SUBJECT: Jason Hollady, M.D.,
a/k/a Jason Lynn Hollady,

Petitioner,

The Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Jason Hollady, M.D. (Petitioner) appealed a June 3, 2002 decision by Administrative Law Judge (ALJ) Steven T. Kessel granting summary disposition for the Inspector General (I.G.). Jason Hollady, M.D., a/k/a/ Jason Lynn Hollady, DAB CR912 (2002) (ALJ Decision). The ALJ Decision affirmed the I.G.'s determination that Petitioner should be excluded for a period of 10 years from participation in all federal health care programs as defined in section 1128B(f) of the Social Security Act (Act), including Medicare and Medicaid.

The ALJ determined that a five-year exclusion was mandatory because Petitioner was convicted, under Michigan law, of a criminal offense occurring after August 21, 1996, in connection with the delivery of a health care item or service. The ALJ further determined that the five-year additional period of exclusion imposed by the I.G. was within a reasonable range given the presence of two aggravating factors, although the ALJ found no factual support for a third aggravating factor relied on by the I.G. On appeal, Petitioner did not dispute that a five-year exclusion was mandated based on his conviction. Petitioner argued, however, that no additional period of exclusion was warranted.

For the reasons discussed below, we conclude that the length of the 10-year exclusion imposed by the ALJ is not within a reasonable range of exclusion periods under the circumstances here, but that an eight-year exclusion is reasonable. ⁽¹⁾

The record for our decision includes the record before the ALJ and the parties' submissions on appeal.

Applicable Law

Petitioner was excluded from participation in federal health care programs under section 1128(a)(3) of the Act. Section 1128(a)(3) mandates exclusion of-

Any individual or entity that has been convicted for an offense which occurred after the date of enactment of the Health Insurance Portability and Accountability Act of 1996, under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, State, or local government, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

August 21, 1996 is the date of enactment of the Health Insurance Portability and Accountability Act of 1996, Public Law 104-191.

Section 1128(c)(3)(B) of the Act provides generally that the minimum period of an exclusion under section 1128(a) shall be not less than five years. 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). The regulations further provide that specified factors may be considered in lengthening the period of an exclusion beyond the five-year minimum for a mandatory exclusion. 42 C.F.R. � 1001.102(b).

The aggravating factors on which the I.G. relied in this case were: whether Petitioner's conviction, or similar acts, resulted in financial loss to a government program or one or more entities of $1,500 or more (section 1001.102(b)(1)), whether the acts that resulted in the conviction were committed over a period of one year or more (section 1001.102(b)(2)), and whether the sentence imposed by the court included incarceration (section 1001.102(b)(5)).

Only if any of the aggravating factors justifies an exclusion longer than five years may mitigating factors be considered as a basis for reducing the period of exclusion to no less than five years. 42 C.F.R. � 1001.102(c). The regulations provide that only the mitigating factors listed at 42 C.F.R. � 1001.102(c) may be considered by an ALJ. Petitioner did not assert that any mitigating factors existed in his case.

Factual Background

The following summary of the undisputed facts is intended to provide a general framework for understanding the decision and is not intended to substitute for the ALJ's findings.

On May 24, 2000, a criminal information was filed against Petitioner in a Michigan State court charging him with multiple criminal offenses. On January 16, 2001, a judgment was entered against Petitioner, convicting him of Counts 8 and 11 of the information based on his guilty plea. Each count was described as Health Care Fraud under Michigan law for submission of false claims. Count 11 listed June 11, 1997, as the date of the service allegedly falsely claimed.

On August 31, 2001, the I.G. notified Petitioner that she had determined to exclude him. The I.G. advised Petitioner that he was being excluded because of his conviction of a criminal offense as defined under section 1128(a)(3) of the Act. The I.G. asserted that there existed three aggravating factors in Petitioner's case which justified imposing an exclusion for more than the five-year minimum that is mandated in cases of exclusion that involve section 1128(a)(3). The I.G. advised Petitioner that she had determined to exclude him for a period of 10 years.

The ALJ Decision

The ALJ Decision, affirming Petitioner's 10-year exclusion, was based on the following six numbered Findings of Fact and Conclusions of Law (FFCLs), which appear as headings in the ALJ Decision:

1. A basis exists to exclude Petitioner pursuant to section 1128(a)(3) of the Act.

2. An exclusion of more than five years may be reasonable where the exclusion is authorized by section 1128(a)(3) of the Act and if there are aggravating factors that are not offset by mitigating factors.

