DATE: March 4, 1998

In the Case of:

Arie Oren, M.D.,

Petitioner,

- v. -

The Inspector General

Civil Remedies CR490

App. Div. Docket No. A-98-2

Decision No. 1650

___________________________________

Arie Oren, M.D. (Petitioner) appealed the December 1, 1997 decision of Administrative Law Judge (ALJ) Joseph K. Riotto in Arie Oren, M.D., DAB CR490 (1997) (ALJ Decision). The ALJ affirmed the I.G.'s determination to exclude Petitioner for a period of 10 years from Medicare, Medicaid, Maternal and Child Health Services Block Grant and Block Grants to States for Social Services programs pursuant to section 1128(b)(1) of the Social Security Act. The ALJ found that an exclusion under section 1128(b)(1) was authorized based on Petitioner's conviction of certain criminal offenses in federal district court. In addition, the ALJ found that the I.G. had proved the presence of three aggravating factors that established Petitioner to be untrustworthy to provide care to beneficiaries and recipients of federally-funded health care programs. The ALJ further found that Petitioner did not prove the presence of any mitigating factor. Accordingly, the ALJ determined that the 10-year exclusion imposed by the I.G. was reasonable.

On appeal, Petitioner argued that an exclusion was not authorized under section 1128(b)(1). Petitioner also argued that the exclusion should not apply to his nephrology practice since the acts which gave rise to the exclusion occurred in another area of medical practice. Petitioner further argued that what he characterized as his limited role in the criminal activities of which he was convicted should be taken into consideration in weighing the aggravating factors. Finally, Petitioner argued that there were two mitigating factors which justified a reduction in the length of the exclusion. In support of the latter argument, Petitioner furnished evidence not in the record before the ALJ, asserting that the evidence should be admitted by the Board because he received ineffective assistance of counsel in the proceedings before the ALJ.

For the reasons discussed below, we reject Petitioner's arguments that the exclusion was not authorized, that the exclusion should not apply to his nephrology practice and that his role in the criminal activities should be considered in weighing the aggravating factors. However, we find that the new evidence Petitioner provided to establish the existence of the mitigating factors is relevant and material and that there are reasonable grounds for Petitioner's failure to furnish the new evidence in the proceedings before the ALJ. Accordingly, we remand the case to the ALJ to determine, based on the new evidence, whether one of the two alleged mitigating factors existed and if so, whether a reduction in the 10-year exclusion is warranted.

We do not remand the case with respect to the second alleged mitigating factor since Petitioner admitted that the evidence he furnished was not sufficient to establish the existence of this factor without additional proceedings. There is no basis for permitting additional proceedings before the ALJ, however. We note that Petitioner requested that this decision be held in abeyance until final review of his conviction. However, we decline to do so. If Petitioner's conviction is reversed or vacated on appeal, he is entitled to retroactive reinstatement in the Medicare program. See 42 C.F.R. . 1001.3005.(a)(1).

BACKGROUND

Under section 1128(b)(1) of the Act, the Secretary may exclude--

[a]ny individual or entity that has been convicted, 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 program operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

The implementing regulations at 42 C.F.R. . 1001.201(b)(1) provide that an exclusion imposed under section 1128(b)(1) of the Act shall be for a period of three years, unless specified aggravating or mitigating factors are present which form a basis for lengthening or shortening the period of exclusion. The aggravating factors are specified in section 1001.201(b)(2); the mitigating factors are specified in section 1001.201(b)(3).

The I.G. imposed the exclusion at issue here based on Petitioner's 1995 conviction of racketeering and criminal forfeiture under federal law. These charges related to a scheme by Petitioner and his co-defendants whereby they staged automobile accidents and reported these accidents to various insurance companies, including health insurers, to collect fees for services that were either not needed or never provided. The 10-year exclusion imposed by the I.G. began January 7, 1997.

PETITIONER'S EXCEPTIONS

Petitioner took exception to the following four findings of fact and conclusions of law (FFCLs) in the ALJ Decision:

16. The I.G. is authorized to exclude Petitioner pursuant to section 1128(b)(1) of the Act.
20. Petitioner did not prove the presence of any mitigating factor.
21. The evidence which relates to the aggravating factors proved by the I.G. establishes Petitioner to be untrustworthy to provide care to beneficiaries and recipients of federally-funded health care programs.
22. A ten-year exclusion of Petitioner is reasonable.
Below, we first discuss Petitioner's exception to FFCL 16. Next, we discuss Petitioner's exception to FFCL 21. We then turn to a discussion of his exception to FFCL 20. Petitioner did not make any independent argument in support of his exception to FFCL 22, which he said followed from his exceptions to the other FFCLs. Petitioner did not take exception to the remaining FFCLs, which we hereby affirm without further discussion.

