Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
DATE: July 24, 1990
Docket No. C-51
In the Case of:
David Cooper, R. Ph.,
Petitioner,
- v. -
The Inspector General.
DECISION
By letter dated July 6, 1988, the Inspector General (the I.G.) notified Petitioner
that he was being excluded
from participation in the Medicare and any State health care program for 15
years. Petitioner was advised
that his exclusion resulted from his conviction of a criminal offense related
to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct. He was further
advised that his exclusion
was authorized by section 1128(b)(1) of the Social Security Act.
Petitioner requested a hearing, and the case was assigned to me for hearing
and disposition. I conducted a
hearing in Detroit, Michigan on April 10, 1990
I have considered the evidence introduced by both parties at the April 10 hearing.
Based on the evidence
and the applicable law, I conclude that the exclusion imposed against Petitioner
is reasonable. Therefore, I
sustain the exclusion.
ISSUE
The issue in this case is whether the exclusion imposed and directed against
Petitioner by the I.G. is
reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner was licensed to practice pharmacy in the State of Michigan. Ex. B-7; Tr. at 294.
2. From January 1982 until October 1986, Petitioner was the largest shareholder
and operator of Karp
Pharmacy, Inc. Ex. B-1, B-3, B-6.
3. In August, 1987, Petitioner was indicted by a federal grand jury on five
counts of unlawful pharmacy
practices and as a participant in a criminal conspiracy. Ex. B-1.
4. On November 19, 1987, Petitioner was convicted after a jury trial on all
five counts of the indictment.
Ex. B-1, B-2.
5. Petitioner was convicted of: conspiracy to commit a violation of the RICO
law, 18 U.S.C. 1962(d);
substantive acts in violation of the RICO law, 18 U.S.C. 1962(c); conspiracy
to distribute controlled
substances in violation of 21 U.S.C. 846; conspiracy to commit mail fraud in
violation of 18 U.S.C. 371;
and substantive acts of mail fraud and aiding and abetting, in violation of
18 U.S.C. 1341 and 1342. Ex. B-
5, B-6.
6. A necessary element of the offenses of which Petitioner was convicted was
that Petitioner knowingly
and intentionally engaged in conduct which was unlawful. Tr. at 118-119.
7. Petitioner's conviction was affirmed on appeal to the United States Court
of Appeals for the Sixth
Circuit. Ex. B-6.
8. Petitioner's unlawful activities were part of a wide-ranging conspiracy
to engage in fraudulent claims for
reimbursement from health insurers, controlled substance violations and mail
fraud. Ex. B-6.
9. In furtherance of this conspiracy, Petitioner filled customers' prescriptions
with generic drugs, but billed
health insurers for more expensive brand name drugs. Ex. B-6.
10. Also in furtherance of this conspiracy, Petitioner filled large quantities
of forged and illegal
prescriptions for controlled substances, which were presented to him by dealers
of "street drugs." Ex. B-6.
11. Petitioner participated in the conspiracy to bill sales of generic drugs
as sales of brand name drugs for
approximately four years. Tr. at 154.
12. Petitioner presented or caused to be presented about 3,000 fraudulent claims
for prescription drugs.
Tr. at 211-212.
13. Petitioner participated in the conspiracy to unlawfully sell controlled
substances from January 1982 to
mid-1983, or about 18 months. Tr. at 106-109, 154, 205-206, 214.
14. During this period, Karp Pharmacy earned at least $300,000 from Petitioner's
unlawful sale of
controlled substances. Tr. at 213.
15. Petitioner unlawfully dispensed Schedule II controlled substances, including
Dilaudid, Talwin,
Preludin, Desoxyn, and Quaalude. Ex. B-6, B-12; Tr. 205-208.
16. Schedule II controlled substances can be addictive, have a high potential
for abuse, and an attendant
value for unlawful drug trafficking. Ex. B-13; Tr. 202-203.
17. Dilaudid is a narcotic properly used to treat extreme pain and sometimes
used illicitly as a heroin
substitute. Ex. B-13, B-21; Tr. at 208.
18. Talwin is also a pain killer with a heroin-like effect. Tr. at 208.
19. Desoxyn is an amphetamine which stimulates the central nervous system. Ex. B-21.
20. Desoxyn is sold illicitly under the street name of "speed." Ex. B-13.
21. Preludin is also a stimulant which is sold illicitly under the street name
of "speed." Ex. B-13, B-21; Tr.
at 208.
22. Quaalude is a sedative or hypnotic drug. Ex. B-13, B-21.
23. Because of its danger and high potential for abuse, Quaalude has been taken off the market. Ex. B-13.
24. In order to conceal his unlawful sales of controlled substances, Petitioner
would "shuffle" false and
forged prescriptions. Ex. B-13, B-16; Tr. at 204-205.
25. Petitioner's "shuffling" of prescriptions consisted of dating
and filing them in a manner calculated to
hide the fact that they were illegal. Ex. B-13, B-16; Tr. at 204-205.
26. Petitioner was sentenced to three years' imprisonment, fined $5,000, and
assessed a special fee of
$250. Ex. B-5.
