$05:Exclusion Case
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Shyam S. Mahajan, M.D.,
Petitioner,
- v. -
The Inspector General.
DATE: November 20, 1995
Docket No. C-95-057
Decision No. CR402
DECISION
I. BACKGROUND
The action was brought by the Petitioner, Shyam S. Mahajan, M.D.,
to contest the reasonableness of the 10-year exclusion period
imposed and directed by the Inspector General (I.G.) pursuant to
section 1128(a)(1) of the Social Security Act (Act). Petitioner
admits that he was convicted of criminal offenses related to the
delivery of an item or service under a State health care program.
Amended Order and Schedule for Filing Briefs and Documentary
Evidence (Amended Order), dated April 25, 1995. Petitioner admits
also that his convictions subject him to the mandatory provisions
of the Act, which require the I.G. to impose and direct
Petitioner's exclusion from participation in the Medicare and
Medicaid 1/ programs for a period of not less than five years.
Act, sections 1128(a)(1) and (c)(3)(B). However, according to the
I.G.'s notice of exclusion (Notice), the I.G. decided to add
another five years to the minimum exclusion period specified by the
Act because she determined that certain circumstances surrounding
Petitioner's conviction were significant. Notice at 1, 2.
During the prehearing conference held on April 25, 1995, the
parties agreed to waive an in-person hearing and to submit the case
for decision based on a written record. Amended Order at 1, 2. 2/
Both parties have filed motions and supporting evidence in
accordance with my scheduling orders. 3/
I have reviewed and admitted all the exhibits submitted by the
parties, with the exception of Petitioner's proposed exhibits 3, 4,
5, 8, and 9, which I find to be immaterial for the reasons detailed
below. 4/ Based on the record before me, I conclude that the
exclusion of 10 years imposed and directed by the I.G. is excessive
and that Petitioner's exclusion should be reduced to five years.
II. ISSUE
The only issue in this case is whether the I.G. has imposed and
directed a period of exclusion (10 years) that is reasonable in
length.
III. RULINGS ON THE ADMISSION OF PETITIONER'S PROPOSED
EXHIBITS
In his brief, Petitioner cited decisions issued by administrative
law judges holding that the aggravating and mitigating factors in
42 C.F.R. 1001.102 are not binding at the hearing level. P. Br.
at 3 - 6. Therefore, he offered various proposed exhibits to show
that he had no financial incentive to defraud the Medicare and
Medicaid programs, that he is a highly skilled physician, and that
he is remorseful for his crimes.
The I.G. correctly points out that, after the adjudication of those
cases cited by Petitioner, the Department of Health and Human
Services (DHHS) issued clarifying regulations on January 22, 1993,
stating that the criteria contained in 42 C.F.R. 1001.102 are
binding upon administrative law judges. I.G. Reply at 1, 2; 42
C.F.R. 1001.1(b). On this basis, the I.G. objects to the
admission of Petitioner's proposed exhibits 2, 4, 5, 8, 9, and 11.
I.G. Reply at 4. In addition, the I.G. objects to the admission of
Petitioner's proposed exhibit 1 "to the extent it seeks to
collaterally attack his conviction." I.G. Reply at 4.
A. I find inadmissible Petitioner's proposed exhibits 3, 4,
5, 8, and 9.
I rule the following proposed exhibits inadmissible pursuant to 42
C.F.R. 1005.17(c) because (1) they are offered to support
propositions which, even if true, I am precluded by the regulations
from considering as a mitigating factor, and (2) they do not serve
to rebut the I.G.'s evidence on the three aggravating factors she
has asserted:
Petitioner's proposed exhibit 3: This document lists the
monetary amounts paid by the Pennsylvania Department of Welfare to
Petitioner for professional services during the years 1983 to 1992.
Petitioner offers these documents to show that his income from
Medicaid represented only a small portion of his practice, and,
therefore, he had no financial incentive to defraud the program.
P. Br. at 5.
Petitioner's proposed exhibits 4 and 5: These are letters
of support and commendations from members of the community, written
after Petitioner pleaded nolo contendere to charges in State court.
See P. Prop. Facts at 3. Petitioner offers these documents to show
that his contributions of time, skill, and financial support to his
community have been a hallmark of his practice. P. Br. at 5.
Petitioner's proposed exhibit 8: This proposed exhibit
consists of letters of recommendation and rating forms prepared by
physicians who support Petitioner's application for a medical
license in the State of North Carolina. Petitioner offers these
documents to show that he has consistently provided high quality
care to his patients for over two decades, which he believes
reflects well on his character and trustworthiness. P. Br. at 7.
Petitioner's proposed exhibit 9: This proposed exhibit
consists of letters and completed forms from the International
Society for Krishna Consciousness, stating that Petitioner
performed approximately 600 hours of volunteer service from July 1,
1994 to June 13, 1995. Petitioner offers these documents to show
that he is remorseful because he has so promptly completed the
hours of community service to which he had been sentenced. P. Br.
at 7.
B. The I.G.'s objections are overruled as to Petitioner's
proposed exhibits 1, 2, and 11.
I overrule the I.G.'s objections to the following proposed exhibits
and admit them into evidence:
Petitioner's proposed exhibit 1: This document consists of
Petitioner's affidavit, in which he recounts his version of the
facts that resulted in his convictions. I admit the document
because the information is useful for background purposes.
However, I give no weight to Petitioner's statements which endeavor
to exculpate himself for the commission of the underlying offenses.
See 42 C.F.R. 1001.2007(d).
I admit Petitioner's proposed exhibit 1 also because it
contains information relevant to the I.G.'s use of two aggravating
factors. Asserting the aggravating factors at 42 C.F.R.
