Timothy L. Stern, M.D., CR No. 154 (1991)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
The Inspector General
- v. -
Timothy L. Stern, M.D.

Respondent.

DATE: October 10, 1991

Docket Nos. C-119, C-177

DECISION

In this case, governed by section 1128A of the Social Security Act (Act), the Inspector General (I.G.) of
the United States Department of Health and Human Services (DHHS) issued a Notice of Determination
(Notice) on January 18, 1989, informing Timothy L. Stern, M.D. (Respondent) that the I.G. was seeking
civil monetary penalties of $425,250.00, an assessment totalling $70,648.00, and a 20 year exclusion of
Respondent from participation as a medical provider in the Medicare, Medicaid, and other federally-funded
State health care programs.

The I.G. alleges that Respondent violated section 1128A of the Act, the Civil Monetary Penalties Law
(CMPL), and its implementing federal regulations (Regulations) when Respondent presented, or caused to
be presented, 688 claims to the Medicare carrier, Blue Shield of Western New York (BSWNY), requesting
Medicare reimbursement for his Medicare patients by stating that he performed either local nerve blocks,
office visits, or consultations, and that Respondent knew, had reason to know, or should have known that
the services were not provided as claimed. The I.G. alleges that Respondent, instead of performing the
services claimed, performed acupuncture services, for which Medicare does not pay. Tr.I/5 through 10, 22.

The I.G.'s Notice was supplemented by an additional Notice, dated November 9, 1989, and was modified
at the hearing. 1// 2// 3/.

Respondent filed a timely answer (Request) denying the I.G.'s allegations, challenging the proposed
sanctions, and requesting a hearing before an Administrative Law Judge (ALJ). Respondent also
challenges the I.G.'s authority and the legality of this action. Respondent argues that he performed the
services as claimed and conformed with BSWNY's instructions for submitting claims. R. Br. 227-239;
Tr.I/10-21.

APPLICABLE FEDERAL STATUTES AND REGULATIONS

I. Statutes.

This case is governed by the Civil Monetary Penalties Law (CMPL), Section 1128A of the Social Security
Act (Act), 42 U.S.C. 1320a-7a (1988).

II. Regulations.

The governing federal regulations (Regulations) are codified in 42 C.F.R. 1003.100 through 1003.133
(1990).

BACKGROUND

I. Prehearing Motions.

On February 6, 1990, Respondent filed a motion to dismiss for lack of jurisdiction and the I.G. objected.
On April 6, 1990, I issued a Ruling denying the motion and on April 24, 1990, I issued a Ruling denying
reconsideration. On May 10, 1990, I issued a Ruling on Respondent's request for discovery and the I.G.'s
motion to strike; on June 7, 1990, I modified the Ruling. There were dozens of other motions or disputes
resolved by prehearing conferences or in miscellaneous rulings or orders issued by me. On May 11, 1990,
Respondent filed a motion to dismiss; the I.G. objected to this motion on June 19, 1990. I denied
Respondent's motion at the hearing on July 30, 1990. Tr.I/81-113.

II. The Hearing.

The evidentiary hearing in this case was conducted in Rochester, New York, in two parts; the first part was
from July 30 through August 3, 1990, and the second part was from January 7-12, 1991. The record
consists of 11 days of trial and documentary evidence submitted by the parties. Respondent proceeded pro
se and on occasion was represented by his brother, Arthur L. Stern, an attorney in Rochester. The I.G. was
represented by Lisa A. Foley and Thomas Herrmann, attorneys, Office of General Counsel, I.G. Division.
4/

III. Posthearing Motions And Defenses.

Respondent renewed many of his legal and constitutional challenges to this action in his posthearing briefs.
These motions and arguments will be addressed in the latter part of this decision.

ISSUES

The issues are:

I. Liability.

1. Whether the I.G. proved that the 688 Medicare services in issue "were not provided as
claimed."

2. Whether the I.G. proved that Respondent "knew, had reason to know, or should have known"
that the 688 Medicare services at issue were not provided as claimed, in violation of the CMPL and
Regulations.

3. Whether the CMPL requires fraud on the part of Respondent for liability to attach.

II. The Amount Of The Penalties, The Assessment, And The Period Of Exclusion.

1. Whether the I.G. proved the aggravating circumstances as alleged.

2. Whether Respondent proved any circumstances that would justify reducing the amount
of the penalties, the assessment, or the period of exclusion proposed by the I.G.

III. Constitutional, Jurisdictional, And Procedural Challenges To This Action.

1. Whether the double jeopardy clause of the Constitution of the United States prohibits the I.G. from
bringing this action against Respondent.

2. Whether the I.G. is equitably estopped or otherwise barred in this case by the Plea Agreement
between the United States and Respondent in Respondent's criminal trial.

3. Whether this action is barred either by the doctrine of res judicata or by the doctrine of collateral
estoppel.

4. Whether this is a quasi-criminal proceeding and Respondent has the right to procedural safeguards,
such as the right to trial by jury and to be found guilty beyond a reasonable doubt.

5. Whether Respondent was prejudiced or denied due process by the admission of written statements of
patients obtained by the I.G. in lieu of live testimony or by the I.G.'s claim of privilege.

FINDINGS OF FACT AND CONCLUSIONS OF LAW 5/

Having considered the entire record, the arguments, and the submissions of the parties, and being advised
fully herein, I make the following Findings of Fact and Conclusions of Law:

1. For the purposes of these proceedings, I have taken judicial notice of the statutes of the United States
and the State of New York, and the regulations of DHHS.

2. This proceeding is governed by section 1128A of the Act (42 U.S.C. 1320a-7a), and regulations
promulgated thereunder at 42 C.F.R. 1003.100 et seq.

3. Section 1128A of the Act authorizes the Secretary to impose a civil monetary penalty, an
assessment and an exclusion from program participation upon a person who presents or causes to be
presented to an officer, employee or agent of the United States a claim for items or services under
Medicare (Title XVIII of the Act) which the person knew, had reason to know, or should have known were
not provided as claimed. 42 U.S.C. section 1320a-7a(a)(1).

4. The Secretary of DHHS has delegated to the I.G. the authority to take action under section 1128A
of the Act. 49 Fed. Reg. 35247, 35250 (September 6, 1984).

5. By letter dated January 18, 1989, the I.G. notified Timothy L. Stern, M.D., Respondent, of the
I.G.'s proposal to impose against Respondent civil monetary penalties totaling $425,250.00; an assessment
of $70,648.00; and exclusion from participation in all federally financed State health care programs for a
20-year period.

6. The I.G. based its proposal on his determination that Respondent presented or caused to be presented to
an agent of the United States claims for items or services which Respondent knew, had reason to know, or
should have known were not provided as claimed.

7. Specifically, the I.G. determined that the Respondent had presented or caused to be presented claims
requesting Medicare reimbursement for nerve blocks, office visits, or consultations, which are covered in
certain circumstances by Medicare, when acupuncture, a non-covered service, was provided.

8. By letter dated March 15, 1989, Respondent, through counsel Charles E. Crimi, requested a hearing
before an ALJ.

9. The I.G.'s January 18, 1989, Notice was subsequently modified by a supplemental Notice dated
November 9, 1989. Tr.I/21.

10. The I.G. appended an attachment to the November 9, 1989 Notice which indexed the claims at issue in
this case as claims 1-707; there were in fact only 706 claims listed (the number 199 was omitted);
subsequently, at the hearing on July 30, 1990, the I.G. dropped claims 315-320, 475-477, and 641-642,
leaving 695 claims at issue. Tr.I/21.

11. Seven of the 695 claims (528, 529, and 533-537) are identical to counts encompassed by Respondent's
criminal conviction and have been eliminated by my Ruling on the applicability of U.S. v. Halper, 490
U.S. 435 (1989).

12. There are 688 claims remaining at issue in this case. FFCL 10/11.

13. The claims at issue represent approximately $35,000 in items or services Respondent claimed to have
provided at Rochester Pain Medicine during the years 1983 through 1986. I.G. Ex. 1-1 through 31-1;
Tr.I/550-553, 555, 593-596, 641-644; I.G. Ex. 32-2; Tr.II/102-104.

14. Although Respondent represented himself in this case, he was assisted at times by his brother Arthur
Stern, an attorney.

15. During the period in which the claims at issue were presented, Respondent was licensed to practice
medicine in the State of New York. Tr.II/188, 190; I.G. Ex. 84-2 /9,10.

16. During the period in which the claims at issue were presented, Respondent was the sole practitioner at
his clinic, Rochester Pain Medicine. Tr.II/52, 1324, 1584; I.G. Ex. 84-2/10.

17. In each patient encounter that resulted in a claim, Respondent performed either electro-acupuncture or
a procedure he called "electrical stimulation," which consisted of inserting 4-16 acupuncture needles into
the skin at various areas of the body, attaching the needles to an electric current source using electrodes and
wires, and applying electric current to the needles for 10-20 minutes. I.G. Ex. 1-19, 2-7, 3-4, 4-8, 5-6, 6-5,
6-6, 7-5, 7-6, 8-39, 8-40, 8-41, 10-22, 10-23, 10-24, 11-10, 11-11, 12-25, 12-26, 12-27, 13-9, 14-7, 15-11,
15-12, 15-13, 16-4, 16-5, 17-6, 17-7, 18-11, 19-4, 19-5, 19-6, 20-4, 21-7, 21-8, 22-4, 22-5, 23-7, 23-8, 24-
3, 25-8, 25-9, 26-3, 27-5, 28-8, 28-9, 29-5, 31-3 59, 59-1. See Tr./I, 150, 838, 920; Tr.II/58, 63, 315; I.G.
Ex. 1-16, 1-17, 1-18, 1-20, 4-6, 4-7, 8-38, 12-23, 12-24, 13-7, 15-9, 15-10, 18-10, 20-3, 22-4, 22-5, 23-5,
23-6, 40; I.G. Ex. 9-63, 22-3, 22-4, 22-5, 30-10; Tr.II/1558, 1546, 1562; Tr.II/92-98; I.G. Ex. 78-2, 78-3,
81-1, 81-3; I.G. Ex. 61-1/5,7; 64-1/6,11; 68/5,6; 69/7; 66-1/4,7; I.G. Ex. 65-1.

18. During some of the patient encounters resulting in the claims at issue, Respondent injected the
electrically stimulated area with a small amount of an anesthetic agent called "marcaine," just prior to the
electro-acupuncture treatments. Tr.II/1116, 1120; Tr.II/1341; see I.G. Ex. 95/2.

19. During many patient encounters, the Respondent provided additional medical services, including
discussions with the patients, prescriptions, minor surgery, blood pressure checks, myelograms, and
referrals for lab tests and procedures. Tr.II/1434-1440. See I.G. Ex. 1-15, 1-18/2, 2-6, 3-3, 4-5, 5-5, 8-36,
8-37, 9-61, 9-62, 9-63, 10-20, 10-21, 11-9, 12-22, 12-24, 13-6, 14-5, 15-8, 16-3, 17-4, 18-9, 19-3, 20-2,
21-6, 22-3, 23-4, 25-7, 26-2, 27-4, 28-6, 29-3, 30-9, 31-2; R. Ex. 101 A-L, N-CC; R. Ex. 63.

20. During the relevant time period, BSWNY was located in Binghampton, New York, and was the
designated Medicare Part B carrier for the region in which the services at issue in this proceeding were
provided. Tr.I/116-117.

21. BSWNY began investigating Respondent in 1983, after a review of his payment records indicated that
he was billing an unusually large number of nerve blocks. Tr.I/150; I.G. Ex. 40. See Tr.I/919, 1011-1012;
I.G. Ex. 73/4.

22. BSWNY's initial telephone contacts with beneficiaries indicated that Respondent was performing
acupuncture, although he was claiming his services as nerve blocks. I.G. Ex. 40. See Tr.I/150.

23. Thereafter, BSWNY and the I.G. had a series of in- person, telephone, and written contacts with
Respondent to determine what services were being claimed as nerve blocks and to educate Respondent on
Medicare policies and rules for filing claims properly. I.G. Ex. 42.1; I.G. Ex. 42-2; Tr.II/920; I.G. Ex.
73/7,9; I.G. Ex. 44; Tr.I/153-154; I.G. Ex. 74/20; I.G. Ex. 47/1; I.G. Ex. 48.

24. During the course of their contacts with Respondent, BSWNY and I.G. representatives specifically
informed Respondent that his patients had indicated he was performing acupuncture and that acupuncture
is not a covered service. I.G. Ex. 42-2; Tr.II/920; I.G. Ex. 73/7,9.

25. During the course of their contacts with Respondent, BSWNY and I.G. representatives specifically
informed Respondent that acupuncture was not the same thing as a nerve block and that Medicare covers
only two nerve blocks per year, but only if nerve blocks are for diagnostic purposes, rather than for the
treatment of pain. I.G. Ex. 42-2; I.G. Ex. 44; I.G. Ex 47/1; I.G. Ex. 48; I.G. Ex. 73/7,9; I.G. Ex. 74/20;
Tr.I/153; Tr.II/920.

26. During the course of their contacts with Respondent, BSWNY and I.G. representatives specifically
informed Respondent that claims for office visits should not be based merely on time spent with the
patient, but rather on some medically necessary service being performed and documented. I.G. Ex. 44;
Tr.I/153-154; I.G. Ex. 74/20; I.G. Ex. 48; I.G. Ex. 47/1,2; Tr.I/939; see I.G. Ex. 37/ 15 and 20.

27. During the course of their contacts with Respondent, BSWNY and I.G. representatives specifically
informed Respondent that only six local infiltrations of anesthetic agent are reimbursable in a calendar year
and only if medically necessary. I.G. Ex. 47/1; I.G. Ex. 48.

28. During the course of their contacts with Respondent, BSWNY and I.G. representatives specifically
informed Respondent that (1) he should not resubmit claims and list the services as an "office visit" if the
services listed on the claims had already been turned down as "nerve blocks" and (2) that he should not add
documentation to his records, as either action could be construed as fraud. I.G. Ex. 47/2; I.G. Ex. 44;
Tr.I/153; I.G. Ex. 74/20-22.

29. It was standard practice for Respondent to collect payment at the time of service, and then for
Rochester Pain Medicine (RPM) staff to submit claims on behalf of patients, who had been led to believe
that they would be reimbursed for Respondent's services. I.G. Ex. 61; I.G. Ex. 64/2; I.G. Ex. 66-1/4; I.G.
Ex. 10-23/2; I.G. Ex. 10-24; Tr.I/429, 466, 942, 943; Tr.II/67. See I.G. Ex. 1-1 through 32-2; I.G. Ex. 82A
and B.