27. Petitioner was convicted under federal law, in connection with the delivery
of a health care item or
service, of a criminal offense relating to fraud or other financial misconduct.
Findings 5, 8; Social Security
Act, section 1128(b)(1).
28. The Secretary of the Department of Health and Human Services (the Secretary)
has authority to
impose and direct an exclusion against Petitioner from participating in Medicare
and Medicaid, pursuant to
section 1128(b)(1) of the Social Security Act. Social Security Act, section
1128(b)(1).
29. The Secretary delegated to the I.G. the duty to impose and direct exclusions
pursuant to section 1128
of the Social Security Act. 48 Fed. Reg. 21662 (May 13, 1983).
30. On July 6, 1988, the I.G. notified Petitioner that he was being excluded
from participation in Medicare
and Medicaid for 15 years, pursuant to section 1128(b)(1) of the Social Security
Act. Ex. B-9.
31. The exclusion provisions of section 1128 of the Social Security Act establish
neither minimum nor
maximum lengths for exclusions based on section 1128(b)(1).
32. The remedial purposes of section 1128 of the Social Security Act include
protecting the integrity of
federally funded health care programs from persons who have demonstrated by
their conduct that they
cannot be trusted to deal with program funds. Social Security Act, section 1128.
33. The remedial purposes of section 1128 of the Social Security Act also include
protecting program
beneficiaries and recipients from persons who have demonstrated by their conduct
that they cannot be
trusted to treat beneficiaries and recipients. Social Security Act, section
1128.
34. An additional remedial purpose of section 1128 of the Social Security Act
is to deter persons from
engaging in conduct which jeopardizes the integrity of federally-funded health
care programs, or the safety
and welfare of program beneficiaries and recipients. Social Security Act, section
1128.
35. Petitioner was convicted of several serious criminal violations. Finding
5; see 42 C.F.R.
1001.125(b)(1).
36. Petitioner's actions jeopardized the integrity of health insurance programs.
Findings 5, 8-9; see 42
C.F.R. 1001.125(b)(2).
37. Petitioner's actions endangered the health and safety of individuals who
obtained controlled substances
which were sold illegally by Petitioner. Findings 5; 10-25 see 42 C.F.R. 1001.125(b)(2).
38. Petitioner's criminal activities were perpetrated over a four-year period,
a lengthy period of time.
Findings 11, 13; see 42 C.F.R. 1001.125(b)(6).
39. As a result of his conviction, Petitioner was sentenced to a lengthy period
of incarceration, three years.
Finding 26; see 42 C.F.R. 1001.125(b)(5).
40. Petitioner has not accepted full responsibility for the offenses of which
he was convicted. Tr. at 286-
87.
41. Petitioner proved that he was devoted to his family, kind to his employees,
and trustworthy in
relationships with his close personal associates. Tr. at 144-145, 217, 247,
254, 256, 266-267, 271.
42. Petitioner did not prove that, in light of the evidence of his character
and personal relationships, he is
trustworthy to deal with federal health care funds or with program beneficiaries
and recipients. See Tr. at
144-145, 217, 247, 254, 256, 266-267, 271.
43. Petitioner's misconduct establishes that he is an individual who is not
trustworthy to deal with program
funds or with beneficiaries or recipients. Findings 35-42.
44. A fifteen-year exclusion is reasonable in this case, given the seriousness
of Petitioner's misconduct, his
lack of trustworthiness, and the dangers posed to the integrity of federally-funded
health care programs and
to beneficiaries and recipients, should Petitioner ever in the future engage
in the misconduct for which he
was convicted.
ANALYSIS
Petitioner does not deny that he was convicted of a criminal offense within
the meaning of section
1128(b)(1) of the Social Security Act. Therefore, there is no dispute in this
case as to the I.G.'s authority to
impose and direct an exclusion against Petitioner from participating in Medicare
and Medicaid. The only
issue before me is whether the length of the 15 year exclusion which the I.G.
imposed is reasonable.
Congress enacted the exclusion law to protect the integrity of federally funded
health care programs. The
law was intended to protect program funds and beneficiaries and recipients from
parties who had
demonstrated by their behavior that they posed a threat to the integrity of
such funds, or to the well-being
and safety of beneficiaries and recipients.
There are two ways that exclusions imposed and directed pursuant to this law
advance the remedial
purpose. First, the law protects the programs and their beneficiaries and recipients
from an untrustworthy
provider until the provider demonstrates that he or she can be trusted to deal
with program funds and to
serve beneficiaries and recipients. Second, exclusions deter providers of items
or services from engaging
in conduct which threatens the well-being and safety of beneficiaries and recipients,
or the integrity of
program funds. See House Rep. No. 95-393, Part II, 95th Cong. 1st Sess., reprinted
in 1977 U.S. Code
Cong. & Admin. News, 3072.
An exclusion imposed and directed pursuant to section 1128 will likely have
an adverse financial impact
on the person against whom the exclusion is imposed. However, the law places
the well-being and safety
of beneficiaries and recipients and the integrity of program funds ahead of
the pecuniary interests of
providers. An exclusion is not punitive if it reasonably serves the law's remedial
objectives, even if the
exclusion has a severe adverse financial impact on the person against whom it
is imposed.
