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Date: January 19, 1999

In the Case of:

The Inspector General

- v. -

Wesley J. Hammer, Four Star
Health Care Systems, Inc.,
d/b/a Gold Star Ambulance,
Advanced Life Support Systems,
Respondents.

Docket No. C-98-395
Decision No. CR565

I affirm the proposals of the Inspector General (I.G.) to exclude each Respondent from participation in the Medicare, Medicaid, and all other federal health care programs, as defined in section 1128B(f) of the Social Security Act (Act), for a period of five years.

I. BACKGROUND

On May 4, 1998, the I.G. notified Respondents by separate letters that she was proposing to exclude them for five years pursuant to section 1128(b)(7) of the Act. As a basis for her proposal to exclude Respondents, the I.G. relied on an April 9, 1997 judgment of the U.S. District Court for the Southern District of Texas finding that Respondents had violated the False Claims Act (FCA), 31 U.S.C. � 3729 et seq., with respect to their submission of 49 claims to Medicare for reimbursement of ambulance services. The I.G. concluded that the judgment of the District Court demonstrated that Respondents had presented or caused to be presented to an agent of the United States claims for medical or other items or services that they knew or should have known were false and/or fraudulent, in violation of section 1128A of the Social Security Act. Respondents separately filed timely requests for hearing dated June 30, 1998.⁽¹⁾ For relief, Respondents ask that the proposals be dismissed in their entirety, or that the length of the exclusions be modified. Hearing requests, 4 - 5.

I held a prehearing conference with the parties on August 17, 1998, during which the parties waived their right to present testimony at an in-person hearing. Thereafter, I issued an Order and Schedule for Filing Briefs and Documentary Evidence dated August 21, 1998. The purpose of this order was to confirm and give effect to the parties' agreement to have me resolve all issues of fact and law on the basis of their written submissions. See 42 C.F.R. � 1005.6(a)(5), (c)⁽²⁾ Neither party objected to the content of my order.

However, what I received from the parties were cross-motions for summary judgment, instead of the "motions for disposition on the written record" specified at page 3 of my August 21, 1998 order. I then authorized the issuance of a letter to the parties, informing them that a summary judgment motion is inappropriate for seeking resolution of factual issues such as whether the period of exclusion is unreasonable. The parties were specifically given an opportunity to inform me that they no longer wished for me to decide all factual issues based solely on the basis of their written submissions. Neither party so informed me. Therefore, I have applied the parties' cross-motions as seeking summary judgment as to certain issues of law. On issues of fact, I have treated their motions as requesting disposition on the basis of the documentary evidence of record.

In issuing this decision, I have reviewed the information contained in the following documents:

-- the motion and brief in support filed by the I.G. (I.G. Mot. and I.G. Br.);

-- the motion and brief in support filed by Respondents (R. Mot. and R. Br.);

-- the reply brief filed by Respondents (R. Reply);

-- the eight (8) documents filed by the I.G. (I.G. Ex. 1 - 8); and

-- the two (2) documents filed by Respondents (R. Ex. 1 and 2⁽³⁾).

My formal findings of fact and conclusions of law (FFCL) appear as subject headings in the Discussion and Conclusion sections, below.

II. DISCUSSION

FFCL 1: The I.G.'s proposals to exclude Respondents are not time-barred.

The statutory provision relied upon by the I.G. states in relevant part:

(b) PERMISSIVE EXCLUSION. -- The Secretary may exclude the following individuals and entities. . . . :

(7) FRAUD, KICKBACKS, AND OTHER PROHIBITED ACTIVITIES. -- Any individual or entity that the Secretary determines has committed an act which is described in section 1128A. . . .

Section 1128(b)(7) of the Act.

Because the I.G. determined that each Respondent had "committed an act which is described in section 1128A" (section 1128(b)(7) of the Act), Respondents assert that the time limitation specified within section 1128A bars the I.G. from exercising her exclusion authority under section 1128(b)(7) of the Act.

Respondents rely on the following words from section 1128A:

[t]he Secretary may initiate a proceeding to determine whether to impose a civil money penalty, assessment, or exclusion [emphasis added by Respondents] under subsection (a) or (b) of this section only as authorized by the Attorney General pursuant to procedures agreed upon by them. The Secretary may not initiate an action under this section with respect to any claim, request for payment, or other occurrence described in this section later than six years after the date the claim was presented, the request for payment was made, or the occurrence took place.

Section 1128A(c)(1).

The most obvious problem with Respondents' arguments is that, if the provisions contained in section 1128A(c)(1) were controlling whenever the Secretary determines that an exclusion should be proposed because an individual has acted in contravention of section 1128A, there would have been no purpose to Congress' enacting also section 1128(b)(7) of the Act. As correctly pointed out by the I.G, the six-year limitation specified in section 1128A(c)(1) was expressly limited to the Secretary's authority to initiate actions action under "this section," and "this section" refers to section 1128A. The term cannot be reasonably extended to include any portion of section 1128(b).