30. BSWNY notified physicians in its region, including Respondent, about Medicare reimbursement
policies by a Claims Manual issued in 1979, a Doctor's Manual released in late 1983, effective January
1984, (1984 Doctor's Manual) (which replaced the Claims Manual), and periodic policy updates. Tr.I/116,
118, 123-127, 666; See I.G. Ex. 34, 35, 36, 37.

31. All but approximately 66 of the 688 claims at issue were submitted on HCFA 1500 claim forms. I.G.
Ex. 1-1 through 1-31.

32. By signing box 25 of the Medicare HCFA 1500 claim form, Respondent certified as follows: "... the
services shown on this form were medically indicated and necessary for the health of the patient and were
personally rendered by me or were rendered incident to my professional service by an employee under my
immediate personal supervision ...." I.G. Ex. 12-15; I.G. Ex. 37/6,7; Tr.I/129, 554.

33. Claims for services should describe the procedure performed by means of a five character procedure
code (e.g., "52980") corresponding to the services listed in the applicable Claims or Doctor's Manual and,
if further clarification of the service is necessary, a verbal description of the service provided (e.g., "nerve
block"). I.G. Ex. 34/8; I.G. Ex. 37/6,9.

34. Respondent had complete control over policies and procedures regarding how claims would be
submitted from Rochester Pain Medicine. I.G. Ex 64; see I.G. Ex. 61; 64-1, 65-1, 66, 67-1, 68, 69.

35. Of the claims at issue in this proceeding, 343 show the verbal description "local nerve block," 339
show "office visit," four show "consultation," one shows "consultation/office visit", and one shows "flu
shot/local nerve block." I.G. Ex. 1-1 through 1-31.

36. Of the 339 claims described as "office visit," 288 show the procedure code 90060 ("intermediate"
office service for an established patient), 16 show code 90050 ("limited" established patient office service)
seven show code 90040 ("brief" established patient office service), eight show code 90020
("comprehensive" new patient office service), and 20 show no procedure code. I.G. Ex. 37/25; see I.G. Ex.
1-1 through 1-31.

37. Of the four claims described as consultation, three show no code, and one shows code 90610
("extensive consultation"). I.G. Ex. 37/26; see I.G. Ex. 3-3, 5-5, 6-4, 14-5.

38. Of the 343 claims for "local nerve block," three show no code, and the rest show different codes for
different time periods, breaking out generally as follows:

123 showing 52980 for the period 1/83 to 2/84;

24 showing 62274 for the period 1/84 - 1/85;

20 showing 64450 for the period 2/84 - 1/85

9 showing 64415 for the period 3/84 - 1/85

24 showing 64441 for the period 6/84 - 11/84;

3 showing 64405 (two in 4/84, and one in 1/85); and

137 showing W3600 for the period 1/85 - 6/86.

I.G. Ex. 1-1 through 1-31.

39. Medicare procedure code 52980 is listed under the term "Nerve Block" and next to the term
"Paravertebral Block (Lumbar)" in the 1979 Medicare Part B Claims Manual. I.G. Ex. 34/31; Tr.I/270.

40. Medicare procedure code 64441 is listed under the term "Introduction/Injection of Anesthetic Agent
(Nerve Block) ..." and next to the term "paravertebral nerves, multiple, regional" in the 1984 Doctor's
Manual. I.G. Ex. 37/30.

41. Medicare procedure code 64450 is listed under the term "Introduction/Injection of Anesthetic Agent
(Nerve Block) ..." and next to the term "other peripheral nerve or branch" in the 1984 Doctor's Manual.
I.G. Ex. 37/30.

42. Medicare procedure code 64415 is listed under the term "Introduction/Injection of Anesthetic Agent
(Nerve Block) ..." and next to the term "brachial plexus" in the 1984 Doctor's Manual. I.G. Ex. 37/29.

43. Medicare procedure code 64405 is listed under the term "Introduction/Injection of Anesthetic Agent
(Nerve Block) ..." and next to the term "greater occipital nerve" in the 1984 Doctor's Manual. I.G. Ex.
37/29.

44. Medicare procedure code 62274 is listed under the term "Puncture for Injection, Drainage, or
Aspiration" and next to the term "injection of anesthetic substance diagnostic or therapeutic subarachnoid
or subdura" in the 1984 Doctor's Manual. I.G. Ex. 37/28.

45. BSWNY local procedure code W3600 was listed under the term "Introduction or Removal" and next
to the term "Localized infiltration of anesthesia" in the 1984 Doctor's Manual. I.G. Ex. 37/27; Tr.I/272-
273; Tr.I/1494.

46. Traditional or classical acupuncture is an ancient form of treatment originating in China and involving
placement and manipulation of one or more thin metal needles beneath the skin at particular points. I.G.
Ex. 76/5,6; Tr.I/763, 1224, 1472.

47. It is possible to use electrical current to create the effect of manual manipulation of the acupuncture
needles. I.G. 76/7-8; Tr.I/1474. See Tr.II/708-709, 724, 763.

48. When electrical current is introduced to the acupuncture needles, the procedure is commonly referred
to as electronic acupuncture, electro-acupuncture, or electrical stimulation. Tr.II/708, 724; I.G. Ex.
82A/1,4.

49. In an electro-acupuncture treatment, 4-16 acupuncture needles inserted beneath the skin are attached
by clips and wires to an electric current source which is activated for ten to twenty minutes. Tr.II/708-711;
I.G. Ex. 76/21-22.

50. Percutaneous electrical stimulation (PENS) involves the introduction of the electric current by way of
an electrode which is surgically implanted in the area of a major nerve in the central nervous system.
Tr.I/1237, 1242, 1485; 1594-1597. See I.G. Ex. 35/4, I.G. Ex. 37/32; I.G. Ex. 105/3; Tr.II/1659.

51. Transcutaneous electrical stimulation (TENS) involves the introduction of the electric current by way
of pads placed on the skin. Tr.I/1482, 1484.

52. Faradic electrical stimulation (FES) is used in the treatment of Bell's Palsy to accelerate regeneration
of facial nerves. Tr.II/1591.

53. Other types of electrical stimulation are used in diagnostic studies for purposes of measuring nerve
conductivity. Tr.II/1591.

54. Acupuncture, electro-acupuncture, PENS, and TENS are all used in the treatment of pain.

55. Respondent's electrical treatments invariably consisted of inserting 4-16 acupuncture needles through
the skin and attaching them by clips and wires to a generator which was turned on for ten to twenty
minutes. FFCL 17.

56. Respondent used the term acupuncture and electrical stimulation synonymously when explaining his
practice before a television audience in 1981. I.G. Ex. 82A/1-4, 9-10.

57. In 1982, Respondent advertised his practice as an "acupuncture and pain clinic." I.G. Ex. 80-3;
Tr.II/164.

58. In 1989, Respondent applied to the State Department of Education to become licensed as an
acupuncturist and stated that he had practiced acupuncture 100 percent of the time for the last ten years.
I.G. Ex. 100, 100-1; Tr.II/208-209.

59. In 1989, Respondent publicized the opening of his acupuncture clinic as the "reopening of his
acupuncture practice of ten years." I.G. Ex. 62.

60. Electro-acupuncture is not traditional acupuncture and it is arguable that electro-acupuncture is not
technically acupuncture if the needles are not placed at traditional acupuncture points. Tr./742-747.

61. The electrical stimulation procedure practiced by Respondent was electro-acupuncture; nevertheless,
for purposes of this case, it is irrelevant whether the acupuncture needles were placed at traditional
acupuncture points (when electrically stimulated) since neither electro-acupuncture nor electrical
stimulation of acupuncture needles (which are not placed at traditional acupuncture points) is covered by
Medicare. Tr.I/1244, 1481-1487; Tr.II/1515, 1527; FFCL 46-60.

62. The electrical stimulation procedure practiced by Respondent was not TENS, PENS, FES, or
diagnostic electrical stimulation. FFCL 49-52, 54.

63. For the sake of convenience, references to electro-acupuncture in this decision include the term
electrical stimulation, as practiced by Respondent.

64. At various times, Respondent practiced both traditional and electro-acupuncture. I.G. 83-3/24;
Tr.I/769-770.

65. During the period involved in this case, Respondent practiced, almost exclusively, electro-acupuncture.
Tr.II/1443.

66. Patients came to Respondent's office primarily for electro-acupuncture treatments. Tr.II/1440.

67. Electro-acupuncture treatments do not constitute nerve blocks. Tr.I/784-785; Tr.II/1483.

68. A nerve block is the application of a chemical substance into or around a nerve trunk so as to interrupt
the transmission of impulses over that nerve trunk to or from the area of the body supplied by that nerve
trunk. I.G. Ex. 77/10,13; Tr.I/1201, 1467; see I.G. Ex. 49-1, 49-2, 49-3, 49-4.

69. Administering a nerve block requires significant technical support facilities, such as oxygen, breathing
mask, breathing bag, endotracheal tubes, and a laryngoscope. Tr.I/1216.

70. Nerve blocks are ordinarily administered with hollow stainless steel needles of varying diameter and
length, not solid acupuncture needles. Tr.I/1217.

71. During a nerve block procedure, a patient would experience pain followed by numbness which would
last from one to twelve hours. Tr.I/606-607, 1220-21.

72. A physician's record of a nerve block should include diagnosis, caliber and length of needle used,
region of the body where the needle was placed; drug used and its amount and concentration, sensations
experienced during the block, what happened after the block, if anything, and an individualized operative
report. Tr.I/976, 1221-24, 1471; See Tr.I/1333.

73. A nerve block differs from local or superficial infiltration or injection of anesthesia, in that nerve block
is a direct injection into the area of the nerve trunk, whereas local or superficial infiltration or injections
involve the injection of anesthetic agent into the skin and subcutaneous tissue around specific areas of pain
to block the nerve endings rather than the nerve trunk. I.G. Ex. 49-4/2; Tr.I/1211-1212, 1469, 1497. See
I.G. Ex. 49-1/2; I.G. Ex. 34/15; I.G. Ex. 55-2/7.

74. While it might be arguable that a local or superficial infiltration or injection of an anesthetic agent
might be called a nerve block, in a generic sense, since the pain pathway is blocked, what Respondent did
was not a nerve block because the amount of anesthetic agent he used was too small. Tr.I/1241, 1297,
1249-1250; Tr.II/1513; Tr.I/785-787.

75. A diagnostic nerve block is used to determine the etiology of the patient's pain and the appropriate
course for treating the pain, whereas a therapeutic nerve block is for the relief of the pain itself. Tr.I/1212-
1213.

76. A local or superficial infiltration or injection of an anesthetic agent is not a diagnostic nerve block.
FFCL 64-66.

77. Medicare provides reimbursement for services which are reasonable and necessary for the diagnosis or
treatment of illness or injury. See Section 1862 of the Act; Tr.I/550.

78. To be considered medically necessary under Medicare, services must be consistent with the diagnosis
and treatment, appropriate with regard to standards of good medical practice, not solely for the
convenience of the patient or the doctor, appropriate with regard to the level of service, adequately
documented, and identifiable in the patients records. I.G. Ex. 37/20; see I.G. Ex. 34/12.

79. It is a basic requirement of good medical practice to keep accurate records of provided services.
Tr.I/797-798, 1224.

80. To establish that a service was medically necessary under Medicare, documentation should include
some statement of the symptoms or diagnosis and a treatment which is consistent with that diagnosis. I.G.
Ex. 37/20; FFCL 77-79.

81. Under Medicare, acupuncture is not considered to be reasonable and necessary and is not a covered
service. I.G. Ex. 33-3, 33-5; see I.G. Ex. 33-1, 33-2, 33-5, 33-6, 33-7, 33-8.

82. Acupuncture is listed as a non-covered service in both the 1979 Medicare Part B Claims Manual and
the 1984 Doctor's Manual. I.G. Ex. 34/18; I.G. Ex. 37/12; see Tr.I/131; Tr.II/41; I.G. Ex. 74/18.

83. Office visits, like all services, must be medically necessary in order to be reimbursed by Medicare.
See I.G. Ex. 74/20, 21.

84. Under Medicare, office visits are subject to qualification and subject to reimbursement according to
various levels of service, reflecting various levels of skill, effort, time, responsibility and knowledge. I.G.
Ex. 37/14, I.G. Ex. 74/22, 23; see I.G. 34/14.

85. Under Medicare, a doctor is not entitled to reimbursement for an office visit simply based on the
amount of time he spent with the patient; there must be some medically necessary service provided,
including documentation of that service. Tr.I/135-139; see I.G. Ex. 37/20.

86. As a general rule, Medicare regulations would not provide reimbursement for an office visit if the only
purpose of the visit were a non-covered service such as acupuncture; an office visit would be allowed and
reimbursed for other medically necessary services rendered in addition to a non-covered service. I.G. Ex.
74/23,24, 28; Tr.I/138, 139, 212; see I.G. Ex. 37/20; I.G. Ex. 39-1; FFCL 69.

87. Under Medicare, a physician may be reimbursed for a "consultation" where he renders services
pursuant to a request from the attending physician for an opinion and advice; the consultation must include
a medical history, physical exam, and written report of findings filed with the patient's permanent record.
I.G. Ex. 34/29; I.G. Ex. 35/2; I.G. Ex. 37/26.

88. Under Medicare, nerve blocks are reimbursable if used diagnostically rather than therapeutically. I.G.
Ex. 34/15; see I.G. Ex. 35/3; FFCL 66.

89. Medicare policy provides for reimbursement of up to two diagnostic nerve blocks in a calendar year.
I.G. Ex. 34/15; I.G. Ex. 35/3; I.G. Ex. 74/17, 30.

90. Medicare policy provides for reimbursement of up to six local infiltrations of anesthesia in a calendar
year. Tr.I/1496; I.G. Ex 47; I.G. Ex 48.

91. Medicare policy provides for reimbursement of only discrete types of electrical stimulation for the
treatment of pain: PENS and TENS. Tr.II/1481-1487, 1591.

92. Section 1320a-7(a)(1)(A) of the Act, the CMPL, prohibits the submission of claims which were not
provided as described in the Medicare claim submitted; this is an exacting standard of care and an
"unartful" description of medical services in a Medicare claim is a description of services that were not
provided as claimed. Anesthesiologists Affiliated et al v. Sullivan, F.2d (8th Cir., No. 90-2387, Aug.
9, 1991).

93. Respondent's medical records for the claims at issue in this proceeding do not reflect that nerve blocks
were provided. Tr.I/1244, 1245, 1282; 1514, 1515, 1519-1521, 1527.

94. Respondent's medical records for the claims at issue in this proceeding do not reflect that office visits
and consultations were provided. Tr.I/1514, 1515, 1519-1521, 1527.

