SUBJECT:

Rodney K. Hough, M.D.,

Petitioner,

The Inspector General.

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Rodney K. Hough, M.D., from participating in Medicare, Medicaid, and all other federally-funded health care programs for a period of five years.

I. Background

During the time period relevant to this case, Petitioner held a license to practice medicine in the Commonwealth of Pennsylvania. On December 30, 2005, the I.G. notified Petitioner that he was being excluded from participation in Medicare, Medicaid, and all federal health care programs for a period of five years pursuant to section 1128(a)(4) of the Social Security Act (Act). The I.G. informed Petitioner that the exclusion action was based on Petitioner's conviction of a felony offense in the Cumberland County Court of Common Pleas, Pennsylvania, of a criminal offense related to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance.

By letter dated February 10, 2006, Petitioner requested review of his five-year exclusion. Petitioner admits that he pled guilty and was convicted of a felony offense, but argues that his criminal offense did not involve a federal health care program or federal health care dollars. ⁽¹⁾ Petitioner's (P.) Hearing Request at 3.

On February 14, 2006, the I.G. amended its December 30, 2005 Notice to Petitioner informing him that the I.G. was excluding him pursuant to section 1128(a)(3) of the Act due to a felony conviction related to health care fraud, and not section 1128(a)(4) as previously identified in the December 30, 2005 Notice.

A prehearing conference was convened in this matter on April 18, 2006, during which counsel for Petitioner acknowledged that Petitioner had received the I.G.'s amended notice of exclusion. Counsel stated that Petitioner would file an objection based on the amended exclusion notice maintaining that the statutory basis for the exclusion under the amended notice had not been met. ⁽²⁾ The parties concurred that this matter could be decided on the parties' written submissions. An Order was issued setting forth a schedule for the parties to file written legal briefs including proposed exhibits.

The I.G. submitted a brief (I.G. Br.) with eight proposed exhibits, and a reply brief (I.G. Reply). Petitioner submitted a brief (P. Br.) without exhibits, and a sur-reply brief (P. Sur-Reply). There being no objections, I.G. Exhibits (Exs.) 1-8 are admitted into evidence.

II. Issue, findings of fact and conclusions of law

A. Issue

The sole issue for review in this case is whether the I.G. has a basis to exclude Petitioner pursuant to section 1128(a)(3) of the Act. Not at issue in this case is whether the length of Petitioner's exclusion - five years - is reasonable. The Act requires an exclusion for at least five years of any individual who is convicted of an offense that is described at section 1128(a)(3). ⁽³⁾ Act, � 1128(c)(3)(B). In this case, the I.G. excluded Petitioner for the minimum statutory period.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding as a separate heading and I discuss each in detail.

1. The I.G. may rely on the records of Petitioner's criminal process to establish that he was convicted of a criminal offense within the meaning of section 1128(a)(3) of the Act.

Petitioner argues that the affidavit of probable cause filed in support of Petitioner's criminal complaint does not constitute "evidence" that the I.G. can use to prove the facts surrounding Petitioner's plea. ⁽⁴⁾ P. Sur-Reply at 1. According to Petitioner, although the criminal complaint has an affidavit of probable cause attached, it is the complaint that states the charges and not the affidavit. P. Br. at 3. Petitioner argues that theft was not charged in the original complaint and, therefore, there is no legal basis to conclude that the theft that was pled to in the final amended Information is related to the underlying facts of the criminal complaint. Id. at 4. Petitioner argues further that the facts surrounding his plea are not a proper basis for exclusion under section 1128(a)(3) of the Act. P. Sur-Reply at 1. According to Petitioner, only the actual conviction can provide the basis for exclusion. Id.