DISCUSSION

1. The ALJ correctly found that the I.G. is authorized to exclude Petitioner pursuant to section 1128(b)(1) of the Act. In excepting to FFCL 16, Petitioner argued that his exclusion was not authorized under section 1128(b)(1) on the ground that the acts with which he was charged did not involve any federally funded programs but rather private insurance companies. Petitioner made the same argument before the ALJ. The ALJ found, based on the wording and the legislative history of this provision, that it gave the I.G. authority to permit the exclusion of individuals or entities convicted of criminal offenses which are not related to Medicare or Medicaid or the other state health care programs. The Board reached the same conclusion in a decision cited in the ALJ decision, Chander Kachoria, R.Ph., DAB 1380 (1993). Petitioner did not advance any cogent reason why the Board should reach a different conclusion here.

Petitioner also argued here that the 1996 amendment of section 1128(b)(1) shows that the pre-existing provision was ambiguous. This is plainly incorrect. As the ALJ noted in his decision, the 1996 amendment created a new section mandating a minimum exclusion of five years for any felony conviction for the type of offense previously described at section 1128(b)(1), and retained the authority for permissive exclusions where there was a misdemeanor conviction. This amendment (on which the ALJ did not rely in imposing the exclusion) would have required the I.G. to exclude Petitioner for a minimum of five years instead of authorizing the I.G. to impose an exclusion of three years or more, as the earlier provision did. The purpose of the amendment was plainly not to clarify any ambiguity in the earlier provision. Accordingly, we affirm FFCL 16.

2. The fact that the acts of which Petitioner was convicted did not occur in his nephrology practice does not invalidate the ALJ's conclusion that Petitioner was generally untrustworthy to provide care to beneficiaries and recipients of federally-funded health care programs.

In excepting to FFCL 21, Petitioner contended that the acts of which he was convicted did not occur in his primary area of medical practice, which was in the area of nephrology (treatment of patients on dialysis). Thus, according to Petitioner, the exclusion should not apply to this practice since the I.G. failed to prove Petitioner to be generally untrustworthy.

Petitioner did not raise this argument before the ALJ. The applicable regulations state that the Board "will not consider any issue not raised in the parties' briefs, nor any issue in the briefs that could have been raised before the ALJ but was not." 42 C.F.R. . 1005.21(e). Since Petitioner did not even allege that this issue could not have been raised before the ALJ, it is not properly before the Board. In any event, the Board has addressed this argument in prior decisions, concluding that--
Congress intended that any exclusion imposed by the Secretary would apply to all items or services for which an excluded party potentially could file Medicare or Medicaid reimbursement claims. Thus, the Secretary (and his delegatees, the ALJ and this Board) do not have authority to tailor an exclusion to permit an excluded party to claim reimbursement for particularized items or services.
Narinder Saini, M.D., DAB 1371 (1992) at 9; see also, Walter J. Mikolinski, Jr., DAB 1156 (1990). Accordingly, we conclude that this argument does not provide a basis for reversing FFCL 21.

3. Petitioner's role in the criminal activities of which he was convicted may not properly be considered in weighing the aggravating factors.
Petitioner argued on appeal that he "was not the central figure" in the criminal activities of which he was convicted. Petitioner's Reply to the I.G.'s Response in Opposition to Petitioner's Exceptions at 3. Petitioner asserted that he was merely a contract physician for the medical centers in question, had no financial interest in the centers, and was not aware of the staged accidents. Petitioner submitted three affidavits from a private investigator concerning statements supporting Petitioner's assertions that the investigator elicited from owners or employees of the medical centers. Id., Ex. 1, 2 and 3. Petitioner took the position that his limited role in the criminal activities should be taken into consideration in weighing the aggravating factors in his case. Although Petitioner did not specifically identify any FFCL to which this argument related, it arguably relates to FFCL 21, which addresses the effect of the aggravating factors.

We conclude that there is no basis for consideration of the circumstances of the underlying conviction in weighing the aggravating factors. Petitioner did not raise this argument before the ALJ. Pursuant to 42 C.F.R. . 1005.21(e), since Petitioner did not allege that this issue could not have been raised before the ALJ, it is not properly before the Board, nor is the evidence submitted in support of this argument admissible. In any event, even if Petitioner's role in the criminal activities of which he was convicted was limited, this would not in any way undercut the existence of the three aggravating factors or establish that Petitioner was not untrustworthy. Accordingly, we conclude that this argument does not provide a basis for reversing FFCL 21.