95. Documentation in the pertinent medical records corresponding to Respondent's nerve block claims is
indistinguishable from documentation corresponding to office visit claims. Tr.I/1515.

96. Notations in Respondent's medical records and operative reports attached the claims forms indicate
that marcaine was injected during many electro-acupuncture treatments. See I.G. 1-11, 1-12, 2-1, 4-1, 4-2,
5-1, 5-4, 6-2, 6-3, 8-18, 8-25, 8-32, 9-19, 11-8, 12-8, 12-9, 12-10, 12-14, 12-15, 14-2, 14-3, 15-1, 15-2, 15-
3, 16-1, 16-2, 18-1, 18-2, 20-1, 22-1, 22-2, 23-1, 23-2, 25-1, 25-2, 25-3, 25-4, 25-5, 27-1, 27-2, 27-3, 28-1,
28-2, 28-3, 28-4, 29-1, 29-2; Tr.I/1251; R.Ex. 94/3; R 14A, 14B;.

97. Respondent's records reflect that he was providing electro-acupuncture treatments to his patients rather
than the services claimed. Tr.I/1244, 1515, 1526-1527.

98. Although Respondent's medical records are extremely sketchy and, at times, illegible, there are a
number of indications that he provided other services in addition to electro-acupuncture (i.e., prescribed
drugs, ordered lab work, administered flu shots, performed minor surgery, or took blood pressure
readings). Tr.I/1515; I.G. Ex. 1-15, 2-6, 3-3, 4-5, 5-5, 6-4, 7-4, 8-37, 9-36, 10-21, 11-9, 13-6, 14-5, 15-8,
16-3, 18-9, 20-2, 21-6, 22-3, 23-4, 25-7, 26-2, 27-4, 28-6, 29-3, 30-9, 31-2.

99. These notations of additional services in Respondent's records sometimes occurred in conjunction with
claims for office visits and sometimes in conjunction with claims for nerve blocks, but consistently in
conjunction with documentation of electro-acupuncture treatments. See I.G. Ex. 1-15, 2-6, 3-3, 4-5, 5-5, 6-
4, 7-4, 8-37, 9-36, 10-21, 11-9, 13-6, 14-5, 15-8, 16-3, 18-9, 20-2, 21-6, 22-3, 23-4, 25-7, 26-2, 27-4, 28-6,
29-3, 30-9, 31-2.

100. The most frequent diagnosis found for the claims at issue is arthritis. Tr.I/1247, 1254, 1259, 1261,
1268, 1271, 1274, 1275, 1280, 1289, 1296, 1297, 1299, 1300, 1303, 1306, 1307; Tr.II/1515.

101. Many of the notations of "marcaine" in Respondent's medical records were added to the records after
the original notations that electro-acupuncture had been performed. Tr.I/1244, 1293.

102. Beneficiary Charlotte Gans made a written sworn statement to I.G. agent Joseph Neigsch that the
only treatment she had received from Respondent was electro-acupuncture. I.G. Ex. 8-40.

103. In subsequent written statements and at the hearing, Ms. Gans recanted the sworn statement, saying
that it had not been read back to her before she signed it, that it had been obtained in a misleading manner,
and that she had received other treatments from Respondent, in addition to electro-acupuncture. R. Ex. 96-
2, 96-3; Tr.II/1281-1284, 1300-1306.

104. I.G. investigator Richard Chorman signed a sworn statement that he had accompanied investigator
Neigsch to the interview with Ms. Gans, that Mr. Neigsch had read Ms. Gans' sworn statement back to her
before she had signed it and that investigator Neigsch had not misled Ms. Gans. I.G. Ex. 8-41/2,3.

105. Ms. Gans is elderly, infirm, and at the hearing appeared at times to have been confused about the
timing of certain events; Ms. Gans remains under the care of Respondent, likes the Respondent, receives
treatment from Respondent at a reduced fee or no fee, and her subsequent written statements were prepared
by Respondent and signed by Ms. Gans at Respondent's office. Tr.II/1300; see Tr.II/1154, 1288-1292,
1306, 1344.

106. I did not find Ms. Gans' testimony at the hearing to be credible.

107. Ms. Gans' testimony does not override her initial sworn statement; while she at times received
additional services from Respondent, the purpose of her visits to Respondent was to receive electro-
acupuncture. See Tr.II/1291, 1294-1295, 1308.

108. Investigator Neigsch did not mislead Ms. Gans. FFCL 106, 107.

109. Sworn statements of five other beneficiaries (or in one instance a relative who had accompanied a
now deceased beneficiary to Respondent's office) were contradicted at the hearing by their own testimony
or that of relatives who had accompanied them to Respondent's office; the sworn statements indicated that
Respondent had provided only electro-acupuncture (with specific stated exceptions), but the testimony
indicated that on occasion Respondent had provided other services as well. Tr.I/415, 482, 484-490, 532,
613-616, 621-625, 627.

110. Sworn statements of other beneficiaries were similarly contradicted by excerpts from testimony
provided to a grand jury in 1986. Tr.II/835-842, 852-858, 869, 878.

111. The testimony elicited at this hearing and the excerpts from the 1986 grand jury investigation do not
override the sworn statements presented by the I.G.; while the beneficiaries received additional services
from Respondent, the primary purpose of their visits to Respondent was to receive electro-acupuncture.

112. The additional services Ms. Gans and others received during their visits for electro-acupuncture
therapy are not reimbursable under Medicare since the treatments were not medically necessary under
Medicare standards (i.e., not sufficiently documented or inconsistent with the stated diagnoses). See FFCL
78, 80, 86.

113. Respondent presented the testimony and sworn affidavit of his employee Charlene Cook as the best
factual account of events in question in this case. R.Br. 46.5; R.Ex. 94; Tr.II/1094.

114. Respondent presented Ms. Cook's testimony to establish and corroborate his version of events. See
Tr.II/1099-1158.

115. Charlene Cook was Respondent's full-time office manager from 1980 through 1985, took a year off
to have a child, went back to work for Respondent part-time thereafter, and at the time of this hearing was
employed by Respondent. Tr.II/1091.

116. Charlene Cook's testimony was not an objective, independent version of events and was not credible;
Ms. Cook has a long-standing, close affiliation with Respondent and, at the time of the hearing, was still
employed by him. See FFCL 115.

117. Respondent did not prove his assertion that in 1980 Carol Durso of Blue Shield, Rochester, told
Respondent to bill his office procedures as nerve blocks under code 52980. See I.G. Ex. 54-1; FFCL 113-
116.

118. Respondent did not prove his assertion that in 1980 representatives of BSWNY or any Medicare
carrier told Respondent to bill his office procedures under the code 52980. See FFCL 113-116.

119. Charlene Cook's notes of a March 19, 1985 meeting with BSWNY do not prove Respondent's
assertion that he was told at that meeting to bill his services first for six local infiltrations of anesthesia and
then all other visits as office visits. See FFCL 113-116.

120. At the March 19, 1985 meeting and in a July 16, 1985 letter confirming the results of the meeting,
BSWNY specified the number of times local infiltrations could be claimed per year and that individual
claims for the services were subject to the Medicare requirement of medical necessity; BSWNY never
stated that Respondent's services fit into particular categories or would be reimbursed without a
determination of medical necessity. I.G. Ex. 47; I.G. Ex. 48/2.

121. Respondent did not prove that he was told at the March 19, 1985 meeting or thereafter to bill the
services he was providing in his office by billing first for six local infiltrations of anesthesia and then all
other visits as office visits. See FFCL 113-116, 119-120.

122. Respondent did not prove that he was billing for his service according to instructions provided by
BSWNY. See FFCL 117, 118, 121.

123. The terms local and superficial nerve block have no medical meaning and are not terms used in
Medicare reimbursement. Tr.I/1214-1215, 1467.

124. Nerve blocks are not appropriate treatments for arthritis. Tr.I/1247.

125. Electro-acupuncture or electrical stimulation therapeutic services performed by Respondent do not
constitute diagnostic or therapeutic nerve blocks, PENS, or TENS, and thus are not reimbursable under
Medicare. FFCL 18, 67, 75, 88, 91.

126. Respondent added local injections of marcaine to his electro-acupuncture therapy only after BSWNY
began to reject his nerve block claims. Tr.II/1341; I.G. Ex. 95/2.

127. Respondent added local injections of marcaine to his electro-acupuncture therapy only because he felt
the injection of an anesthetic agent would legitimize his claims as nerve blocks. I.G. Ex. 95/2; R. Ex. 94.

128. The injection of marcaine, when administered in conjunction with electro-acupuncture, does not
convert the electro-acupuncture treatment into a nerve block. Tr.I/1241, 1247, 1249-1251, 1513; See
FFCL 126, 127.

129. The injections of marcaine are not reimbursable under Medicare as nerve blocks because Medicare
only reimburses diagnostic blocks, and injections of marcaine are not diagnostic blocks. FFCL 75, 76, 88.

130. The injections of marcaine are not reimbursable under Medicare as office visits, since the purpose of
the visits was to receive electro-acupuncture and the injections were not medically necessary. FFCL 66,
78, 86, 126, 127.

131. The injections of marcaine are not reimbursable under Medicare as local infiltrations of anesthesia,
since they were not medically necessary and were improperly described as "local nerve blocks" on the
claim forms. FFCL 78, 92, 135.

132. The additional services provided by Respondent were not reimbursable as office visits under
Medicare since the purpose of the visits was electro-acupuncture and since the notations do not constitute
sufficient documentation to establish the medical necessity of the services, except in the fourteen instances
noted in FFCL 181, below. FFCL 86.

133. The diagnosis listed on the vast majority of the claims in question is not consistent with the treatment
documented in the corresponding medical records. Tr.II/1515, 1538-1541, 1545-1563.

134. Respondent's evidence was insufficient to establish the medical necessity of any treatment.
Tr.II/1515.

135. The terms "local nerve block" and "superficial nerve block," were "unartful" descriptions of the
services provided and, therefore, are descriptions of services not provided as claimed under the CMPL,
section 1320a-7(a)(1)(A) of the Act. See FFCL 92.

136. None of the claims in question were properly described: either because the narrative description was
improper for the service provided, the code was improper for the service provided, the narrative description
did not correspond with the code, or the service provided was claimed at an improper level of service.
FFCL 123, 125, 128, 129. 133, 135.

137. All of the 688 claims in question are false or improper under the CMPL. FFCL 123-136.

138. Respondent submitted or caused to be submitted to BSWNY the 688 Medicare claims at issue in this
proceeding. Tr.I/550-553, 555, 593-596, 641-644. See I.G. 1-1 through 31-1.

139. Respondent knew that electro-acupuncture was not a covered Medicare service and, therefore,
claimed his electro-acupuncture services as "nerve blocks."

140. Respondent knew that electro-acupuncture was not a covered service and, therefore, claimed the
electro-acupuncture services he provided as "office visits."

141. Respondent had reason to know that electro-acupuncture was not reimbursable as a nerve block. I.G.
Ex. 35/3; FFCL 26, 31, 88.

142. Respondent had reason to know that to be reimbursable as an "office visit," any additional services
provided during an electro-acupuncture treatment would have to meet the criteria for medical necessity,
including adequate documentation. FFCL 27, 31, 86.

143. Respondent had reason to know that the cryptic notations of additional services (prescription drugs,
orders for lab work, administering flu shots, doing minor surgery, or taking blood pressure readings) would
not be sufficient to convert otherwise unallowable claims for electro-acupuncture into reimbursable claims
for office visits. FFCL 27, 31, 86; Tr.II/151

144. Respondent had reason to know that the additional services he was performing, except for the
fourteen noted below, were not sufficiently documented so as to be considered medically necessary under
Medicare. FFCL 31, 78-80.

145. Respondent had reason to know that neither the notations of "marcaine," nor the notations in
conjunction with occasional operative reports, are sufficient to convert Respondent's unallowable electro-
acupuncture services into reimbursable "local infiltration of anesthesia" services. Tr.I/1515, 1526-1527;
FFCL 31, 131.

146. Respondent had reason to know that his local injections of marcaine services were not reimbursable
under Medicare, since they did not meet the criteria for medical necessity. FFCL 31, 131.

147. Respondent acted with reckless disregard for the Medicare regulations in order to attempt to provide
reimbursement for his Medicare patients. FFCL 30, 141-146.

148. Respondent submitted or caused to be submitted to BSWNY claims on behalf of 31 beneficiaries for
688 items or services which he knew, had reason to know, or should have known were not provided as
claimed. See FFCL 73, 127, 128, 130, 131, 132.

149. In assessing Respondent's credibility, I considered that when he applied to be licensed as a
acupuncturist in 1988, Respondent indicated on his application to the New York Department of Education
that he had practiced acupuncture 100 percent of his time for the last ten years, but when attempting to
persuade this ALJ that he should not be found liable under the CMPL, Respondent testified under oath that
his was a general medical practice specializing in the treatment of pain and that electro-acupuncture was
only one of several medical modalities which he used in treating pain. See FFCL 58; Tr.II/1334-1337.

150. In assessing Respondent's credibility, I considered that Respondent has more than a nine year history
of drug addiction, spanning the period in question in this case and lasting at least until 1987. Tr.II/1055-
1056, 1058, 1064.

151. In assessing Respondent's credibility, I considered that, in 1986, Respondent lied to the New York
State Board for Professional Medical Conduct when he testified under oath that he was drug free.
Tr.II/1076, 1086; I.G. Ex. 55-1/4,5; see Tr.II/1326.

152. In assessing Respondent's credibility, I considered that, in entering into a plea agreement in 1987,
Respondent admitted guilt to one count of mail fraud under Indictment 86-194T, encompassing five false
claims for seven services rendered to beneficiary Antoinette Pezzulo, and to one count of distribution of a
controlled substance under Indictment 87-106T. I.G. Ex. 88.4/2-3, 15.

153. In assessing Respondent's credibility, I considered that the claims for services to Ms. Pezzulo
corresponded to counts 528, 529, 533, 534, 535, 536, and 537 of the I.G.'s case in this proceeding. I.G. Ex.
15-1, 15-4, 15-5, 15-6.

154. In assessing Respondent's credibility, I considered that, in entering into the 1987 plea agreement,
Respondent admitted under oath that he had known that acupuncture was not a covered service under
Medicare and had billed Medicare for nerve block services which he had not provided as claimed, whereas
in this proceeding Respondent contended that he was merely billing his services as he had been instructed
by BSWNY. I.G. Ex. 88-4/8,12; Tr.II/1340-1341, 1441.

