Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of: Joyce Faye Hughey, Petitioner,
- v. -
The Inspector General.
Docket No. C-201
Decision No. 1221
DATE: January 25, 1991
FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION
On August 9, 1990, Administrative Law Judge (ALJ) Steven T. Kessel
issued
a decision regarding the Petitioner's exclusion of Joyce Faye
Hughey
(Petitioner) from participation in the Medicare and Medicaid
programs.
1/ Joyce Faye Hughey, DAB Civ. Rem. C-201 (1990)(ALJ
Decision).
The Inspector General (I.G.) advised Petitioner on December
20, 1989 that she
was being excluded for five years as a result of her
conviction in state
court for receiving money misappropriated from a
patient trust fund at the
nursing home for which she was working. The
exclusion was based on
section 1128(b)(1) of the Act, which provides:
The Secretary may exclude . . . [a]ny individual . .
.
convicted, under Federal or State law, in connection with
the
delivery of a health care item or service . . . , of a
criminal
offense related to fraud, theft, embezzlement, breach
of
fiduciary responsibility, or other financial misconduct. 2/
The ALJ held a hearing at which the Petitioner conceded that she had
been
convicted of an offense for which exclusion was authorized, but
contended
that the period of exclusion was unreasonably long. The ALJ
found that
the exclusion for five years was excessive, in light of the
evidence at the
hearing, and reduced the exclusion to one year.
The I.G. requested review of this decision before us pursuant to 42
C.F.R.
498.74 and 498.82. 3/ The I.G. did not take exception to any
particular
finding or conclusion in the decision but objected to how the
ALJ weighed as
mitigating factors the Petitioner's remorse and the
circumstances leading to
the crime.
The ALJ Decision
The ALJ made the following findings of fact and conclusions of law. 4/
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Beginning in 1986, and ending in March, 1987, Petitioner
was
employed as a bookkeeper at the Bellmead Nursing Home in Waco, Texas.
2. Petitioner was hired for this position by her sister, who
was
employed as the administrator of the Bellmead Nursing Home.
3. At the time Petitioner was employed by the Bellmead Nursing
Home,
she was experiencing personal financial hardship.
4. Petitioner's financial problems were the consequence of
an
automobile accident and resulting injuries to Petitioner which
had
occurred in 1984.
5. After beginning her employment at the Bellmead Nursing
Home,
Petitioner learned that her sister was involved in
misappropriating
funds from the patients' trust fund.
6. Petitioner did not report her sister's unlawful acts to
law
enforcement authorities.
7. Petitioner did not report her sister's unlawful acts because of
her
relationship to her sister.
8. Between October and December, 1986, Petitioner's sister
offered
Petitioner money which had been misappropriated from the patients'
trust
fund.
9. The total amount of misappropriated money Petitioner accepted
from
her sister was about $875.00.
10. Petitioner's decision to accept money from her sister was
motivated
in part by her relationship with her sister, and by her
financial
circumstances in 1986.
11. In February, 1988, Petitioner learned that her acceptance
of
misappropriated funds was being investigated by law
enforcement
authorities.
12. On November 18, 1988, a criminal information was filed
against
Petitioner in Texas state court.
13. Petitioner was charged in the information with two
misdemeanor
offenses of unlawfully appropriating money in an amount greater
than
$200.00, and less than $750.00.
14. On December 2, 1988, Petitioner pleaded guilty to a
misdemeanor
charge of theft of an amount between $200.00 and $750.00.
15. Petitioner was sentenced to twelve months' probation, and to
a
probation payment of $350.00.
16. Petitioner has no record of criminal offenses other than the
charge
to which she pleaded guilty.
17. Petitioner has accepted responsibility for her unlawful conduct
and
has acknowledged that it was wrong.
18. The criminal offense of which Petitioner was convicted is
a
criminal offense as described in section 1128(b)(1) of the
Social
Security Act. Social Security Act section 1128(b)(1).
