SUBJECT: Stacy Ann Battle, D.D.S., and Stacy Ann Battle, D.D.S., P.C.,

Petitioners,

The Inspector General

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

By notice of appeal filed June 17, 2002, Stacy Ann Battle, D.D.S., and Stacy Ann Battle, D.D.S., P.C., (Battle) appealed the May 10, 2002 decision of Administrative Law Judge (ALJ) Keith Sickendick affirming the determination of the Inspector General (I.G.) to exclude Battle from participation in federal health care programs for a period of 10 years. Stacy Ann Battle, D.D.S., P.C., DAB CR900 (2002) (ALJ Decision). Battle argued that permissive rather than mandatory exclusion provisions should have been applied to her case. She also argued that it was not reasonable for the I.G. to impose a 10-year exclusion, based on three aggravating factors, because the factors, according to Battle, should be considered either negated or mitigated by other circumstances in her case. Further, Battle contended that the I.G. was barred from imposing an exclusion here because the I.G. previously sent Battle a letter stating that its investigation had been completed, no exclusion would be implemented, and no further action was anticipated. For the reasons explained below, we find no merit to any of Battle's arguments and we therefore affirm the ALJ Decision imposing a 10-year exclusion.

Background

The following material facts are not disputed and are presented briefly here to provide a general framework for understanding the decision, not as a substitute for the ALJ's findings. The individual petitioner was a dentist in Missouri and the corporate petitioner was her professional corporation, both of which were authorized to participate in federal health care programs. ALJ Decision at 2, Findings of Fact 1-3. Battle pled guilty to conversion of government money based on a "false entry on a patient record . . . supporting an application for payment under a federal health care program." ALJ Decision at 2, Finding of Fact 4, quoting I.G. Ex. 5, at 1. Her sentence included four months confinement in a halfway house. ALJ Decision at 2, Finding of Fact 5; Battle Br. at 1. The I.G. notified Battle by letters dated July 31, 2001 that both petitioners were being excluded from participation in federal health care programs for 10 years. ⁽¹⁾ ALJ Decision at 2, Finding of Fact 6.

Issues

Battle excepted to the ALJ's Conclusion of Law 3 that Battle "must" be excluded under mandatory exclusion provisions at section 1128(c)(3)(B). Battle Br. at 2; ALJ Decision at 3.

Battle also excepted to Findings of Fact 5 and 8 and Conclusion of Law 10. The ALJ concluded that the I.G. could increase the period of exclusion from the mandatory minimum of five years to the 10 years which was imposed here because three aggravating factors were present: (1) a government financial loss of more than $1,500; (2) a sentence that included incarceration; and (3) adverse action against Battle by Missouri. ALJ Decision at 2-4, Finding of Fact 8 and Conclusions of Law 5-8. The ALJ further concluded that a 10-year exclusion was not unreasonable. Id. at 4, Conclusion of Law 10. Battle argued that the second factor was not present or should have been mitigated in some way, because her confinement in a community-based halfway house did not constitute "traditional" incarceration. Battle Br. at 4-5. Battle also argued that 10 years was unreasonably long because Battle cooperated in a civil settlement with the federal government to pay $85,000 and because shorter exclusion periods have been imposed on other providers who allegedly caused more program loss than she had. Battle Br. at 5-6.

Standard of review

In an appeal of an ALJ decision, our standard of review on a disputed issue of law is whether the decision is erroneous; for a disputed issue of fact, the standard is whether the ALJ decision is supported by substantial evidence in the whole record. 42 C.F.R. � 1005.21(h). Under the substantial evidence standard, the reviewer must examine the record as a whole and take into account whatever in the record fairly detracts from the weight of the decision below. The reviewer does not, however, reweigh the evidence nor substitute his or her judgment for that of the initial decision-maker. John (Juan) Urquijo, DAB No. 1735, at 4 (2000).

1. Mandatory exclusion provisions apply.

Section 1128(a)(1) of the Social Security Act (Act) mandates exclusion of "any individual that has been convicted of a criminal offense related to the delivery of an item or service under [Medicare] or any State health care program." Battle did not deny that she was convicted of a criminal offense related to the delivery of a health care service under a State health care program. She argued, nevertheless, that mandatory exclusion required that the conviction be for a felony, while she was convicted of a misdemeanor.

