracts with providers for the provision
of
hospitalization and medical care coverage to members.
Ariz. Rev. Stat.
Ann. . 36-2903(A) (1993 and Supp. 1994).
8. A "prepaid capitated" payment system is one in which
a health
care provider is paid based on a fixed rate per
member, notwithstanding the
actual number of members who
receive care from the provider and the amount of
health
care services provided to any member. Ariz. Rev. Stat.
Ann. .
36-2901(9) (1993 and Supp. 1994).
10. The director of AHCCCS is authorized to apply for
and accept
federal funds available under Title XIX of the
Act in support of AHCCCS; such
funds may be used only to
support persons who are defined as meeting Title
XIX
eligibility requirements. Ariz. Rev. Stat. Ann. .
36-
2903.01(B)(5) (1993).
11. An AHCCCS contractor is required to comply with the
provisions
of federal law and regulations governing the
Title XIX program, except for
those requirements waived
by the federal government for the State in the
State plan
for Medical Assistance. A contractor is required also
to
comply with the provisions of Title 36, Chapter 29 of the
Arizona
Revised Statutes (governing AHCCCS), and with all
applicable regulations
promulgated by the Arizona
Department of Health Services. I.G. Ex. 8 at
6.
12. Another section of the Arizona statutes mandates
that the
provisions relating to the operation of AHCCCS
will be suspended if, at any
time, federal funding under
Title XIX is denied, not renewed or becomes
unavailable.
Ariz. Rev. Stat. Ann. . 36-2919 (1993).
13. The section 1115 waiver enables AHCCCS to receive
Title XIX
funds from the State as payments for services
furnished under it.
14. Payments made to AHCCCS pursuant to section
1115(a)(2) are
indisputably payments made under Title
XIX, i.e., Medicaid payments.
FFCL 9-13.
15. The AHCCCS program is a project approved under
section 1115 of
the Act. FFCL 5, 13.
17. Petitioner, an ophthalmologist, was one of three
owners and
principals of Health Care Providers of
Arizona, Inc. (HCPA). I.G. Ex. 1
at 3-5; I.G. Ex. 10 at
2; P. Ex. 2.
18. HCPA was incorporated on August 6, 1982, to deliver
health care
to AHCCCS enrollees. I.G. Ex. 1 at 3-5; I.G.
Ex. 7 at 3.
19. HCPA was a prime contractor with AHCCCS from 1982 to
1984.
I.G. Ex. 1 at 3-5; P. Ex. 2.
20. AHCCCS paid HCPA monthly capitation payments for the
delivery of
health care to indigent Arizona citizens.
I.G. Ex. 1 at 3-5.
23. AHCCCS checks paid to HCPA were deposited into
HCPA's corporate
checking account, which was controlled
by HCPA's principals, one of whom was
Petitioner. I.G.
Ex. 1 at 4-5.
24. On or about July 28, 1989, a 17-count indictment was
filed in
the Superior Court of the State of Arizona
(State court) against Petitioner
and the two other
principals of HCPA. I.G. Ex. 7.
25. On April 6, 1992, Petitioner pled guilty to two
counts of
facilitation of theft, in violation of Ariz.
Rev. Stat. .. 13-1004 and
13-1802(A)(2). Pursuant to a
plea agreement, these counts were amended
and constitute
amended counts 14 and 16 of the indictment. See I.G.
Ex.
1.
26. By signing and dating the statements attached to his
plea
agreement, titled "Exhibit II, Factual Basis for
Amended Count 14" and
"Exhibit III, Factual Basis for
Amended Count 16," Petitioner has admitted to
the facts
set forth in these statements. I.G. Ex. 1 at 4, 5.
27. The factual basis for amended count 14 states that
Petitioner
"aided [another principal's] theft of HCPA
monies in violation of A.R.S.
13-1802(A)(2) by signing
check number 2018 in the amount of $300.00 written
on
HCPA's checking account payable to Oximetrix, Inc." I.G.
Ex. 1 at
4.
28. Petitioner signed check number 2018 to pay for an
electric
surgical knife, "knowing that the equipment was
to be used for . . .
non-AHCCCS cosmetic surgery
patients. Cosmetic procedures are not
covered by
AHCCCS." I.G. Ex. 1 at 4.
29. The factual basis for amended count 16 states that
Petitioner
"aided in Berton Siegel's theft of HCPA monies
by signing check #3748 in the
amount of $10,000 written
on Health Care Providers of Arizona checking
account to
Touche Ross Minneapolis." I.G. Ex. 1 at 5.
30. Check number 3748 was used to pay the balance on an
actuarial
study which was to provide information for a
private health care organization
owned by Berton Siegel
and Petitioner. Petitioner signed the check
knowing that
the actuarial study was not used for HCPA's purposes.
I.G.
Ex. 1 at 5.
32. Petitioner was a joint owner of Eyelites
International, Inc.
(Eyelites), an optical company. I.G.
Ex. 1 at 3.
33. Via two subcontracts executed on or about August 9,
1983 and
August 11, 1983, Eyelites became a HCPA
subcontractor to provide eyeglasses
to HCPA's AHCCCS
members. I.G. Ex. 1 at 3; I.G. Ex. 7 at 13.
34. Neither Petitioner nor the other principal of
Eyelites signed
the subcontract; instead, two employees
of the principals who had no
association with Eyelites
were directed to sign the Eyelites'
subcontracts. I.G.
Ex. 1 at 3.
35. AHCCCS regulations required HCPA's principals to
disclose to
AHCCCS any subcontracts in which a HCPA
principal had a financial
interest. I.G. Ex. 1 at 3.
36. On April 6, 1992, Petitioner pled guilty to one
count of
fraudulent schemes and practices, wilful
concealment, in violation of Ariz.
Rev. Stat. . 13-2311.
Pursuant to a plea agreement, this count was amended
and
now constitutes amended count 10 of the indictment. See
I.G. Ex.
1.
37. By signing and dating the statement attached to his
plea
agreement, titled "Exhibit I, Factual Basis for
Amended Count 10," Petitioner
has admitted to the facts
set forth in this statement. I.G. Ex. 1 at
3.
38. The factual basis for amended count 10 states that
Petitioner
"knowingly concealed the related party status
of Eyelites International, Inc.
pursuant to a scheme or
artifice to defraud which enabled [Petitioner] to
have
HCPA pay $60,000.00 to Eyelites between November 14, 1983
and
February 8, 1984 . . . while [Petitioner's] financial
interest in Eyelites,
International, Inc. remained
concealed from AHCCCS." I.G. Ex. 1 at
3.
39. Petitioner knowingly concealed from AHCCCS that
Petitioner, a
HCPA principal, had a financial interest in
Eyelites' subcontract. FFCL
32-38.
43. Based on Petitioner's guilty plea, the State court
convicted
Petitioner of two counts of facilitation of
theft and one count of fraudulent
schemes and practices
and wilful concealment. I.G. Exs. 2, 3.
44. In accordance with the terms of Petitioner's plea
agreement, the
State court judge granted Petitioner's
motion to dismiss counts 1-9, 11-13,
15, and 17 of the
indictment. I.G. Ex. 3 at 4.
47. Under section 1128(i)(3) of the Act, "an individual
or entity is
considered to have been `convicted' of a
criminal offense -- (3) when a plea
of guilty or nolo
contendere by the individual or entity has been
accepted
by a Federal, State or local court. . . . "
48. Petitioner's guilty plea, and the actions taken by
the State
court indicating acceptance of his plea,
constitute a "conviction" of
Petitioner within the
meaning of section 1128(i)(3) of the Act. FFCL
36; 43-
47.
50. Under section 1128(a)(1) of the Act, a conviction
within the
meaning of section 1128(i) mandates exclusion.