Section 1128A(a) of the Act specifies that individuals or entities who commit certain proscribed acts become liable for a civil money penalty and an additional monetary assessment in lieu of damages, and they may be excluded from program participation if the Secretary chooses to "make a determination in the same proceeding to exclude. . . ." Section 1128A(a) of Act. Thus, for a proposed exclusion to become subject to the six-year statute of limitation, an exclusion determination must be made in the same proceeding as the one involving the assessment of a civil money penalty or the additional assessment authorized by section 1128A(c). Moreover, section 1128A(a) makes clear also that the liability for a civil money penalty, an assessment, or an exclusion specified by section 1128A is "in addition to any other penalties that may be prescribed by law." Section 1128A(a) of Act (emphasis added).

The statutory section relied upon by the I.G. to exclude Respondents neither references nor specifies a time limit within which the Secretary "determines [that an individual or entity] has committed an act which is described in section 1128A. . . ." Section 1128(b)(7) of the Act. Section 1128(b)(7) of the Act provides the Secretary with the authority to propose an exclusion even when no civil money penalty or assessment has been proposed under section 1128A(a). A regulation implementing exclusions proposed under section 1128(b)(7) makes explicit that "imposition of a civil money penalty or assessment is not a prerequisite for an exclusion under this section." 42 C.F.R. � 1001.901(a). Whereas section 1128A(c)(1) permits the Secretary to propose an exclusion "only as authorized by the Attorney General pursuant to procedures agreed upon by them . . . ," there is no similar limitation under section 1128(b)(7).

In this case, the I.G. did not propose to impose any civil money penalty or other monetary assessment against Respondents. Nor is there any indication that the I.G.'s actions in this case were related to any authorization from the Attorney General or any agreement between the agencies on the procedures. The evidence of record establishes that Respondents' exclusions were proposed by the I.G. based on her own determination under section 1128(b)(7) of the Act that Respondents had committed certain acts described in section 1128A.⁽⁴⁾ The procedures the I.G. followed in issuing her notices of proposed exclusions, as well as in informing Respondents of the effect of those proposals and their appeal rights, are in accord with those regulations which are applicable to section 1128(b). See 42 C.F.R. � 1001.2003;⁽⁵⁾ I.G. Ex. 1 and 2. Those regulations were promulgated by the Secretary without any apparent in-put from the Attorney General.

Lastly, there is no merit to Respondents' argument that the time limitation of section 1128A(c)(1) must be applied to section 1128(b)(7) because the converse is true also: certain parts of section 1128 must be read into section 1128A. R. Reply, 4. According to Respondents, this argument is supported by the fact that section 1128A does not specify matters such as the conduct to be remedied by the exclusion, how an exclusion is initiated, or the procedures for appeal. Id. A reading of section 1128A shows the contrary of what Respondents contend.⁽⁶⁾ According to the clear language of section 1128(b)(7), it incorporates only "an act which is described in section 1128A."

For all of these reasons, I conclude that the I.G.'s proposals to exclude Respondents are not time-barred.

FFCL 2: The doctrines of res judicata and collateral estoppel do not bar the I.G. from proposing to exclude Respondents.

In their reply brief, Respondents add the argument that the I.G.'s proposal to exclude them under section 1128(b)(7) is also barred by the doctrine of res judicata. They rely on the fact that they were found liable under FCA, but the court did not order exclusion as relief because the Secretary did not request that form of relief under section 1128A of the Act in the FCA case. The court ordered Respondents to satisfy a monetary award. I.G. Ex. 3; I.G. Ex. 7 at 52.⁽⁷⁾ Therefore, Respondents contend that the I.G. is estopped from proposing the exclusions at issue after having relinquished its right and opportunity to do so during the FCA proceedings.

I reject Respondents' arguments.

As noted above, the Secretary is authorized to propose an exclusion pursuant to section 1128A of the Act if she chooses to "make a determination in the same proceeding to exclude. . . ." Section 1128A(a) of Act (emphasis added). The "same proceeding" refers to a proceeding to impose a civil money penalty or an additional assessment under the authority of section 1128A. Clearly, the FCA is not even a part of the same Act that includes section 1128A. The complaint filed in U.S. District Court against Respondent rested solely on the FCA, the court assumed jurisdiction over the case based solely only the FCA. I.G. Ex. 6 and 7. Nothing in section 1128A or section 1128(b)(7) of the Act creates an obligation to propose an exclusion in a proceeding brought under the FCA.

Even if the exclusions at issue were proposed under section 1128A instead of section 1128(b)(7) of the Act, section 1128A specifically states that the remedies contained therein are "in addition to any other penalties that may be prescribed by law." Section 1128A(a) of Act. Imposing a civil money penalty or an assessment--under the FCA or any other statutory provision--is not a prerequisite to proposing an exclusion by authority of section 1128(b)(7). 42 C.F.R. � 1001.901(a). The liabilities specified by FCA are a civil money penalty, plus triple the damages sustained by the government. 31 U.S.C. � 3729(a)(1). Thus, it does not follow that any exclusion under sections 1128A or 1128(b)(7) should have been sought against Respondents herein in the FCA case.