1001.102(b)(2) and (5), the I.G. contends that Petitioner's "drug
convictions are `similar acts' to the criminal acts underlying his
program-related conviction" (I.G. Br. at 7) and his committing
"drug crimes" during the period preceding his program-related
offenses constitutes a prior criminal sanction record (I.G. Br. at
10).
Petitioner's proposed exhibit 2: This is a two-page
document generated by the National Practitioner Data Bank.
According to Petitioner, it shows that, for two decades prior to
the convictions in issue, Petitioner had not been convicted of any
criminal offense, had not been involved in any civil litigation
relating to his medical practice, and had not been sanctioned by
any government funded health care program. P. Br. at 4. This
exhibit is admitted because it is relevant to Petitioner's defense
against the I.G.'s contention that he has a prior criminal sanction
record within the meaning of 42 C.F.R. 1001.102(b)(5).
Petitioner's proposed exhibit 11: This is an executed
Memorandum of Understanding between Petitioner and the Drug
Enforcement Administration. Petitioner relies upon this document
to argue that the 10-year exclusion imposed and directed by the
I.G. is excessive, as shown by the Drug Enforcement Agency's
decision to impose only a five-year probationary period against
Petitioner. P. Br. at 9. Because the I.G. makes arguments for
lengthening the exclusion based on Petitioner's convictions on
drug-related offenses, and because the regulations do not specify
the amount of time that should be associated with each aggravating
or mitigating factor, I find Petitioner's proposed exhibit 11 to be
relevant. I have therefore admitted it into evidence.
The remaining proposed exhibits offered by the parties were not
subject to objections. I find all the remaining proposed exhibits
to be relevant and have admitted them into evidence.
IV. FINDINGS OF FACT AND CONCLUSIONS OF LAW
In deciding to modify the exclusion to a period of five years, I
make the following Findings of Fact and Conclusions of Law (FFCL).
Where appropriate, I have noted after the FFCL those pages in this
Decision where I discuss the FFCL in greater detail:
1. Petitioner is a physician, licensed to practice medicine in the
State of Pennsylvania. P. Ex. 1.
2. Petitioner pled nolo contendere and was convicted in the Court
of Common Pleas, Monroe County, Pennsylvania, to two counts of
Theft by Deception. I.G. Ex. 7 at 1; I.G Ex. 9 at 1.
3. Also, Petitioner pled nolo contendere and was convicted in the
Court of Common Pleas, Monroe County, Pennsylvania, of five
additional counts relating to the sale or dispensing of drugs --
i.e., drug-related offenses or convictions -- which consisted of
two counts of "Violation of the Medical Practice Act," two counts
of "Refusal or Failure to Keep, Mark or Furnish Records," and one
count of "Criminal Attempt to Sell Sample Drugs." I. G. Exs. 2 -
8.
4. On July 5, 1994, the court sentenced Petitioner to five years
of probation; a fine $24,000; 600 hours of community service; and
ordered him to pay $500 in restitution and the costs of his
prosecution. I.G. Ex. 8.
5. Petitioner has admitted that he was convicted of criminal
offenses related to the delivery of an item or service under a
State health care program. Amended Order; P. Br. at 1, 2.
6. Petitioner admits also that his convictions subject him to the
mandatory provisions of the Act, which require
the I.G. to exclude him from participation in the Medicare and
Medicaid programs for a period of not less than five years,
pursuant to sections 1128(a)(1) and (c)(3)(B) of the Act. Amended
Order; P. Br. at 1, 2.
7. Petitioner was convicted of a criminal offense related to the
delivery of an item or service under the Medicaid program, within
the meaning of section 1128(i)(3) of the Act.
8. Petitioner was convicted of a criminal offense related to the
delivery of an item or service under the Medicaid program, within
the meaning of section 1128(a)(1) of the Act. FFCL 4; see FFCL 1
- 3, 5 - 7.
9. The Secretary of DHHS (Secretary) is required to exclude for a
period of at least five years any individual or entity convicted of
a criminal offense related to the delivery of an item or service
under the Medicare or Medicaid program. Act, sections 1128(a)(1)
and (c)(3)(B); 48 Fed. Reg. 21,662 (1983).
10. The regulation codified at 42 C.F.R. 1001.102 contains the
only aggravating and mitigating factors which may be used in
determining whether an exclusion based on a program-related
conviction should be lengthened to a period of more than five
years, or whether it should be reduced to period of not less than
five years. 42 C.F.R. 1001.1, 1001.102.
11. The period of exclusion may be lengthened if the acts that
resulted in the conviction, or similar acts, were committed over a
period of one year or more. 42 C.F.R. 1001.102(b)(2).
12. The two program-related offenses for which Petitioner was
convicted took place from September 11, 1988 to January 6, 1992.
I.G. Exs. 1, 7, 8.
13. Under 42 C.F.R. 1001.102(b)(2), the I.G. has proved only
the existence of an aggravating factor based on Petitioner's
commission of his program-related offenses for the period from
September 11, 1988 to January 6, 1992. Pages 8 to 10.
14. The I.G. has failed to prove that Petitioner's drug-related
offenses are "similar acts" within the meaning of 42 C.F.R.
1001.102(b)(2). Pages 10 to 11.
15. The period of exclusion may be lengthened if the acts that
resulted in the conviction had a significant adverse financial
impact on one or more program beneficiaries or other individuals.
42 C.F.R. 1001.102(b)(3).
16. The I.G. has failed to prove the existence of the aggravating
factor set forth at 42 C.F.R. 1001.102(b)(3). Pages 11 to 14.
17. The period of exclusion may be increased if the convicted
individual has a prior criminal, civil, or administrative sanction
record. 42 C.F.R. 1001.102(b)(5).