19. Pursuant to section 1128(b)(1) of the Social Security Act,
the
Secretary of the Department of Health and Human Services (the
Secretary)
has authority to impose and direct an exclusion against Petitioner
from
participating in Medicare and Medicaid. Social Security Act,
section
1128(b)(1).
20. The Secretary delegated to the I.G. the duty to impose and
direct
exclusions pursuant to section 1128 of the Social Security Act.
48 Fed.
Reg. 21662 (May 13, 1983).
21. On December 20, 1989, the I.G. notified Petitioner that she
was
being excluded from participation in the Medicare and Medicaid
programs
as a result of her conviction of a criminal offense related to
fraud,
theft, embezzlement, breach of fiduciary responsibility, or
other
financial misconduct.
22. Petitioner was notified that she was being excluded for five
years
pursuant to section 1128(b)(1) of the Social Security Act.
23. The exclusion provisions of section 1128(b)(1) of the
Social
Security Act establish neither minimum nor maximum exclusion terms
in
those circumstances where the I.G. has discretion to impose and
direct
exclusions. Social Security Act, section 1128(b)(1) - (14).
24. A remedial objective of section 1128(b)(1) of the Social
Security
Act is to protect the integrity of federally funded health
care
programs, and their recipients and beneficiaries, from individuals
who
demonstrate by their conduct that they cannot be trusted to deal
with
program funds or to provide items or services to recipients
and
beneficiaries. Social Security Act, section 1128.
25. An additional remedial objective of section 1128 is to
deter
individuals from engaging in conduct which jeopardizes the integrity
of
federally-funded health care programs. Social Security Act,
section
1128.
26. Petitioner was convicted of a serious criminal offense.
Finding
14; see 42 C.F.R. 1001.125(b)(1).
27. The offense of which Petitioner was convicted involved an
isolated
circumstance of wrongful conduct which occurred over a brief period
of
time. Finding 8; see 42 C.F.R. 1001.125(b)(1).
28. The amount of money misappropriated by Petitioner, while
not
insubstantial, did not constitute a large sum.
29. Petitioner's misconduct was in some respects the consequence
of
emotional duress, and is at variance with her record for
honesty.
Finding 10; see 42 C.F.R. 1001. 125(b)(4), (6).
30. There is little likelihood that Petitioner will in the
future
repeat her unlawful conduct. Findings 16, 17, 29; see 42
C.F.R.
1001.125(b)(6).
31. The sentence imposed on Petitioner for her crime did not
involve
incarceration. Finding 15; see 42 C.F.R.
1001.125(b)(5).
32. The five year exclusion imposed and directed against Petitioner
is
excessive. Findings 26-30.
33. The remedial considerations of section 1128 of the Social
Security
Act will be served in this case by a one year exclusion.
ALJ Decision at 2-5 (citations to record omitted).
The ALJ pointed out that no regulations have yet been adopted
under
section 1128(b)(1), under which Petitioner was excluded. The
current
regulations apply only to exclusions for crimes related to the
Medicare
or Medicaid programs, not permissive exclusions for offenses such
as
Petitioner's, which involve misconduct in other government programs
or
health care services. The ALJ, nevertheless, looked to
those
regulations for "broad guidelines" to determine the factors to
consider
in setting the appropriate length of an exclusion. Id. at 6-7.
5/
Those regulations provide that the I.G. will consider:
(1) The number and nature of the program violations and
other
related offenses;
(2) The nature and extent of any adverse impact the
violations
have had on beneficiaries;
(3) The amount of damages incurred by the Medicare,
Medicaid
and the social services programs;
(4) Whether there are any mitigating circumstances;
(5) The length of the sentence imposed by the court;
(6) Any other factors bearing on the nature and seriousness
of
the program violations; and
(7) The previous sanction record of the suspended party
under
the Medicare or Medicaid program.
42 C.F.R. 1001.125(b). The findings of the ALJ demonstrated that
he
considered each of these points.
The ALJ also noted that regulations have been proposed which
would
supersede the existing regulations for program-related convictions
and
apply to permissive exclusions, if adopted. See 55 Fed. Reg.