Respondents err also in suggesting that the Secretary was a party in the FCA action against Respondents. Neither the I.G. nor the Secretary was a party. The plaintiff in the FCA case was the United States. Recovery under the FCA was sought on behalf of the Department of Health and Human Services because false claims had been submitted to the Department's agents and paid from Medicare, Part B, funds. I.G. Ex. 7 at 2, 5. The Act authorizes only the Secretary to propose, impose, and direct exclusions from the Medicare and other federally funded health care programs. Section 1128 and 1128A of the Act. Therefore, Respondents have misapplied the doctrines of res judicata and collateral estoppel in this case.

For these foregoing reasons, I conclude that the proposed exclusions before me are not barred by the fact that Respondents' exclusions were neither requested nor granted in the FCA proceedings.

FFCL 3: The I.G. has properly relied upon section 1128(b)(7) of the Act as the basis for proposing to exclude Respondents, and, therefore, the proposed exclusions cannot be set aside in their entirety.

During the prehearing conference in this case, the parties identified as a dispute the I.G.'s basis for proposing the exclusions in controversy (i.e., whether Petitioner had committed acts described in section 1128A). Order and Schedule for Filing Briefs and Documentary Evidence, 2 (Aug. 21, 1998). However, the briefs filed thereafter by Respondents specifically assert only that the I.G.'s proposals to exclude are barred as a matter of law (see discussions herein) and that the length of exclusion sought by the I.G. is unreasonable.

I have determined it appropriate to render a specific finding on whether Respondents committed actions described in section 1128A because, in arguing that the length of exclusion is unreasonable, Respondents do not concede that an exclusion of some period must be upheld by me if a factual basis exists for the I.G.'s exercise of her discretion under section 1128(b).⁽⁸⁾ They argue, for example, "[t]here are many mitigating factors that warrant a much lower exclusion, if one should be granted at all." R. Br., 4. Additionally, even though the I.G. based the proposed exclusions on Respondents' submissions of false claims for services (I.G. Ex. 1 and 2; section 1128A, as incorporated by section 1128(b)(7) of the Act), Respondents assert that there was "no finding of fraud or culpable behavior" by Wesley Hammer and damages "were due to mistake, not fraud. . . ." R. Br., 6. The relief they seek is that the proposed exclusions "be denied." R. Reply, 4. By such arguments, Respondents are in effect challenging the I.G.'s basis for proposing an exclusion of any length against them.

As relevant to this action,⁽⁹⁾ section 1128A of the Act imposes liability on a person or entity that--

(1) presents or causes to be presented to an officer, employee, or agent of the United States, or of any department or agency thereof . . . , a claim . . . that the Secretary determines-- . . . .

(B) is presented for a medical or other item or service [,] and the person knows or should know the claim is false or fraudulent.

Section 1128A(a)(1)(B) of the Act.

The FCA also imposes liability against any person or entity that--

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States government . . . a false or fraudulent claim for payment or approval . . . .

31 U.S.C. � 3729(a). The FCA defines the terms "knowing" and "knowingly" as follows:

the terms "knowing" and "knowingly" mean that a person, with respect to information--

(1) has actual knowledge of the information;

(2) acts in deliberate ignorance of the truth or falsity of the information; or

(3) acts in reckless disregard of the truth or falsity of the information . . . . 32 U.S.C. � 3729(b). Thus, the FCA's definition of "knowing and knowingly" encompasses the "knows or should have known" standard of section 1128A of the Act. See also Tommy G. Frazier and Prater Drugs., Inc., DAB CR79 at 22 (1990) (standard of liability of "know" or "should know" under section 1128A subsumes acting "in reckless disregard for the truth" with respect to submission or preparation of false claims).

The evidence of record establishes that, on April 9, 1997, the U.S. District Court for the Southern District of Texas found Respondents herein liable under the FCA for the submission of 49 claims for ambulance services that were not medically necessary to the patients on the dates claimed, in reckless disregard of the truth of those claims. I.G. Ex. 7 at 40 and 45. As noted in the District Court's opinion, the named defendants in the FCA action were Wesley J. Hammer, his daughters, and the two Texas corporations that the family owned between 1987 and 1992: Four Star Health Care Systems, Inc. (d/b/a Gold Star Ambulance) and Four Star Health Care Systems' successor, Advance Life Support Systems (d/b/a Gold Star Ambulance). I.G. Ex. 7 at 2.⁽¹⁰⁾

Respondents herein appealed the District Court's factual finding that they had acted with "reckless disregard" of the truth in billing Medicare for transporting those 49 patients in ambulances. I.G. Ex. 8. The Fifth Circuit Court of Appeals affirmed the judgment of the District Court and found "no quarrel" with the conclusion that 49 claims were submitted with reckless disregard for the truth. I.G. Ex. 8 at 3. In so concluding, the Fifth Circuit noted that the record supported the District Court's finding that billing clerks were instructed to ignore information on the "run sheets" provided by the paramedics and emergency medical technicians concerning the patients' need for ambulance service; instead, the billing clerks were given preprinted forms showing the information which was critical to Respondents' right to submit claims for ambulance services: that the transported patients were "unable to sit, stand or walk." I.G. Ex. 8 at 2.