Battle argued that the I.G. had failed to show why the cited provision is "more applicable" than the permissive exclusion provision for those "convicted . . . (A) of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct - (I) in connection with the delivery of a health care item or service . . . ." Battle Br. at 3-4, citing section 1128(b)(1)(A)(I) of the Act. The ALJ correctly concluded that the I.G. had no choice but to exclude pursuant to section 1128(a) because Battle's conviction was for program-related fraud. ALJ Decision at 9-10. The same analysis set out in a prior Board decision relied on by the ALJ is squarely on point here:

The statute as enacted by Congress draws a distinction between felony and misdemeanor offenses only for fraud committed in connection with the delivery of a health care item or service in a health program other than Medicare or State health care programs. See sections 1128(a)(3) and 1128(b)(1)(A). Section 1128(a)(1), which pertains to criminal offenses related to the delivery of an item or service under such programs, does not draw a distinction by degree of offense. Consequently, the plain language of the statute is inconsistent with Petitioner's proposed interpretation.

Lorna Fay Gardner, DAB No. 1733, at 5 (2000) (emphasis in original).

2. The 10-year exclusion period is not unreasonable.

The minimum required period of exclusion for mandatory exclusions under section 1128(a)(1) is five years. Section 1128(c)(3)(B) of the Act. The regulations governing mandatory exclusions also provide that no such exclusion will be for less than five years. 42 C.F.R. � 1001.102(a). A longer period may be imposed in the presence of certain aggravating factors of which the three relevant here are as follows:

• The acts resulting in the conviction or similar acts, resulted in financial loss to a government program or to one or more entities of $1,500 or more. (The entire amount of financial loss to such programs or entities, including any amounts resulting from similar acts not adjudicated, will be considered regardless of whether full or partial restitution has been made);


• The sentence imposed by the court included incarceration; [and]


• [T]he individual or entity . . . has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion.

42 C.F.R. � 1001.102(b)(1), (5), and (9). Battle argued that the factors either did not apply or were mitigated in a way that should have reduced the appropriate exclusion period. Battle Br. at 6.

The ALJ recognized that his review did not extend to substituting his judgment of the proper length of exclusion to be imposed for that of the I.G. but rather to determining whether the period imposed is within a reasonable range given the aggravating and mitigating circumstances found to apply. ⁽²⁾ ALJ Decision at 11. The Board has indeed previously taken notice that the regulations intended to narrowly constrict ALJ review of the I.G.'s selection of a period of time to exclude an individual, as follows:

The preamble to the regulations governing exclusions states:

The OIG's broad discretion [over exclusions] is also reflected in the language of [� 1001.2007(a)(1)(ii)], restricting the ALJ's authority to review the length of an exclusion imposed by the OIG. Under that section, the ALJ's authority is limited to reviewing whether the length is unreasonable. So long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule. We believe that the deference [� 1001.2007(a)(1)(ii)] grants to the OIG is appropriate, given the OIG's vast experience in implementing exclusions under these authorities.

Joann Fletcher Cash, DAB No. 1725, at 16-17 (2000), quoting 57 Fed. Reg. 3298, 3321 (1992); see also Barry D. Garfinkel, M.D., DAB No. 1572 (1996). ⁽³⁾

a. Agreement to a civil settlement does not undercut the loss amount.

Battle argued that her agreement to pay $85,000 to settle a federal civil case against her arising from the fraud of which she was convicted showed cooperation and mitigated the actual financial losses. Battle Br. at 5-6. The ALJ rejected this argument, noting that the regulation specifically provides that restitution may not be considered as mitigating the loss amount. ALJ Decision at 13, citing 42 C.F.R. � 1001(b)(1) and (c). Battle failed to address this regulatory restriction in briefing before us. The Board has previously addressed a claim that later restitution should mitigate the significance of the amount of a fraud and found it unpersuasive, for the following reason:

The aggravating factor presupposes that a person who has stolen a significant amount is likely to be less trustworthy than a person who has stolen a small amount. We find no merit to Williams' suggestion that, in effect, the magnitude of the theft becomes irrelevant if the government succeeds in obtaining recovery after discovering its loss.