The administrative law judge
is not authorized to look
behind the conviction to determine its
validity.
51. The Secretary of HHS 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).
52. An exclusion imposed and directed pursuant to
section 1128(a)(1)
of the Act must be for a period of at
least five years. Act, sections
1128(a)(1),
1128(c)(3)(B); 42 C.F.R. . 1001.102(a).
53. Section 1128 of the Act is intended to protect the
integrity of
federally-funded health care programs and
the welfare of program
beneficiaries and recipients from
individuals and entities who have been
shown to be
untrustworthy. See S. Rep. No. 109, 100th Cong.,
1st
Sess. 1 (1987), reprinted in 1987 U.S.C.C.A.N. 682.
54. Neither the I.G. nor an administrative law judge is
authorized
to reduce the five-year minimum mandatory
period of exclusion.
ALJ Decision at 3-9. We affirm and adopt these FFCLs.
The FFCLs to
which Petitioner specifically excepted are
discussed in our analysis.
We note that while Petitioner
did not specifically except to FFCL 55, his
arguments
necessarily challenge that FFCL by implication. That
FFCL
states:
55. The I.G. properly excluded Petitioner from
participation in the
Medicare and Medicaid programs for
five years, as required by sections
1128(a)(1) and
1128(c)(3)(B) of the Act. FFCL 1-54.
We affirm and adopt FFCL 55 for the reasons explained
below.
Analysis
As the forum for administrative review of an ALJ's
decision in an
exclusion case, we have a limited role.
The standard of review on disputed
issues of fact is
whether the ALJ Decision is supported by
"substantial
evidence on the whole record." The standard of review
on
disputed issues of law is whether the ALJ Decision
is
"erroneous." 42 C.F.R. . 1005.21(h); Joyce Faye Hughey,
DAB 1221,
at 11 (1990); Lakshmi N. Murty Achalla, DAB
1231, at 7 (1991).
Petitioner raised 19 exceptions to the ALJ Decision. We
discuss
these exceptions and Petitioner's related
arguments in three sections of the
analysis. The
sections address:
o whether AHCCCS was a "State
health care
program"
as defined by section 1128(h)(1);
o whether the offenses for which
Petitioner was
convicted were "related to the delivery of
an
item of service" as
required by section
1128(a)(1); and
o whether the ALJ was prejudiced
against
Petitioner and
erroneously admitted
exhibits
concerning
Arizona's title XIX State plan
and
section 1115
waivers.
In each section, we discuss the basis for our conclusions
concerning these
issues, Petitioner's arguments, and
Petitioner's exceptions to the related
FFCLs. Based on
our analysis, we either adopt or modify and adopt
those
FFCLs..
I. AHCCCS, which delivered items and
services
under a State
plan approved under title
XIX,
was a State
health care program as defined
by
section
1128(h)(1).
We conclude that items and services provided by the
AHCCCS program were
delivered under a State plan approved
under title XIX and that AHCCCS was a
"State health care
program" as defined by section 1128(h)(1).
As to the facts, both parties agreed and the undisputed
FFCLs establish
that AHCCCS was a demonstration project
approved under a section 1115 waiver
(FFCL 4). Further,
both parties agreed and the undisputed FFCLs
establish
that AHCCCS was partially funded by federal funds which
are
appropriated for and paid to Arizona pursuant to
title XIX (FFCLs 6, 10,
14).
In Exception 5, Petitioner excepted to FFCL 1, in which
the ALJ found that
"Arizona has in place a State plan
approved under Title XIX of the
Act." Petitioner argued
that FFCL 1 is not supported by substantial
evidence and
is erroneous, as a matter of law. We find that FFCL 1
is
supported by substantial evidence, for the following
reasons:
o Exhibit 12 consists of portions
of the Arizona
title
XIX State plan and of
correspondence
between
Arizona and the Health Care
Financing
Administration (HCFA) concerning
federal
approval of
that State plan. It
establishes
that, in
1982, the Governor of
Arizona
submitted to
HCFA for its approval "the
State
Plan for Arizona
Health Care Cost
Containment
System
under Title XIX of the Social
Security
Act . . .
." I.G. Ex. 12, at 1. In
response,
HCFA issued
a "Transmittal and Notice
of
Approval of State
Plan Material"
approving
AHCCCS as a
new title XIX State plan
effective
January 1,
1982. Id. at 5. 3/ Exhibit 12
also
reflects that
Arizona was "in the process
of
submitting a
section 1115 waiver request" as
to
certain items in
the State plan. Id. at 2.
o Exhibit 13 consists of portions
of the Arizona
title
XIX State plan as it existed in
1992,
indicating that
the State plan continued
in
effect until at
least after the time period
in
question
here. Exhibit 13 also reflects
that
Arizona requested
and received waivers,
pursuant to section 1115, of certain title
XIX
requirements for
State plans.
o The purpose of a section 1115
medical
assistance
waiver is to relieve a state
from
having to comply
with specified portions of
the
section 1902
requirements for title XIX
State
plans.
Section 1115(a)(1). Therefore, for
a
medical assistance
program, a section
1115
waiver would be
unnecessary unless the
state
also had an
approved title XIX State plan.
Arizona could not
operate AHCCCS pursuant to
a
section 1115 waiver
unless Arizona also had
an
approved title XIX
State plan.
o Petitioner did not dispute the
findings in
FFCLs 6,
10, and 14 that Arizona
receives
reimbursement
for a portion of its expenses
for
AHCCCS pursuant to
title XIX. Title
XIX
reimbursement is
authorized by section 1903
for
"each State which
has a plan approved
under
this
title." Section 1115(a)(2) provides
that
a section 1115
waiver project's costs
"which
would not
otherwise be included as
expenditures
under
section . . . 1903" shall "be regarded
as
expenditures under
the State plan . . .
approved under such title." Therefore,
an
approved title XIX
State plan is a
precondition
to
payment of title XIX funds pursuant to
a
section 1115
waiver. Payment of title
XIX
reimbursement to
Arizona for AHCCCS
necessarily
means that
Arizona has in place a title
XIX
State plan for
AHCCCS.
o Petitioner relied on two
secondary sources
representing that Arizona had
initially
declined to
participate in title XIX and
then
subsequently did
so pursuant to a section
1115
waiver
project. Exceptions at 27.
However,
neither the
ALJ nor the I.G. disputed
that
AHCCCS was a
demonstration project
approved
under a
section 1115 waiver. Rather, the
fact
of AHCCCS's
section 1115 waiver supports
a
finding that Arizona
necessarily had an
approved title XIX State plan.
o Arizona statutes, which govern
the operation of
AHCCCS, also demonstrate that AHCCCS
delivers
services
under title XIX. Pursuant to
Ariz.
Rev. Stat. Ann.
. 36-2903.01(B)(5) (1993),
the
director of AHCCCS
is authorized to apply
for
and accept federal
funds available under
Title
XIX of the Act
in support of AHCCCS and
such
funds may be used
only to support persons
who
are defined as
meeting title XIX
eligibility
requirements. FFCL 10. Pursuant to Ariz.
Rev.
Stat. Ann. .
36-2919 (1993), the operation
of
AHCCCS will be
suspended if, at any
time,
federal funding
under Title XIX is denied,
not
renewed or becomes
unavailable. FFCL 12.
As
explained above, a
state must have an
approved
State plan in
order to participate in
title
XIX.
Therefore, there is substantial evidence in the record
establishing that
Arizona had in effect, at all times
relevant to this dispute, a State plan
under title XIX
and that, pursuant to this State plan, Arizona
received
title XIX reimbursement for the federal share of the
expenses it
incurred for the operation of AHCCCS.
We also reject Petitioner's arguments in support of his
position that FFCL
1 is erroneous as a matter of law.