For all of the foregoing reasons, the preponderance of the evidence establishes that Respondents committed acts described in section 1128A of the Act. I conclude, therefore, that the I.G. had authority to propose excluding Respondents pursuant to section 1128(b)(7) and that the proposed exclusions cannot be set aside in their entirety as requested by Respondents.

FFCL 4: The I.G.'s proposed exclusion of five years for each Respondent is not unreasonable.

Where, as here, the I.G. has taken actions pursuant to her discretionary authority under section 1128(b) of the Act, the regulations permit Respondents to challenge the issue of whether the length of the proposed exclusions is unreasonable. 42 C.F.R. � 1001.2007(a)(1)(ii). Respondents herein have done so in their hearing requests and in their briefs. Therefore, I note the following principles which will govern my resolution of this issue.

A. The statute, regulations, and case law establish the framework for resolving the issue of whether the exclusion period is unreasonable.

The statute entitles the affected party dissatisfied with a decision rendered by or on behalf of the Secretary to submit a timely request for hearing. Section 205(b) of the Act, as incorporated by section 1128(f) of the Act. Upon such a request, the Secretary must make available a hearing upon reasonable notice and, based solely on the evidence adduced at hearing, issue a written decision which affirms, modifies, or reverses the findings under challenge. Id. The nature and extent of the proofs and evidence, as well as the methods for taking and furnishing them, have been committed to the Secretary's discretion to establish through the adoption of rules or regulations. Section 205(a) of the Act.

In the foregoing context, how I review and decide the length of an exclusion controversy must necessarily follow the parameters set in the relevant regulations. For example, the review I conduct may be considered de novo in the sense that the regulations permit the consideration of new evidence, i.e., evidence which does not relate only to the items and information set forth in the I.G.'s notice letter; however, those very regulations also specify the types of new evidence which may not be accepted into evidence. 42 C.F.R. � 1005.15(f)(1). Similarly, the regulations adopted by the Secretary require the application of the "preponderance of evidence" standard of proof, and they expressly limit the issues which may be reviewed in exclusion cases. 42 C.F.R. � 1001.2007(a) and (d).

The Secretary's regulations state that one of the appealable issues is whether the exclusion imposed or proposed by the I.G. is "unreasonable." 42 C.F.R. � 1001.2007(a)(1)(ii)(emphasis added). The Secretary's use of the word "unreasonable" (as opposed to "reasonable") reflects her intent, which was stated as follows in promulgating 42 C.F.R. � 1001.2007(a)(1)(ii):

[t]he OIG's broad discretion is also reflected in the language of � 1001.2007(a)(2), restricting the ALJ's authority to review the length of an exclusion imposed by the OIG. Under that section, the ALJ's authority is limited to reviewing whether the length is unreasonable. So long as the amount of time chosen by the OIG is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it under this rule. We believe that the deference � 1001.2007(a)(2) grants to the OIG is appropriate, given the OIG's vast experience in implementing exclusions under these authorities.

57 Fed. Reg. 3298, 3321 (1992). Consistent with the foregoing intent, the Secretary also declined to assign specific weight to those aggravating and mitigating factors enumerated in her regulations.⁽¹¹⁾ The I.G. is supposed to weigh those factors on a case by case basis in order to arrive at a particular period of exclusion.⁽¹²⁾

Several appellate panel decisions of the Departmental Appeals Board (DAB) have reemphasized that the length of the exclusion chosen by the I.G. must be upheld if, based on the existence of aggravating or mitigating factors specified by regulation, the length appears to fall within a reasonable range. Barry Garfinkle, M.D., DAB No. 1572 (1996); Frank A. DeLia, D.O, DAB No. 1620 (1997); Gerald A. Snider, M.D., DAB No. 1637 (1997). However, the I.G.'s evidence in those cases did not show which years comprised the "reasonable range." The I.G.'s evidence in those cases did not establish that she follows a practice of setting the parameters of a "reasonable range" and then choosing a specific number of years therefrom. Nor do the authors of those DAB decisions identify the "reasonable range" in concluding, explicitly or implicitly, that the number of years selected by the I.G. fell within a "reasonable range."