Paul W. Williams, Jr. and Grand Coteau Prescription, DAB No. 1785, at 2 (2001). We find no error in the ALJ's conclusions that the I.G. proved the presence of the aggravating factor of program loss over $1,500 and that the civil settlement does not constitute a relevant mitigating factor.

b. Placement in a halfway house constitutes incarceration.

Battle argued that her sentence did not constitute "traditional incarceration" because she was ordered to serve four months in a halfway house and four months under house arrest, rather than being confined in a prison. Battle Br. at 1-2, 4-5. The ALJ rejected this argument because the regulation specifically provides that "incarceration" is defined to include non-prison confinements including house arrest. ALJ Decision at 13, citing 42 C.F.R. � 1001.2. In this regard, Battle also excepted to the reference in Findings of Fact 5 and 8 that she was sentenced to "confinement" on the basis that a community-based sanction like a halfway house placement is not confinement. Battle Br. at 1-2.

We conclude that the phrase "any type of confinement, including but not limited to, community confinement, house arrest and home detention" in the definition of "incarceration" is, on its face, broad enough to include placement in a halfway house which by nature is more intrusive than placement for detention in one's own home. We conclude that the ALJ did not err in finding that the I.G. had proved the presence of the aggravating factor of incarceration and that uncontested evidence in the record supports Findings of Fact 5 and 8.

Battle argued that the selection of a halfway house rather than a prison facility should at least mitigate the aggravating factor. Battle Br. at 5. While this is not a mitigating factor, it may nevertheless be relevant to the extent that Battle means that less weight might be given to the aggravating factor of incarceration than would be the case if she had been imprisoned or had served a longer term. See, e.g., John (Juan) Urquijo at 9. We are not persuaded, however, that the ALJ gave excess weight to the incarceration factor in assessing the reasonableness of the five-year extension of the mandatory exclusion period.

c. The aggravating factor of adverse action by the State Medicaid agency is not mitigated by Battle's entry into probation by settlement with the State Dental Board.

Battle did not dispute that she was subject to an adverse action by the State of Missouri which terminated her participation in the State Medicaid program. ALJ Decision at 3, Finding of Fact 8. On appeal, Battle did allege that she entered a settlement agreement with the State Dental Board for a three-year probationary period on her dental license so that she "is fully licensed to practice dentistry in the State of Missouri." Battle Br. at 5. Battle suggested that this fact demonstrates her cooperation with "the various authorities in this matter," and therefore was in some sense mitigating. Id. However, the adverse action against her by the State Board would seem to be an additional example affirming the applicability of the aggravating factor at 42 C.F.R. � 1001.102(b)(9). It does not undercut the finding that the termination of her participation in Medicaid by the State agency constitutes an aggravating factor.

d. The exclusion periods imposed on other individuals do not show that Battle's exclusion for 10 years is not within a reasonable range of exclusion periods.

Battle also argued that we should treat the 10-year exclusion here as unreasonable because "far less stringent periods of exclusion have been meted out to health care providers who caused far greater and more visible evidence of program loss." Battle Br. at 6. The ALJ declined to consider this argument given that Battle cited no authority for it. ALJ Decision at 13. The three exclusions which Battle cited on appeal as support for the factual premise of the argument are not analogous to Battle's situation.

In Arie Oren, M.D., DAB CR490 (1997), a 10-year exclusion had originally been upheld. After Oren produced new evidence on appeal that substantiated the existence of a mitigating factor (cooperation with the government as specified in the regulations), the ALJ, on remand, reduced the exclusion period to seven years. Arie Oren, M.D., DAB CR564 (1999), on remand from Arie Oren, M.D., DAB No. 1650 (1998); see also Howard Schreibstein, D.P.M., DAB CR517 (1998) (again a regulatory mitigating factor was present). Frank A. DeLia, DAB No. 1620 (1998), involved a permissive exclusion unlike the mandatory exclusion which, as we have confirmed above, applies to Battle.