18. The I.G. has failed to prove the existence of the aggravating
factor set forth at 42 C.F.R. 1001.102(b)(5). Pages 14 to 19.
19. If an exclusion under section 1128(a)(1) of the Act has been
increased due to the existence of an aggravating factor, the period
of exclusion may be reduced to a period not less than five years if
the excluded individual was convicted of three or fewer misdemeanor
offenses, and the entire amount of financial loss to the Medicare
or Medicaid programs caused by the acts that resulted in the
conviction, and similar acts, is less than $1500. 42 C.F.R.
1001.102(c)(1).
20. Under the facts of this case and the nature of the aggravating
factor proven by the I.G., Petitioner has proven the mitigating
factor described at 42 C.F.R. 1001.102(c)(1). Pages 19 to 22.
21. The I.G. has the burden of proving the reasonableness of the
10-year exclusion period by a preponderance of the evidence.
Amended Order; 42 C.F.R. 1001.2007(c).
22. The I.G. has failed to show by a preponderance of the evidence
that any period of exclusion in excess of five years is reasonable.
Pages 22 to 24.
23. An exclusion period of five years is reasonable in this case.
Pages 22 to 24.
V. DISCUSSION
A. The I.G. has proven the aggravating factor at 42 C.F.R.
1001.102(b)(2), in that the criminal acts that resulted in
Petitioner's program-related convictions were committed from
September 11, 1988 to January 6, 1992.
The regulation states that the following factor may be considered
aggravating and a basis for lengthening the five-year exclusion
required by law:
[t]he acts that resulted in the conviction, or similar
acts, were committed over a period of one year or more. . . .
42 C.F.R. 1001.102(b)(2).
1. Analysis of the time period during which
Petitioner committed his program-related offenses
As a result of his pleas of nolo contendere, Petitioner was
convicted of offenses related to the Medicaid program. I.G. Exs.
8, 9. The two counts of Medicaid-related offenses to which he pled
are:
COUNT 4: [o]n or about September 11, 1988 through December
21, 1991, the Defendant
[Petitioner], . . . on at least one of the occasions set forth
in Exhibit A [I.G. Ex. 1 at 6 - 8] attached hereto, as a part of a
continuing scheme to defraud, did knowingly and intentionally
obtain the property of other persons, by representing to his
Medical Assistance [Medicaid] patients that he was entitled to a
$2.00 co-payment when, in fact, Department of Public Welfare
Regulation . . . does not require co-payment for Medical Assistance
recipients under the age of 18 years.
COUNT 5: [o]n or about September 19, 1988 through January
6, 1992, the Defendant [Petitioner], . . . on at least one of the
occasions set forth in Exhibit B [I.G. Ex. 1 at 9 - 18] attached
hereto, as part of a continuing scheme to defraud, did knowingly
and intentionally obtain the property of other persons, namely his
Medical Assistance [Medicaid] patients, by deception by
representing to his Medical Assistance patients that they were
required to make a $2.00 co-payment for services rendered by
Mahajan under the Medical Assistance Program when, in fact, Mahajan
was only entitled to a $1.00 co-payment under Medical Assistance
Regulation . . . when the service provided was an office visit. .
. .
I.G. Ex. 1 at 3, 4, 6 - 18. The court's sentencing order describes
the two offenses as "Theft by Deception." I.G. Ex. 8.
The foregoing evidence makes the aggravating factor at 42 C.F.R.
1001.102(b)(2) applicable. The two continuing schemes to defraud
Medicaid patients that resulted in Petitioner's convictions under
Counts 4 and 5 of the Information took place over a period of
nearly three and one-half years -- i.e., from September 11, 1988 to
January 6, 1992.
2. Analysis rejecting the additional period of one
month asserted by the I.G. based on "similar acts"
The I.G. argues that the period under 42 C.F.R. 1001.102(b)(2)
covers an additional month because "[t]he criminal acts underlying
Petitioner's drug convictions are 'similar acts' to the criminal
acts underlying his program-related conviction." I.G. Br. at 7.
The I.G. contends that, after Petitioner had stopped engaging in
his program-related offenses, he continued to engage in criminal
drug conduct for an additional period of one month (February 1992).
Id.. The I.G. argues that the aggravating factor listed at 42
C.F.R. 1001.102(b)(2) covers the total period of time during
which Petitioner committed his program-related offenses and his
drug-related offenses -- September 11, 1988 to February 1992. I.G.
Br. at 7, 8; see I.G. Exs. 4, 5, 6.
I find that there is not an adequate basis in the record for
concluding that Petitioner's drug-related offenses are similar to
his schemes for collecting excess co-payments from his Medicaid
patients. The court that accepted his pleas and imposed sentence
on him described his Medicaid-related offenses as two counts of
"Theft by Deception" and his drug-related offenses as "Violation
of
the Medical Practice Act" 5/ (two counts), "Refusal or Failure to
Keep, Make or Furnish Records" (two counts), and "Criminal Attempt
to Sell Sample Drugs." I.G. Ex. 8. The elements of Petitioner's
drug-related offenses are not similar to those in the two counts of
"Theft by Deception." I.G. Exs. 1 - 6. For example, in the
drug-related charges, there was no allegation of intentional
misrepresentation, fraud, deception, or unjust enrichment. There
is no evidence that the patients identified in the drug-related
counts were beneficiaries or recipients of Medicare or Medicaid, or
that either program was involved. See, e.g., I.G. Ex. 1 at 6 - 18;
I.G. Exs. 2, 4. The partial overlap of time during which
Petitioner committed drug-related offenses and program-related
offenses does not make the two types of offenses similar in nature.
Accordingly, I conclude that the I.G. has succeeded in proving the
applicability of the aggravating factor at 42 C.F.R.