Petitioner argued that AHCCCS could not
be "a State
health program within the definition of Section
1128(h)(1) of
the Act, because to be approved under Title
XIX, the plan must fulfill all
requirements imposed by
the law." Exceptions to Decision of
Administrative Law
Judge (Exceptions) at 28. Petitioner contended
that,
because Arizona had obtained a section 1115 waiver of
certain title
XIX State plan requirements for AHCCCS,
AHCCCS could not, as a matter of law,
be a State plan
approved under title XIX and therefore did not meet
the
definition in section 1128(h)(1). Id.
We disagree. First, Petitioner framed the issue
incorrectly as a
question of whether AHCCCS is a title
XIX State plan. The issue is
correctly framed by
substituting the section 1128(h)(1) definition of
"State
health care program" for that term as used in
section
1128(a)(1). Thus framed, the issue is whether
Petitioner's
conviction is for an offense related to the
delivery of an item or service
under a State plan
approved under title XIX. For the following reasons,
we
conclude that the items and services delivered to title
XIX recipients
under AHCCCS are delivered under a State
plan approved under title XIX:
o The fact that compliance with
certain
requirements
of section 1902 were waived
under
section 1115 for
AHCCCS does not negate
the
fact that AHCCCS
was approved under and
administered in conformance with, or
"under",
the unwaived
requirements of section 1902
as
set forth in the
Arizona title XIX State plan.
o Arizona's title XIX State plan
governed
significant
elements of the delivery of
items
or services by
AHCCCS. In the
letter
transmitting
its State plan, Arizona
listed
section 1902
provisions for which it would
seek
a section 1115
waiver. This list did not
refer
to a range of
fundamental title XIX
requirements, including the requirements
for
statewideness
(section 1902(a)(1));
for
adoption of
resource and income standards
for
recipients
(section 1902(a)(17)); and
for
compliance with
section 1917 regarding
liens
and other types
of recovery of the costs
of
medical assistance
(1902(a)(18)), and
most
fundamentally,
the requirements for
persons
eligible for
title XIX services
(section
1902(a)(10)). See I.G. Ex. 12, at 2.
Therefore, clearly items or services provided by AHCCCS
were provided
under Arizona's State plan approved under
title XIX.
Second, Petitioner treated title XIX State plans and
section 1115 waiver
projects as mutually exclusive but
pointed to nothing in the wording of the
Act which
supports this reading. As authority for his position
that
a project operating under a section 1115 waiver
cannot also be a program
approved under a title XIX State
plan, Petitioner cited Crane v. Mathews, 417
F.Supp. 532,
536 (N.D. Ga. 1976). Petitioner asserted that Crane
held
that, to be approved under Title XIX, a plan must fulfill
all
requirements imposed by title XIX. Exceptions at 28.
Petitioner's reliance on the dicta from Crane is
misplaced. In
Crane, the plaintiffs challenged the
Secretary's granting of a section 1115
waiver which
allowed Georgia to impose copayments on Medicaid
recipients
who were statutorily exempt from copayments
under section 1902(a)(14).
In the portion of the
decision on which Petitioner relied, the Court
discussed
the interaction of title XIX and section 1115 waivers
and
said:
Title XIX of the Social Security Act, 42 U.S.C.
.
1396 et seq., provides for the establishment
of
cooperative federal-state programs, commonly
called
"Medicaid", to provide payment for
"necessary
medical services" rendered to
certain "(needy)
individuals, whose income and
resources are
insufficient to meet the costs of
(these) services."
42 U.S.C. . 1396. States
which choose to
participate in the Medicaid program
must submit to
the Secretary of Health,
Education, and Welfare a
"state plan" which fulfills
all requirements of the
Act. See 42 U.S.C.
1396a. If the state submits a
plan which
fulfills all requirements set out in
section 1396a
and implementing federal rules, then
the
Secretary must approve it. Georgia
participates in the Medicaid program under such an
approved state plan. While state requirements
under
Title XIX are mandatory upon the states, Title
XI of
the Act, section 1115, 42 U.S.C. s 1315,
provides a
mechanism whereby such requirements may
be waived in
certain circumstances.
Crane, 417 F.Supp. at 536 (emphasis added).
Contrary to Petitioner's assertions, the Court did not
say that, in order
to be approved under title XIX, a
State plan must fulfill all requirements of
title XIX.
Rather the Court said that, when a State plan fulfills
all the
requirements of section 1902 of the Act (42
U.S.C. . 13396a), the Secretary
must approve that State
plan. The Court went on to explain that title
XIX
mandatory requirements may be waived by the Secretary
under certain
circumstances, i.e., when the Secretary
finds, under section 1115, that a
waiver of section 1902
requirements is likely to promote the objectives of
title
XIX. Nowhere does the Court indicate that, if some State
plan
requirements have been waived pursuant to section
1115 so that the plan does
not fulfill all the
requirements of section 1902, the State plan may not
be
approved.
Petitioner also argued that a section 1128(a)(1)
exclusion is a punitive
remedy and therefore section
1128(h)(1) should be narrowly construed and no
exclusion
imposed unless the I.G. established the applicability of
section
1128(h)(1) beyond a reasonable doubt. Exceptions
at 22.
Petitioner contended that construing section
1128(h)(1) to include AHCCCS
would constitute an
expansive interpretation of the definition of
"State
health care program."
This argument has no merit. Section 1128(a)(1) is not
punitive, but
remedial. Its purpose is to protect "State
health care programs" and
Medicare from untrustworthy
individuals. Larry White, R.Ph., DAB 1346,
at 3 (1992);
Janet Wallace, L.P.N., DAB 1326, at 12-14 (1992);
Manocchio
v. Kusserow, 961 F.2d 1539 (11th Cir. 1992)
(holding that an exclusion under
section 1128(a)(1) was
remedial rather than punitive and, therefore, the
Double
Jeopardy and Ex Post Facto Clauses of the United
States
Constitution did not apply). This purpose can best
be
achieved if medical assistance programs operated with a
section 1115
waiver are protected against individuals who
Congress determined to be
untrustworthy. A section 1115
waiver of a section 1902 requirement is
granted only
after the Secretary finds that the waiver will further
the
objectives of title XIX. Therefore, programs which
operate under both a
section 1115 waiver and a title XIX
State plan are medical assistance
programs; they are
administered pursuant to the unwaived portions of
a
state's title XIX State plan; they serve the goals of
title XIX, and
they receive federal reimbursement
pursuant to title XIX. To construe
section 1128(h)(1) in
a way which would place such programs beyond the
federal
mandates designed to protect the federal fisc and title
XIX
recipients would contravene Congressional intent.
For the preceding reasons, we reject Petitioner's
Exception 5. We
affirm and adopt FFCL 1 as written:
1. Arizona had in place a State plan approved
under
Title XIX of the Act.
Petitioner filed several additional exceptions related to
this
issue. Below, we consider those exceptions and
either adopt or modify
and adopt the ALJ's FFCLs.
In Exception 8, Petitioner excepted to the conclusion in
FFCL 16 that
"AHCCCS is considered to be a State Health
care program." Petitioner
objected that the appropriate
standard was not whether AHCCCS was
"considered" to be a
State health care program but rather whether it met
the
definition in section 1128(h)(1). Based on the
preceding
analysis, we adopt the following modified version of
FFCL
16:
16. For title XIX recipients, the items
and
services provided by AHCCCS are delivered under
a
State plan approved under title XIX. AHCCCS
is a
State health care program within the meaning
of
section 1128(h)(1). FFCL 13-15.
In Exception 6, Petitioner excepted to the FFCLs on the
grounds that the
ALJ failed to consider that AHCCCS was
approved under section 1115 and not
approved under title
XIX. We reject this exception on the grounds that
we
have concluded that Arizona had a State plan approved
under title XIX,
under which items and services were
delivered.