4. The new evidence submitted by Petitioner is relevant and material, and there are reasonable grounds for Petitioner's failure to adduce this evidence before the ALJ.
In excepting to FFCL 20, Petitioner took the position that, due to the ineffective assistance of counsel, two mitigating factors which were present in his case were not established: that his "cooperation with Federal or State officials resulted in . . . [o]thers being convicted . . . ," (42 C.F.R. . 1001.201(b)(3)(iii)), and that "[a]lternative sources of the type of health care items or services furnished by the individual or entity are not available" (42 C.F.R. . 1001.201(b)(3)(iv)). Petitioner had argued before the ALJ that his cooperation with federal authorities qualified as a mitigating factor under section 1001.201(b)(3)(iii). The ALJ found that there was no evidence to support this argument, since the record showed at most that the prosecuting authorities with whom Petitioner had cooperated considered the information he supplied to be valuable. See ALJ Decision at 10. Petitioner did not dispute that the record before the ALJ did not support a finding that this mitigating factor existed. However, on appeal to this Board, Petitioner submitted a copy of the sentencing transcript, in which the Assistant U.S. Attorney stated in support of a motion to depart from the sentencing guideline range (which was granted) in pertinent part as follows:

. . . the defendant appears . . . having been convicted of RICO or pled guilty to two separate RICO offenses. In one of the cases, . . . he cooperated to the extent in that case alone to earn such a motion. He provided information regarding that case. He testified at a trial arising out of that case at which other co-defendants were convicted and provided other information that the Government considered helpful.

Petitioner's Reply to the I.G.'s Response in Opposition to Petitioner's Exceptions, Ex. 4, at 8-9. Petitioner also alleged that he persuaded one of his co-defendants to plead guilty and submitted the first page of that guilty plea agreement. Petitioner's Reply to the I.G.'s Response in Opposition to Petitioner's Exceptions, Ex. 5.

Petitioner also asserted that another mitigating factor existed by virtue of the fact that he organized a program to make night house calls in the North Philadelphia area, especially "the unsafe parts of this economically depressed area which other physicians simply refused to visit because it was considered too dangerous." Petitioner's Reply to the I.G.'s Response in Opposition to Petitioner's Exceptions at 4. Petitioner claimed that this qualified as a mitigating factor under 42 C.F.R. . 1001.201(b)(3)(iv). Petitioner did not argue before the ALJ that this mitigating factor existed. However, on appeal to the Board, Petitioner provided a copy of the sentencing transcript, citing to a discussion of whether a deferral of sentencing was warranted in order to permit Petitioner to continue his night house call program. Petitioner also submitted copies of patient billing cards to show the house calls he made under this program. See id., Ex. 6. Section 1005.21(g) of 42 C.F.R. provides that--

[i]f any party demonstrates to the satisfaction of the DAB that additional evidence not presented at [the] hearing [before the ALJ] is relevant and material and that there were reasonable grounds for the failure to adduce such evidence at such hearing, the DAB may remand the matter to the ALJ for consideration of such additional evidence.

The evidence submitted by Petitioner to establish the mitigating factors described in section 1001.201(b)(3)(iii) and (iv) is clearly relevant and material. Thus, we must consider whether there "were reasonable grounds for the failure to adduce such evidence" at the hearing before the ALJ. 42 C.F.R. . 1005.21(f).

Petitioner took the position that he received ineffective assistance of counsel and that this constituted reasonable grounds for his earlier failure to provide the evidence submitted to the Board. Petitioner claimed that, after receiving a copy of the I.G.'s Motion for Summary Disposition from his counsel, he sent her comments to be used in preparing his brief that "specifically described how my cooperation with the government resulted in others being convicted, sentenced and ordered to pay restitution." Petitioner's Reply at 6-7. According to Petitioner, his comments "also emphasized the vitality of my house-call practice, and how my [patients] would be left uncared for." Id. at 7. Petitioner further claimed that, when he discovered that the brief filed by his counsel "failed to disclose my cooperation with the government in a proper context, and never mentioned the existence of my second mitigating factor, house-call service," he extracted a promise that the brief would be resubmitted promptly "with the necessary corrections." Id. According to Petitioner, he did not realize that these "corrections" were not made until he reviewed a copy of the record after his appeal was filed.