1001.102(b)(2) based only on Petitioner's schemes to overcharge
Medicaid copayments from September 11, 1988 to January 6, 1992.
B. Under 42 C.F.R. 1001.102(b)(3), the I.G. has failed to
prove her allegation that Petitioner's program-related offenses had
a significant adverse financial impact on program beneficiaries or
other individuals which would justify lengthening the period of
exclusion.
The regulation states that the following factor may be considered
aggravating and a basis for increasing the five-year exclusion
required by law:
[t]he acts that resulted in the conviction, or similar
acts, had a significant adverse physical, mental or financial
impact on one or more program beneficiaries or other individuals.
. . .
42 C.F.R. 1001.102(b)(3).
1. Analysis rejecting the I.G.'s arguments and
supporting evidence on the allegation that Petitioner's offenses
had significant adverse financial impact on Medicaid recipients
The I.G. argues that Petitioner illegally required a co-payment of
$2.00 from each of the more than 40 Medicaid patients under the age
of 18 identified on the list incorporated by Count 4, 6/ and the
I.G. maintains that Petitioner repeatedly overcharged by $1.00 the
copayment due from many of the Medicaid patients identified on the
list incorporated by Count 5. 7/ I.G. Br. at 8, 9. According to
the I.G., one Medicaid patient identified by Count 5 was
overcharged by $1.00 on 17 different occasions. I.G. Br. at 9.
The I.G. reasons that, because Petitioner continuously charged such
amounts to a group of individuals with very low income, he caused
them significant financial harm within the meaning of the
aggravating factor at 42 C.F.R. 1001.102(b)(3). I.G. Br. at 9.
The I.G. does not argue that any asserted "similar act" caused
significant adverse financial impact within the meaning of 42
C.F.R. 1001.102(b)(3).
I do not find the aggravating factor cited by the I.G. at 42 C.F.R.
1001.102(b)(3) applicable in this case. The actual language of
the charges to which Petitioner pled nolo contendere and for which
he was convicted does not establish the extent of the financial
impact alleged by the I.G.. As discussed already, the evidence
establishes that, for nearly three and one-half years, Petitioner
participated in two criminal schemes to defraud Medicaid
recipients. However, the charges themselves allege only that "on
at least one of the occasions set forth" in each of the two lists
appended to Counts 4 and 5, Petitioner obtained an excessive
copayment amount as part of each scheme. I.G. Ex. 1 at 3 - 4.
When Petitioner pled nolo contendere to Counts 4 and 5, he did not
identify which of the patients listed on the attachments he had
overcharged the copayment. I.G. Exs. 7 - 9. Nor did Petitioner
volunteer that he had charged and obtained an excessive copayment
on more than the single occasion charged in each count. Id..
Therefore, the totality of the evidence proves only that, on at
least one unspecified occasion, one unspecified Medicaid patient
under the age of 18 paid $2.00 unnecessarily, and, on at least one
unspecified occasion, one unspecified Medicaid patient over the age
of 18 paid $1.00 unnecessarily. 8/ I.G. Ex. 1 at 3 - 4; I.G. Exs.
7 - 9.
Contrary to the arguments in the I.G.'s brief, I decline to draw
the general inference of severe financial impact based on the
probable low-income levels of Medicaid recipients. I believe the
regulations require a case-by-case approach, based on the evidence
in the record. When DHHS was issuing the final regulations
containing the relevant aggravating factors, it addressed the
public's concern that circumstances such as "significant impact on
the programs or individuals" may exist in every case and could be
used by the I.G. to increase the exclusion period routinely. 57
Fed. Reg. 3315 (1992). DHHS stated that, "[o]ur experience has
shown that none of the aggravating factors included in these final
regulations are present in every case[;]" and an aggravating factor
is one that "does not automatically exist in every case. . . ."
Id.. DHHS emphasized also that, for a factor to be considered as
aggravating, the impact on programs or individuals must be more
than minimal -- "that is, it must have been significant." Id..
Based on these considerations, I do not find it appropriate to
adopt the generalization suggested by the I.G. -- that, because
Petitioner's fraudulent schemes involved only Medicaid recipients
(who presumably have low-income levels), therefore, any and all of
the individuals who might have been victimized by Petitioner would
necessarily have suffered significant adverse financial detriment
when one or more individuals, on any or all of the days alleged in
Counts 4 and 5, paid Petitioner either $1.00 or $2.00 in excess of
what the law permitted.
2. Analysis of the order of restitution contained
in the I.G.'s evidence
The I.G.'s briefs do not contain arguments based on the fact that
the sentencing order submitted by the I.G. shows that the court
directed Petitioner to pay a fine of $2500 for each of his
program-related convictions and, in addition, to pay restitution in
the amount of $500 under Count 4 (the program-related conviction
involving Medicaid patients under the age of 18). See I.G. Ex. 8.
I agree with the I.G.'s apparent concession that the foregoing
facts do not establish the applicability of 42 C.F.R.
1001.102(b)(3). The fines were imposed pursuant to State laws, and
the court did not direct Petitioner to make the fines payable to
individuals. I.G. Ex. 8. Therefore, the fines that Petitioner was
ordered to pay do not evidence any financial hardship any
individual may have suffered.
Petitioner's obligation to pay restitution in the amount of $500
under Count 4, in the absence of any other evidence such as
instructions by the court to make the amount payable to individual
Medicaid patients either directly or through the State, is also not
sufficient for proving that Petitioner's deeds caused a significant
financial impact on one or more program beneficiaries or other
individuals. See 42 C.F.R. 1001.102(b)(3). Additionally, the
$500 in restitution Petitioner must pay under Count 4 far exceeds
the total amount he might have overcharged his Medicaid patients,
even if he had pled guilty to all the incidents alleged on the list
attached to Count 4. I.G. Ex. 1 at 6 - 8. Therefore, the
sentencing order which directed Petitioner to pay restitution of
$500 does not prove that one or more individuals have suffered
significant adverse financial impact within the meaning of 42
C.F.R. 1001.102(b)(3).