In Exception 3, Petitioner objected that the ALJ failed
to cite the text
of section 1128(h)(1). In Exception 17,
Petitioner objected to FFCL 49,
in which the ALJ used the
term "Medicaid" instead of the statutory language
in
section 1128(h)(1). Petitioner argued that the ALJ's
failure to
properly quote and consider the wording of the
relevant statutes resulted in
erroneous application of
law. We agree with Petitioner that the better
practice
is to cite and use the specific statutory language that
is being
applied and that the ALJ's analysis would have
been more complete if he had
used the text of section
1128(h)(1) rather than substitute the general
term
"Medicaid." While we do not regard this as a material
error on
the ALJ's part, we adopt the following modified
version of FFCL 49. 4/
49. Petitioner was convicted of a criminal
offense
related to the delivery of an item or
service under
a State health care program, that is,
under a State
plan approved under title XIX, within
the meaning of
sections 1128(a)(1) and 1128(h)(1) of
the Act. FFCL
36-48.
Petitioner objected to FFCLs 21 and 41 in which the ALJ
found that funds
paid to HCPA were federal funds or title
XIX funds. Exceptions 9,
13. Petitioner argued that the
nature of the funds was irrelevant to
the legal
definition of State health care program. We do
not
agree. Title XIX funds are paid only if a state has an
approved
State plan. Section 1903. The payment of such
funds is evidence
that Arizona had such a plan for AHCCCS
and the existence of a title XIX plan
is relevant to
whether AHCCCS meets the definition of State health
care
program. Therefore, we modify 5/ and adopt FFCL 21 and
affirm
and adopt FFCL 41:
21. Parts of the monthly contract payments
made to
HCPA were federal funds under Title
XIX. FFCL 10,
14-19.
41. Petitioner used Title XIX funds paid to
HCPA by
AHCCCS to pay Eyelites under the
fraudulently
obtained subcontract. Petitioner
misappropriated
Title XIX funds by directing such
monies to
Eyelites, a HCPA related party. I.G.
Ex. 1 at 4.
FFCL 32-40.
Petitioner also argued that the fact that sections
1128(h)(2) and (3) are
framed in terms of "any program
receiving funds" under title V or title XX,
but section
1128(h)(1) is not, shows that the source of funds
is
irrelevant in this case. Exceptions at 25. We do
not
agree. Title V and title XX are block grant programs
which do
not operate pursuant to State plans while title
XIX is an entitlement program
which can operate only
pursuant to a State plan. The language of
section
1128(h) merely reflects the difference between the
structure of
the two types of programs.
For the preceding reasons, we conclude that items and
services provided to
title XIX eligible individuals by
the AHCCCS program were delivered under a
State plan
approved under title XIX and that AHCCCS is a "State
health
care program" as defined by section
1128(h)(1).
II. Petitioner was convicted of an offense
related
to the
delivery of an item or service
as
required by section
1128(a)(1).
Section 1128(a)(1) mandates the exclusion of an
individual who has been
convicted of an offense "related
to the delivery of an item or service" under
Medicare or
a State health care program. Petitioner argued that
the
nature of Petitioner's offenses and the fact that HCPA
was reimbursed
on a capitated, rather than fee-for-
service basis, mean that Petitioner's
offenses were not
"related to the delivery of an item or service"
as
required by section 1128(a)(1). Below, we describe the
felonies
to which Petitioner pled guilty, Petitioner's
arguments as to why these
offenses were not related to
the delivery of an item or service, and our
analysis as
to why they were related. In the course of our
analysis,
we consider the related FFCLs to which Petitioner
excepted and
either adopt or modify and adopt those
FFCLs.
In 1992, Petitioner pled guilty to and was convicted of
three felonies
under Arizona law. Two of the felonies
involved facilitation of theft
based on Petitioner's
admission that he signed checks drawn on HCPA funds
to
pay for medical equipment and an actuarial study which
would not be
used by HCPA. The third felony involved
fraudulent schemes and
practices and wilful concealment
and was based on Petitioner's admission
that, "pursuant
to a scheme or artifice to defraud," he knowingly
failed
to disclose his ownership interest in a HCPA
subcontractor as
required by AHCCCS regulations. FFCL
38.
In its 1987 amendments to section 1128(a)(1), Congress
sought to ensure
that a broad range of crimes involving
delivery of items or services under
protected health care
programs would result in an exclusion from
participation
in those programs. See Jack W. Greene, DAB 1078, at
11
(1989) (discussion of revised language and legislative
history of
section 1128(a)(1) in the "Medicare and
Medicaid Patient and Program
Protection Act of 1987,"
Pub. L. No. 100-93), affirmed Greene v. Sullivan,
731 F.
Supp. 835 (E.D. Tenn. 1990)). In applying section
1128(a)(1),
the Board has repeatedly held that an offense
is "related" to the delivery of
an item or service under
a State health care program as long as there is a
common
sense connection or nexus between the offense for which
a
petitioner was convicted and the delivery of an item or
service under a
covered program. See, e.g., Thelma
Walley, DAB 1367 (1992); Niranjana
B. Parikh, M.D., DAB
1334 (1992), Berton Siegel, D.O., DAB 1467 (1994).
Therefore, the Board has determined that an offense
committed by someone
providing billing or accounting
services could be related (Greene, DAB 1078,
at 7;
Michael Travers, M.D., DAB 1237, at 9 (1991), affirmed
Travers v.
Sullivan, 791 F. Supp. 1471, 1481 (E.D. Wash.
1992); that no showing of harm
to a protected program was
necessary in order for an offense to be related
(Paul R.
Scollo, D.P.M., DAB 1498, at 9 (1994)); that an offense
could be
related even if the services were actually
provided by an entity different
from the individual being
excluded (Napoleon S. Maminta, M.D., DAB 1135, at
7
(1990)); and that an offense could be related even if no
service or item
was actually delivered (Francis
Shaenboen, R.Ph., DAB 1249, at 4 (1991)).
The Siegel case involved a section 1128(a)(1) exclusion
of one of the
other co-owners of HCPA. In Siegel, the
Board concluded that Dr.
Siegel's conviction of the crime
of facilitation of theft of HCPA funds was
related to the
delivery of an item or service. The Board reasoned
that
Dr. Siegel's misuse of HCPA funds for the purchase of
non-HCPA
equipment resulted in less funds being available
to pay for covered services
delivered to AHCCCS patients
and that the theft of funds which he facilitated
was a
misappropriation of those funds. Berton Siegel, D.O.,
DAB
1467, at 6.
Petitioner, however, contended that there was no nexus
between his
criminal offenses and the delivery of an item
or service for three
reasons: first, HCPA was paid on a
capitated basis without regard to
the delivery of any
specific item or service; second, the funds at
issue
belonged solely to HCPA as an independent contractor, not
as an
agent of Arizona; and third, HCPA, not AHCCCS or
HCFA, was the victim of
Petitioner's offenses.
Petitioner's first argument is based on the undisputed
fact that AHCCCS
reimbursed HCPA on a capitation rather
than a fee-for-service basis.
Petitioner contended that,
under a capitation system, AHCCCS made payments to
HCPA
without regard to delivery of any item or service.
Exceptions at
33. Petitioner argued that consequently
his offenses did not relate to
or follow from the
delivery of any identifiable item or service and did
not
affect reimbursement for any service or item. He
asserted:
"All payments from AHCCCS to HCPA would have
been made regardless of how the
funds of HCPA were
spent." Id. at 34.
We reject this argument. 6/ In arguing that offenses
committed under
a capitation reimbursement system would
not fall within section 1128(a)(1),
Petitioner ignored
the fact that section 1128(a)(1) merely requires that
an
offense be "related to" delivery of an item or service.