12205
(1990). The ALJ declined to rely on these proposed regulations,
despite
the urging of the I.G., because (1) it would not be appropriate
to
assume that they will be adopted without change, and (2) it is not
clear
that they would apply retroactively even if adopted. ALJ Decision
at 7,
n.4; see also David Cooper R.Ph., DAB Civ. Rem. C-51, at 8, n.4
(1990).
Analysis
The I.G. objected to consideration of the Petitioner's remorse and
the
circumstances of the crime in evaluating the reasonableness of
the
exclusion period, arguing that standard had no basis in law. In
support
of this objection, the I.G. cited the two remedial purposes of
the
exclusion remedy mentioned above, protecting the programs and
deterring
other possible wrongdoers. The I.G. also pointed out that the
ALJ's
role was only to determine whether the exclusion period was
reasonable,
i.e., "not extreme or excessive." I.G.'s Brief (Br.) at
4-5; 43 Fed.
Reg. 3744 (1983). The I.G. agreed that, in so doing, the
ALJ was to use
the factors listed at 42 C.F.R. 1001.125 as guidelines,
including
mitigating circumstances. Id. at 5. The I.G.'s
description of the
legal standard to be applied thus appears to be
substantially the same
as the standard on which the ALJ relied. The
difference lies in what
effect the proposed regulations should be given and
what weight various
mitigating facts should be assigned.
The I.G. argued that no weight should be given to expressions of
remorse
as a mitigating factor, because such expressions are self-serving
and
not a reliable measure of trustworthiness. Id. at 5-6; but see
Roderick
L. Jones, R. N., DAB Civ. Rem. C-230, at 7 (1990)
(Petitioner's
repentance and remorse are relevant to trustworthiness.).
The I.G.
concluded that "[t]here is nothing in the record but Ms.
Hughey's
alleged remorse to offset the fact that she participated in a scheme
to
steal money from elderly patients in a nursing home." Id. at 6.
We find no merit in the I.G.'s arguments. The ALJ did not exonerate
the
Petitioner from responsibility for her actions, and in fact
emphasized
that the offense was "serious and unforgivable." ALJ
Decision at 9. He
did, as the finder of fact, assess the credibility of
the Petitioner and
judge that she had "credibly asserted that she had learned
never to
repeat her unlawful conduct." Id. at 8. The ALJ's
findings based on
witness demeanor and credibility are entitled to particular
weight since
we lack the opportunity to make observations of testimony.
See, e.g.,
Kopack v. NLRB, 668 F.2d 946, 953-55 (7th Cir. 1982), cert. den
456 U.S.
994; Butler-Johnson Corp v. NLRB, 608 F.2d 1303, 1305 (9th Cir.
1979).
Resolving such credibility issues is the function of the ALJ.
Myers v.
Secretary of Health and Human Services, 893 F.2d 840, 846 (6th
Cir.
1990) and cases cited therein.
In addition, remorse was not the only mitigating factor on which the
ALJ
relied. The ALJ also found that Petitioner's demonstration of
remorse
was supported by evidence of trustworthy behavior before and after
the
offense, which the ALJ characterized as a "brief and isolated
incident."
ALJ Decision at 8. The ALJ found that the circumstances of
her crime
were unusual and unlikely to recur. Id. 6/ The I.G. is
thus incorrect
in asserting that only her statements of remorse before the
ALJ offset
the fact of Petitioner's crime in weighing her future
trustworthiness.
Contrary to what the I.G. argued, the message of the ALJ's
decision
plainly is not that "mere expressions of remorse" can thwart
the
consequences intended by Congress. I.G. Br. at 7.
The I.G. sought to require the ALJ to apply the provisions of the
proposed
regulations to define which mitigating factors should have
been
considered. I.G. Br. at 8; 55 Fed. Reg. 12205, 12217.
7/ The short
answer is that, since proposed regulations have no
legal force until
adopted, the ALJ was not bound by them. The
Administrative Procedure
Act (APA) requires generally that proposed
regulations be published,
followed by an opportunity for comment. 5
U.S.C. 553(b) and (c). Only
after consideration of these comments shall
a final rule be issued which
may be effective, i.e., have legal force, no
less than 30 days
thereafter. 5 U.S.C. 553(c) and (d). 8/ Until
final publication, the
regulations may well be changed or may never be
adopted at all.