C. Under 42 C.F.R. 1001.102(b)(5), the I.G. has failed to
prove her allegation that Petitioner had a prior criminal, civil,
or administrative sanction record which would justify lengthening
the period of exclusion.
The regulation states that the following factor may be considered
aggravating and a basis for lengthening the period of exclusion:
[t]he convicted individual or entity has a prior criminal,
civil or administrative sanction record. . . .
42 C.F.R. 1001.102(b)(5).
In her Notice, the I.G. did not cite the foregoing factor in
explaining her reasons for imposing and directing a 10-year
exclusion. However, the I.G. did state in the Notice that she
considered the following evidence:
[c]ourt documents indicate that you were also convicted of
violating the Medical Practice Act by dispensing prescription drugs
in non-conforming packages; that you criminally attempted to sale
[sic] drug samples by repackaging drugs originally marked "Sample"
or other similar inscription; and that you failed to keep records,
for two years, [of] controlled substances that you administered,
dispensed, distributed, purchased or sold.
The I.G.'s briefs attempt to link the foregoing facts to the
aggravating factor listed in 42 C.F.R. 1001.102(b)(5). I.G. Br.
at 10; I.G. Supp. Br. at 3 - 6.
1. Analysis rejecting the I.G.'s arguments under
section 1128(b)(3) of the Act based on the health risks allegedly
created by Petitioner's drug-related offenses
The I.G. asserts the applicability of 42 C.F.R. 1001.102(b)(5)
by contending that the I.G. would be justified in imposing an
exclusion under section 1128(b)(3) of the Act 9/ on the basis of
Petitioner's drug-related convictions. I.G. Br. at 9. According
to the I.G., patients were subjected to a risk of physical harm by
Petitioner's sale of sample drugs, dispensing of drugs in an
improper container, and failing to keep required records of
dispensed drugs. I.G. Br. at 6, 10. The I.G. reasons that,
because Petitioner's drug-related crimes bear directly upon
Petitioner's treatment of patients, and one of the primary goals of
the exclusion statute is to prevent harm to patients, it follows
that Petitioner's criminal drug convictions should be given effect
in this forum. I.G. Supp. Br. at 5.
I find the I.G.'s foregoing arguments immaterial and premature
regarding the I.G.'s discretion to impose an exclusion under
section 1128(b)(3) of the Act. According to the Notice, the I.G.
did not in fact use section 1128(b)(3) as a basis for excluding
Petitioner in this case. The absence of the required antecedent
notice of proposal to exclude and opportunity for Petitioner to
respond suggests that the I.G. has not yet considered the
imposition of a permissive exclusion under section 1128(b)(3) of
the Act. See 42 C.F.R. 1001.2001. The I.G.'s failure to
exercise her discretion under section 1128(b) of the Act is not
reviewable or remediable by me. 42 C.F.R. 1005.4(c)(5).
I find that the I.G.'s arguments on the health risks allegedly
created by Petitioner's drug-related offenses are also immaterial.
There is no indication that the acts underlying the section
1128(a)(1) exclusion -- i.e., Petitioner's schemes for charging and
collecting excess Medicaid copayments -- have placed Medicaid
patients at physical risk. Moreover, whether or not Petitioner's
program-related offenses have caused health risks, the aggravating
factor at 42 C.F.R. 1001.102(b)(5) is not applicable unless
there is a prior sanction record. Even though the Act is intended
to protect the health of program beneficiaries and recipients,
health risks to individuals do not serve as a substitute for a
prior sanction record under 42 C.F.R. 1001.102(b)(5).
2. Analysis rejecting the I.G.'s arguments on the
existence of a prior criminal sanction record
The I.G. argues that a prior criminal sanction record exists
because Petitioner's criminal drug conduct occurred over an
eight-month period -- June 4, 1991 to February 7, 1992 -- which
"overlapped and extended" the period during which Petitioner was
engaged in his schemes to defraud Medicaid patients -- September
11, 1988 until January 6, 1992. I.G. Br. at 9. Based on the
asserted overlap and extension, the I.G. concludes, "[t]herefore,
some of the criminal drug conduct occurred prior to some of
Petitioner's program-related criminal acts." I.G. Br. at 9, 10;
I.G. Prop. Facts at 4 (# 24 and # 25). However, the I.G.'s
supplemental brief poses a hypothetical set of facts to suggest the
existence of a "prior criminal record":
. . . in this case, had Petitioner been convicted of the
five drug misdemeanors a year before his conviction of the
program-related crimes which triggered his exclusion, the cited
aggravating factor [42 C.F.R. 1001.102(b)(5)] would have
authorized the I.G. to consider the prior drug conviction and
increase the exclusion length as appropriate.
I.G. Supp. Br. at 3, 4; see also I.G. Supp. Br. at 5. 10/
I find that the requirement of 42 C.F.R. 1001.102(b)(5) that
"[t]he convicted individual . . . has a prior criminal . . .
sanction record" has not been satisfied by the I.G.'s arguments or
the evidence. I will address each of the I.G.'s contentions.
First, as correctly pointed out by Petitioner, the I.G. is
attempting to use the timing of Petitioner's conduct as a prior
criminal sanction record. P. Br. at 8. Petitioner objected to the
I.G.'s approach, noting that the I.G. has not cited any authority
in support. Id.. The I.G. has not responded with any authorities
or arguments on why she considers the timing of Petitioner's
conduct sufficient to satisfy the regulation's requirement for a
prior criminal sanction record.