Therefore, what appears to have developed from these cases is the rule that where the specific number of years selected by the I.G. does not appear to be unreasonably long in light of the relevant factors specified by the regulations, the I.G.'s determination on the length of the exclusion should be affirmed unless a preponderance of the evidence supports a contrary conclusion. This approach approximates a shifting burden of moving forward with evidence on the "unreasonableness" issue. The approach is consistent with the intent of the regulations in framing the issues as whether an exclusion period is "unreasonable," as opposed to reasonable. Moreover, this approach encompasses the consequences of deferring to the I.G.'s experience and deeming her or her designated decision-maker an expert in these proceedings, as intended by the regulations.⁽¹³⁾

Experts may provide an opinion or inference, even when the opinion or inference embraces an ultimate issue to be decided by the trier of fact. See Fed. R. Evid. 702, 704. Therefore, in the more informal setting of an administrative hearing, it is permissible for the I.G. to shift the burden of moving forward with the evidence on the "unreasonable" length issue by establishing through the use of testimony or documents, such as her notice letters, that--

(1) the exclusion period at issue is reflective of the expert opinion rendered by the I.G. or her designated decision-maker as to an appropriate length of exclusion;

(2) the process used in reaching that opinion was lawful and included, where applicable, consideration of those aggravating or mitigating factors specified by regulation; and

(3) the facts used to establish the exclusion period do exist.

Unless the I.G.'s evidence along the foregoing lines is problematic on its face,⁽¹⁴⁾ the burden of moving forward on the issue of "unreasonableness" shifts to the party opposing the exclusion period.

The party opposing the exclusion period will then have the opportunity to prove, through questioning of the I.G.'s personnel or otherwise, that the length of the exclusion is unreasonable for reasons not apparent from the I.G.'s presentation of the evidence. The party opposing the exclusion period may attempt to establish "unreasonableness" by introducing proof, for example, that the I.G. failed to present accurately the legally relevant facts, that facts of material significance⁽¹⁵⁾ have been overlooked by the I.G., that the exclusion period is out of proportion to the others imposed by the I.G. under similar facts, or that the analysis done by the I.G. was so cursory, illogical, or standardless as to have rendered the resulting length determination arbitrary and capricious. Additionally, if the party opposing the exclusion period wishes to prove "unreasonableness" by showing that the period selected by the I.G. falls outside of a "reasonable range,"⁽¹⁶⁾ that party may avail itself of the opportunity to present evidence concerning a "reasonable range" through its own witnesses or the questioning of the I.G.'s personnel.

If "unreasonableness" is not shown by a preponderance of the evidence at the close of both parties' presentations, then the length of exclusion selected by the I.G. must be affirmed. If "unreasonableness" is shown by a preponderance of the evidence, then the exclusion period selected by the I.G. must be set aside. Since the exclusion period cannot be reduced to zero if the I.G. had a basis for imposing or proposing an exclusion (42 C.F.R. � 1005.4(c)(4) and (5)), then the administrative law judge needs to set a length that is consistent with the weight of the evidence.

B. The evidence presented by the I.G. adequately supports her proposals to exclude each Respondent for five years.

The I.G. introduced as evidence her notice letters to Respondents, which state that she is proposing to exclude each of them for a period of five years pursuant to her evaluation of the relevant factors contained in 42 C.F.R. � 1001.901, the regulation which implements section 1128(b)(7) of the Act. I.G. Ex. 1 and 2. The regulation states:

[i]n determining the length of an exclusion . . .the OIG will consider the following factors--

(1) [t]he nature and circumstances surrounding the actions that are the basis for liability, including the period of time over which the acts occurred, the number of acts, whether there is evidence of a pattern and the amount claimed;

(2) [t]he degree of culpability;

(3) [t]he individual's or entity's prior criminal, civil or administrative sanction record (The lack of any prior record is to be considered neutral); and

(4) [o]ther matters as justice may require.

42 C.F.R. � 1001.901(b). The I.G.'s notice letters make obvious that the regulatory provisions were applied in concluding that, for each Respondent, the aggravating factors consisted of:

-- the length of time (November 1988 to May 1990) over which false or fraudulent claims for Medicare payments were made;

-- the number of false or fraudulent claims (49) which were submitted, and the amount of Medicare payment damages ($17,474.94) which resulted from Respondents' submission of those claims;

-- additional liability for 69 double-load transportation of patients which resulted in an unjust enrichment of $6,624.89;⁽¹⁷⁾

-- the high degree of culpability, as well as personal liability, for the improper conduct.

I.G. Ex. 1 at 2 - 3; I.G. Ex. 2 at 2. To establish the existence of those facts she deemed to be aggravating factors, the I.G. submitted the U.S. District Court's Memorandum Order (I.G. Ex. 7), the Final Judgment issued by the U.S. District Court (I.G. Ex. 3), and the Opinion of the U.S. Court of Appeals for the Fifth Circuit (I.G. Ex. 8). Those judicial documents establish as fact the information used by the I.G. as to the first three aggravating factors. With respect to the I.G.'s findings of the high degree of culpability and personal liability, portions of the District Court's Memorandum Order can be read to support the inferences drawn by the I.G.

In the foregoing manner, the I.G. showed that she had rendered a determination on the length of an exclusion for each Respondent, as well as the substance of her determination. She demonstrated that the process she used in reaching that determination was lawful. She established also the existence of those facts used to formulate her determination as to the length of the exclusion. Since no evidence presented by the I.G. indicates on its face that an exclusion of five years may be improper or excessive, Respondents assumed the burden of moving forward to show that the five-year exclusion is unreasonably long.