It would be unfair to Petitioner to bind the ALJ to a standard for
which
the Petitioner may not have prepared in presenting her evidence and
of
which she could not have had notice. The Tenth Circuit has pointed
out
that a proposed rule does not serve as notice of the final rule:
At the point of publication of the proposed rule the agency
is,
of course, not bound to the issuance of the rule in any
exact
form. . . . [U]ntil publication is made of the rule
actually
adopted, the public of course does not know which course
the
agency will take or how to prepare for the regulation.
Rowell v. Andrus, 631 F.2d 699, 702, n.2 (10th Cir. 1980).
Therefore,
the ALJ was not restricted to the list of mitigating factors in
the
proposed regulation. 9/
The I.G.'s position seems to be that once a conviction has
been
demonstrated, untrustworthiness is sufficiently proved to require
a
five-year exclusion and that any reduction in that period reflects
a
"sympathy" standard not derived from the law. I.G. Br. at 6,
9-12. In
arguing that remorse and personal circumstances are not valid
grounds to
reduce an exclusion period, the I.G. cited Frank J. Haney, DAB
Civ. Rem.
C-156 (1990). In that case, the ALJ reduced an exclusion
period from
five years to three, also over the I.G.'s objection,
despite
Petitioner's conviction for a felony. While rejecting the
stress of
Petitioner's involvement in a lawsuit as mitigation, because it
might
recur, the ALJ considered other factors including character
evidence,
Petitioner's mother's illness and death, and Petitioner's otherwise
good
record.
In Haney, as here, the ALJ determined that a conviction alone does not
end
the discussion, since a "criminal conviction in 1988 does not
necessarily
evidence that [Haney] . . . is, at this time, an
untrustworthy
individual." Id. at 8. If anything, the Haney decision
suggests
that the ALJ in each case viewed the evidence of mitigation
individually and
carefully weighed it against the factors favoring
exclusion. The ALJ
reasonably determined that Petitioner, who completed
a one-year probation for
a misdemeanor theft, should not undergo a
longer exclusion than Mr. Haney,
who was convicted of two felonies in a
tax fraud scheme spreading over
several years for which he was still
serving five years probation.
This does not mean that we would have reduced the exclusion here
as
substantially as the ALJ did if we were making the decision in the
first
instance. Our review of the record indicates that there are
factors
which the ALJ may not have fully considered (but which the I.G. did
not
raise) which lead us to question the reduction of the period
of
exclusion to one year. For example, Petitioner testified that
she
turned the patient account books for the Bellmead Nursing Home over
to
her sister. Transcript (Tr.) at 72. It is not clear whether
the ALJ
considered the fact that this may have contributed to further thefts
and
that Petitioner could have instead set up a system for accounting
for
the patient funds such as the system she testified she later used
in
other nursing homes. Tr. at 90.
We view our role as a limited one, however. Our guidelines state
that
our standard of review on disputed issues of fact is "whether the
ALJ's
decision is supported by substantial evidence" and on disputed
legal
issues is whether "the ALJ's decision was erroneous." DAB
Guidelines,
Appendix B at 28.29 (1989). The I.G. did not challenge the
ALJ's
findings of fact, and we have concluded that the I.G.'s
arguments
concerning the legal standard applied are without merit.
Thus, given
the limited scope of our review, we must affirm the ALJ's
decision.
Conclusion
Based on the foregoing analysis, we affirm the ALJ decision.
Alexander G. Teitz
Theodore J. Roumel
Judith A. Ballard Presiding Panel Member .1. The
exclusion
extends to three federally-assisted state health care programs
defined
in section 1128(h) of the Social Security Act (Act), including Title
XIX
(Medicaid); we follow the ALJ decision in referring to them
collectively
as "Medicaid".