The probable cause affidavit which Petitioner references, is part of the criminal complaint which states that Petitioner submitted written requests via letters and notations to UBC Pharma for donations for the drug Hydrocodone (or Lortab). ⁽⁵⁾ In his requests to UCB Pharma, Petitioner stated specifically that the drugs would be used for his mission work in the Dominican Republic. Id. UCB Pharma then provided Petitioner with the donated drugs for use and distribution through his mission work. I.G. Exs. 7; 8, at 6. The criminal complaint indicates that from January 22, 2001 through October 12, 2001, Petitioner obtained over 70,700 Hydrocodone pills from UCB Pharma for his mission work. Id. at 6. The criminal complaint further indicates, based on an interview in July 2002 with the founder of World Blindness Outreach, that although Petitioner did participate in mission trips to the Dominican Republic through World Blindness Outreach on several occasions, the last time he participated in a mission trip in any way was in July and August of 1999. I.G. Ex. 8, at 7. Additionally, Petitioner did not provide any medications or drugs of any type after the 1999 trip. Id. The criminal complaint also outlines that Petitioner stated to the interviewing agent that the Hydrocodone obtained from UCB Pharma was used by Petitioner to support his drug habit (80 tablets of Hydrocodone per day). Id.

The criminal complaint also notes that Petitioner stated to the interviewing agent that he was unable to obtain sufficient amounts of Hydrocodone from UCB Pharma to support his drug habit, so he began to ask patients to go to pharmacies (function as "runners") and obtain Hydrocodone tablets. I.G. Ex. 8, at 7. Petitioner would write prescriptions in the patients' (runners) names, have them go to a local pharmacy to have the prescription filled, and then have the patients return and give him the Hydrocodone drugs. Id. Petitioner admitted to having paid for the medications and that the "runners" were under the belief that they were assisting Petitioner in obtaining the drugs for Petitioner's mother who needed the medication for an illness. Id. at 7.

Petitioner does not dispute the accuracy of the information contained in the affidavit. Rather, Petitioner argues that the I.G. can not use the information in the affidavit to prove the facts surrounding Petitioner's plea. I do not find Petitioner's argument to be persuasive. There is nothing in the Act which limits the I.G. in deciding which criminal records he may obtain or rely upon to determine whether to impose an exclusion. Furthermore, Petitioner has offered no basis to show that the I.G.'s authority would be limited as he contends. Section 1128(a) of the Act is federal law and Congress did not suggest that it intended that the federal exclusion program be limited as Petitioner suggests. ⁽⁶⁾ I conclude that the I.G. is not prohibited from using the facts and circumstances outlined in the criminal complaint to ascertain the underlying facts of the offense surrounding Petitioner's plea and subsequent felony conviction, and to use this information as a basis for exclusion under section 1128(a)(3).

2. Petitioner was convicted of a criminal offense related to the delivery of a health care item.

The relevant facts in this case are that on May 14, 2003, Petitioner was charged with five counts of obtaining drugs by fraud and five counts of a misdemeanor drug charge. ⁽⁷⁾ I.G. Ex. 6. Each of the charged felony offenses were in violation of Pennsylvania statute 35 P.S. � 780-113(a)(12). Id. On September 15, 2003, Petitioner entered a plea of guilty to one felony count of theft by deception and one misdemeanor count of unlawful procurement of prescription drugs. I.G. Exs. 3, 4. The plea agreement states that Petitioner specifically waived filing of an Information for the felony theft by deception charge. I.G. Ex. 3. On the felony charge of theft by deception which is the basis of the I.G.'s exclusion, and the matter at issue in this appeal, Petitioner was required to make restitution in the amount of $20,000 to World Blindness Outreach, and was sentenced to incarceration for three to 23 months with work-release authorized. I.G. Ex. 7.

Under the statute and relevant regulation, an individual convicted of a felony offense in connection with the delivery of a health care item must be excluded from participation in federal health care programs for a minimum of five years. Act, � 1128(a)(3); 42 C.F.R. � 1001.101(c). Here, Petitioner admits the felony conviction of theft by deception, but argues that his offense was not committed in the course of delivery of a health care item. P. Br. at 3; P. Sur-Reply at 2. Petitioner states that he pled guilty to a felony theft of contributions to a South American Mission Relief Project, and it was that theft, not the obtaining of prescription drugs by runners, which formed the basis for the amended Information and his guilty plea. P. Br. at 2.

a. An exclusion under section 1128(a)(3) does not require that the criminal offense be both in connection with the delivery of a health care item or service and an act or omission in a governmentally-operated or financed health care program.