Even if Petitioner's conduct could be considered a prior criminal
sanction record, the I.G.'s brief is factually incorrect in
asserting that Petitioner committed some of his drug offenses
before he committed his Medicaid-related offenses. Petitioner's
two schemes to defraud Medicaid patients took place continuously
from September 11, 1988 to January 6, 1992. I.G. Ex. 1 at 3, 4;
I.G. Exs. 7 - 9. As noted in the I.G.'s brief, Petitioner's
drug-related offenses began on June 4, 1991. I.G. Br. at 9. None
of the drug-related offenses of record had taken place before
September 11, 1988. I.G. Exs. 2 - 8. The fact that four of
Petitioner's drug-related offenses took place during February 1992,
one month after his program-related offenses (I.G. Exs. 3 - 6),
fails also to support the I.G.'s theory that a prior criminal
record exists.
There is no basis for concluding that Petitioner was convicted of
drug-related offenses before he was convicted of program-related
offenses. Petitioner was convicted of drug offenses at the same
time he was convicted of the program-related offenses: on May 6,
1994. I.G. Exs. 7, 8. The court imposed sanctions on July 5, 1994
for all of Petitioner's convictions. I.G. Ex. 8. There is no
evidence that Petitioner had any criminal, civil, or administrative
sanction record that predated those events. P. Ex. 2.
The regulation sets forth a prior sanction record as an aggravating
factor because a prior sanction record shows an unwillingness to
comply with the law. 57 Fed. Reg. 3316 (1992). The words "prior
sanction," together with the administratively noticed fact of an
unwillingness to comply with the law, mean that the sanctions
should have been imposed at different times, which would have
afforded the individual an opportunity to comply with the law.
Thus, "prior sanction" does not apply to the situation before me,
where Petitioner was convicted of all of his offenses on the same
day and sentenced on all of his convictions on the same day.
In previous cases where the I.G. persuaded me to uphold an
increased period of exclusion based on a "prior sanction record,"
the I.G. had proven the existence of a prior sanction record
meeting the above definition. In addition, there was relevant
evidence establishing the extent of the excluded individual's
unwillingness or inability to act in accordance with his legal
obligations, which continued to pose threats to the programs and
which could be remedied only by a lengthened exclusion. See, e.g.,
Paul O. Ellis, R.Ph., DAB CR283 (1993). By contrast, the I.G. has
not proven the existence of a prior sanction record in this case.
Nor does the evidence in this case suggest that, after Petitioner
had committed various offenses and was sentenced on July 5, 1994,
he failed to learn from his mistakes or failed to become a
law-abiding citizen. See P. Ex. 2.
Therefore, I find the use of an alleged "prior sanction record" for
lengthening Petitioner's exclusion to be inappropriate and
inconsistent with the regulation's remedial purpose for providing
adequate, but not excessive, protection for the Medicare and
Medicaid programs and their beneficiaries and recipients. See 57
Fed. Reg. 3316 (1992).
D. Based on the facts of this case, the mitigating factor at
42 C.F.R. 1001.102(c)(1) exists.
Where the excluded individual or entity is convicted of three or
fewer misdemeanor offenses, and the entire amount of financial loss
to the Medicare or Medicaid programs due to the acts that resulted
in the conviction and similar acts is less than $1500, a mitigating
factor exists and may be used to reduce or offset the lengthening
of an exclusion based on aggravating factors. 42 C.F.R.
1001.102(c)(1).
Initially, Petitioner did not assert any mitigating factor because,
as I discussed above, he contended that the regulations containing
the aggravating and mitigating factors were not applicable at the
hearing level. By order dated August 9, 1995, I ruled that the
criteria contained in 42 C.F.R. 1001.102 were applicable and
afforded the parties an opportunity to file additional submissions
on the issue of whether the mitigating factor set forth at 42
C.F.R. 1001.102(c)(1) is applicable. Both parties have now
addressed the issue.
Having received the parties' arguments and evidence on this issue,
I will determine whether or not a mitigating factor exists, in
order to resolve the pending dispute concerning the applicability
of 42 C.F.R. 1001.102(c)(1). However, as discussed below, the
I.G. has not shown by the preponderance of the evidence that the
minimum mandatory period of exclusion should be increased based on
the aggravating factor she has proven. Therefore, whether or not
the mitigating factor at 42
C.F.R. 1001.102(c)(1) exists in this case does not materially
affect the outcome of the case.
1. Analysis of whether the amount of financial loss
to the programs due to Petitioner's program-related offenses, and
similar acts, is less than $1500
In opposing the use of the mitigating factor at 42 C.F.R.
1001.102(c)(1), the I.G. has not alleged that the programs have
incurred a loss of $1500 or more due to the acts that resulted in
Petitioner's program-related convictions or similar acts. Whether
or not Petitioner's drug-related offenses constitute "similar
acts," there is no evidence that Petitioner's drug-related offenses
have had any financial impact on the programs. The excess
copayments Petitioner collected in the perpetration of his
program-related crimes were from his Medicaid patients, not from
the Medicaid program itself. I.G. Ex. 1 at 3, 4. Even if one
could construe Petitioner's collection of excess copayment amounts
from his patients as having a financial impact on the Medicaid
program itself, the maximum amount Petitioner might have collected
from all individuals listed in counts 4 and 5 of the relevant
Information totals less than $1500. Id..
For these reasons, use of the mitigating factor listed at 42 C.F.R.
1001.102(c)(1) is not precluded by the amount of financial
damage to the Medicare or Medicaid programs.
2. Analysis of whether Petitioner was "convicted of
3 or fewer misdemeanor offenses"
The record is clear that Petitioner has a total of seven
misdemeanor convictions, two of which are program-related. I.G.