155. In assessing Respondent's credibility, I considered that, in entering into the plea agreement,
Respondent testified under oath that he had not been forced to plead guilty under the plea agreement,
whereas in this proceeding, Respondent contended that he was forced to plead guilty to mail fraud
involving Ms. Pezzulo because the prosecutor threatened to send him to jail on the drug charge if he did
not plead guilty to the mail fraud charge as well. I.G. Ex. 88-4/15; Tr.II/1328, 1334-1335.

156. In assessing Respondent's credibility, I considered that Respondent's testimony under oath in this
proceeding contradicts previous testimony given under oath. FFCL 154-155.

157. In assessing Respondent's credibility, I considered that Respondent was asked to resign from
Rochester General Hospital for improper billing practices and upon his departure wrote a letter to the
Executive Director of Rochester General Hospital admitting that he knew that many of his charges were
improper and stating that he was seeking psychiatric care to find out why he had acted as he had, whereas
in this proceeding Respondent testified that the charges against him at Rochester General were unfounded.
I.G. Ex. 90-2/3-4; Tr.II/1321-23.

158. In assessing Respondent's credibility, I considered that Respondent's testimony under oath in this
proceeding is inconsistent with the earlier admission made to the Executive Director of Rochester General
Hospital. FFCL 157.

159. In assessing Respondent's credibility I considered that Respondent altered his medical records to
show that he had administered marcaine to his patients, although BSWNY and I.G. representatives advised
him not to add anything to his records. Tr.II/1119, FFCL 29.

160. In assessing Respondent's credibility, I considered that Respondent grossly misinterpreted
information provided by BSWNY and Blue Shield of Rochester, disavowing any personal responsibility
for his dilemma in this case and alleging that confusion within the Medicare system and personal vendettas
against him created the dilemma. See FFCL 25-29, 118-122; Tr.II/1341; R.Br. at 115, 151-152; I.G. Ex.
54-1, 54-2/14-15, 17-18.

161. In assessing Respondent's credibility, I considered that Respondent initially told I.G. investigators
that both Carol Durso (of Blue Shield, Rochester) and representatives of BSWNY told him to bill under
code 52980, but later testified that only Carol Durso told him to bill under code 52980, and that he thought
she worked for BSWNY. I.G. Ex. 42-2/2; I.G. Ex. 73/8; Tr.I/92; Tr.II/1095-1097.

162. In assessing Respondent's credibility, I considered that Respondent distinguished acupuncture from
electronic stimulation when trying to establish that his services should be reimbursed under the Medicare
regulations, while during essentially the same time period, Respondent used the terms synonymously in an
effort to convince the State Board of Education that he should be granted a license as an acupuncturist.
I.G. Ex. 42-2/2; I.G. Ex. 73/6,9; FFCL 50.

163. In assessing Respondent's credibility, I considered that in this proceeding Respondent represented
that whenever he injected marcaine he billed under procedure code W3600, local infiltration of anesthesia,
whereas the claims show that marcaine was billed under various codes, including 64415, 64441, 64405,
64450, and 90610. R. Br. at 95; R. Rep. Br. I at 1-2; R. Rep. Br. II at 2; Tr.II/1339. See I.G. Ex. 1-8, 5-1,
8-18, 9-19, 11-8, 12-8, 12-9, 12-10, 16-1, 16-2, 15-1, 15-2.

164. In assessing Respondent's credibility, I considered that Respondent alleged having little or no
financial resources, yet he received approximately $800,000 after taxes from his mother's 1987 will, and, at
the time of the hearing, owned art, furniture, a valuable home, retained membership in a country club
($300/mo.), and had given away substantial amounts to Lisa Carlier, including over $50,000 in jewelry and
$160,000 to start a business in which he participated. Tr.II/1599-1600, 1603, 1605, 1607-1610, 1616-1618,
1620-1622, 1636; I.G. Ex. 104; 107/12; R.Br. 175.

165. In assessing Respondent's credibility, I considered that Respondent reported conflicting information
about his financial condition to the I.G., the New York State Supreme Court for the County of Monroe, and
this ALJ. R. Br. 175; Tr.II/1603, 1605-1613, 1618, 1620-1621, 1630, 1638-1639; I.G. Ex. 106, 107.

166. Respondent is not a credible witness. See FFCL 149-165.

167. Section 1128A of the Act provides for the imposition of a penalty of up to $2,000.00 for each item or
service falsely or improperly claimed, an assessment of up to twice the amount falsely or improperly
claimed, and an exclusion from Medicare and federally-financed State health care programs.

168. In determining the amount of penalty and assessment to be imposed, and the length of exclusion,
Section 1128(a)(1) of the Act and regulations direct the finder of fact to consider several factors which may
be of an aggravating or mitigating nature. 42 U.S.C. 1320a-7a; 42 C.F.R 1003.106.

169. The I.G. has the burden of proving the existence of any aggravating factors by a preponderance of the
evidence.

170. The amount of penalties and assessment, and the length of exclusion from participation in the various
medical programs, is to be determined in a CMPL case by reviewing:

a. the nature and circumstances under which the requests for payment were made;

b. the degree of a respondent's culpability;

c. the existence of prior offenses;

d. any other matters that justice may require.

42 C.F.R. 1003.106, 1003.107.

171. It is an aggravating factor that the claims at issue were presented over a lengthy period of time. FFCL
14.

172. It is an aggravating factor that there were a substantial number of claims involved in this case.
FFCL 10-13.

173. It is an aggravating factor that the amount claimed for the services at issue was substantial. FFCL 14.

174. It is an aggravating factor that Respondent acted with reckless disregard for Medicare rules and
regulations. FFCL 147

175. It is an aggravating factor that the Department has had to expend considerable resources in
monitoring Respondent and attempting to secure his compliance. FFCL and Tr.I/168,586; see FFCL 22-
29.

176. It is an aggravating factor that Respondent assured patients that electrical stimulation treatments
would be reimbursed by Medicare, thereby inducing the patients to undergo electrical stimulation
treatments and to pay Respondent at the time of treatment when he knew or had reason to know the
services provided were not reimbursable under Medicare. FFCL 30, 141-148; I.G. Ex. 82A, 82B.

177. It is an aggravating factor that Respondent has a history of misrepresenting facts. See FFCL 149-
171.

178. The I.G. did not prove all of the aggravating factors which he alleged, including that Respondent has
knowingly practiced acupuncture without appropriate authorization and has resisted paying restitution
under a previous plea agreement.

179. It is a mitigating factor that medical records submitted by the parties showed indications that some
other medical services besides electro-acupuncture or injections of marcaine were provided in numerous
patient encounters leading to the claims in question. I.G. Ex. 1-1 through 1-31; FFCL 20.

180. It is mitigating factor that Respondent provided many medical services to his patients which would
have been reimbursable if properly documented. See FFCL 20, 107, 109-112, 132, 179.

181. It is a mitigating factor that one of the I.G.'s medical experts identified 14 claims which he considered
to be reimbursable, although most of them at a lower level of service than claimed. Tr.II/1541, 1542,
1545-1547, 1549.

182. It is a mitigating factor that Respondent was drug addicted during the period of time in which the 688
claims at issue in this proceeding were submitted and that the addiction clouded his judgment. See
Tr.II/1055-1058; FFCL 150.

183. It is a mitigating factor that many beneficiaries benefitted from Respondent's services and found him
to be a good doctor. See I.G. Ex. 1-18/2, 4-5, 9-36, 12-24/2, 14-5, 21-6, 25-7.

184. The Respondent did not prove all the mitigating factors he alleged, including that his financial
condition warrants a lesser penalty and assessment. FFCL 170, 171, 172.

185. The six-year statute of limitations provided by section 1128A(c)(1) of the Act is controlling in this
case, because this case was initiated by the I.G. after September 1, 1987.

186. The I.G. is not barred from bringing this action by either the doctrine of equitable estoppel or
collateral estoppel.

187. The I.G. is not barred in this case by the double jeopardy clause of the United States Constitution.

188. The I.G. is not equitably estopped or otherwise barred in this case by the Plea Agreement
between the United States and Respondent in Respondent's criminal trial.

189. Respondent does not have the right to trial by jury and to be found guilty beyond a reasonable doubt.

190. Respondent was not prejudiced or denied due process by the admission of written statements of
patients obtained by the I.G. in lieu of live testimony.

191. Respondent was not prejudiced or denied due process by the I.G.'s claim of privilege.

DISCUSSION

I. Introduction And Summary.

The I.G. proved that Respondent presented 688 Medicare claims to the Medicare carrier, BSWNY,
between January 1983 and the end of 1986. 6/ Since Respondent made his Medicare patients pay for
treatment at the time of service, he asked Medicare to reimburse his patients. The services claimed to have
been provided to these Medicare patients by Respondent were described in writing on the face of these
claims. Most of the services listed on the claims are for "local nerve block" and "office visit," in
approximately equal numbers. A handful are described as a "consultation," one as a "flu shot and a local
nerve block," and one is described as a "consultation/office visit." None of the claims has the service
described as acupuncture or electro-acupuncture. The vast majority of the claims list arthritis as the
diagnosis or nature of the illness. There are also a few diagnoses of asthma, sciatica, back pain, coronary
artery disease, tendinitis, multiple sclerosis, knee pain, Parkinson's disease, and bursitis of the shoulder.

The I.G. argues that none of the claims in issue were provided as claimed and that Respondent is liable
under the CMPL. I.G. Br. 185-187. The I.G. alleges that while Respondent claimed for local nerve blocks,
office visits, or consultations, Respondent performed only acupuncture or electro-acupuncture services.
The I.G. contends that since Respondent knew that Medicare did not pay for acupuncture or electro-
acupuncture services, Respondent devised a scheme to circumvent the Medicare rules and regulations by
misrepresenting the services he performed. The I.G. alleges that Respondent knew that an accurate
description of the services provided would result in denial of reimbursement. The I.G. produced two
expert witnesses, a variety of fact witnesses, and documentary evidence to support these allegations.

The I.G. argues, in the alternative, that (1) even if Respondent lacked actual knowledge that his claims
were for services not provided as claimed, Respondent had a reckless disregard for the truth or falsity of his
claims and their supporting documentation and, accordingly, (2) Respondent had reason to know or should
have known that his claims were for services not provided as claimed.

Respondent contends that most patients received local infiltration of anesthesia and electrical stimulation
and that this treatment constituted local nerve blocks as claimed. R.Br. 229. Respondent offered an expert
anesthesiologist at the hearing, with expertise in pain management, to support his arguments. Tr.I/732-815.
Respondent also argues that his claims for office visits or consultations were entirely justified by what he
did during his patient encounters. R. Br. 229. He offered patient testimony and his own testimony to
support these arguments. While he admits that he was a poor record keeper, Respondent argues that he
performed the services listed on the 688 claims at issue and that Medicare's carrier, BSWNY, instructed
him to submit the claims the way he did. He points to an earlier ALJ decision issued in his exclusion case
and asks that I similarly conclude that what occurred in this case is just a difference of opinion between
him and Medicare's carrier, BSWNY.

Respondent is an intelligent physician who specialized in the alleviation of pain. He appears to have the
support of a caring family, friends, and patients. Unfortunate-ly, Respondent turned to drugs to numb his
own pain. His judgment became clouded and impaired. He became arrogant and reckless with regard to
Medicare rules and regula-tions. He began to manipulate and rationalize to attain his goals. He is still
difficult and disrespectful at times. He is subject to emotional outbursts and is tenaciously unwilling to
yield to rules or authority. At times, he seems to be very sincere. At other times, he engages in over-
rationalizing past reckless or illegal behavior. His history of manipulating and misleading people is well
documented in this record.

Based on all of the evidence in the record and based on my observation and study of Respondent's
credibility and demeanor, I conclude that he believed strongly in the results produced by his form of
practicing pain medicine, and believed very strongly that his pain medicine services should be covered by
Medicare. So, Respondent sought to help his patients by circumventing the Medicare rules and
regulations. He thought that he would be clever enough to figure out ways to bend or twist the Medicare
rules and regulations. However, through clouded, obstinate, and drug-impaired judgment, he misled and
knowingly or recklessly filed false claims.

Respondent knew acupuncture, including electro-acupuncture, was not a service covered by Medicare. He
knew that the primary service his patients sought from him was the treatment of their pain. His principal
modality for treating pain was electro-acupuncture. When speaking to patients, Respondent characterized
his pain treatments as acupuncture or electrical stimulation. At other times, he characterized these same
services as nerve blocks. In other words, Respondent described his services one way to induce patients to
come to his office for electro-acupuncture treatments and then described what he did another way on the
Medicare claims to induce the Medicare carrier to pay for his services. He told his lawyer in a letter that he
began the practice of injecting his Medicare patients with a small amount of local anesthetic simply so he
could "legitimately" bill his services as nerve blocks. I.G. Ex. 95/2. This letter reveals much about
Respondent's practices and attitude towards Medicare's rules.

I discounted the testimony of Dr. Gilies, Respondent's impressive expert witness, because he had little
familiarity with Medicare rules and regulations and, more importantly, because Dr. Gilies failed to review
the medical records in issue and had no first-hand knowledge of what Respondent actually did. On the
other hand, Dr. Harding was both well informed and impressive; he testified as both an expert and as one
familiar with the actual facts in the record. Dr. Tofany's testimony was also impressive, except for his lack
of regard for traditional acupuncture.

I conclude that the patients in issue received electro-acupuncture and local infiltration of anesthesia. I
conclude that sometimes Respondent performed additional medical services, in addition to electro-
acupuncture and local infiltration of anesthesia. While these additional services might have benefitted his
patients, they were not adequately documented or consistent with symptoms or diagnosis and, therefore,
not "medically necessary," as defined by the Medicare rules and regulations. In addition, while there is
credible testimony from Dr. Gilies that Respondent's treatments were therapeutic and useful to the
Medicare patients in issue, the services were not reimbursable by Medicare and Respondent knew it or had
reason to know it.

Respondent, through clouded and drug-impaired reasoning, felt justified in what he did. Now, while he
appears to be drug-free (even though he is not presently active in any twelve-step or other rehabilitation
programs), he appears to be adamant that he did nothing wrong except fail to keep adequate records.

Although Respondent has begun his slow road back to complete function and integrity, he has not come to
the end of that journey. He lacks complete candor and appears to need additional rehabilitation. I found
Respondent, when not provoking the anger of others, to engender sympathy. I did not find Respondent to
be credible, because of his history of deception, the overwhelming evidence contradicting his testimony,
and because of his demeanor throughout the hearing.