In arguing that his actions are outside the purview of the Act, Petitioner maintains that his criminal conduct did not involve a health care program operated by or financed in whole or in part by any federal, state, or local government agency. P. Sur-Reply at 2. However, whether World Blindness Outreach is operated or financed by the government is not a matter in this case that the I.G. must establish. The language of section 1128(a)(3) of the Act establishes that an exclusion can be predicated on either a felony criminal offense that was in connection with the delivery of a health care item or service or a felony offense that was an act or omission in a governmentally-operated or financed health care program. An exclusion under section 1128(a)(3) does not require that the criminal offense be both in connection with the delivery of a health care item or service and an act or omission in a governmentally-operated or financed health care program. See Erik D. DeSimone, R.Ph., DAB No. 1932 (2004). In this case, the I.G. proposes to exclude Petitioner based on his criminal offense in connection with the delivery of a health care item or service.

b. Petitioner's interference with the delivery of donated drugs by diverting the controlled substances for his own use establishes the requisite "common sense connection" to health care delivery that section 1128(a)(3) of the Act requires.

Petitioner asserts that drugs donated to an international charity (here World Blindness Outreach) and destined for the Dominican Republic are not a "health care item or service" under the Act. P. Sur-Reply at 2. Petitioner's argument that his felony conviction was not in connection with the delivery of a health care item or service is unpersuasive. There is a line of cases from this tribunal holding that theft of drugs by a pharmacist from his employer constitutes theft in connection with the delivery of a health care item. See Robert F. Tschinkel, R.Ph., DAB CR1323 (2005) (theft of Vicodin); Thomas A. Oswald, R.Ph., DAB CR1216 (2004) (conviction on four counts of theft of Schedule III controlled substances).

Although Petitioner in this case is a physician and not a pharmacist, I find that the appellate panel of the Departmental Appeals Board's (Board) reasoning in finding a "common sense connection" in cases involving pharmacy employees is analogous to this case. DeSimone, DAB No. 1932 (where the petitioner pled guilty to theft of a controlled substance and paid $2,500 in restitution). The appellate panel in DeSimone reasoned that the pharmacy obtains health care items for the purpose of delivering them to members of the general public in order to meet their medical needs. When an employee pharmacist takes one of those drugs, he interferes with the delivery of that item. "[T]heft of [a] drug while under the guise of performing his professional responsibilities is clearly the requisite common sense 'connection' to health care delivery that section 1128(a)(3) requires." Id. at 4-5.

Petitioner's felony conviction was for theft by deception. I.G. Ex. 7. Petitioner admits that he pled guilty to a felony theft of contributions to a South American Mission Relief Project. P. Br. at 2. As a physician involved in mission work for the World Blindness Outreach, Petitioner had the authority to request the Hyrdrocodone drugs, a health care item, from UCB Pharma for the intended use of prospective patients - his or that of World Blindness Outreach. His misappropriation of the donated drugs, which he used for himself, resulted in the diversion of the Hydrocodone away from the intended recipients of the drugs - the patients. Clearly, Petitioner's theft of Hydrocodone unquestionably had the effect of diverting the delivery by him to the intended recipients in the Dominican Republic. Petitioner had direct access to these drugs in his capacity as a physician and, as such, he was able to divert these drugs while he was in the process of performing his professional responsibilities of delivering health care items or services to the general public. Petitioner requested Hydrocodone (a Schedule III controlled substance) from UCB Pharma for the delivery and use by individuals in the Dominican Republic in order to meet their individual physical, mental or emotional needs. Petitioner interfered with that delivery by diverting those controlled substances for his own use. I find there to be a "common sense connection" between Petitioner obtaining the donated controlled substances, diverting them for his own use, and the delivery of a health care item or service. The theft or unlawful diversion of health care products such as pharmaceuticals is clearly connected with the delivery of a health care item or service because it impairs patients' access to the product - whether that be in the Unites States or to World Blindness Outreach for use with patients in the Dominican Republic.