Exs. 7, 8. The I.G. acknowledges that there are not any
Departmental Appeals Board decisions interpreting the phrase,
"convicted of 3 or fewer misdemeanor offenses." I.G. Supp. Br. at
2. Also, Petitioner notes that the Secretary of DHHS has never
issued any official interpretation of the phrase. P. Supp. Br. at
2. However, both parties have cited case authorities and
established regulatory construction principles in urging opposite
interpretations of the phrase "convicted of 3 or fewer misdemeanor
offenses."
42 C.F.R. 1001.102(c).
The I.G. argues that I should give effect to the plain and natural
meaning of the words in issue and apply all seven of Petitioner's
misdemeanor convictions to preclude the use of the mitigating
factor. I.G. Supp. Br. at 2, 3. The I.G. argues also that the
mitigating factor at issue should not be limited to program-related
misdemeanor convictions because other parts of the regulation are
not so limited -- for example, 42 C.F.R. 1001.102(b)(5) permits
the I.G. to increase an exclusion based on prior convictions for
any type of offense. I.G. Supp. Br. at 4. Petitioner argues that
I should not give force to one phrase in isolation, but should,
instead, give effect to all provisions possible in order to derive
a harmonious and comprehensive meaning from the regulation. P.
Supp. Br. at 2, 3.
I conclude that it is not appropriate to assign a broad reading to
the phrase "convicted of 3 or fewer misdemeanor offenses" given the
limitation stated by the regulation itself. As explained at 42
C.F.R. 1001.102(c), "[o]nly if any of the aggravating factors
set forth in paragraph (b) of this section justifies an exclusion
longer than 5 years, may mitigating factors be considered as a
basis for reducing the period of exclusion to no less than 5
years." Thus, the mitigating factor at issue should be interpreted
in the context of what aggravating factors have been proven by the
I.G. for the purpose of lengthening the exclusion in the first
instance.
If "similar acts" or a prior sanction record existed and
established the aggravating factors at 42 C.F.R.
1001.102(b)(2),(3), then "convicted of 3 or fewer misdemeanor
offenses" should mean the misdemeanor convictions that form the
basis of the exclusion, as well as any misdemeanor convictions that
constituted the individual's "similar acts" or prior sanction
record. However, under the particular facts of this case, the I.G.
did not prove the existence of a prior sanction record or any
"similar acts" that may justify lengthening the period of
Petitioner's exclusion. The only aggravating factor proven by the
I.G. is the length of time over which Petitioner committed his two
Medicaid-related offenses. Therefore, under the facts of this
case, "convicted of 3 or fewer misdemeanor offenses" means only
Petitioner's two program-related misdemeanor convictions.
E. The I.G. has failed to prove that an exclusion of more
than five years is reasonable under the facts of this case.
Even though 42 C.F.R. 1001.102 specifies the evaluation criteria
for lengthening or decreasing an exclusion beyond the minimum
mandatory period, there exists no formula for determining what
period of time should correspond with each aggravating or
mitigating factor. Prior to the implementation of regulations
containing aggravating and mitigating factors, administrative law
judges relied on the concept of "trustworthiness" to determine the
amount of risk that a party might pose in relationship to the harm
Congress has sought to prevent. Thus, the term "trustworthiness"
reflects the extent of the needed remedial action. Behrooz Bassim,
M.D., DAB 1333, at 13 (1992). The fundamental concept of
"trustworthiness" continues to apply since the implementation of
regulations such as 42 C.F.R. 1001.102, although it is now
applied to the inferences that may be drawn from evidence relevant
to the aggravating and mitigating factors specified by regulations.
As noted by Administrative Law Judge Steven Kessel, the presence of
an aggravating or mitigating factor in a case may permit an
inference about a party's trustworthiness; however, more about the
party's trustworthiness may be explained and developed by the
evidence concerning the mitigating or aggravating factors. John M.
Thomas, DAB CR281, at 15 - 16 (1993). This approach is consistent
with DHHS's acknowledgement that it intentionally did not assign
specific values to aggravating and mitigating factors in the
regulations, choosing instead for the factors to be "evaluated
based on the circumstances of the case." 57 Fed. Reg. 3314 (1992).
Exclusions of more than five years imposed under section 1128(a)(1)
of the Act have been found reasonable only to the extent that the
evidence shows that they comport with the Act's remedial purpose of
protecting the integrity of federally funded health care programs
and the health of the programs' beneficiaries and recipients. See
Robert M. Matesic, R.Ph., DAB 1327 (1992).
In my prehearing order, I informed the I.G. of her burden to show
the reasonableness of the 10-year exclusion she directed and
imposed. Amended Order. This allocation is consistent with my
authority and was not objected to by the I.G.. See 42 C.F.R.
1005.15(c). The regulation specifies that the standard of proof is
the preponderance of the evidence. 42 C.F.R. 1001.2007(c).
There is adequate evidence establishing the existence of one
aggravating factor. However, very little else is proved beyond its
existence. The evidence does not adequately explain or develop the
issue of trustworthiness (i.e., the extent to which remedial action
is needed). The totality of the I.G.'s evidence consists of the
charges against Petitioner, Petitioner's pleas, and the sentencing
order. I.G. Exs. 1 - 9. These documents do not disclose adequate
information concerning what extent, if any, beyond the statutorily
mandated five years, remedial action is needed for the protection
of the programs or its beneficiaries and recipients.