3. An excluded individual has a right to a de novo hearing.

4. The I.G. proved the presence of two aggravating factors.

a. The I.G. proved that the acts resulting in Petitioner's conviction, or similar acts, resulted in financial loss to a government program or to one or more entities of $1,500 or more (42 C.F.R. � 1001.102(b)(1)).

b. The I.G. failed to prove that the acts that resulted in Petitioner's conviction, or similar acts, were committed over a period of one year or more (see 42 C.F.R. � 1001.102(b)(2)).

c. The I.G. proved that Petitioner's sentence for his crimes included a period of incarceration (42 C.F.R. � 1001.102(b)(5)).

5. Petitioner did not allege or prove the presence of any mitigating factors.

6. A 10-year exclusion is reasonable.

In support of FFCL 4.a., the ALJ stated that the "court which sentenced Petitioner for his crimes ordered, as one element of Petitioner's sentence, that he pay restitution to Blue Cross/Blue Shield of Michigan in the amount of $347,463." ALJ Decision at 6. The ALJ stated that it was reasonable to conclude from this that "the sentencing court found that Petitioner had engaged in unlawful activities which caused Blue Cross/Blue Shield of Michigan to incur a substantial financial loss" and that "the amount of damage caused by Petitioner exceeded the threshold level of $1,500" for applying the aggravating factor. The ALJ noted that Petitioner disputed that the restitution amount in the court order measures accurately the extent of his unlawful conduct or related acts. He discussed this issue in evaluating the reasonableness of the length of the exclusion imposed by the I.G. Specifically, he stated:

I am not persuaded [by the I.G.] that the restitution amount in this case establishes the precise losses that were sustained by Blue Cross/Blue Shield of Michigan. There is no evidence in the record of this case that would establish how the sentencing court determined the restitution amount. Therefore, I do not hold that Petitioner caused Blue Cross/Blue Shield of Michigan to sustain losses of $347,463.

On the other hand, the restitution ordered by the court is prima facie evidence that Petitioner caused Blue Cross/Blue Shield of Michigan to sustain very substantial losses. It is reasonable to infer that the court would not have ordered restitution of so large an amount unless it concluded that Petitioner's crimes and related conduct had a very sustantial adverse impact on the health care insurer.

ALJ Decision at 6-7. The ALJ rejected Petitioner's assertion that the amount was based on a flawed audit by Blue Cross/Blue Shield of Michigan that he was challenging in judicial proceedings, because Petitioner had introduced no evidence that "would show that the audit - if indeed one was conducted - was flawed or produced inaccurate results" and because Petitioner had signed the Order of Probation and had thereby "agreed to comply with the restitution order and accepted the restitution amount at a time when it was in his interest to do so." ALJ Decision at 7.

In evaluating what weight to give to the aggravating factor related to Petitioner's incarceration, the ALJ stated:

I find this relatively lengthy sentence to be evidence that Petitioner's crimes were significant. Petitioner asserts - without offering evidence to support his assertion - that he was allowed to treat patients during business hours during the period of his incarceration. Even assuming that assertion to be true, Petition nevertheless received substantial jail time for his crimes and that is strong evidence of their seriousness.

Id.

Issues on Appeal

On appeal, Petitioner took exception only to FFCLs 4 and 6. With respect to FFCL 4a., Petitioner asserted that the finding, and consequently the entire ALJ Decision, was premature. Petitioner argued that any reliance on the probation order was premature since the amount of Petitioner's restitution was still being considered by the Michigan State Circuit Court and a final restitution order had not yet been entered. As he did before the ALJ, Petitioner questioned the methodology employed by Blue Cross/Blue Shield of Michigan (Blue Cross) to arrive at the amount of loss resulting from Petitioner's actions. Petitioner noted that while the ALJ "discredited" the restitution amount offered by the I.G. in this case, the ALJ nonetheless inferred that the amount of restitution was prima facie evidence that Petitioner's crimes caused Blue Cross to incur substantial financial losses. Petitioner's Appeal Brief (P. App. Br.) at 3-4. Petitioner disputed the ALJ's determination that Petitioner's signature on the Order of Probation was, in effect, an agreement with its findings. Petitioner asserted that the court's examination of the restitution issue would support his position that his crimes resulted in very little financial loss to Blue Cross/Blue Shield. He noted that the total of all of the 23 counts of false claims for which he was charged in the information was only $1,200, less than the $1,500 threshold. Petitioner asked that the ALJ Decision be stayed and that the case be sent back to the ALJ pending final court resolution of the amount of restitution.