C. The evidence and arguments provided by Respondents fail to establish that the proposed period of exclusion is unreasonable.

To show the unreasonableness of a five-year exclusion period, Respondents note that the 69 instances of "double-load" transportation of patients cited by the I.G. did not amount to "false claims" under the FCA, and, moreover, the trial court found no specific Medicare regulation specifically prohibiting the practice of billing for "double-loads" during the relevant time period. R. Br., 4 - 5.

With respect to the 49 "false claims" found by the District Court under the FCA, Respondents reiterate some of their evidence and arguments from the court proceedings in urging me to find that Respondents had made mere "mistakes," and were without any specific intent to defraud the government. R. Br., 5 - 6. In support of these conclusions, Respondents contend that the "paucity of the number of 'false' claims (i.e. 49) in context with the total number of claims filed (several thousand) does not support a pattern of deceit or fraudulent behavior." R. Br., 5.

In addition to interposing all of the foregoing arguments with the other Respondent before me, Respondent Hammer asserts that "there was no finding of fraud or culpable behavior on his part with regard to any claim." R. Br., 6. He relies upon some words from the District Court's opinion for that proposition. Id. He views the exclusion period of five years as overly harsh because it may cause him to lose his current job as an "Operations Manager" for the Harris Country (Texas) Emergency Services District No. 1, which provides ambulance services to approximately 250 square miles of unincorporated territory. R. Br., 6 - 7. He fears also that his exclusion would cause him to have difficulty obtaining other employment in the health care industry, inasmuch as "[p]otential employers would naturally shy away [from] employing any person who could potentially disrupt or impact [on] the employers' billings to Medicare." R. Br., 7.

I find that all of the arguments alleging unreasonableness are either immaterial or unpersuasive. Even though the regulation permits consideration of "[o]ther matters as justice may require" (42 C.F.R. � 1001.901(b)(4)), the matters raised by Respondents do not demonstrate that the proposed exclusion period of five years is unreasonable. I begin with those arguments applicable only to Respondent Hammer.

Without doubt, an exclusion is intended to bar the affected individual from working in a job where he will be submitting, or causing to be submitted, claims to Medicare. The scope and effect of an exclusion is explained by regulation at 42 C.F.R. � 1001.1901. The regulation states in relevant part:

(1) [u]nless and until an individual or entity is reinstated into the Medicare program . . . , no payment will be made by Medicare or any of the State health care programs for any item or service furnished, on or after the effective date specified in the notice period, by an excluded individual or entity. . . .

(3) [a]n excluded individual or entity that submits, or causes to be submitted, claims for items or services furnished during the exclusion period is subject to civil money penalty liability under section 1128A(a)(1)(D) of the Act, and criminal liability under section 1128B(a)(3) of the Act.

42 C.F.R. � 1001.1901(b)(1) and (3). Therefore, it is not a reason for setting aside a proposed exclusion if the individual fears the very effects intended by law.

Moreover, the evidence from Respondent Hammer does not establish the precise nature of his current job duties. His evidence does not establish that the performance of those job duties would subject him or his employer to liability under the Act should the proposed exclusion take effect. Nor has he shown that all his other employment opportunities would be limited to jobs in which he would be submitting, or causing others to submit, claims to Medicare. On the present evidence, his fears for his present job and future employability are speculative. I cannot shorten or eliminate the proposed exclusion due to the existence of such speculation. Even if his evidence were otherwise, I would not thwart the intent of the Act for the reasons urged by Respondent Hammer.

As for Respondent Hammer's assertion that "there was no finding of fraud or culpable behavior on his part with regard to any claim" (R. Br., 6), I find this to be a misinterpretation of the conclusion reached by the District Court. The court stated as follows:

Defendant Wesley J. Hammer has raised no bar to a finding of joint and several liability, and any argument that he is not personally liable for the corporation's acts is waived.

I.G. Ex. 7 at 51. Accordingly, the court did find Respondent Hammer personally liable, because he had waived arguments to the contrary when he had the opportunity to present them.

I will not absolve Respondent Hammer of personal liability in the submission of 49 claims under the FCA because he has chosen this moment to argue the absence of personal liability. The regulations are clear that, where the I.G.'s exclusion action is derived from a conviction or determination by another governmental entity, the basis for the underlying determination is not reviewable, and the underlying determination cannot be collaterally attacked on either substantive or procedural grounds. 42 C.F.R. � 1001.2007(d). Therefore, Respondent Hammer's arguments concerning his lack of personal liability are without any legal significance in these proceedings.

For the same reasons, no legal significance can be given to Respondents' prior evidence and prior unsuccessful arguments that their submissions of 49 "false claims" in violation of the FCA had resulted from mere mistakes. The District Court found them liable for those 49 claims under the FCA, and the Court of Appeals has affirmed that finding. I.G. Ex. 7 and 8. As a matter of law, I cannot readjudicate the merits of Respondents' failed evidence and arguments.