For example, as discussed above, the wording of the criminal
charges to which Petitioner pled nolo contendere constitutes the
only proof that the Petitioner had committed his two
program-related offenses over a combined period of nearly three and
one-half years. I.G. Ex. 1. However, even though Petitioner was
convicted of having schemed to defraud Medicaid patients for nearly
three and one half years, there is no proof that Petitioner has
defrauded more than one Medicaid recipient on a single occasion for
one or two dollars under each of his two schemes. I.G. Exs. 1, 7,
8. Nor is there evidence proving that Petitioner had attempted to
obtain money on more than "at least one" instance specified in each
count. The fact that the State of Pennsylvania has classified
Petitioner's "Theft by Deception" offenses as misdemeanors also
militates against according great weight to the length of time
during which he schemed to defraud Medicaid patients. Id.. Even
though the I.G. has submitted the sentencing order as evidence
relevant to the reasonableness of the 10-year exclusion (I.G. Ex.
8), I am unable to draw conclusions concerning how heavily
Petitioner was sanctioned, or how serious the sentencing court
considered Petitioner's program-related misdemeanor offenses,
without information concerning the potential ranges and nature of
penalties that the court might have imposed.
The mere presence of an aggravating factor does not mean that an
exclusion of any particular length beyond the five years is
reasonable. Dr. Abdul Abassi, DAB CR390, at 8 (1995). Even though
the evidence relevant to Petitioner's mitigating factor is also not
illuminating, the burden was on the I.G. to prove the
reasonableness of the exclusion period she imposed and directed.
The evidence does not adequately show that the aggravating factor
in this case carries a great deal of weight, or even what amount of
weight it carries. The evidence does not preponderate in favor of
an exclusion in excess of five years.
If I were to take into consideration Petitioner's mitigating
factor, the most that can be concluded from the evidence on the
reasonableness issue is that, whatever amount of untrustworthiness
might be implied by the mere existence of a single aggravating
factor proven by the I.G., that amount has been negated by the
equally ambiguous amount of trustworthiness implied by the
existence of a single mitigating factor proven by Petitioner.
Accordingly, I find that the I.G. has failed to prove the
reasonableness of the 10-year exclusion period she imposed and
directed. Nor has she proven the reasonableness of any exclusion
period in excess of five years.
VI. CONCLUSION
I reduce Petitioner's period of exclusion to the minimum five years
mandated by law.
________________________
Mimi Hwang Leahy
Administrative Law Judge
1. I use "Medicaid" as an abbreviation for all the State health
care programs identified in section 1128(h) of the Act.
2. Paragraph 6 of the Amended Order summarizes summary judgment
standards, which do not apply to the motions filed by the parties.
3. Along with a motion, the I.G. filed a Brief in Support of
Motion for Disposition on the Written Record (I.G. Br.), a Reply
Brief (I.G. Reply), a Supplemental Brief (I.G. Supp. Br.), nine
proposed exhibits, and a proposed Statement of Material Facts and
Conclusions of Law (I.G. Prop. Facts).
Petitioner filed a Brief in Response to the I.G.'s Motion for
Disposition on the Written Record (P. Br.), a Supplemental Brief
(P. Supp. Br.), 11 proposed exhibits, and a proposed Statement of
Material Facts and Conclusion of Law (P. Prop. Facts).
4. Each of the admitted exhibits from the I.G. will be
referenced as "I.G. Ex. (number) at (page)," and each of the
admitted exhibits from Petitioner will be referenced as "P. Ex.
(number) at (page)."
5. Petitioner was convicted on two counts of "Violation of the
Medical Practice Act" in having dispensed prescription drugs to two
patients without the use of a safety closure package. I.G. Exs. 2,
6.
There is a discrepancy in the court's nolo contendere plea order
and sentencing order in that the former order states Petitioner
pled to Count 1 of Information 687 ("Dispensing of Drugs without
Proper Label"), whereas the latter order states that Petitioner
pled to Count 2 of Information 687 ("Violation of the Medical
Practice Act"). I.G. Exs. 7, 8, and 9. I agree with the I.G. that
the sentencing order contains the correct information with respect
to Petitioner's plea under Information 687. I.G. Br. at 5, n.1
(citing also I.G. Exs. 8, 9).
6. This list appears as Exhibit A to Information No. 558.
I.G. Ex. 1 at 6 - 8. The I.G. refers to this list in her brief as
Exhibit A.
7. This list appears as Exhibit B to Information No. 558. I.G.
Ex. 1 at 9 - 18. The I.G. refers to this list in her brief as
Exhibit B.
8. The lists appended to Counts 4 and 5 are not fully
consistent with the allegations stated in those Counts that
Petitioner illegally received the copayment amount of $2.00 from
Medicaid recipients under the age of 18 and that Petitioner
illegally received an excess co-payment amount of $1.00 from
Medicaid patients over the age of 18. I.G. Ex. 1. Part of the
list corresponding to Count 4 seeks to show that Petitioner
received only $1.00 from certain program recipients under 18 years
of age. I.G. Ex. 1 at 6, 7. Similarly, the list corresponding to
Count 5 seeks to show that, in one instance, Petitioner collected
only $.50 in excess co-payment from a patient over the age of 18.
I.G. Ex. 1 at 10. Solely for the sake of convenience, I have been
discussing the overcharge received by Petitioner from any Medicaid
patient listed for Count 4 as $2.00 and the overcharge received by
Petitioner from any Medicaid patient listed for Count 5 as $1.00.
9. Section 1128(b)(3) provides in relevant parts:
(b) PERMISSIVE EXCLUSION. -- The Secretary may exclude the
following individuals . . .
(3) CONVICTION RELATING TO CONTROLLED
SUBSTANCE. -- Any individual . . . that has been convicted . . . of
a criminal offense relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled
substance.
10. The I.G. submitted the following argument also, which is
consistent with her hypothetical use of a prior criminal sanction
record in this case:
. . . a conviction for the crimes cited above, which could
be considered as an aggravating factor if it were to occur before
the conviction for the two misdemeanor program-related offenses .
.
I.G. Supp. Br. at 5.