Based on the entire record in this case, I conclude that Respondent's patients came to him primarily for the
alleviation of pain and that Respondent alleviated their pain by performing some form of electro-
acupuncture. His local injection of marcaine or anesthesia was an adjunct to his electro-acupuncture
treatments; it was done to assure reimbursement and was not medically necessary, within the meaning of
the Medicare rules. Because I believe that Respondent was motivated, in part, to help his patients and
because the evidence demonstrates that Respondent did perform some beneficial medical services to the
Medicare patients in question in this case, in addition to electro-acupuncture, I have reduced the penalties
and exclusion.

I have not let my personal beliefs about traditional acupuncture affect my decision in this case. My
experience is that traditional acupuncture is an efficacious and beneficial healing art when performed by
trained and licensed practitioners and I believe that traditional acupuncture should be reimbursable by
Medicare at rates similar to office visits provided by a physician. It is ironic that Dr. Stern's actions
actually impeded the result he sought, which was to have Medicare pay for the pain services he performed.
It would have been better if Dr. Stern had joined others and worked within the system to effect changes in
Medicare reimbursement policy.

In sum, I find and conclude that Respondent is liable for submitting false or improper Medicare claims
based on the law and a preponderance of the evidence. I have reduced the amount of civil monetary
penalties and period of exclusion, and I have concluded that the constitutional, jurisdictional, and
procedural arguments raised by Respondent have no merit.

II. Medicare Does Not Pay For Acupuncture Services.

This is a case involving Part B of Medicare, a federal program of health insurance for the aged and
disabled. Medicare covers 80 percent of the reasonable charges for physician services, tests, and medical
supplies. The Secretary of DHHS contracts with entities known as "carriers" to perform functions
necessary to administer the Medicare program, mainly the processing and payment of claims in accordance
with Medicare rules and regula-tions. The Medicare carrier for the Rochester, New York area for the
period in issue was Blue Shield of Western New York (BSWNY).

Traditional acupuncture, an ancient healing art, dates back more than 2,000 years and originated in China.
It is effective and beneficial for the treatment of pain and a myriad of other conditions. Traditional or
classical acupuncture involves the placement and manipulation of solid, thin, metal needles inserted
slightly beneath the skin at various points. Traditional acupuncture does not involve injection of drugs or
other substances and the needles are not hollow (like hypodermic needles used for injections).

When acupuncture needles are manipulated electronically, the procedure is commonly referred to as
electronic acupuncture, electro-acupuncture, or electrical stimulation. In an electro-acupuncture treatment,
4-16 solid metal acupuncture needles are attached by clips and wires to a generator which is turned on for
ten to twenty minutes. (This procedure is not traditional acupuncture.) When the acupuncture needles are
not placed at acupuncture points, it is arguable that the term electrical stimulation might be a more accurate
description of the treatment than electro-acupuncture. However, neither electro-acupuncture nor electrical
stimulation with acupuncture needles is covered by Medicare. 7/

Medicare is rightfully concerned about the misuse of acupuncture in the United States. See I.G. Ex. 33-1.
As a result of that concern, however, Medicare has taken a restrictive view of traditional acupuncture and
other forms of acupuncture as an effective treatment. Medicare deems all forms of acupuncture to be
experimental and not reimbursable. I.G. Br.14-17.

BSWNY formally recognized Medicare policy regarding the non-payment for acupuncture services
beginning in 1979. In 1979 and in November 1983, BSWNY sent "Claims" and "Doctor's" manuals, to all
physicians in the Rochester area. The two manuals contained Medicare rules and regulations, billing
information, tables of procedure codes, and verbal descriptions of the proper procedure codes to use for
different physician's services. The Claims and Doctor's manuals specifically list acupuncture as a non-
covered service. FFCL 30.

Respondent was informed personally by BSWNY and I.G. personnel, beginning in early 1984 and
continuing throughout the period involved in this case, that acupuncture was not covered by Medicare and
that Respondent's services appeared to be acupuncture. FFCL 24.

III. Federal Law Demands That Medicare Pay Only For Physician's Services That Are "Reasonable And
Necessary".
Section 1862 (a)(1)(A) of the Act provides that Medicare will pay only for physician's services if they are
"reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning
of a malformed body member." Medicare carriers are instructed to pay only for "reasonable and
necessary" services performed by a physician. Tr.I/550.

The Claims and Doctor's Manuals provide that physicians must document services, as an element of
proving that they are medically necessary, in order to be reimbursed. I.G. Ex. 37/20; see I.G. Ex. 34/12,
16.

Thus, even if a service were performed by a physician, it would not be reimbursable by Medicare unless it
were "reasonable and necessary", as required by Section 1862 of the Act and "medically necessary," as
defined by the Medicare rules.

IV. The Elements Of Liability Under The CMPL.

The CMPL provides that any person who presents a false or improper claim for Medicare or Medicaid
reimbursement shall be subject to (1) a civil money penalty of not more than $2,000 for each item or
service, (2) an assessment of not more than twice the amount claimed for each item or service, and (3) an
exclusion from participating in the Medicare and Medicaid programs.

The I.G. has the burden of proving by a preponderance of the evidence all elements of liability under the
CMPL and Regulations for each claim in issue. The I.G. must prove that (1) a "claim", (2) was "presented
or caused to be presented", (3) by Respondent, (4) to the Medicare or Medicaid programs, (5) for "a
medical or other item or service", (6) when he "knew, had reason to know, or should have known," (7) that
the items or services in issue were "not provided as claimed." CMPL 1320a-7a(1) (A)(B)(C); Regulations
1003.102(a)(1).

The elements of liability in dispute in this case are: (1) whether Respondent provided the services "as
claimed" and, if not, (2) whether he "knew, had reason to know, or should have known" that the services
claimed were "not provided as claimed."

V. The I.G. Proved That The Services Listed on The Claims In Issue Were Not Provided As Claimed.

The evidence in the record proves that the Medicare requirements necessary to support claims for
reimbursement for 688 services in issue were not met by Respondent. The I.G. has shown, by a
preponderance of the evidence, that where Respondent sought reimbursement for office visits,
consultations, and local nerve blocks, these services were not performed as claimed in 688 instances. The
primary service actually provided in each of the 688 instances was electro-acupuncture and, in certain
instances, local injections of anesthesia was administered in conjunction with the electro-acupuncture.
Respondent admits that in most of these 688 instances, the Medicare patients received electrical stimulation
or electrical stimulation in conjunction with a local injection of marcaine. R. Br. 229. He argues, however,
that the services were provided and claimed in accordance with instructions from Medicare representatives.

A. Respondent Did Not Perform Nerve Blocks, As Claimed.

There are approximately 343 claims in issue where the service is described as "local nerve block".
Respondent used several different procedure codes on these claims and, after early 1984, attached an
operative report entitled "superficial nerve block," to many of the claims. FFCL 38.

Medicare pays only for two diagnostic nerve blocks per patient in one year and does not pay for nerve
blocks for the treatment of pain. FFCL 73, 88, 89. Respondent had notice of this through contacts with
BSWNY and I.G. personnel in 1984 and 1985. He also had constructive notice of these facts as early as
1979 from BSWNY. See FFCL 31. FFCL 30, 73.

Respondent argues that, with regard to each "local nerve block" claim in issue, he performed either
electrical stimulation alone, or in conjunction with local infiltration of anesthesia, and that those treatments
constitute "nerve blocks." R. Br. 229. This argument has no merit.

The treatments Respondent provided consisted of placing acupuncture needles at or near the site where the
patient was experiencing pain and applying electric current to the needles. Nevertheless, whether the
treatment modality employed by Respondent is labelled acupuncture, electro-acupuncture, or electrical
stimulation, the I.G. proved that the treatment of placing acupuncture needles into a patient and applying
electrical current was not a nerve block, as that term is used in Medicare reimbursement terminology. Dr.
Gilies, Respondent's own expert, testified that what Respondent did with the acupuncture needles was not a
nerve block, but would be considered electrical stimulation. Tr.I/795. 8/

The medical records pertaining to the beneficiaries whose claims are at issue in this proceeding contain no
documentation related to nerve blocks, as that term is used in Medicare reimbursement terminology. When
submitting claims, Respondent frequently attached a form "operative report," captioned "superficial nerve
block," which stated that an injection of .25 cc or 4 cc of marcaine had been administered. Respondent's
form "operative reports" do not describe nerve block, or constitute sufficient documentation that a nerve
block was given.

Again, based on Respondent's own expert, Dr. Gilies, Respondent did not have the proper documentation
to support his claims for a nerve block. Tr. I/796-808. Drs. Tofany and Harding reviewed Respondent's
medical records for the claims at issue in this proceeding and concluded that the records did not reflect that
nerve blocks had been provided. Tr.I/1244, 1245, 1282; Tr.II/1514, 1515, 1519-1521, 1527. 9/ The
experts testified that a physician's record of a nerve block should include diagnosis, caliber and length of
needle used; region of the body where the needle was placed; type, amount, and concentration of drug
used; sensations experienced during the block; and, finally, what happened after the block, if anything.
Documentation should also include an individualized and detailed operative report, not like the kind
submitted by Respondent. Tr.I/976, 1221-24, 1471; see also Tr.I/1333.

However, in some cases Respondent also injected his patients with a small amount of marcaine, a local
anesthetic agent, in conjunction with the electro-acupuncture treatments.

Dr. Gilies was of the opinion that the injection of marcaine by Respondent could be a nerve block,
especially if it is injected into a trigger point. Tr.I/746. I reject this conclusion because it is refuted by the
persuasive testimony of I.G.'s expert witnesses. I agree with Dr. Tofany and Dr. Harding that what
Respondent did was not a nerve block. Both I.G. experts testified that Respondent's injections of .25 cc or
4 cc of marcaine was not sufficient to block a nerve, and the addition of an electro-acupuncture treatment
would not itself, or in conjunction with the injection of marcaine, be considere

a nerve block. Tr.I/1241, 1247, 1249-1250; Tr.II/1513. Furthermore, there is no evidence to prove that
Respondent ever injected marcaine into trigger points. 10/
Even if I were inclined to accept this medical characterization of a nerve block, Medicare would not pay
for it because Medicare pays only for diagnostic nerve blocks, not nerve blocks for the treatment of pain.
None of Respondent's medical records for the claims at issue support a finding that Respondent performed
diagnostic nerve blocks. In fact, Respondent has not alleged that any of the claims at issue were for
diagnostic nerve blocks. By Respondent's own admission, he injected the marcaine superficially.

Finally, Respondent argues, that even if his nerve blocks were technically not reimbursable under the
Medicare rules, he was instructed by Medicare to submit the claims the way he did. Respondent was not a
credible witness and did not present sufficient evidence to find that he was billing for his service according
to instructions provided by BSWNY. Moreover, there is credible testimony that quite the opposite is true.

Beginning in 1984, in a telephone conversation, in a meeting, and in a letter confirming the results of the
meeting, BSWNY personnel informed Respondent that Medicare would cover two nerve blocks per year,
but only if they were for diagnostic purposes. Respondent was also told that Medicare would reimburse up
to six local infiltrations of anesthesia in a calendar year. Tr.I/1496; I.G. Ex 47; I.G. Ex 48. BSWNY
personnel never stated that Respondent's services fit into either category or would be reimbursed without a
determination of medical necessity. I.G. Ex. 47; I.G. Ex. 48/2.

In summary, the overwhelming evidence in the record supports the fact that Respondent did not perform
nerve blocks as claimed.

B. Respondent's Local Injections Of Marcaine Were Not Medically Necessary, Within The
Meaning Of The Medicare Rules.

Of the approximately 343 claims describing the service as local nerve block, there were 137 claims listing
the procedure code as W3600. This is the procedure code for "local infiltration of anesthesia". In 80 of the
remaining claims describing the service as local nerve block, Respondent used various other procedure
codes generally describing procedures involving injections of anesthetic agents. Attached to many of the
claims where operative reports entitled "superficial nerve block," indicating Respondent administered a
superficial injection of the anesthetic agent "marcaine."

Respondent argues, in effect, that even if what he did was not technically considered a nerve block, when
he injected marcaine and used the procedure code W3600 or any other Medicare procedure code for the
injection of an anesthetic agent, he was claiming for a superficial injection of anesthesia, a service that he
performed, that had medical validity, and that was reimbursable. R. Br. 231.

At first, this argument seems to have merit. This is especially so when considering Dr. Gilies testimony
that the injection of marcaine had therapeutic value. However, the I.G. proved by a preponderance of the
evidence that the procedure was not medically necessary under the Medicare rules. After much scrutiny
and study of the entire record, it is apparent that even this procedure was designed to mislead Medicare.

To be considered medically necessary under Medicare, services must be consistent with the diagnosis and
treatment, appropriate with regard to standards of good medical practice, not solely for the convenience of
the patient or the doctor, appropriate with regard to the level of service, adequately documented, and
identifiable in the patients records. FFCL 78.

I conclude, after careful consideration, that the injection of marcaine into these Medicare patients was not
medically necessary and was performed to mislead BSWNY into reimbursing for services that were not
reimbursable. Respondent actually stated in a letter to his lawyer in January 1985 that he had started
injecting marcaine so his services could "legitimately" be considered nerve blocks. I believe this candid
statement reflects Respondent's true motivation for injecting his patients with marcaine. This is not what
Medicare had in mind by demanding that services be medically necessary in order for them to be
reimbursed. 11/

Neither the notation in the patient's medical records nor the notations in conjunction with operative reports
is sufficient to convert Respondent's otherwise unallowable claims for electro-acupuncture into
reimbursable claims for local or superficial injections of anesthesia, since the services were not medically
necessary. While Dr. Gilies testified that the injection of marcaine had therapeutic value because it
stimulated the blood flow, the I.G. established by expert testimony that the amount of marcaine was so
small that its only likely effect would have been to numb a small "wheel" of skin to make the patient more
comfortable while the acupuncture needles were inserted. The most credible evidence in the record
establishes that Respondent performed the procedure to get reimbursed and not because of medical
necessity.

C. Respondent Did Not Perform Office Visits Or Consultations, As Claimed.

In about 339 of the services at issue, Respondent described the procedure performed as "office visit,"
mostly with a procedure code "90060," representing an "intermediate" level of service. Four described the
service performed as "consultation" and showed no code or code "90610."

Under Medicare, office visits are subject to qualification and subject to reimbursement according to various
levels of service, reflecting various levels of skill, effort, time, responsibility and knowledge. FFCL 84. A
doctor is not entitled to reimbursement for an office visit simply based on the amount of time he spent with
the patient. There must be some medically necessary service provided, and documentation of that service.
FFCL 85.