Nor do the court's findings concerning the absence of specific intent to defraud support Respondents' theory concerning the occurrence of mere mistakes. See R. Br., 5 - 6. In its opinion, the District Court noted:

USA argues, quite correctly, that under the statute, as amended, it need not prove any specific intent by Defendants to defraud the government. 31 U.S.C. � 3729(b).

I.G. Ex. 7 at 32. Therefore, the court concluded as follows:

USA need not show proof of a specific intent to defraud under the False Claims Amendments Act of 1986 [citations omitted]. The applicable standard of proof is the "knowing submission of a false claim" and liability can be established by showing that defendants acted with deliberate ignorance or reckless disregard for the truth of the information provided in the claims.

I.G. Ex. 7 at 49 - 50. Accordingly, the court found Respondents liable under the FCA because they had submitted 49 claims "in reckless disregard for the actual truth of the matters stated." I.G. Ex. 7 at 50.

Acting in reckless disregard of the truth does not signify that mere mistakes were made by Respondents. The former is the finding of the court, and the latter is the line of argument that was rejected by the court in reaching the former finding. Additionally, it goes without saying that Respondents' failure to have any specific intent to defraud the government, in addition to having acted in reckless disregard for the truth of the matters stated in 49 claims, cannot be construed as a mitigating factor.

For similar reasons, I reject as unpersuasive Respondents' argument that the alleged "paucity of the number of 'false' claims (i.e. 49) in context with the total number of claims filed (several thousand) does not support a pattern of deceit or fraudulent behavior. R. Br., 5. What Respondents are stating is that, even though they had the opportunity to submit a much greater number of false claims, they did not do so. This argument is illogical. Moreover, Respondent takes no issue with the I.G.'s observation that the 49 false claims were submitted over 18 months, from November 1988 to May 1990. See I.G. Ex. 1 at 2; I.G. Ex. 2 at 2. Nothing of record shows the total number of claims submitted by Respondent over this period. Therefore, there is also no factual support for Respondents' contention that no pattern of deceit or fraudulent behavior may be inferred from their submission of 49 false claims over 18 months.

Nor have Respondents shown the length of the proposed exclusion to be unreasonable because the I.G. cited their additional liability for 69 instances of double-load transportation of patients which resulted in an unjust enrichment of $6,624.80. See I.G. Ex. 1 at 2 - 3; I.G. Ex. 2 at 2; R. Br., 4 - 5. Respondent is correct that they were not found liable for these double-load charges under the FCA because the regulations then in effect did not specifically preclude such billing practices. R. Br., 4 - 5. However, the court did find that they had unjustly incurred enrichment in the amount of $6,624.80 through these 69 double-load trips. I.G. Ex. 7 at 52; I.G. Ex. 3 at 2.

The I.G. has the discretion to note an individual's prior sanction record or other matters as justice may require. 42 C.F.R. � 1001.901(b)(3) and (4). The I.G. did not mistake the 69 double-loads for liability under the FCA. I.G. Ex. 1 and 2. Rather, Respondents' unjust enrichment through the submission of these 69 claims bears on the issue of their willingness to behave with honesty and fiscal integrity even when no regulation spells out the mechanisms for their doing so. It is difficult to believe, for example, that persons wishing to deal honestly with the Medicare program would find a gap in the regulations and thereby conclude that when they transport two patients in the same ambulance on the same trip, they should receive double the amount for transporting a single patient. Therefore, I do not find the I.G.'s determination to be flawed because Respondents did not incur liability for unjust enrichment under the FCA for the 69 double-load claims.

In sum, the I.G.'s proposal to exclude each Respondent for five years has not been shown to be unreasonably long on the basis of the evidence of record.

III. CONCLUSION

FFCL 5: For the reasons set forth above, I uphold the I.G.'s proposal to exclude each Respondent for a period of five years.

Having considered all of the evidence of record, together with the parties' arguments, I hereby affirm the I.G.'s proposal to exclude each Respondent for five years.

Mimi Hwang Leahy
Administrative Law Judge

1. A request for hearing was filed on behalf of Respondent Wesley J. Hammer, and another request for hearing was filed on behalf of Respondent Advance Life Support System/Four Star Health Systems, Inc., d/b/a Gold Star Ambulance. The contents of these two hearing requests are almost identical.

2. Citations to the Code of Federal Regulations are to the 1997 edition, which was in effect at the time the exclusions were proposed.

3. P. Ex. 2 is the same document as I.G. Ex. 7.

4. The I.G. explains in her brief that the determination to exclude under section 1128(b)(7) of the Act "is predicated on a prior Federal Court decision, issued on April 9, 1997. . . ." I.G. Br., 7. This explanation is supported by the I.G.'s notice letters to Petitioner, which state that "[o]n April 9, 1997, you were found to have violated the False Claims Act. . . . [by] Final Judgment of U.S. Magistrate Judge Mary Milloy. . . ." I.G. Ex. 1 at 1; I.G. Ex. 2 at 1.