Petitioner also questioned the underlying basis of FFCL 4c. Petitioner conceded that he had been sentenced to nine months incarceration but noted that he served only 10 weeks, during which time he was on work-release, available to treat patients during normal business hours five days a week. Petitioner questioned the ALJ's analysis of this issue, contending that the ALJ had determined that there was no evidence of Petitioner's work release, but that the Order of Probation contained the work release provision. Petitioner noted that the ALJ had cited the Order of Probation in his decision and, thus, should have been aware of the work release provision. Given his relatively brief incarceration and concurrent availability to serve his community, Petitioner asserted, the ALJ should not have relied on this aggravating factor to increase the length of the exclusion. P. App. Br. at 2.

Petitioner also argued more generally that no extension of the mandatory five-year period of exclusion was warranted based on the two remaining aggravating factors, and, therefore, the 10-year period was unreasonable.

The I.G.'s response supported the ALJ Decision. The I.G. did not take exception to the ALJ's finding in FFCL 4b. that the I.G. did not prove that the offense or similar acts occurred over a period of more than one year.

Our standard of review on a disputed conclusion of law is whether the ALJ Decision is erroneous. Our standard of review on a disputed finding of fact is whether the ALJ Decision is supported by substantial evidence on the record as a whole. 42 C.F.R. � 1005.21(h).

Below, we discuss each of the exceptions raised by Petitioner. We affirm without further discussion those findings of fact and conclusions of law to which no exception was made.

1. The ALJ's finding that the I.G. proved that the acts resulting in Petitioner's conviction, or similar acts, resulted in financial loss to a government program or to one or more entities of $1,500 or more is supported by substantial evidence.

We agree with Petitioner that the ALJ may have attributed more significance to Petitioner's signing of the Order of Probation than warranted. On its face, the Order indicates that the $347,463 was not a final restitution amount. Specifically, the Order states: "Court reserves . . . final restitution pending further information." I.G. Ex. 3, at 1. No evidence in the record refers to the amount as a final amount. The Judgment of Sentence lists "$.00" under "RESTITUTION AMOUNT" (although it also incorporates by reference the Order of Probation which contains the $347,463 figure). ⁽²⁾

Thus, the record as a whole does not support a finding that the restitution amount was final. This does not, however, provide a basis for overturning the ALJ Decision. The ALJ specifically indicated in his decision that he was not treating the amount in the probation report as establishing the precise amount of the restitution. Instead, he treated it as evidence that the amount of harm caused to Blue Cross/Blue Shield by Petitioner's offenses and similar acts was substantial (and more than the $1500 required to establish the existence of the aggravating factor).

The ALJ also relied on Petitioner's failure to provide any evidence to dispute the figure in the Order of Probation. Petitioner had asserted to the ALJ during a pre-hearing telephone conference on December 10, 2001, that the restitution amount was "open for review" and that he hoped to have a final restitution figure in February 2002. ALJ December 10, 2001 Order and Schedule for Filing Briefs and Documentary Evidence at 2. In light of this, the ALJ gave the parties "a liberal briefing schedule which would allow the parties time to resolve the issue of the amount of restitution." Id. He advised Petitioner that, when he received the final restitution order, he should send a copy to I.G. counsel, and Petitioner agreed to do so. Id. He also set a schedule for each party to file a brief "and supporting evidence, if any." Id.