In a January 1985 telephone conversation, Mary McCarthy of BSWNY explained to Respondent that,
under Medicare, office visits must be medically necessary, documented, and that Respondent should not
resubmit a claim a "office visit" if the claim had already been turned down as "nerve block." Tr.I/153-154.
As a general rule, Medicare regulations would not provide reimbursement for an office visit if the only
purpose of the visit were a non-covered service such as acupuncture or electro-acupuncture. An office visit
would be allowed by Medicare for other services rendered in addition to non-covered services, but the
additional services must be medically necessary. FFCL 86. In addition to establishing medical necessity
under the Medicare rules, it is a basic requirement of good medical practice to keep accurate records of the
services. FFCL 77, 80.

Under Medicare, a physician may be reimbursed for a "consultation" where he renders services pursuant to
a request from the attending physician for opinion and advice. The consultation must include a medical
history, physical exam, and written report of findings filed with the patient's permanent record. FFCL 87.

Respondent's medical records for the claims at issue in this proceeding do not reflect that office visits and
consultations had been provided. FFCL 94. Documentation in the pertinent medical records
corresponding to Respondent's nerve block claims is indistinguishable from documentation corresponding
to office visit claims. FFCL 95. Respondent's records reflect that he was providing electro-acupuncture
treatments to his patients rather than the office visits claimed. Tr.I/1244, 1515, 1526-1527.

Respondent's medical records are incomplete, and, at times, illegible. However, there are numerous
indications that he provided other services in addition to electro-acupuncture, (i.e., prescribed drugs,
ordered lab work, administered flu shots, performed minor surgery, or took blood pressure readings).
These notations of additional services in Respondent's records sometimes occurred in conjunction with
claims for office visits and sometimes in conjunction with claims for nerve blocks, but consistently in
conjunction with documentation of electro-acupuncture treatments.

Nonetheless, the cryptic notations of additional services are not sufficient to convert otherwise unallowable
claims for electro-acupuncture into reimbursable claims for office visits, since the purpose of the visits was
electro-acupuncture and the notations do not constitute sufficient documentation to establish the medical
necessity of the additional services.

A candid statement of what Respondent claimed as "office visit" is found in a letter Respondent wrote to
his attorney on January 31, 1985. This letter followed the June 1984 meeting with OIG agent Linda Lloyd,
who informed Respondent that his electrical stimulation services appeared to be for acupuncture and could
not be claimed as nerve blocks. I.G. Ex. 42-2; Tr.II/920; I.G. Ex. 73/7,9. It also followed the January
1985 telephone conversation with BSWNY representative Mary McCarthy, who informed Respondent that
only two diagnostic nerve blocks were reimbursable in a calendar year and that he could not simply
resubmit as office visits past claims which had been turned down as nerve blocks. I.G. Ex. 44; Tr. I/153-
154; I.G. Ex. 74/20.

In the wake of these communications, Respondent told his attorney:

When a patient comes to my office it is an "office visit" NO MATTER what I do to the patient ....
A patient comes to me for my consultation about their problems and although I may do acupuncture or
nerve block, I also am a physician and I do prescribe medicines and council them .... I am a doctor, see a
patient and talk to them in my office, that in itself is an office visit no matter what else I do.

I.G. Ex. 95/2,3.

While Respondent is correct that he could bill his patients for an office visit under such circumstances, he
was incorrect in assuming Medicare would reimburse him for the services. While I believe Respondent did
perform other services (besides electro-acupuncture and local infections of anesthesia), he simply could not
claim them as office visits, given the level of documentation in his medical records. The I.G.'s expert, Dr.
Harding, identified only a handful of instances in which he considered sufficient documentation to be
present in the records. Accordingly, the other services can only be considered in mitigation.

VI. The I.G. Proved That Respondent "Knew," "Had Reason To Know," Or "Should Have Known" The
Services Claimed Were Not Provided As Claimed.

The current standard of knowledge in the CMPL required for liability to attach is that a respondent "knows
or should know" that an item or service is not provided as claimed. The statute sweeps within its ambit not
only the knowing, but the negligent. . . ." 48 Fed. Reg. 38827, 38831 (Aug. 26, 1983). The standard
contained in Section 1128A of the Act prior to December 22, 1987 was that a respondent "knew or had
reason to know." 12/

A. Personal History

Respondent comes from a prominent Rochester family, is well-educated and intellectually talented. As a
young man in the mid 1970s, he had already graduated from a prestigious University (with honors) and
medical school, had young triplet boys and another infant, and had begun what appeared to be a promising
career as an anesthesiologist. Tr.II/1321, 1323. By the late 1970s, he had been investigated by Medicare
for misrepresenting his anesthesia billing, had resigned from the hospital where he was attending physician
in anesthesia, had a drug problem which involved prescribing controlled substances for his own use, and
was asked to leave two other hospitals when they discovered his drug problem. Tr.II/1323-1324.

In late 1979 or early 1980, Respondent became certified as an acupuncturist and opened his own pain
clinic, called Rochester Pain Medicine. Tr.II/1324. I.G. Ex. 54-2/4. Respondent primarily provided
classical and electro-acupuncture treatments as a means for treating a wide variety of pain problems. He
referred to the treatments as acupuncture or electrical stimulation and told potential patients that Medicare
covered such services. I.G. Ex. 82A and 82B. Throughout the early 1980's, he continued to be heavily
addicted to drugs and was in and out of various drug rehabilitation programs. Tr.II/1324-1326. By 1983,
Medicare had begun to investigate his practice and, by 1986, he had been indicted by a federal grand jury
on charges related to his drug addiction and Medicare claims for services provided at Rochester Pain
Medicine. Tr.II/1327-1328. Only after the death of his parents, break up of his own family, and loss of his
medical license in the late 1980's did Respondent begin to overcome his drug addiction. Tr.II/1327-1329.

B. Medicare Contacts and Respondent's Claims

In 1979, BSWNY sent all providers in the Rochester area a Claims Manual, and, in 1980, a Medicare Part
B Update. FFCL 30. Both these documents state that injections of local anesthesia into specific areas of
pain (i.e., toe, spot on back) are not nerve blocks, that nerve blocks are only reimbursable if they are for
diagnostic purposes, and that only two such blocks are allowed in a calendar year. The 1979 Claims
Manual also points out that there is a specific code which should be used for local injections, that
acupuncture is not a covered service, and that documentation of services is critical to appropriate
reimbursement. I.G. Ex. 34/ 15, 16, 20.

In 1980, Carol Durso of Blue Cross/Shield, Rochester (the private insurance carrier and not the Medicare
carrier, BSWNY) contacted Respondent about his claims for services. She had been instructed to contact
Respondent because Blue Shield could not tell what service Respondent was providing. Ms. Durso
informed Respondent that acupuncture was not a covered service, that all claims for nerve blocks had to be
accompanied by operative reports, and that the claims would be reviewed by the medical director who
would determine whether they met the criteria for coverage. Respondent thereafter presented operative
reports and claims for superficial nerve blocks which were rejected by Blue Shield, Rochester because they
did not meet the requirements for reimbursement. Respondent subsequently alleged that Ms. Durso had
informed him that claims for superficial nerve blocks would be reimbursed. Ms. Durso denied this in
sworn testimony before a grand jury and by affidavit in this proceeding. I.G. Ex. 54-1; I.G. Ex. 54-2/ 11
through 17. I.G. Ex. 42-2/2.

Between 1980 and about January 1984, Respondent billed Medicare for his electrical stimulation services
using the description "local nerve block" and the code "52980." In 1983, BSWNY sent Respondent a
Doctor's Manual to replace the Claims Manual. The Doctor's Manual stated five elements were needed for
a service to be considered medically necessary, and thus reimbursable. The service had to be: 1) consistent
with the diagnosis and treatment; 2) appropriate with regard to standards of good medical practice; 3) not
solely for the convenience of the patient or the doctor; 4) appropriate with regard to the level of service and
adequately documented; and 5) identifiable in the patients records. I.G. Ex. 37/20; see I.G. Ex. 34/12.

BSWNY began investigating Respondent in 1983, after a review of his payment records indicated that he
was billing an unusually large number of nerve blocks. Tr.I/150. See I.G. Ex. 40, Tr.I/1011,1012.

During the initial review, 15 beneficiaries reported that Respondent was treating them with acupuncture
and electrical stimulation; a couple of beneficiaries reported that he also performed nerve blocks. I.G. Ex
40. See Tr.I/150.

On November 18, 1983, BSWNY referred its findings to the Inspector General. I.G. Ex. 40; Tr.I/1012; I.G.
Ex. 73/4; Tr.I/919.

In about January 1984, Respondent discontinued using his code 52980, began injecting the area electrically
stimulated with marcaine, began using a variety of codes for injections of anesthetic agents, and began
attaching a form operative report entitled "superficial nerve block" and noting the marcaine injections.
FFCL 38, 96. He still called his service a "nerve block" on his claim forms.

By letter dated May 7, 1984, the I.G. notified Respondent that he had questions about Respondent's
Medicare claims; that representatives wished to meet with him; and that, if satisfactory explanations were
not provided, exclusions from eligibility in Medicare and Medicaid were possible. I.G. Ex. 42-1.

On June 5, 1984, OIG analyst Linda Lloyd personally told Respondent that Medicare does not pay for
acupuncture and that if he was misrepresenting his services as nerve blocks he could be liable for civil
monetary penalties. I.G. Ex. 42-2; Tr.II/920; I.G. Ex. 73/7 through 9.

At this meeting, Respondent stated that he had been told by Carol Durso and someone at BSWNY that he
could bill for his electrical stimulation treatments as "nerve block" under code 52980. I.G. Ex. 42-2 /2;
Tr.I/921; I.G. Ex. 73/8. At this meeting, Respondent stated that to administer chemical nerve block took
10-15 seconds, electrical nerve block took several minutes, and acupuncture took about 15 minutes. I.G.
Ex. 42-2/2; I.G. Ex. 73/11. At this meeting, Respondent stated that he used acupuncture on a limited basis,
but that electrical stimulation was not acupuncture and the patients who said he had performed acupuncture
rather than electrical stimulation must have been confused. I.G. Ex. 42-2/2. He stated that he performed
electrical nerve blocks, chemical nerve blocks, and some combination of these. I.G. Ex. 42-2/2. Several
days after the meeting, Respondent telephoned OIG agent Lloyd late at night at her hotel room in
Rochester, and, in a loud and agitated voice, threatened to take action against her if she did not stop her
investigation. Tr.I/934; I.G. Ex. 73/12, 13.

As stated earlier, in January 1985, Mary McCarthy of BSWNY received a call from Respondent asking
why his claims for nerve blocks were being turned down and why when he resubmitted the same claims as
office visits they were also being turned down. I.G. Ex. 44; Tr.I/153-154; I.G. Ex. 74/20. Mary
McCarthy informed Respondent that Medicare would cover only two nerve blocks per year, but only if
they were for diagnostic purposes. I.G. Ex. 44; Tr.I/153; See I.G. Ex. 74/20. Ms. McCarthy explained to
Respondent that, under Medicare, office visits must be medically necessary, documented, and that
resubmitting the same claim under a different code appeared to be a misrepresentation of the service. I.G.
Ex. 44; Tr.I/153; I.G. Ex. 74/20 through 22. Ms. McCarthy sent Respondent two Medicare "Updates,"
further explaining how Medicare reimburses for nerve blocks and office visits. I.G. Ex. 44; I.G. Ex.
74/24.

In about January 1985, Respondent began using code W3600, but still called his services local nerve block
on the claim form. FFCL 38.

On March 19, 1985, a representative of BSWNY, Jean Jerris, met with Respondent, his wife, his lawyer,
and his office assistant to further clarify the appropriate way to bill Medicare. I.G. Ex. 47/1. During the
March 19, 1985 meeting the BSWNY representative, Jean Jerris, told Respondent that Medicare covers
two diagnostic nerve blocks per year and, based on medical necessity, up to six local infiltrations of
anesthesia per year (code W3600), and that the type medication, dosage, and area injected must be
documented. I.G. Ex. 47/1. During the meeting, the BSWNY representative also told Respondent that an
office visit must be reasonable and medically necessary and that no less than a blood pressure, weight,
temperature, physical examination of the area of complaint, along with a history, must be documented in
the medical record. I.G. Ex. 47/1; Tr.I/939; see I.G. Ex. 37/15 through 20. During the meeting, the
BSWNY representative also told Respondent that office visit codes are not based on time spent with a
patient, but on the service which was provided (e.g., injection); she referred Respondent to the Doctor's
Manual. I.G. Ex. 47. During the meeting, Respondent requested permission to add documentation to his
previous records and was informed that he should not do so as that could be construed as altering records.
I.G. Ex. 47/2.

On July 16, 1985, a representative of BSWNY sent a letter confirming that Respondent had been told at the
July 19 meeting that two diagnostic nerve blocks and six local infiltrations of anesthesia, if medically
necessary, are reimbursable in a calendar year. I.G. Ex. 48.

C. Respondent Knew That The Claims Were For Services Not Provided As Claimed.

Almost all the services described on the claims in issue were submitted on HCFA 1500 claim forms. FFCL
31. When Respondent signed the claim form, he certified that: "The services shown on this form are
medically indicated and necessary for the health of the patient, and were personally rendered by me or
were rendered incident to my professional service by an employee under my immediate personal
supervision, except as otherwise expressly permitted by Medicare regulations."

A person "knows" that a service is not provided as claimed when he or she knows that the information that
he or she is placing on the claim is untrue or misleading. Tommy G. Frazier and Prater Drugs, DAB Civ.
Rem. C-127; aff'd, F 2d. ( 6th Cir. No. 90-4121, Aug. 5, 1991). As I stated in Jimmy Paul Scott,
Ph.D., DAB Civ. Rem. C-15 at 27 (1986), it was decided that Congress, in using the term "knows" and the
drafters of the Regulations in using the term "knew," were referring to conscious knowledge of a fact (or
subjective knowledge).

Respondent knew that a true and accurate description of the services he provided would result in denial of
reimbursement. Respondent knew that the electro-acupuncture treatments he was providing were not
reimbursable nerve blocks but represented his treatments as nerve blocks or office visits in an attempt to
obtain Medicare reimbursement for his patients. Respondent knew that Medicare would not pay for nerve
blocks or office visits if the service rendered was electro-acupuncture. He purposely did not accurately
describe the visit when he submitted claims for nerve blocks or office visits.

While I would like to believe that this dispute merely involved a misunderstanding of Medicare rules with
regard to a relatively novel approach to pain management, as Respondent contends, the overwhelming
weight of the evidence supports a conclusion that Respondent in fact knew that the services he was
claiming as "nerve block," and later as "office visit" and "nerve block," were not provided as claimed. As
will be discussed below, Respondent had constructive notice as early as 1980 when BSWNY mailed all
providers in the area copies of the 1979 Claims Manual and 1980 Medicare Part B Update. The record
indicates to me that Respondent actually knew.