On the other hand, the Board has, as the ALJ noted, many times upheld exclusions for 10 years in appropriate cases, most recently in Susan Malady, R.N., DAB No. 1816 (2002). See ALJ Decision at 13.

We conclude that Battle has not shown that 10 years is outside the reasonable range of exclusions appropriate to the circumstances here.

4. The I.G. is not estopped from imposing this exclusion.

On February 9, 2001, the I.G. sent a letter to Battle. This notice, signed by the Director of Health Care Administrative Sanctions, Office of Investigations, contained the following statements:

You were advised that an exclusion action was being proposed under section 1128(a)(1) of the Social Security Act (Act) based on the fact that you were convicted in the United States District court, Western District of Missouri, of a program-related offense.

After a complete review of the information in the file, we have determined that an exclusion action from Medicare participation under the authority of section 1128(a)(1) of the Act will not be implemented. We have closed our case file and anticipate no further action on this matter at this time.

Pet. Ex. 1.

Before the ALJ, the I.G. portrayed this as a "conditional letter" to the effect that "the I.G. was contemplating subsequent action against her" and "that no final decision had yet been made." ALJ Decision at 7. The ALJ rejected this interpretation as "tortured." Id. Before the Board, the I.G. argued that the letter was "factually correct in that the information Mr. Anderson had at the time he sent the letter, the OIG did not have sufficient basis to impose mandatory exclusion" and that only later did the I.G. determine that sufficient evidence existed to impose a mandatory exclusion. I.G. Br. at 15. It is not entirely clear what new evidence was received or at what point in time, since the record indicates that Battle was convicted on October 19, 1999 of the offense triggering the mandatory provisions and sentenced over a year before the February 9, 2001 letter. ALJ Finding of Fact 4.

The subsequent letter imposing the 10-year mandatory exclusion was dated July 31, 2001, and did not refer to the earlier decision. I.G. Ex. 1. The exclusion was signed by a different official, Ms. M. Joanne Lanahan, Reviewing Official of Health Care Program Exclusions, Office of Counsel to the Inspector General. The I.G. asserted in its appeal brief that Ms. Lanahan is the official authorized to issue exclusion notices whereas the signatory of the first letter lacked "final decision-making authority on program exclusions." I.G. Br. at 15. Two inferences are possible from these assertions: that the first signatory acted beyond his authority in sending a letter saying no exclusion was anticipated or that he had sufficient authority to send that letter but he was misinformed factually about Battle's case at the time. In any case, the February 2001 letter does expressly reserve some possibility of future change, stating only that no further action was anticipated at the time it was written.

The I.G. has never explained satisfactorily how the decision about imposing an exclusion came to be changed. Such an explanation, however, would not change the legal situation. Battle may well be correct in her speculation that, at the time of the letter, the author believed that permissive provisions applied so that the decision of whether to impose an exclusion was discretionary. Battle Br. at 7-8. Battle cited no authority, however, which would permit an error by any official at the Office of the I.G. to override a statutory mandate to exclude. To the argument that estoppel cannot avail where the I.G. had no choice but to exclude once the statutory conditions for mandatory exclusion were met, Battle responded that this assumed that mandatory instead of permissive provisions apply. Battle Br. at 7. That assumption is correct in this case, however, for the reasons we explained in the first section of this decision. Therefore, we agree with the ALJ's conclusion that the Office of the I.G. cannot be estopped by prior statements of its agents, even if erroneous at the time or in light of additional events, from performing mandatory duties imposed by statute.

Battle argued that the ALJ erred in his conclusion that he was without power to estop the I.G., on the grounds that the regulations empower the ALJ to recognize collateral estoppel against respondents under 42 C.F.R. � 1003.114. Battle Br. at 7. Hence, according to Battle, it is "only fair" that both parties should be subject to the estoppel doctrine. Id. The attempted parallel fails. Collateral estoppel serves to avoid waste and inconsistency by precluding relitigating in an administrative forum an issue of liability already finally resolved in a court proceeding. In the criminal proceedings, Battle had ample opportunity and motivation to litigate the elements of the offense alleged and had only to raise a reasonable doubt to prevail. The Secretary could reasonably conclude that repeating that trial before permitting the federal government to take the steps mandated to protect patients in federal health programs (and the federal fisc) from those already criminally convicted would be wasteful. By contrast, Battle seeks to use estoppel as a weapon to prevent the federal government from enforcing legal requirements, and to do so not because the I.G. was proven wrong in a judicial proceeding but because a government agent mistakenly indicated that a step that later proved mandatory was not going to be taken. As the ALJ pointed out, Supreme Court precedent has made it highly unlikely that estoppel can ever be used to compel payment contrary to law. See ALJ Decision at 8, and citations therein. In any case, Battle failed to prove or even assert the minimum factual prerequisites of estoppel, in particular detrimental reliance.