2. The permissive exclusion authority applied here was
added by the
Medicare and Medicaid Patient and Program Protection Act of
1987, Pub.
L. No. 100-93, section 2.
3. In our Acknowledgment of Request for Review, we advised
the
parties that we could dismiss the appeal only for the reasons listed
at
42 C.F.R. 498.83(b), none of which appeared to apply. Petitioner
was
given five days to object or the request for review would be
granted.
Petitioner's submission objected generally to review but gave no
grounds
or argument to support the objection. The submission was
entirely
addressed to responding to the I.G.'s attack on the ALJ's
ruling. We
therefore affirm our initial conclusion that no legal
grounds exist to
dismiss the I.G.'s appeal and proceed to address the
substantive points
raised on appeal.
4. Since neither party challenged any of the numbered
findings and
conclusions and we affirm the ALJ decision below, we affirm and
adopt
the ALJ's findings and conclusions.
5. We have previously held that the I.G. could properly
impose
sanctions before promulgating regulations, because the statute
is
self-implementing. Jack W. Greene, DAB No. 1078 (1989), aff'd sub
nom.,
Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990).
(Although
Greene involved the revised provisions on mandatory exclusions, we
see
no reason to treat the permissive exclusion provisions
differently.) We
have also held that the ALJ may properly turn to the
existing
regulations for general guidance in permissive exclusion
cases. Vincent
Baratta, M.D., DAB No. 1172 at 11, n.7 (1990); see also
David Cooper,
R.Ph., DAB Civ. Rem. C-51, at 8 (1990). Neither party
contests these
points.
6. We think the I.G.'s concern that financial need
not be given much
weight in determining trustworthiness is warranted.
Such need may
recur. Here, however, the financial need was viewed by
the ALJ as
merely one of a set of circumstances which he found was not likely
to
recur.
7. The proposed regulations would limit the mitigating
factors which
could reduce a permissive exclusion period below five years to
the
following:
(i) The individual or entity was convicted of 3 or
fewer
misdemeanor offenses, and the entire amount of financial loss
to
a government program or to other individuals or entities due
to
the acts that resulted in the conviction and similar acts
is
less than $1,500;
(ii) The record in the criminal proceedings,
including
sentencing documents, demonstrates that the individual had
a
mental, emotional or physical condition, before or during
the
commission of the offense, that reduced the
individual's
culpability;
(iii) The individual's or entity's cooperation with Federal
or
State officials resulted in others being convicted or
excluded
from Medicare or any of the State health care programs; or
(iv) Alternative sources of the type of health care items
or
services furnished by the individual or entity are
not
available.
8. The APA provides exceptions for interpretative rules
and
statements of policy, but the I.G. did not contend that any
exception
would apply here. Clearly, the Secretary has issued the
proposed
regulations in compliance with APA procedure and their
preamble
identifies them as implementing regulations, not mere
interpretations.
55 Fed. Reg. 12205. During the period before final
regulations are
issued, the proposed regulations state the Secretary's
intention that
these proposals "provide guidance" in imposing
sanctions. Id. at 12215.
While the ALJ might thus seek such guidance,
he cannot be held bound to
impose on Petitioner a limitation on acceptable
evidence of mitigating
circumstances which does not appear in the statute or
in any regulation
presently in force.
9. We also note that the I.G. presented nothing which
convincingly
shows that application of the factors in the proposed regulation
would
have made a difference here. The I.G. argued that these
regulations
would have barred evidence of Petitioner's later remorse and of
the
circumstances motivating the crime if not appearing in the
criminal
record. The I.G. did not, however, assert that the criminal
record
contained no evidence of Petitioner's remorse or the
circumstances
considered relevant by the ALJ. As the ALJ found,
Petitioner was
sentenced to one-year probation, not incarceration.
Finally, we note
that limiting the ALJ's consideration to only those factors
listed in
the proposed regulations would appear to be unwise, based on
our
experience in deciding cases. It is extremely difficult to
anticipate
what all relevant circumstances might be. The approach in
the existing
regulations allows for consideration of "[a]ny other factors
bearing on
the nature and seriousness of the program