As explained
above, this language does not require the
actual delivery of an identified
item or service. In
this case, HCPA contracted to ensure the delivery
of a
range of medical items and services to AHCCCS enrollees
in exchange
for capitation payments from AHCCCS. 7/ A
theft of the funds paid by
AHCCCS to HCPA for the
provision of these items and services is plainly
related
to delivery of such items and services. It is
irrelevant
that HCPA did not have to submit separate claims for
specific
services and items provided to title XIX
recipients. HCPA's right to
AHCCCS capitation payments
arose from its contractual duty to ensure delivery
of
items and services to title XIX recipients. Theft of
these funds
potentially harmed its ability to do so.
Therefore, with respect to the need
to protect the
program, we see no meaningful distinction between
an
offense in a capitation system and in a fee-for service
system.
Further, Petitioner's offense of fraudulent schemes and
practices and
wilful concealment is similarly connected
to the delivery of items and
services. In Petitioner's
plea, he admitted that he--
. . . knowingly concealed the related party
status
of Eyelites . . . pursuant to a scheme or
artifice
to defraud which enabled Neil R. Hirsch . .
. to
have HCPA pay [on a capitated basis]
$60,0000.00 to
Eyelites between November 14, 1983
and February 8,
1984 for approximately 63 pairs of
eyeglasses for
HCPA's
AHCCCS patients for an average cost
of
approximately
$952.38 per pair while Neil
R.
Hirsch's . . .
financial interest in Eyelites
.
. . remained
concealed from AHCCCS.
I.G. Ex. 1, at 3. 8/
Therefore, Petitioner admitted that he acted pursuant to
a scheme to
defraud which enabled him to be paid, by
HCPA, over $900 per pair of
glasses. While Petitioner
protested that, under a capitation system, it
is
inappropriate to calculate a price per item, the apparent
gross
disparity between the price and the item and
Petitioner's admission that he
acted "pursuant to a
scheme or artifice to defraud" is relevant here.
This
disparity indicates that this crime, like the crimes of
facilitation
of theft, enabled Petitioner to benefit to
the potential detriment of HCPA
and HCPA enrollees.
We also reject Petitioner's argument that there was no
nexus between the
offenses and the delivery of an item or
service because the money involved
belonged to HCPA and
not AHCCCS. Petitioner asserted that HCPA was
an
independent contractor rather than an agent of Arizona;
that AHCCCS did
not have a right to recoup capitation
payments if it had confirmed enrollment
for a recipient;
and that the funds in HCPA's account were not
public
funds held in trust. Petitioner concluded therefore that
he
did not misuse public funds. Regardless of whether
these payments
became HCPA funds once they were placed in
a HCPA bank account, the
undisputed fact remains that, in
exchange for these payments, HCPA contracted
to ensure
the delivery to title XIX recipients of certain health
care
items and services. Under HCPA's contract with
AHCCCS, the corporate
officers of HCPA had an obligation,
during the term of the contract, to use
HCPA's funds for
that purpose and not for the benefit of themselves
and
their separate private practices. That obligation is
evidenced
by the terms of Petitioner's guilty plea.
Petitioner pled guilty to
facilitation of theft under
Arizona Revised Statutes . 13-1004 for aiding
"Berton
Siegel's theft of HCPA's monies in violation of
A.R.S.
13-1802(A)(2)." I.G. Ex. 1, at 4. Section
13-
1802((A)(2) provides that a person commits theft "if
without lawful
authority, such person knowingly:"
Converts for an unauthorized term or use . .
.
property of another entrusted to the defendant
or
placed in the defendant's possession for a
limited,
authorized term or use.
Therefore, the fact that these funds may have been the
legal property of
HCPA does not mean that they no longer
had any relation to the reason they
were paid by AHCCCS
to HCPA. Rather, these funds were entrusted to HCPA
and
Petitioner and HCPA's co-owners to ensure the provision
of items and
services under a State health care program.
Finally, we reject Petitioner's argument that there was
no nexus between
his criminal conduct and the delivery of
an item or service because the
victim of his offense was
HCPA, not AHCCCS or HCFA, which administers title
XIX on
the federal level. Petitioner maintained that payments
made
to HCPA were not affected by his offenses and AHCCCS
was not obligated to pay
HCPA any additional sums because
of his offenses. Petitioner contended
that these
payments became "private funds" which were too far
removed from
the delivery of an item or service for there
to be a common sense connection
between the offense and
delivery of HCPA services. Exceptions at
38.
We disagree for the following reasons. First, as we have
previously
held, section 1128(a)(1) only requires that an
offense be "related to"
delivery of an item or service
under a protected program, not that the
program be the
"victim" or be directly or actually harmed. Scollo,
DAB
1498, at 11. Second, under the facts presented by this
case, we
would not conclude that HCPA was the only victim
of Petitioner's
offenses. Certainly, HCPA was a primary
victim as reflected by the
Court's order requiring
Petitioner to make restitution to HCPA.
However, it is
fair also to conclude that title XIX recipients,
AHCCCS,
and HCFA were victimized by Petitioner's crimes. The
theft
of HCPA's funds potentially diminished its ability
to provide appropriate
services to title XIX recipients.
The theft of HCPA's funds meant that state
and federal
funds which had been entrusted to HCPA for the provision
of
such services were unlawfully diverted thereby
injuring AHCCCS and
HCFA. The court's order of
restitution of funds to HCPA appropriately
addressed the
injury of all four of these entities by restoring to
HCPA
funds that had been entrusted to it to use to provide
items and
services to title XIX recipients.
Petitioner's additional exceptions to FFCLs addressing
whether
Petitioner's offenses were related to the
delivery of an item or service
indicate at most harmless,
technical errors in the ALJ Decision.
In Exception 11, Petitioner excepted to FFCL 31, in which
the ALJ
concluded that Petitioner had misappropriated
AHCCCS funds. Petitioner
contended that the money at
issue belonged to HCPA and therefore this FFCL
was not
supported by substantial evidence. We modify and adopt
this
FFCL to avoid any ambiguity the wording may have
created concerning the
technical ownership of the funds
in the HCPA bank account.
31. By signing checks on HCPA's checking
account
for the purchase of equipment for
non-AHCCCS
patients and for services for a
non-AHCCCS
organization, Petitioner misappropriated
funds that
had been entrusted to HCPA by AHCCCS to
pay for
health care to indigent Arizona citizens who
were
enrolled in the AHCCCS program. FFCLs
23-30.
In Exception 7, Petitioner argued that FFCL 9 was
incomplete and
misleading because HCPA was not "prepaid."
9/ Petitioner argued
that this finding was prejudicial
because it allowed the ALJ to ignore the
fact that funds
paid to HCPA belonged to HCPA and not AHCCCS. We
agree
with Petitioner that the I.G. did not contest
Petitioner's
representation that HCPA was not prepaid and
therefore this portion of FFCL 9
is not supported by the
record. However, as explained in our analysis,
the fact
that the funds may have become HCPA's upon payment from
AHCCCS
does not mean that Petitioner, as an owner of
HCPA, could convert those funds
for uses not authorized
by HCPA's contract with AHCCCS. Therefore, the
fact that
HCPA was not prepaid is not relevant to whether
Petitioner's
crimes were related to the delivery of an
item or service. In order to
correctly reflect the
evidence in the record, we adopt the following
modified
version of FFCL 9:
9. AHCCCS operates on a capitated basis.
Ariz.
Rev. Stat. Ann. . 36-2904(A) (1993 and Supp.
1994).