Battle also suggested that the February 2001 letter raised issues of jurisdiction as well as estoppel in that the I.G. "did not refer to any specific regulations allowing the I.G. to reverse what appears to be its final decision." Battle Br. at 7. We do not find this approach any more persuasive than the direct estoppel tack. The I.G. is authorized, and indeed mandated, by statute to exclude those who have been convicted of the defined offenses under section 1128(a)(1) of the Act. Battle has shown no authority for the proposition that the I.G. is divested of this authority by sending a letter to an individual subject to mandatory exclusion expressing a present intent not to exclude.

Finally, Battle objected to the absence of a specific numbered finding on the estoppel issue. Battle Br. at 6. The ALJ's treatment of the estoppel issue in the body of his discussion did not prejudice Battle. The ALJ concluded unequivocally that "[e]stoppel does not bar the exclusions in this case." ALJ Decision at 7. He based this conclusion on a thorough analysis of Battle's arguments and the relevant portions of the record. Id. at 7-9. We find no error in his conclusion.

Conclusion

For the reasons explained above, we affirm the ALJ Decision, his Findings of Fact and Conclusions or Law, and the 10-year period of exclusion imposed therein. We also adopt the following additional Conclusion of Law Number 11:

The I.G. is not estopped from imposing the 10-year exclusion in this case.

Judith A. Ballard

Donald F. Garrett

Marc R. Hillson
Presiding Board Member

1. The corporate entity's exclusion is derivative of and coextensive with the individual's exclusion under section 1128(b)(8) of the Act, based on her undisputed ownership interest. We therefore do not distinguish between the two petitioners further in this decision except where necessary for clarity.

2. The situation is somewhat different where an ALJ finds that the I.G. has not proven an aggravating factor which was considered in setting the proposed length of exclusion or that a petitioner has proven a mitigating factor that was not considered. In such situations, the ALJ must consider those regulatory factors proven on the record, rather than those considered originally by the I.G. in determining whether the proposed length of exclusion is reasonable. See, e.g., Gary Alan Katz, R.Ph., DAB No. 1842, at 6-9 (2002); John (Juan) Urquijo at 7-11. In the present case, the ALJ concluded that the I.G. had proven all three aggravating factors and agreed with the I.G. that Battle failed to prove any mitigating factor.

3. The ALJ stated that he was unable to find a "clear statement of what constitutes the reasonable range" of mandatory exclusion periods and concluded that it is "from the minimum of 5 years to a maximum of permanent exclusion." ALJ Decision at 11. Considering the range in this sense would mean that any exclusion period between five years and a permanent exclusion would be within a reasonable range and upheld in every case, which is inconsistent with the regulatory intent reflected in the preamble which states that "[s]o long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule." See e.g., Cash at 17, quoting 57 Fed. Reg. 3298, 3321 (1992). Thus, a "reasonable range" refers to a range of exclusion periods that is more limited than the full statutory range and that is tied to the circumstances of the individual case. If the ALJ determines that the length of the exclusion imposed by the I.G. is within this range under the circumstances as found by the ALJ, he may not change it even if he believes that another exclusion period is more reasonable. In the present case, we find that the ALJ's statements are harmless error, because he proceeded to discuss the reasonableness of the length of Battle's exclusion based on the proven aggravating factors and because he properly evaluated not merely the number of factors but the total circumstances to determine how much extension was warranted. See ALJ Decision at 11-12, citing Barry D. Garfinkel, M.D., DAB No. 1572 (1996).