I find Petitioner's argument unpersuasive, and he has provided no evidence to support his contention that his conviction was for conduct unrelated to the delivery of a health care item. That Petitioner waived the filing of an Information does not remove him from the reach of section 1128(a) of the Act. To do so would elevate form over substance in this matter. The facts set forth in both the Information and criminal complaint clearly outline the facts that formed the basis of Petitioner's conviction. I find that drugs donated to an international charity and destined for the Dominican Republic are a health care item under the Act. I conclude that Petitioner's theft of the donated Hydrocodone while under the guise of performing his professional duties is clearly the requisite "common sense connection" to health care delivery that section 1128(a)(3) of the Act requires.

3. Petitioner's conviction is for an offense that is covered by section 1128(a)(3) of the Act.

To establish that Petitioner is subject to mandatory exclusion under section 1128(a)(3), the I.G. must prove four things: (1) that Petitioner was convicted of a felony offense; (2) that the offense took place after August 21, 1996; (3) that the offense was related to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct; and (4) that the offense was in connection with the delivery of a health care item or service. See Katherine Marie Nielson, DAB CR1181 (2004). I find that the preponderance of the evidence advanced by the I.G. establishes that: (1) Petitioner was convicted of the felony crime of theft by deception (I.G. Ex. 7); (2) the actions that formed the basis of Petitioner's conviction occurred between September 2, 1999 and December 7, 2001, therefore occurring after August 1996 (I.G. Ex. 6); (3) the offense was related to theft - specifically, theft by deception (I.G. Ex. 7); and (4) the Hydrocodone drugs which Petitioner diverted for his own use were health care items.

Petitioner pled guilty to one felony count of theft by deception and the Court of Common Pleas of Cumberland County, Pennsylvania accepted Petitioner's plea. Petitioner's conviction of theft by deception is related to the delivery of a health care item or service within the meaning of section 1128(a)(3) of the Act. Consequently, Petitioner's crime falls within the reach of the mandatory exclusion provisions section 1128(a)(3) of the Act and the I.G. is thus required by law to exclude Petitioner.

III. Conclusion

For these reasons, I conclude that the I.G. has a basis for excluding Petitioner from participation in Medicare, Medicaid, and all other federal health care programs, and I sustain the five-year exclusion.

Alfonso J. Montano

Administrative Law Judge

1. In his request for hearing, Petitioner raises a due process issue related to the I.G.'s December 30, 2005 Notice. Petitioner avers that the Notice did not indicate whether the I.G. ever received or reviewed Petitioner's initial response to the exclusion notice. P. Hearing Request at 2. Although I do not have the authority to address constitutional issues, Petitioner's issue has been properly preserved for the record.

2. Subsequent to the April 18, 2006 prehearing conference, Petitioner submitted an Amended Answer to the I.G.'s February 14, 2006 amended notice of exclusion. In his Amended Answer, Petitioner reiterates his objection to the exclusion and states that the statutory basis for exclusion had not been met as the felony charge Petitioner was convicted of does not meet the requirements of 42 U.S.C. � 1320a-7(a)(3). Petitioner does not raise any objection to the fact that the I.G. issued the February 14, 2006 amended notice of exclusion.

3. Petitioner concedes that if the exclusion is upheld, the statutory five-year exclusion period is required. P. Br. at 1.

4. The affidavit of probable cause which Petitioner references is marked as I.G. Ex. 8, and details the findings of the special agents of the Drug Enforcement Administration in Philadelphia, PA as well as a recording of their interview with Petitioner, his patients, the founder of World Blindness Outreach, and a representative from UCB Pharma.

5. According to the interviewing agent, records obtained from UCB Pharma showed that the ICG Pharma was a supplier of Lortab products for Petitioner for his private practice. Additionally, those records also showed that there were a number of Lortab products provided to Petitioner and listed as "donations." I.G. Ex. 8, at 6.

6. See Tanya A. Chuoke, R.N., DAB No. 1721 (2000); Narendra M. Patel, M.D. DAB No. 1736 (2000)(where extrinsic evidence was found permissible to discern whether a connection existed between the conviction and the delivery of health care item or service).

7. Petitioner was charged with five misdemeanor counts of unlawful procurement of prescription drugs in violation of 63 P.S. � 390-8(13) - however, the misdemeanor conviction is not at issue in this proceeding. Both the felony and misdemeanor charges involved Hydrocodone (Lortab) a Schedule III controlled substance. I.G. Ex. 8, at 1.