In Exception 12, Petitioner excepted to FFCL 40, in which
the ALJ found
that, under its contract with Eyelites,
HCPA paid $60,000 for 69 pairs of
eyeglasses. Petitioner
argued that this finding is incomplete,
misleading and
demonstrates prejudice because the payment was a
capitated
payment made on the basis of enrollment not
pairs of glasses. While is
appropriate to recognize that
the subcontract payment was made on a capitated
basis, we
conclude, as explained above, that this does not mean
that the
price per pair of glasses is irrelevant here.
We modify FFCL 40, however, to
reflect the capitated
nature of the payment and Petitioner's full
admission
that he received this subcontract payment pursuant to a
scheme
to defraud.
40. Under its subcontract, HCPA paid $60,000
to
Eyelites between November 14, 1983 and February
8,
1984 on a capitation basis for HCPA's
AHCCCS
patients, who received approximately 63 pairs
of
eyeglasses with an average cost of
approximately
$952.38 per pair of glasses. In
his plea agreement,
Petitioner admitted that "a
scheme or artifice to
defraud" "enabled" him to
receive these payments.
I.G. Ex. 1 at 3.
In Exception 14, Petitioner excepted to FFCL 42, in which
the ALJ found
that Petitioner caused AHCCCS funds to be
used for private non-title XIX
purposes. Petitioner
argued that this finding was incorrect, misleading
and
showed prejudice because the funds belonged to HCPA, not
AHCCCS.
As discussed above, we conclude the ALJ properly
found that AHCCCS funds were
entrusted to HCPA for the
provision of items and services to title XIX
recipients.
We modify this FFCL as follows to avoid any ambiguity
about
the technical ownership of the funds in the HCPA
bank account:
42. Petitioner caused funds which had been
paid to
HCPA by AHCCCS to ensure the delivery of
items and
services to title XIX recipients to be
used for
private, non-Medicaid purposes. FFCL
25-41.
In Exception 15, Petitioner argued that FFCL 45 is
incomplete and
misleading because it does not say that
Petitioner's restitution was to HCPA,
not AHCCCS. As
explained above, the fact that restitution was paid
to
the HCPA Bankruptcy Trustee does not mean there is no
connection
between Petitioner's offenses and the delivery
of an item or service under
AHCCCS. Restitution to HCPA
restored, to the extent of the restitution,
HCPA's
ability to provide items and services to title XIX
recipients
pursuant to its contract with AHCCCS.
Therefore, we adopt the following
modified FFCL:
45. The State court placed Petitioner on
three
years probation, commencing July 31, 1992,
and
ordered him to pay restitution in the amount
of
$40,000 to the HCPA Bankruptcy Trustee.
In
addition, the court ordered Petitioner to
pay
$50,000 as reimbursement, a fine of $14,000,
and
other assessments and fees. I.G. Ex. 3 at
3.
For the preceding reasons, we conclude that the ALJ
Decision correctly
held that Petitioner's offenses were
related to the delivery of an item or
service.
III. The ALJ did not err in admitting I.G. Exhibits
12
and 13, and the ALJ's rulings and decision do
not
establish that the ALJ was prejudiced.
Petitioner argued that the ALJ erred by ordering
supplemental briefing and
by admitting I.G Exhibits 12
and 13. Exceptions 2, 13, 18.
Petitioner also asserted
that the ALJ's rulings and conduct during the course
of
the proceeding demonstrate that the ALJ was prejudiced
against
Petitioner and acted unfairly towards Petitioner.
Exceptions 18, 19.
Below we review the sequence of events in the case before
the ALJ.
We then discuss Petitioner's arguments and
explain why we conclude that it
was not an error to admit
Exhibits 12 and 13 and why we conclude that the ALJ
did
not act prejudicially towards Petitioner. We also
consider
Petitioner's exceptions related to these issues.
On September 28, 1994, Petitioner appealed the I.G.'s
decision to exclude
him pursuant to section 1128(a)(1)
and requested a hearing on this
exclusion. The ALJ set a
Prehearing Conference for October 25, 1995 to
discuss
with the parties how the case would proceed. Prior to
that
conference, Petitioner filed a discovery request
seeking 13 categories of
documents including all waiver
requests submitted by Arizona and Illinois,
all DHHS
responses to such waiver requests, and the State plan for
Arizona
approved under title XIX. Petitioner's Request
for Discovery.
After the October 25, 1995 conference, the ALJ set a
briefing schedule
under which the parties were to address
the merits of the issues, the need
for a hearing, and
Petitioner's discovery request. Pursuant to
this
schedule, the I.G. filed a Motion for Summary
Disposition, a
Memorandum in Support of the Inspector
General's Motion for Summary
Disposition, and 11
exhibits. The Petitioner then filed
Petitioner's
Response to the Inspector General's Motion for
Summary
Disposition, Petitioner's Motion for Summary Disposition,
and
Petitioner's Objection to Certain Exhibits
(specifically, Petitioner objected
to I.G. Exhibits 7, 9,
and 11). The I.G. did not reply to
Petitioner's
response.
On March 6, 1995, the ALJ conducted a second Prehearing
Conference and
issued an order based on that conference.
In that order the ALJ (1) reserved
judgment on
Petitioner's objections to I.G. Exhibits 7 and 11 and
excluded
I.G. Exhibit 9; (2) noted that Petitioner had
withdrawn his discovery request
on the basis of the
I.G.'s representation that all the documents
considered
by the I.G. in making the determination to exclude
Petitioner
were already included in the record; (3)
requested the parties to submit
supplemental briefing and
"any documentary evidence" in support of the
arguments in
the briefing on the question of "whether the AHCCCS plan
may
be deemed a state plan approved under Title XIX of
the Act." ALJ Order
for Supplemental Briefing at 4. The
I.G. was ordered to file its
supplemental brief first and
the Petitioner was ordered to respond to the
I.G.'s
submission.
On March 23, 1995, the I.G. filed its Supplemental Brief
and I.G. Exhibits
12 and 13, containing correspondence
concerning approval of the Arizona title
XIX State plan
and portions of that State plan. On March 31,
1995
Petitioner filed his Response to the Inspector General's
Brief,
objecting that the I.G. had "unfairly controlled
documents to surprise and
prejudice Petitioner" and that
Exhibits 12 and 13 should be stricken.
Petitioner argued that the ALJ committed a prejudicial
error when he
admitted I.G. Exhibits 12 and 13, for the
following reasons. First,
Petitioner said the ALJ should
be limited to the record on which the I.G.
based her
decision, which did not include Exhibits 12 and 13, and
the I.G.
should not be permitted to change her position
as to the relevance of these
documents. Second,
Petitioner contended, when the ALJ requested
additional
briefing and exhibits, the ALJ was thereby "sending a
message"
that the record was insufficient to support a
mandatory exclusion and
offering the I.G. a chance to
correct a defect in its case. Third,
Petitioner said,
when Petitioner had previously sought to discover
from
the I.G. materials about Arizona's title XIX State plan
and waivers,
the I.G. had contended that those documents
were not relevant to this
proceeding. According to
Petitioner, the manner in which the I.G.
presented
Exhibits 12 and 13 "deprived Petitioner from the
opportunity to
fully respond" to the exhibits.
Exceptions at 13. Fourth, Petitioner
argued, the I.G.
introduced only portions of the Arizona title XIX
State
plan and waivers while fundamental fairness requires
that, if one
party submits portions of a document into
evidence, the adverse party should
be entitled to submit
additional portions of the document.
Petitioner
contended that he could not introduce portions of
these
documents because the I.G. had refused to produce them
in
discovery. Petitioner relied on Dick v. United States,
339 F.Supp
1231 (D.C. Dist. 1972), for the proposition
that, where both parties do not
have equal access to
documents, the opportunity to submit documents that
the
adversary will not produce is meaningless. Finally, in
his reply
brief, Petitioner noted that the I.G.'s brief
had referred to an
"institutional assumption" that AHCCCS
was an approved State plan under title
XIX. Petitioner
argued that a determination based on such
an
"institutional assumption" constituted a denial of due
process.