We conclude that the circumstances alleged by Petitioner constitute reasonable grounds for his failure to adduce the evidence described above in the proceedings before the ALJ. The I.G. argued that ineffective assistance of counsel should not constitute reasonable grounds because "every petitioner who loses before the ALJ could argue that counsel was ineffective, and in the absence of any evidence supporting this claim, relitigate their exclusions." I.G.'s Response in Opposition to Petitioner's Exceptions at 22. This argument has no merit under the circumstances here, however. In this case, Petitioner's argument that counsel was ineffective relates specifically to the failure to submit readily available evidence which was clearly probative of a mitigating factor under the applicable regulations. To admit such evidence under these circumstances hardly opens the door to general allegations that a case was decided against a petitioner due to the ineffective assistance of counsel.

The I.G. also disputed that Petitioner in fact received ineffective assistance of counsel. According to the I.G., counsel's failure to provide the evidence in question was instead the "product of a reasoned legal strategy," since sentencing hearings "are apt to portray a petitioner in a less than favorable light." Id. However, we do not find this argument persuasive since we see nothing in the sentencing transcript that was not already known that would have further prejudiced Petitioner. The I.G. argued in addition that Petitioner had the opportunity to replace his counsel prior to the issuance of the ALJ's decision affirming his exclusion. However, Petitioner asserted that he had no such opportunity since he was not aware prior to the issuance of the ALJ Decision of any inadequacies in the brief filed on his behalf. We see no reason to doubt the truth of that assertion since it is unlikely that Petitioner would have knowingly retained counsel who did not properly represent him.

Since the evidence in question is relevant and material and there were reasonable grounds for Petitioner's failure to adduce this evidence in the proceedings before the ALJ, it is properly admitted into the record at this juncture. As indicated above, pursuant to section 1005.21(f), the Board may remand the case to the ALJ to consider this new evidence. However, we remand the case to the ALJ only to consider the evidence submitted in support of the mitigating factor in section 1001.201(b)(3)(iii) and the effect on the ALJ's finding that a 10-year exclusion was reasonable if the ALJ determines that this mitigating factor existed. Petitioner himself admitted that the sentencing transcript and the billing cards alone were not sufficient to establish that the mitigating factor at section 1001.201(b)(3)(iv) existed, but that further proof would have to be adduced before the ALJ. See Petitioner's Reply to the I.G.'s Response in Opposition to Petitioner's Exceptions at 5, 10. Section 1005.21(f) does not authorize the Board to remand a case to the ALJ to admit new evidence, however, but rather to consider new evidence which the Board has found admissible. Since the existing evidence is, by Petitioner's own admission, insufficient to establish the existence of this mitigating factor and no additional evidence may be adduced, a remand would serve no purpose.

Accordingly, on remand, the ALJ shall first determine whether the sentencing transcript and/or the co-defendant's guilty plea establish that Petitioner's cooperation resulted in the conviction of others within the meaning of section 1001.201(b)(3)(iii). We note that the I.G. argued that the sentencing transcript establishes only that Petitioner testified in a trial after which some individuals were convicted, not that his testimony "led to," i.e., resulted in, the convictions. I.G.'s Response in Opposition to Petitioner's Exceptions at 15. However, since it would be difficult if not impossible to establish precisely what testimony the judge found dispositive, it appears that the former may suffice to establish this mitigating factor.

If the ALJ determines that this evidence establishes that the mitigating factor in section 1001.201(b)(3)(iii) exists, the ALJ shall then consider the effect of the mitigating factor on the ALJ's finding that the 10-year exclusion imposed by the I.G. was reasonable.

Petitioner argued that, since the I.G. found that a 10-year exclusion was warranted in the absence of any mitigating factors, the exclusion should be reduced to a period of three to five years taking this mitigating factor into account. The I.G., on the other hand, argued that, even if the Board finds that there was a mitigating factor, the 10-year exclusion falls within a reasonable range of exclusion periods based on the facts of this case, which involves three aggravating factors. We note that, as indicated by the I.G.'s argument, the proper standard here is whether the 10-year exclusion falls within a reasonable range of possible exclusion periods under the circumstances of this case, not whether the 10-year exclusion was reasonable. See Gerald A. Snider, M.D., DAB 1637 (1997); Frank A. DeLia, D.O., DAB 1620 (1997); and Barry D. Garfinkel, M.D., DAB 1572 (1996). Thus, the ALJ might find that a 10-year exclusion remains within a reasonable range of possible exclusion periods notwithstanding the existence of a mitigating factor or that a 10-year exclusion is no longer within a reasonable range in light of the mitigating factor.

CONCLUSION

For the reasons discussed above, we affirm FFCLs 16 and 21 and remand the case to the ALJ to determine whether FFCLs 20 and 22 are correct in light of the new evidence admitted here.

____________________________
Cecilia Sparks Ford
____________________________
Norval D. (John) Settle
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Donald F. Garrett
Presiding Board Member