5. Separate regulations, appearing at 42 C.F.R. �� 1003.109 and 1003.110, govern the notices and procedures the I.G. must use when proposing a civil money penalty or exclusion under section 1128A of the Act.

6. The conduct subject to an exclusion is described in section 1128A(a)(1) through (3). Section 1128A(c)(1) states that an exclusion under this section may be initiated "by serving

notice of the action in any manner authorized by Rule 4 of the Federal Rules of Civil Procedure." Section 1128A(c)(4) makes clear that an administrative hearing is available. See also section 1128A(j)(1) of the Act (incorporating subsections (d) and (e) of section 205). Section 1128A(e) provides for review of the Secretary's final determinations by the U.S. Court of Appeals.

7. The court found Respondents liable under the FCA for 49 claims that were submitted with reckless disregard for the truth. I.G. Ex. 7 at 51. Therefore, the court found that the Plaintiff (the United States) was entitled to recover treble damages and a statutory penalty of $5000 for each of the 49 claims under 31 U.S.C. � 3729(a)(1). I.G. Ex. 7 at 51. The cited section of the FCA specifies liability "to the United States government for a civil money penalty of not less than $5,000 and not more than $10,000 plus three times the amount of damages which the government sustains because of the act of that person." 31 U.S.C. � 3729(a)(1).

8. The regulation at 42 C.F.R. � 1005.4(c) states that an administrative law judge may not--

(5) Review the exercise of discretion by the OIG to exclude an individual under section 1128(b) . . .

(6) Set a period of exclusion at zero, or reduce a period of exclusion to zero, in any case where the ALJ finds that an individual or entity committed an act described in section 1128(b) of the Act. . . .

42 C.F.R. � 1005.4(c)(5) and (6).

9. The I.G.'s notice letters stated as follows to each of the Respondents:

[b]ased on the acts that resulted in your liability under the FCA [False Claims Act], I have determined that you presented or caused to be presented to an agent of the United States . . . claims for medical or other items or services that you knew or should have known were false and/or fraudulent, in violation of section 1128A(a)(1)(B) of the Act, 42 U.S.C. � 1320a-7a(a)(1)(B). Therefore, because you committed acts in violation of section 1128A of the Act, I am proposing to exclude you from program participation pursuant to section 1128(b)(7) of the Act, 42 U.S.C. � 1320a-7(b)(7), and 42 C.F.R. � 1001.901.

I.G. Ex. 1 at 1 - 2; I.G. Ex. 2 at 1 - 2.

10. The court explained in its opinion that it was referring to all of the named defendants collectively as "Gold Star." I.G. Ex. 7 at 2.

11. For cases arising under section 1128(b)(7) of the Act, 42 C.F.R. � 1001.901(b) contains those criteria which the I.G. must consider in setting the length of the exclusion. These criteria are the substantive equivalent of those which are called "aggravating" and "mitigating" factors in like regulations. See, e.g., 42 C.F.R. � 1001.201(b) (exclusions due to convictions relating to program or health care fraud).

12. When the proposed regulations were published for comment, the agency received suggestions for the inclusion of specific guidance as to how aggravating and mitigating factors should be weighed. The Secretary responded thus:

[w]e do not intend for the aggravating and mitigating factors to have specific values; rather, these factors must be evaluated based on the circumstances of a particular case. . . . The weight accorded to each mitigating and aggravating factor cannot be established according to a rigid formula. . . .

57 Fed. Reg. 3314 - 15.

13. Using the Federal Rules of Evidence as guidance, I note that an expert may be any individual who, by virtue of his skills, experience, training, or education, has specialized knowledge that will assist the trier of fact to understand the evidence or to determine a fact in issue. Fed. R. Evid. 702.

14. A facial defect might be present where, for example, legally impermissible factors were considered in determining the exclusion period; the evaluation process was improper as a matter of law; or the information which materially affected the exclusion period determination is patently unreliable or patently beyond belief.

15. The regulations will be used to determine relevancy and materiality. For example, 42 C.F.R. � 1001.2007(d) states:

[w]hen the exclusion is based on the existence of a conviction, a determination by another government entity or any other prior determination, the basis for the underlying determination is not reviewable and the individual or entity may not collaterally attack the underlying determination, either on substantive or procedural grounds, in this appeal.

16. I do not suggest that the I.G. is precluded from providing information concerning the existence of any "reasonable range" used while she is moving forward with the evidence or when she is submitting rebuttal evidence. If her attorneys' litigation strategy so provides, she may certainly set forth a "reasonable range" at the very outset of her case or in its rebuttal phase. She may also volunteer other types of information to make an affirmative showing that her exclusion period determination is facially reasonable. In Sharad Patel, M.D., DAB CR447 (1996), for example, the I.G. made such an affirmative showing with success by comparing her exclusion period in controversy with those which have been affirmed by the DAB or its administrative law judges in cases with similar fact patterns.

17. Respondents transported two or more patients together in a single ambulance for dialysis treatment, but Respondents obtained Medicare payments as if each patient had been transported separately. See I.G. Ex. 7 at 6 - 7, 48.