These arguments have no merit, for the following reasons:
o The proceeding before the ALJ is
a de novo
proceeding,
not a review of whether the
I.G.
properly imposed
an exclusion based on
the
record before the
I.G. 42 46 C.F.R.
..
1005.15(f),
1005.20(a). Petitioner pointed
to
nothing in the Act
or regulations which
limits
the ALJ to the
record before the I.G. at
the
time of the I.G.
determination.
o The ALJ properly viewed the
question of whether
AHCCCS is a "State health care program"
as
defined by section
1128(h)(1) as a mixed
question of fact and law. Section
1902
establishes
requirements for title XIX
State
plans; section
1115 provides for waivers
of
section 1902
provisions; section
1128(h)(1)
defines
"State health care program."
Applying
these
provisions requires legal analysis
but
also raises a
factual question
regarding
whether any
particular state has an
approved
title XIX
State plan.
o Based on the record before him,
the ALJ
properly
determined that additional
questions
needed to be
addressed in order to
determine
whether
section 1128(h)(1) applied and that
the
resolution of
these questions could be aided
by
documentary
evidence regarding
Arizona's
program. He therefore properly requested
that
both parties
supplement the record. See
42
C.F.R. .
1005.4(b)(3).
o Contrary to what Petitioner
argued in his reply
brief, the ALJ did not improperly use
Exhibits
12 and 13 as
"extrinsic aids" to
statutory
construction; rather, he used them to
make
factual findings
concerning the nature
of
Arizona's
program.
o While the I.G. may have
initially based the
exclusion on a "legal assumption," this
is
irrelevant where
the I.G. ultimately
produced
documentary
evidence to establish that
Arizona
had a State
plan approved under title XIX
and
where Petitioner
had a meaningful
opportunity
to rebut
this evidence. The ALJ gave
both
parties an
opportunity to file
supplementary
memoranda and documentary evidence,
and
Petitioner was
given an opportunity to
respond
to the I.G.
supplemental submission.
o The mere facts that the I.G. did
not produce
Exhibits
12 and 13 pursuant to
Petitioner's
discovery
request and that those
exhibits
contain only
a portion of the State plan
does
not mean that
Petitioner had no
meaningful
opportunity
to rebut this evidence after it
was
produced during
the ALJ proceeding.
Documents
concerning
any Arizona State plan
submittal,
HCFA's
approval of any plan, and any
waivers
under section
1115 are public records
available
to
Petitioner under the federal Freedom
of
Information Act
upon request from HCFA,
which
administers the
Medicaid program.
Similarly,
information
on AHCCCS should be available
from
the State of
Arizona pursuant to its
public
records law, or
from State officials. There
is
no basis for
viewing the I.G. as somehow
the
sole source of
relevant information on
AHCCCS
and its
relationship to any Medicaid
State
plan.
Indeed, given the I.G.'s statement
that
it based its view
of AHCCCS on an
"institutional assumption," there is no
reason
to think that
the I.G. had these documents
in
her possession at
the time of
Petitioner's
discovery
request.
o Petitioner did not seek
additional time to
respond to Exhibits 12 and 13. While
he
alleged that the
documents were incomplete
and
did not show what
the I.G. said they
showed,
Petitioner did
not request that any
additional
parts of
the documents be included in
the
record, nor did
Petitioner renew his
discovery
request. Petitioner's motion to
strike
Exhibits 12 and
13 was based on allegations
of
unfair surprise,
allegations which have
no
merit in light of
the procedures set by
the
ALJ, which
provided Petitioner
adequate
opportunity
to respond.
Thus, we conclude that the ALJ acted properly in
developing the record
here, that Petitioner had an
adequate opportunity to respond, and that
Petitioner was
not denied due process.
We also reject Petitioner's further arguments that the
ALJ was prejudiced
generally against Petitioner. In
Exception 19, Petitioner argued that
the ALJ's prejudice
was demonstrated by the ALJ's failure to
consider
applicable provisions of the statute; the ALJ's failure
to
address arguments raised by Petitioner; the ALJ's
evidentiary rulings; the
ALJ's reliance on the case of
Berton Siegel, D.O., and the ALJ's unfair
comments.
Petitioner's allegation that the ALJ was biased lacks
merit. The law
has long been well-settled that, in order
to disqualify a judge, prejudice or
bias must stem from
an extrajudicial source. The Supreme Court has
held
that:
The alleged bias and prejudice to be
disqualifying
must stem from an extrajudicial source
and result in
an opinion on the merits on some basis
other than
what the judge learned from his
participation in the
case . . . .
United States v. Grinnell Corp., 384 U.S. 563, 583
(1966); see also Tynan
v. United States, 376 F. 2d 761
(D.C. Cir. 1967), cert. denied, 389 U.S. 845
(1967);
Duffield v. Charleston Area Medical Center, 503 F.2d
512,
517 (4th Cir. 1974).
Petitioner argued that the ALJ was prejudiced against him
because the ALJ
had presided in Siegel. 10/ Petitioner
argued that as a result of his
participation in Siegel,
the ALJ had prejudged this case and that it was
improper
for the ALJ to cite the Siegel decision. We disagree
that
the ALJ's participation in Siegel constitutes an
extrajudicial source which
biased the ALJ. The ALJ's
reliance on the holding in Siegel does not
constitute
"prejudice" to Petitioner. Prejudice would result if
the
ALJ used factual information which he gained in the
course of the
Siegel case and which was not part of the
record in this case to reach his
decision. While
Petitioner alleged that the ALJ's statement that
federal
funds were paid directly to HCPA "comes out of the
decision in
Berton Siegel" (Exceptions at 47), Petitioner
provided no cites to either
decision for this allegation
so we are unsure of the text to which Petitioner
is
referring. Possibly, Petitioner was referring to the
portion of
the discussion in which the ALJ paraphrased
his understanding of Petitioner's
argument concerning who
was the victim of Petitioner's offenses. 11/
However, in
his discussion, the ALJ repeatedly acknowledges that
payments
to HCPA were made by AHCCCS and nowhere does he
say that payments were made
to HCPA by HCFA. ALJ
Decision at 11, 12. Therefore, we do not see
the basis
for Petitioner's allegation that the ALJ improperly
relied on a
finding of direct federal payment in the
Siegel case and used that finding to
Petitioner's
detriment.
Petitioner argued that the ALJ's rulings, which favored
the I.G., showed
that the ALJ was prejudiced. We
disagree. The ALJ's rulings do
not meet the requirement
of an extrajudicial source for showing bias.
See Ex
Parte American Steel Barrel Co. and Seaman, 230 U.S. 35
(1913); In
Re International Business Machine Corp., 618
F.2d 923, 929 (2d Cir. 1980);
see also Annotation,
Disqualification of Federal Judge, 2 A.L.R. Fed. 917,
at
927 (1969), noting: "It has been uniformly held or
recognized in
civil proceedings that adverse rulings made
by the judge in the case or
proceeding itself do not
constitute a sufficient basis for his
disqualification
under the statute [pertaining to disqualifications
of
federal judges]."
In the regulatory provisions pertaining to the authority
of the ALJ, the
only reference to an ALJ's conduct
provides that the ALJ "will conduct a fair
and impartial
hearing." 42 C.F.R. . 1OO5.4(a). For the
following
reasons, we conclude that Petitioner allegations do not
show
that the hearing was unfair:
o Petitioner alleged that the
ALJ's prejudice was
demonstrated by his failure to refer to
the
text of the
statutes at issue, by his
failure
to consider
Petitioner's arguments, and by
his
misstatement of
Petitioner's arguments.