On February 12, 2002, the I.G. moved for summary disposition, arguing among other things that Petitioner had provided no evidence in support of his assertions. In his April 16, 2002 response, Petitioner made numerous assertions about the $347,643 figure, including that the audit by Blue Cross/Blue Shield used unreliable statistical sampling methods. Petitioner also asserted that the court had "stayed any payments" to Blue Cross/Blue Shield to provide Petitioner an opportunity to perform his own audit, that an independent audit has now been completed with the report yet to be written, that no evidence of intentional misbilling was found, and that a copy of this report would be forwarded "as soon as it is received." P. Br. at 5. ⁽³⁾ Petitioner provided no documentary support for any of his assertions about the Blue Cross/Blue Shield audit, the independent audit, or the related court proceedings. The ALJ Decision was issued on June 3, 2002 (almost two months after Petitioner's response brief), but he still had not submitted any independent audit or any other evidence in support of his assertions. Given the lengthy time period which Petitioner was given to present evidence in support of his assertions, the ALJ was reasonable in going to decision at that point. Even if the restitution figure in the Order of Probation was not final, it was the only evidence in the record on restitution amount.

We recognize that Petitioner is appearing pro se, and the I.G. did not explicitly dispute Petitioner's assertions about further proceedings regarding restitution amount. Such a dispute was, however, implicit in the position that the I.G. took regarding the effect of the Order of Probation, and the ALJ's Order provided for the submission of supporting evidence generally, not just a final restitution order. Moreover, the ALJ Decision had mentioned the lack of any evidence in the record to support Petitioner's assertions. On appeal, Petitioner alleged that court proceedings to decide a final restitution amount had been scheduled (and then rescheduled) and offered to submit evidence in support of his assertions. He implied that he had thought the ALJ and I.G. wanted to see only a final order by the court. However, he still did not actually submit any evidence that the court proceeding is ongoing or even a copy of an independent audit report that might show that, in fact, there is a genuine dispute about the restitution amount that is material to the issues before us. Thus, we have no reason to think that further delay of this proceeding is warranted.

Accordingly, we affirm and adopt FFCL 4a.

2. The ALJ's finding that the I.G. proved that Petitioner's sentence for his crimes included a period of incarceration is supported by substantial evidence.

Petitioner is correct that the sentencing report, submitted as I.G. Exhibit 3, on its face shows that, starting January 15, 2000 (a few days after the beginning date of his sentence on January 12, 2000), Petitioner was on a work release program. See I.G. Ex. 3. Thus, while the ALJ was correct that Petitioner did not provide evidence of the work release, the record as a whole did contain such evidence in an I.G. Exhibit.

The fact that Petitioner was on a work release program is irrelevant, however, to the issue of whether his sentence included incarceration. The term "incarceration" is defined in the regulations to mean "imprisonment or any type of confinement with or without supervised release, including, but not limited to, community confinement, house arrest and home detention." 42 C.F.R. � 1001.2. Thus, the evidence regarding work release does not undercut the ALJ's finding that the I.G. proved that the aggravating factor of "incarceration" existed.

Similarly, the alleged fact that Petitioner may not in fact have served the full nine-month period of incarceration to which he was sentenced is irrelevant in determining whether the aggravating factor existed. Under the regulation, the aggravating factor exists if the "sentence imposed by the court included incarceration." 42 C.F.R. � 1001.102(b)(5).

Accordingly, we affirm and adopt FFCL 4c.

3. The ALJ erred in concluding that a 10-year exclusion is reasonable.

In reviewing the length of an exclusion period beyond a mandatory five-year period, the regulation at 42 C.F.R. � 1001.2007(a)(1) limits an ALJ review to the issue of whether the length of the exclusion is reasonable. The preamble to the final regulations stated: "So long as the amount of time chosen by the [I.G.] is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule." 57 Fed. Reg. 3298, 3321 (Jan. 29, 1992). Board decisions have recognized, however, that the ALJ review is a de novo review and, therefore, the ALJ's determination of whether the amount of time is within a reasonable range must be based on the facts as found by the ALJ, including whether the aggravating factors alleged by the I.G. were proved. See, e.g., Barry D. Garfinkel, M.D., DAB No. 1572 (1996). As the Board noted in Gary Alan Katz, R.Ph., DAB No. 1842 (2002), the preamble to the regulations on mandatory exclusions further states that "[a]n aggravating factor is one that does not automatically exist in every case, but when it does exist, justifies a longer period of exclusion. . . . To be an aggravating factor, we agree that the impact must be more than minimal, that is, it must have been significant . . . ." 57 Fed. Reg. at 3315.