Carol Durso, who Respondent claims he thought worked for a Medicare carrier, told him in 1980 that
Medicare does not cover acupuncture, that he could not claim nerve blocks without operative reports, and
that his claims would be reviewed to determine if they met the requirements for coverage. Respondent
followed this procedure for a while, but the claims were denied. This represents credible evidence that as
early as 1980 he actually knew that electro-acupuncture was not a covered service and could not be
claimed as nerve block and that adding local injections of anesthesia did not make the procedure a nerve
block.

Even if Respondent did not know as of 1980, he knew as of the June 5, 1984 meeting with Linda Lloyd.
By his own admission, she told him that his services could not be claimed as nerve block, so he began
injecting marcaine so as to be able to legitimately claim them as nerve blocks. Moreover, his threats to Ms.
Lloyd after her visit to him indicate that he knew his claims were false.

Even if Respondent did not know that he could not claim his services as office visit at this time, he knew
on the first week of January 1985 after his telephone conversation with Mary McCarthy. She told him not
only that Medicare covered only diagnostic nerve blocks, but also that he could not submit claims for
office visit or any service unless the service was medically necessary. Nevertheless, Respondent continued
to claim in the same manner, except for switching to the code for local infiltration of anesthesia (W3600)
on claims for nerve block. Apparently, after this discussion with Mary McCarthy, Respondent decided that
he would have to attempt to justify services in a different way.

It is also significant that one of the I.G. expert witnesses, Dr. Harding, pointed out that no matter what
procedure code or service was described by Respondent on the claim forms, the treatment records are all
identical and reveal that Respondent was really performing electro-acupuncture.

Respondent argues that he was simply submitting claims for the services he provided as he was instructed
to do by either the private insurer, Blue Shield of Rochester, or by BSWNY. There was a great deal of
testimony regarding what instructions Respondent received regarding billing for his services. However,
Respondent failed to convince me that he was merely doing as he was told. Respondent did not present
any credible evidence to prove his assertion that, in 1980, Carol Durso of Blue Shield of Rochester told
Respondent to bill his office procedures as nerve block under code 52980. See I.G. Ex. 54-1. Similarly,
Respondent did not produce any credible evidence that he switched to code number W3600 in 1985
because BSWNY informed him that he could bill for nerve blocks by using this code (local infiltration of
anesthesia). See R.Ex. 94 at 3.

On various occasions, Respondent stated to employees and to at least one patient that he knew that
acupuncture was not a covered Medicare service, but that if his services were described in other ways the
patients could obtain reimbursement. Several of Respondent's employees stated to I.G. investigators that
Respondent knew that acupuncture was not a covered service and attempted to secure reimbursement for
his patients by representing the services in other ways. I.G. Ex. 64/2. In a written sworn statement, a
patient stated that Respondent informed him that acupuncture was not a covered service, but that
Respondent could fill out the Medicare forms in ways which would allow the electro-acupuncture
treatments he received to be reimbursable. I.G. Ex. 7-6/2. I am convinced that Respondent did make such
statements and that they demonstrate his knowledge that the information provided in his claim forms was
untrue or misleading.

Finally, there is additional convincing evidence that Respondent knew that his services were not provided
as claimed. BSWNY and I.G. representatives informed Respondent that he should not add documentation
to his records or resubmit claims that had been turned down under a different procedure designation, as
either action could be construed as fraud. The evidence in the record supports a finding that Respondent
ignored Medicare and altered his records. When Respondent produced documents in the discovery phase
of this proceeding, they were altered. Agent Niegsch testified credibly that there are markings on the
produced records that are not on the records previously submitted to BSWNY. Tr.II/179-182.

C. Respondent Had Reason To Know.

Respondent knew that acupuncture was not a covered Medicare service. He also had constructive notice of
Medicare coverage policy from written policy statements issued by the carrier. BSWNY notified
physicians in its region about Medicare reimbursement policies by a Claims Manual issued in 1979, a 1984
Doctor's Manual, released in 1983, and periodic policy updates. Acupuncture is listed as a non-covered
service in both the 1979 Medicare Part B Claims Manual and the 1984 BSWNY Doctor's Manual. Thus,
even if Respondent did not have actual knowledge that his claims were false, he had notice of documents
which put him on notice of the rules.

The "reason to know" standard contained in the CMPL prior to December 22, 1987 employs the
"reasonable person" (objective knowledge) concept. The "reason to know" standard attaches where (1) a
respondent had sufficient information, as a reasonable medical provider, to create an obligation to
investigate and find out whether certain services are billable under the Medicare or Medicaid programs; or
(2) there were pre-existing duties which would require a provider to verify the truth, accuracy, and
completeness of claims. See George A. Kern, DAB Civ. Rem. No. C-25 at 6 (1987); and the Restatement
of Torts (2d) (at section 12) (1965).

Respondent acted with reckless disregard for the Medicare regulations in order to attempt to allow
reimbursement for his Medicare patients. The verbal descriptions (and sometimes the procedure codes)
entered on the claim forms for Respondent's services were sufficiently different from the services
Respondent was providing that a reasonable medical provider would have investigated to ascertain whether
the services were artfully described to the Medicare carrier. Moreover, Respondent had knowledge of
other facts which would have caused a reasonable medical provider to investigate. In 1980, Carol Durso
told him that his claims for nerve blocks had to be accompanied by operative reports and such claims were
denied thereafter. Again on May 7, 1983, he had notice when the I.G. notified him that it had questions
about his claims. I am not persuaded by Respondent's arguments that he did investigate and was given
conflicting information. The Claims Manual, Doctor's Manual, and Part B Updates gave all the
information needed to determine that his services were not provided as claimed.

A duty also arises by reason of Medicare instructions issued by BSWNY to all Medicare providers. I held
in Kern, supra (at pp. 60-62), that another duty, the duty to investigate the accuracy of the claims
submitted, springs from the certifications of truth and accuracy on the claim form itself.

Thus, to the extent that Respondent submitted improper claims which he should have known were
improper had he investigated, he is liable under the CMPL for presenting claims in which the services were
"not provided as claimed." He is liable under this standard whether or not his awareness at the time he
signed or submitted a claim would support a finding that he knew the services were not provided as
claimed.

D. Respondent Should Have Known.

As I stated in the case of Corazon C. Hobbs, DAB Civ. Rem. C-55 (1990), the "should know" standard is
quite similar to the "reason to know" standard, except that the duty to inquire (the duty to ascertain the
truth and accuracy of a claim) exists at all times and does not require any special circumstances to bring
attention to the duty. The Restatement of Torts (2d) (at section 12) states:

The words "should know" are used throughout the Restatement of this Subject to denote the fact
that a person of reasonable prudence and intelligence or of the superior intelligence of the actor would
ascertain the fact in question in the performance of this duty to another, or would govern his conduct upon
the assumption that such fact exists.

In enacting the "should know" amendment in 1987, Congress indicated in the legislative history that the
legislation was a clarification of the existing standard and that the "should know" standard of knowledge
placed on Medicaid and Medicare providers the duty to ascertain the truth and accuracy of claims
submitted by them:

Providers who bill the Medicare, Medicaid and MCH programs have an affirmative duty to ensure
that the claims for payment which they submit, or which are submitted on their behalf by billing clerks or
other employees, are true and accurate representations of the items or services actually provided.

H. R. Rep. No. 391, 100 Cong., 2d Sess., pp. 533-535 (1987).

The "should know" standard subsumes the other two standards and includes negligence in submitting, or in
directing the preparation and submission of claims. Anesthesiologists Affiliated, supra, at 56; Frazier,
supra. Respondent should have known that what he was doing was not a nerve block as the term is
commonly used in accepted medical practice. I.G. Ex. 55-2/7.

For the reasons stated above, Respondent should have known that what he was doing was not a nerve
block, an office visit, or a consultation as the terms are used for purposes of Medicare reimbursement. He
should have known that the services he claimed for were not medically necessary.

Respondent made no attempt to prepare his Medicare claims in a manner that reflected his services
accurately. Rather, he disregarded Medicare rules and regulations and Medicare personnel and thought
only of securing reimbursement.

I am not persuaded by Respondent's arguments that Medicare rules were ambiguous or that BSWNY
misled him. The "should know" standard includes reckless disregard for the consequences of a person's
acts and simple negligence in preparing, presenting, or in supervising the preparation and presentation of
claims. Mayers v. U.S. Dept. of Health and Human Services, 806 F.2d 995 (11th Cir. 1986), cert. denied,
484 U.S. 822 (1987).

Respondent's tiresome pattern of refusing to honor Medicare's rules for submitting accurate claims for
reimbursement is at best characterized as obstinacy. Respondent failed to honor his duty to Medicare to
accurately and honestly claim reimbursement for his services. Anesthesiologists, supra. At the very least,
Respondent should have known that his claims for nerve blocks, office visits, and consultations were not
provided as claimed.

VII. The Appropriate Amount Of The Penalty, Assessment, and Exclusion.

Once liability is proven by a preponderance of the evidence, the ALJ must determine the appropriate
amount of penalties, assessment and length of exclusion. To make this determination, the CMPL and
Regulations require the ALJ to consider aggravating and mitigating circumstances.

Specifically, the CMPL and Section 1003.106 of the Regulations require me to examine: (1) the nature of
the claims or requests for payment and the circumstances under which they were presented, (2) the degree
of culpability of Respondent, (3) the history of prior offenses of Respondent, (4) the financial condition of
Respondent, and (5) such matters as justice may require. Section 1003.106(b) of the Regulations contains
some general guidelines for the interpretation and application of these aggravating and mitigating factors.

The I.G. must prove, by a preponderance of the evidence, any aggravating circumstances. Respondent
must prove, by a preponderance of the evidence, any mitigating circumstances. 42 C.F.R. 1003.114(a),
1003.114(c). The Regulations provide that, in cases where mitigating factors are greater in weight,
quantity, or importance, the penalties and assessment should be set below the maximum permitted by law,
and where aggravating factors preponderate, the penalty and assessment should be set at or close to the
maximum permitted by law. 42 C.F.R. 1003.106(c)(2). Therefore, in determining the appropriate penalty,
assessment, and period of exclusion, I must apply these factors to the 688 services for which liability has
been established.

While the CMPL and Regulations require consideration of aggravating and mitigating factors to determine
the appropriate amount of the penalty, assessment, and the length of exclusion to be imposed in a given
case, there is no formula set forth for computing them, and there is little guidance to be found in the CMPL
and its legisla-tive history (except with regard to an assessment, see 48 Fed. Reg. 38827 (Aug. 26, 1983).
Hume, supra, at pp. 21-29. The preamble to the Regulations state that "fixed numbers" have been
"eliminated" as "triggering devices." This emphasizes that discretion is preferable to a mechanical formula.
Id. The preamble further states: "as we gain more experience in imposing sanctions under the statute, we
may further refine the guidelines, but at this early stage we believe that increased flexibility is preferable."

The ALJ must also keep in mind that the purpose of a civil monetary penalty in a CMPL case is protection
of the Medicare and Medicaid programs, rather than retribution or punishment. See Mayers v. U.S.
Department of Health and Human Services, 806 F.2d (11th Cir. 1986), cert. denied, 484 U.S. 822 (1987);
Chapman v. United States of America, Department of Health and Human Services, 821 F.2d 523 (10th
Cir., 1987). The dual purpose of deterrence is to encourage others to comply with the law and to
discourage a respondent from committing the wrong again. Thus, to arrive at an appropriate penalty that
would be a deterrent, rather than retribution, the ALJ must consider the factors outlined in the Regulations,
weigh the gravity of the wrong done by a respondent, and attempt to prevent the wrong from being
committed again by a given respondent and other providers.

The purpose of the assessment in a CMPL case is to enable the United States to recover the damages
resulting from false or improper claims. The evaluation of an appropriate assessment includes estimates of
amounts paid to a respondent by the Medicare and Medicaid programs and the costs of investigating and
prosecuting unlawful conduct. See 48 Fed. Reg. 38831 (Aug. 26, 1983). See H.R. Rep. No. 158, 97th
Cong., 1st Sess. 329, 461-462 (1981), 1981 U.S. Code Cong. & Admin. News 727-28.

A. The I.G. Proved Significant Aggravating Factors.

1. The I.G. Proved That the Nature and Circumstances of the Claims and Services at Issue Were
Aggravating Circumstances.

The guidelines at section 1003.106(b)(1) of the Regulations state that an aggravating circumstance exists
where the requests for payment were of several types, occurred over a lengthy period of time, were large in
number, indicated a pattern of making such requests for payment, or the amount was substantial. The
guidelines do not indicate what period constitutes a "lengthy" period, what number of requests is a "large"
number, or what amount is a "substantial amount." See 48 Fed. Reg. 38827 (Aug.26, 1983). These
judgments are left to the discretion of the ALJ.

The guidelines, at section 1003.106(b) of the Regulations, state that it is a mitigating circumstance if the
nature and circumstances of the requests for payment were all of the same type, occurred within a short
period of time, were few in number, and the total amount requested from Medicaid recipients was under
$1,000. The Regulations do not specify what constitutes a "short period of time" or how to evaluate the
number of claims.

Although the I.G. did not prove all of the aggravating circumstances which he alleged, he did establish
more than one aggravating circumstance in this case. The I.G. proved that the claims for services at issue
were provided over a lengthy period of time, were a substantial number, and involved a substantial amount
claimed.

2. The I.G. Proved That the Degree of Culpability of Respondent Was an Aggravating
Circumstance.

As I said in Hobbs, supra, one of the most complex of the factors to be considered by the ALJ in
determining the amount of the penalty is the "degree of culpability." Hume, supra, at p. 24. The guidelines
in the Regulations indicate that this factor relates to the degree of a respondent's knowledge and intent.
Knowledge is an aggravating factor and "unintentional or unrecognized error" is a mitigating factor if a
respondent "took corrective steps promptly after the error was discovered." Regulations, section
1003.106(b)(2). Thus, the determination of the degree of culpability involves an inquiry into the degree of
a respondent's knowledge. See 48 Fed. Reg. 38831 (Aug. 26, 1983).

The I.G. proved that Respondent "knew" that the services claimed by Respondent were not provided as
claimed. He also had reason to know and should have known that the claims in issue were not provided as
claimed. It is an aggravating circumstance that Respondent had a reckless disregard for the Medicare rules
in that he knowingly ignored the requirements when presenting claims to Medicare. See Anesthesiologists,
supra, at 60-61.