While
we have
acknowledged that the ALJ
Decision
would have
been clearer and more responsive
to
Petitioner's
arguments if the ALJ had relied
on
the text of the
statutes, we do not think
that
this demonstrates
extrajudicial prejudice
on
the part of the
ALJ. The issues presented
by
the case have been
complex. A failure
to
address that
complexity with perfect clarity
is
not tantamount to
prejudice.
o Petitioner alleged that the
ALJ's evidentiary
rulings demonstrated prejudice. We
conclude
that his
evidentiary rulings were appropriate.
Therefore, we do not
regard his rulings as
evidence of prejudice. 12/
o Petitioner alleged that the ALJ
made "unfair
comments." As examples he cited the portion
of
the discussion in
which the ALJ wrote
that
Petitioner's
offenses "directly
diminished"
HCPA's
ability to provide health services
(ALJ
Decision at 16,
18) and the ALJ's referral
to
the individual
price of glasses under
the
Eyelites
subcontract. Neither of
these
observations by
the ALJ constitutes prejudice.
As to the price of
the glasses, we
conclude
that
Petitioner himself, by the terms of
his
plea, made this
relevant to the
consideration
of
whether his offense was related to
the
delivery of an
item or service. As to
the
"directly
diminished" phrase, as we held
in
Scollo, DAB 1498,
at 9 and the decision
here,
it is not
necessary to show that the
offense
actually
harmed a protected program or
its
beneficiaries. Here, the theft of
funds
potentially
diminished HCPA's capacity
to
provide items and
services. Under
section
1128(a)(1),
that is sufficient. The fact
that
the ALJ drew a
further inference from
the
evidence does not
constitute prejudice.
In Exception 10, Petitioner also excepted to FFCL 22, in
which the ALJ
found that, between October 1, 1982 and
September 30, 1984, HCPA's sole
source of income was
payments by AHCCCS and interest derived therefrom.
Petitioner argued that this finding was based on the
unproven allegations
of I.G. Exhibit 7, the indictment
filed against Petitioner. Petitioner
alleged that 14 of
the 17 counts in the indictment were dismissed and
the
remainder amended. Petitioner neither specifically
denied the
finding in the FFCL, nor explained why his
plea agreement could not
reasonably be considered an
admission of this particular count.
Further, from the
actual terms of his plea agreement, it can be
inferred
that the funds in HCPA's corporate account were solely
derived
from capitation payments from AHCCCS. I.G. Ex.
1, at 4-5. Thus,
we affirm and adopt FFCL 22.
In Exception 16, Petitioner excepted to FFCL 46 as
irrelevant. That
FFCL states:
46. As part of his plea agreement,
Petitioner
stipulated that he was "on notice that as
a result
of his plea he is subject to exclusion from
Medicare
and other State health care programs as a
health
care provider for a minimum period of at
least five
years." I.G. Ex. 1 at 6.
Petitioner argued that he did not waive his right to
contest an
exclusion.
Whether Petitioner, in his plea agreement, agreed to
waive his right to
contest the exclusion was not the
point of the ALJ finding. However,
the fact that
Petitioner had specific notice at the time of his plea
that,
as a result of his plea, he would be subject to a
mandatory five-year
exclusion is relevant. It undercuts
Petitioner's argument that the Act
does not clearly make
his offenses subject to section 1128(a)(1) and
therefore
he did not have adequate notice of the consequences of
his
decision to plead guilty. Thus, we affirm and adopt
FFCL 46.
In sum, we conclude that the ALJ properly admitted
Exhibits 12 and 13, and
was not prejudiced against
Petitioner.
Conclusion
For the reasons stated above, we affirm the ALJ Decision.
We affirm and
adopt the FFCLs, as modified above.
___________________________
Cecilia Sparks Ford
___________________________
M. Terry Johnson
__________________________
Judith A.
Ballard
Presiding Board Member
1.
We have retained the original numbering scheme of
the
FFCLs. The FFCLs to which Petitioner objected are
considered
later in the decision.
2.
The ALJ Decision identified the year of
AHCCCS
implementation as 1992. However, since the materials
cited
for this FFCL reflect that 1982 was the year of
implementation, we correct
this obvious typographical
error.
3.
Petitioner also took exception to the admission
of
Exhibits 12 and 13. We discuss this exception in the
third
section of the analysis.
4.
In the following section of our analysis, we
explain
why we adopt the portion of FFCL 49 concerning whether
the
offenses were "related to the delivery of an item or
service."
5.
We modify FFCL 21 to reflect that only part of
the
monthly contract payments made to HCPA were made from
federal
funds. Under title XIX, a state has to match
federal funds with a state
share and that state share
would have been paid to HCPA also.
6.
We note preliminarily that Petitioner's assertion
that,
under title XIX, capitation reimbursement can be made
only if a
state has obtained a waiver is not accurate.
Section 1903(m), added to title
XIX in 1976, provides for
reimbursement for title XIX services on a
capitation
basis pursuant to contracts with health
maintenance
organizations and other types of capitated providers.
Therefore, capitation reimbursement, as opposed to fee-
for-service
reimbursement, may be made under title XIX
without a waiver so long as the
standards set forth in
section 1903(m) concerning the provider and the
contract
terms with the provider are met.
7.
The contract between HCPA and AHCCCS, the
authenticity
of which is undisputed, provided that, in exchange for
AHCCCS
payments, HCPA would--
. . . furnish personnel, facilities,
equipment,
supplies, pharmaceutical, and other items
and
expertise necessary for, or incidental to,
the
provision of the medical care services
specified
in Appendix A at locations specified in
Appendix
A to AHCCCS members enrolled with the
Contractor.
Article I, Arizona Health Care Cost Containment System
Contract, I.G. Ex.
8, at 2.
Appendix A specifies that the services HCPA agreed to
provide include
"out-patient health services, laboratory
and x-ray services, pharmacy
services, medical supplies,
medical equipment and prosthetic devices,
inpatient
hospital services, emergency services, emergency
ambulance and
medically necessary transportation,
emergency dental care and extraction,
early and periodic
screening, diagnostic and treatment service, and
all
other services which may be provided under AHCCCS."
8.
We put the phrase "on a capitated basis" in
brackets
where an asterisk appears in the agreement because
another
asterisk at the bottom of the page indicates that
this phrase was to be
inserted there. Initials under
this addition indicate that the parties
agreed to
incorporate it into the agreement.
9.
Under its contract with AHCCCS, HCPA had the right
to
be prepaid if it posted a bond to guarantee its
performance under the
contract. Because HCPA did not
post such a bond, Arizona delayed
payments to HCPA for 30
days "to offset any damages accruing to the State
by
reason of a breach by the Contractor . . . ." Arizona
Department
of Health Services Arizona Health Care Cost
Containment System Contract, I.G.
Ex. 8, at 57.
10.
While Petitioner also argued that the I.G.
had
attempted to prejudice the ALJ against Petitioner,
Petitioner did not
allege that the I.G. did this outside
of the judicial proceedings before the
ALJ.
11.
"According to Petitioner, HCPA, and not AHCCCS,
was the
victim of his crimes since the federal funds at issue
were
directly paid in trust to HCPA." ALJ Decision at
16.
12.
Petitioner pointed out that the ALJ excluded
I.G.
Exhibit 9 in his March 20, 1995 Order for Supplemental
Briefing but
then, in footnote number 2 in the ALJ
Decision, the ALJ admitted I.G.
Exhibits 8-10. We
conclude that the footnote inclusion of I.G. Exhibit
9
was an oversight on the ALJ's part. We therefore delete
I.G.
Exhibit 9 from the record.