Given that I.G. did not prove one aggravating factor alleged here, the ALJ was required to reassess the appropriateness of imposing more than the minimum period of exclusion given the existence of only two aggravating factors. The ALJ nonetheless determined that the absence of one of the aggravating factors made no difference in the length of the exclusion. As we said with respect to a similar conclusion in Katz:

This conclusion is difficult to reconcile with the Department's view, expressed in the preamble language quoted above, that each aggravating factor provides a basis for lengthening the mandatory five-year period. Given this language, some part of the additional five years that the I.G. added to the five-year mandatory exclusion period was necessarily attributable to the aggravating factor at section 1001.102(b)(2). Conversely, one would generally expect that the absence of one of the three aggravating factors on which the I.G. relied should result in a downward adjustment in the length of the exclusion.

Katz at 7-8.

The basis upon which the ALJ concluded that a 10-year exclusion was reasonable here was that the two remaining aggravating factors had aspects that he found indicate that Petitioner is untrustworthy: the period of incarceration to which Petitioner was sentenced and the amount of the restitution. Nothing in the ALJ Decision indicates, however, that the ALJ accorded some additional weight to both remaining aggravating factors beyond what the I.G. accorded them, given the facts as developed before him. To the contrary, the ALJ indicated that, unlike the I.G., he did not accept the figure in the probation order as establishing the precise amount of the restitution. Moreover, the record does not support a conclusion that the particular circumstances surrounding these aggravating factors are so exceptional as to justify the same exclusion period as the I.G. imposed based on three aggravating factors. ⁽⁴⁾

Thus, some reduction in the 10-year exclusion imposed by the I.G. was required in view of the ALJ's finding that the I.G. failed to prove an aggravating factor under section 1001.102(b)(2).

4. We conclude that an exclusion period of eight years is a reasonable period under the particular circumstances here.

In setting the 10-year period of exclusion, the I.G. relied on the finding that the period during which the offenses occurred was from August 25, 1995 to June 11, 1997, a period roughly one and one half times the one-year period required in order to prove an aggravating factor under section 1001.102(b)(2). The ALJ found that the I.G. did not prove this factor, and the I.G. did not take exception to this finding. Moreover, there is no evidence that, in setting the 10-year period of exclusion, the I.G. took into account the fact that the sentence included work release. This is a circumstance relevant in weighing the aggravating factor since it is an aspect of the sentencing judge's evaluation of Petitioner; compared to a nine-month period with no release it has less weight.

On the other hand, given our analysis above about the restitution amount in the Order of Probation, we conclude that the evidence in the record supports the ALJ conclusion that the harm to Blue Cross/Blue Shield was substantial. The sentence of incarceration for nine months, even with the work release, also is more than a token incarceration and, in that sense, relatively substantial, as the ALJ found.

Reassessing the appropriateness of imposing more than the minimum period of exclusion based on our analysis above, we conclude that an exclusion period of eight years is reasonable.

Conclusion

Based on the preceding analysis, we affirm and adopt FFCLs 1 through 5. We modify FFCL 6 as follows:

6. An exclusion period of 10 years is not within a reasonable range. An exclusion period of eight years is reasonable.

Cecilia Sparks Ford

Marc R. Hillson

Judith A. Ballard
Presiding Panel Member

1. To expedite the resolution of this case, we are reaching this question rather than remanding the case to the ALJ. The Board has the option under 42 C.F.R. � 1005.21(g) of issuing a decision or remanding a case to the ALJ.

2. Since on its face the restitution amount was not finally determined by the court, we do not agree with the I.G. that Petitioner's arguments are a collateral attack on the court proceedings, barred under 42 C.F.R. � 1001.2007. Instead, Petitioner has alleged that he is moving forward in court to challenge the preliminary amount determined by the court. He did not ask us to find a different amount of restitution, but only to wait until the court finally sets an amount.

3. This response was titled "The Petitioner's Motion for Immediate Revocation of Suspension and Denial of Motion for Summary Disposition Brief in Support." Although the date on the front is February 12, 2002, it was signed on a date that appears to be April 16, 2002 and was received April 24, 2002.

4. This does not mean that, under other circumstances, an ALJ could not reasonably decide that the remaining aggravating factors should be given more weight than the I.G. gave them (for example, based on new evidence), so that the length of the exclusion imposed by the I.G. is within a reasonable range even where the I.G. fails to prove an aggravating factor on which she relied.