I conclude that Respondent did not prove that his presentment of claims was a result of unrecognized and
unintentional error, nor did he prove that corrective steps were taken promptly after the error was
discovered.
Justice requires that I consider other factors as aggravating, such as the high costs associated with the
investigation and prosecution of this case, and the negative impact that Respondent's actions had on
Medicare beneficiaries.

B. Respondent Proved Mitigating Circumstances.

As I stated in Hobbs, supra, and Hume, supra, at p. 27, the CMPL and the Regulations contain an umbrella
factor: "other matters as justice may require." Justice requires that certain mitigating factors proven by
Respondent be considered in reducing the amount of the penalty and assessment and the length of the
exclusion proposed by the I.G.

The medical records submitted by the parties show that, in a significant number of the claims in question,
some other medical services besides electro-acupuncture or injections of marcaine were provided. These
notations in the medical records were corroborated by testimony from Respondent's patients, including
those patients testifying on behalf of the I.G. See FFCL 98, 103,109 110, and 111. Also, one of the I.G.'s
medical experts identified 14 services on claims which he considered to be sufficiently documented to be
reimbursable, although most of them at a lower level of service than claimed. Tr.II/1541, 1542, 1545-
1547, 1549. Thus, I have mitigated primarily because I believe that Respondent indeed provided many
medical services to his patients which would have been reimbursable if properly documented.

I am also influenced by the fact that many of Respondent's patients found his treatments to be beneficial
and were very satisfied with Respondent's services. In addition, I am influenced by what I consider to be
Respondent's concern for his patients.

Even though I have found that Respondent's injections of marcaine were not medically necessary, it is a
mitigating factor that these injections, according to Dr. Gilies testimony, were beneficial because they
increased the blood flow to the area injected. It is also a mitigating factor that Respondent considered his
electro-acupuncture and injections of marcaine to be an effective treatment for pain.

While Respondent's drug addiction does not excuse his behavior or change the fact that he violated the
CMPL, it is a mitigating factor in considering the amount of the penalties and assessment that Respondent
was drug addicted during the period of time in which the 688 claims at issue in this proceeding were
submitted. See Tr.II/1055-1058. Had Respondent been drug-free, I doubt that this case would have
occurred.

While I consider Respondent's drug-impaired judgment to be mitigating for purposes of the penalties and
assessment, I must consider it differently for purposes of the length of exclusion. In determining the length
of the exclusion, it is important to consider the degree to which Respondent is trustworthy and
rehabilitated. As I stated earlier, while there is evidence that Respondent has remained drug-free for
several years and has made progress, Respondent still has work to do before he is totally rehabilitated. See
Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990).

The regulations state that the financial condition of a respondent should constitute a mitigating
circumstance if the penalties or assessment, without reduction, would jeopardize the ability of a respondent
to continue as a health care provider. Thus, it is clear that the ALJ may consider a respondent's financial
condition. Furthermore, the guidelines at section 1003.106 (b)(4) note that the ALJ must consider the
resources available to a respondent. This indicates that financial disclosure by a respondent is a key
requirement in evaluating a respondent's financial condition.

Respondent has the burden of proving by a preponderance of the evidence that his financial condition
would prevent him from being able to pay the penalties and assessment imposed in this case.

While Respondent produced some credible testimonial evidence pertaining to his current financial
condition, the I.G. elicited testimony from Respondent which casts doubt on his assertions. Also,
Respondent declined to participate in the I.G.'s requests for discovery of documentation concerning his
finances. Accordingly, there is no basis in the record upon which to limit the sanctions proposed on
grounds of financial condition.

B. The Amount of the Penalties, Assessment, and Exclusion, as Modified Here, is Supported by the
Record.

After reviewing all of the evidence in the record, including aggravating and mitigating factors in this case, I
conclude that civil monetary penalties of $140,000, an assessment of $45,000, and an exclusion from
Medicare and Medicaid programs for seven years is sufficient to protect the Medicare program and its
beneficiaries and sufficient to serve the remedial purposes of the CMPL. See Hume, supra, at 29-30; Tr.
II/1329; Berney R. Keszler, M.D., DAB Civ. Rem. C-167 (1990) at pp. 34-39.

VIII. The Double Jeopardy Clause of the Constitution of the United States Does Not Prohibit The I.G.
From Bringing This Action Against Respondent.

Respondent argues that since he pled guilty to one count of an eight count indictment in the United States
District Court involving 26 mailings of Medicare claims, the double jeopardy clause of the Constitution of
the United States protects him from this civil action and prevents the I.G. from recovering any penalties or
assessment under the CMPL. R. Br. 2,8-17. Respondent argues that double jeopardy relates to the entirety
of the "scheme" which he allegedly perpetrated, and not merely to the specific "mailings" involved in the
indictment. R. Br. 2. Respondent relies upon the United States Supreme Court's holding in the case of
United States v. Halper, 490 U.S. 435 (1989). Respondent also relies on the holding in the case of
Albernaz v. United States, 101 S. Ct. 1137 (1989) and argues that the attempt by the I.G. to subject him to
this action is contrary to Congress' intent and amounts to a cumulative penalty. R. Br. 2, 15-17.

For the reasons expressed at the hearing, I find and conclude that Respondent's reliance on Halper and
Albernaz is misplaced and that the I.G. had authority to bring, and properly brought, this action. Tr.I/81-
110. See Keszler, supra, at pp. 39-42.

IX. The I.G. Is Not Equitably Estopped or Otherwise Barred In This Case By The Plea Agreement.

Respondent asserts that we need not deal with the merits of this case because this proceeding is barred by
the Plea Agreement he entered into with the United States in connection with the resolution of the criminal
charges brought against him. R. Br. 4-5, 30-35. He argues that the doctrine of equitable estoppel,
principles of fairness, and principles of the law of contracts are applicable to this agreement. Id.

There is no merit to Respondent's arguments. The doctrine of equitable estoppel does not apply in this
case. There has been no proof of any misstatement or affirmative misconduct on the part of any United
States Government official, and no showing of detrimental reliance. Heckler v. Community Health
Services of Crawford County, 467 U.S. 51 (1989); Wagner v. Director Federal Emergency Management
Agency, 847 F.2d 515, 519 (9th Cir. 1988). Moreover, Respondent testified that it was his understanding
that the government could recover from him, in a separate civil suit, up to $190,000. Tr. II/1329.

This action was initiated after September 1, 1987, and all the claims in issue were presented within six
years preceding the I.G.'s Notice. Congress intended the new six-year statute of limitations to apply in all
CMPL actions initiated after September 1, 1987. Accordingly, I conclude that the six-year statute of
limitations applies to this action. Donald O. Bernstein, D.O., DAB Civ. Rem. C-40 (1989); aff'd, F2d
(C.A.10, 1990).

X. This Action Is Not Barred By The Doctrine Of Res Judicata Or By The Doctrine Of Collateral
Estoppel.

On January 13, 1989, ALJ Joseph G. Medicis suspended Respondent from Medicare and Medicaid
programs for five years (commencing on May 2, 1988), pursuant to Section 1862 (e) of the Act.
Respondent argues that because of this, the I.G. is barred from bringing this action by the doctrines of res
judicata and collateral estoppel.

This argument has no merit, because the CMPL is an alternative remedy to criminal or other civil action.
See Tr.I/87-110; Mayers, supra.

XI. Respondent Does Not Have The Right To Trial By Jury Or To Be Found Guilty Beyond A Reasonable
Doubt.

Respondent's argument that this is a quasi-criminal proceeding is groundless. Scott v. Bowen, 845 F. 2d
856 (C.A. 9, 1988); Marcus v. Hess, 350 U.S. 148 (1956).

XII. Respondent was not prejudiced or denied due process by: (1) the admission of written statements of
patients obtained by the I.G. in lieu of live testimony; or (2) the I.G.'s claim of privilege.

Respondent argues that he was denied due process and prejudiced by the admission of written statements
of patients obtained by the I.G. in lieu of live testimony. R. Br. 35-45. Respondent asserts that he did not
have the "financial resources or the time to subpoena the government's witnesses." Id. at 38.

Respondent's arguments have no basis in fact or in law. The record in this case is replete with offers to
accommodate Respondent's need to cross-examine adverse witnesses. The leading case of Richardson v.
Perales, 402 U.S. 389 (1971), holds that a party is not denied due process if he or she is given the right to
cross-examine witnesses giving written statements in lieu of live testimony and the party fails to exercise
that right. As in Perales, Respondent failed to subpoena the witnesses in question for cross-examination,
despite my repeated offers to subpoena them. At the hearing, I specifically inquired about this and was
told that most of the witnesses resided in the Rochester area. The cost for them to appear would have been
less than $500. Respondent's stated reason for not calling these witnesses was not convincing.

ORDER

Based on the entire record, the CMPL, and the Regulations, it is hereby Ordered that:

(1) Respondent pay civil monetary penalties totalling $140,000.00;

(2) Respondent pay an assessment totalling $45,000.00; and

(3) Respondent be excluded for a period of seven years from the Medicare and Medicaid programs.

_____________________________
Charles E. Stratton
Administrative Law Judg

1. The citations to the record in this Decision are as follows:

Hearing Transcript--July-Aug. Tr.I/(p.)
Hearing Transcript--Jan.'91 Tr.II/(p.)
Respondent's Exhibits R.Ex. (no./p.)
Respondent's Brief R.Br. (p.)
Respondent's Reply Brief R.Rep.Br.I (p.)
Respondent's 2nd Reply Brief R.Rep.Br.II (p.)
I.G.'s Exhibits I.G.Ex.(no./p.)
I.G.'s Brief I.G.Br. (p.)
I.G.'s Reply Brief I.G.Rep.Br.(p.)
I.G.'s June 1990 Brief I.G. 1990 Br.(p.)
Findings of Fact FFCL (no.)
and Conclusions of Law
Prehearing Rulings ALJ Ruling (date/p.)

2. Although traditional acupuncture is an ancient Chinese healing art dating back at least two thousand
years, Medicare still considers it experimental and does not reimburse medical providers for performing
such services to patients. See I.G. Br. 14-17.

3. The I.G. alleged in his January Notice that 707 services were not provided as claimed and appended a
schedule of services to his November Notice, but only listing 706 claims or counts. During the hearing, the
I.G. withdrew 11 counts, leaving 695 in issue. On the first day of the hearing, however, the I.G. argued
that there were 696 services in issue because he was not yet aware that one of the alleged services was not
listed on the schedule. Tr.I/6. At the hearing, I reduced the CMPL counts from 695 to 688 because I
concluded that the holding in the case of United States v. Halper, 490 U.S. 435 (1989), required that the
seven services which had also been involved in Respondent's criminal conviction be eliminated from this
civil action. Tr.II/810-811; see I.G. Br. 2 (fn.1), 186 (fn.37,38).

4. Respondent was originally represented by Charles E. Crimi who, unfortunately, died six months after
filing Respondent's request for a hearing.

5. Some of my statements preceding these Findings of Fact and Conclusions of Law are also findings of
fact and conclusions of law. To the extent that they are not repeated here, they were not in controversy.

6. See footnote 3.

7. Dr. John E. Harding, a physician, the Medical Director for the Medicare Division of BSWNY, and an
expert witness, testified unequivocally that what Respondent did was electro-acupuncture. Tr. I/1455. I
found Dr. Harding to be a credible and impressive witness. For this and other reasons stated in this
Decision, I conclude that what Respondent did was electro-acupuncture. While I have concluded that what
Respondent did was electro-acupuncture, it would not matter whether the service which he performed was
described as electro-acupuncture or electrical stimulation, because neither service is covered by Medicare.
Even if the service were called electrical stimulation, it would not be covered by Medicare because
Medicare covers only specific types of electrical stimulation and what Respondent did is not one of the
types covered. See I.G. Br. 28, fn. 8; Tr.I 1481-1487, 1518.

8. Respondent argues, in the alternative, that what he did should have been reimbursable by Medicare as
electrical stimulation. The type of electrical stimulation as performed by Respondent is not reimbursable
by Medicare. FFCL 61, 62.

9. The written statements and testimony of the beneficiaries on whose behalf Respondent submitted the
claims at issue described the treatments as involving the insertion of multiple needles which were attached
to electrodes and an electronic generating machine for periods ranging from ten to twenty minutes. Some
used the term "acupuncture" to describe the treatments they received. Similarly, five of Respondent's
employees during the period involved in this case testified before a grand jury that the treatments provided
by Respondent either were acupuncture treatments or described the treatments in terms characteristic of
acupuncture. Another employee, who worked for Respondent from 1980 until the fall of 1983, said in a
written sworn statement that the "typical course of treatment" for Respondent's patients was a series of
electro-acupuncture treatments. I.G. Ex. 65-1. Respondent himself has, on several occasions, admitted
that he was engaged primarily in the practice of acupuncture. For example, when explaining his practice
before a television audience, Respondent described the treatments he provided as acupuncture or electronic
stimulation. I.G. Ex. 82 at 1, 4, 9,10. Additionally, as part of a plea agreement Respondent made in 1987,
he admitted under oath that he had billed the Medicare program for nerve block services, when the service
he had actually provided was acupuncture. Finally, in 1988, when Respondent applied to the New York
State Department of Education to become licensed as an acupuncturist, he stated that he had practiced
acupuncture 100 percent of the time for the last ten years.

10. The I.G. established by expert testimony (Victor J. Tofany, M.D. and John F. Harding, M.D.) that a
"nerve block" is understood in the medical community to be the application of a chemical substance into a
nerve or into the region of a nerve trunk so as to interrupt the transmission of impulses over that nerve
trunk to or from the area of the body supplied by that nerve trunk. Nerve blocks are typically performed
on a patient with a chronic pain problem or with a reflex sympathetic dystrophy as a result of injury or
surgery. During a nerve block procedure, a patient would experience pain followed by numbness which
would last from one to twelve hours.

11. There is no evidence that the injection of marcaine was harmful to the patients in question.

12. The standard of knowledge in the CMPL prior to December 22, 1987 was that a respondent "know" or
had "reason to know." The "should know" standard became law on December 22, 1987, as a result of an
amendment to the CMPL, enacted by section 4118(e) of the Omnibus Budget Reconciliation Act (OBRA)
of 1987, Pub. L. 100-203. The legislation stated that the amendment would "apply to activities occurring
before, on, or after the date of [OBRA's] enactment . . ." Section 4118(e)(3) of OBRA. See, Dean G.
Hume, D.O., DAB Civ. Rem. C-50 at 18-21 (1989). Thus, on December 22, 1987, Congress retroactively
substituted the "should know" standard for the "reason to know" standard. Since no court has decided the
validity of this retroactive substitution, I will use both standards to determine Respondent's liability.