The hearing is, by law, de novo. Social Security Act, section 205(b). Evidence
which is relevant to the
reasonableness of an exclusion will be admitted in a hearing on an exclusion
whether or not that evidence
was available to the I.G. at the time the I.G. made his exclusion determination.
Moreover, evidence which
relates to a petitioner's trustworthiness or to the remedial objectives of the
exclusion law is admissible at
the hearing, even if that evidence is of conduct other than that which establishes
statutory authority to
exclude a petitioner. The purpose of the hearing is not to determine how accurately
the I.G. applied the
law to the facts before him, but whether, based on all relevant evidence, the
exclusion comports with the
legislative purpose.
In this case, I permitted both sides to offer evidence consisting of excerpts
from the record of Petitioner's
criminal trial. My purpose in admitting such evidence was to create as full
a record as possible of
Petitioner's motivation for engaging in unlawful conduct, as well as the gravity
and effect of his offenses. I
also received evidence from Petitioner as to his character and trustworthiness.
The Secretary has adopted regulations to be applied in exclusion cases. The
regulations specifically apply
only to exclusions for "program-related" offenses (convictions for
criminal offenses relating to Medicare
and Medicaid). However, they express the Secretary's policy for evaluating cases
where permissive
exclusions may be appropriate. Thus, the regulations are instructive as broad
guidelines for determining
the appropriate length of exclusions in cases where the Secretary has discretionary
authority to exclude
parties. The regulations require the I.G. to consider factors related to the
seriousness and program impact
of the offense, and to balance those factors against any mitigating factors
that may exist. 42 C.F.R.
1001.125(b)(1) - (7).
An exclusion determination will be held to be reasonable where, given the evidence
in the case, it is shown
to fairly comport with legislative intent. "the word `reasonable' conveys
the meaning that . . . [the I.G.] is
required at the hearing only to show that the length of the [exclusion] . .
. was not extreme or excessive."
(Emphasis added). 48 Fed. Reg. 3744 (Jan. 27, 1983). However, based on the law
and the evidence,
should I determine that an exclusion is unreasonable, I have authority to modify
the exclusion. Social
Security Act, section 205(b).
The evidence establishes a pattern of many criminal offenses by Petitioner
over a lengthy period of time.
See 42 C.F.R. 1001.125(b)(1). The seriousness of Petitioner's offenses is in
some measure reflected in the
sentence imposed on him, which included three years' incarceration. See 42 C.F.R.
1001.125(b)(5). The
evidence establishes that Petitioner's conduct was motivated by considerations
of unlawful gain.
Furthermore, his conduct jeopardized the safety of his customers. See 42 C.F.R.
1001.125(b)(2).
Petitioner was a pharmacist and the largest shareholder in a pharmacy. For
a period of approximately four
years, Petitioner, in concert with numerous other individuals, participated
in a criminal conspiracy to
defraud health care insurers, including Blue Cross and Blue Shield of Michigan.
Petitioner's role in this
conspiracy included systematically claiming reimbursement from health care insurers
for the sale of brand
name prescription drugs, when in fact, he had dispensed less costly generic
substitutes to insured
customers.
Petitioner also conspired to unlawfully distribute controlled substances. He
was found to have filled large
quantities of forged and illegal prescriptions for such drugs. The substances
unlawfully dispensed by
Petitioner included the Schedule II narcotics Dilaudid and Talwin, and the amphetamine
Desoxyn. These
are addictive drugs with a high potential for abuse. Misuse of these drugs may
pose grave health hazards
for the abuser. Petitioner's unlawful sales of these drugs included sales of
large quantities to runners for
drug dealers, for which he received substantial illicit cash payments.
Petitioner was convicted of criminal offenses including conspiracy and racketeering.
Petitioner's crimes
both compromised the integrity of health insurance programs, and endangered
the health and safety of his
customers. During the more than four years that Petitioner defrauded insurers,
he filed approximately 3000
false claims for prescription drugs. Over a period of approximately 18 months,
Petitioner's pharmacy
unlawfully made sales of controlled substances in an amount of at least $300,000.00
The offenses of which Petitioner was convicted were offenses which required
proof that Petitioner
knowingly and intentionally engaged in unlawful activity. The evidence establishes
not only that he
intentionally engaged in unlawful conduct, but that Petitioner systematically
attempted to conceal his
activities from scrutiny. Such efforts included "shuffling" forged
prescriptions to make it more difficult to
detect Petitioner's unlawful sale of controlled substances. I conclude that
this evidence establishes an
extremely high level of culpability on Petitioner's part.
I am not convinced, even as of this date, that Petitioner accepts full responsibility
for his unlawful conduct.
Petitioner characterized his behavior as constituting "poor judgment."
Ex. P-18. He has consistently
denied his guilt of the offenses of which he was convicted.
I conclude that the 15 year exclusion imposed against Petitioner is reasonable.
I base my conclusion on the
seriousness of Petitioner's crimes, the damage that they caused, and on Petitioner's
inability to accept full
responsibility for his actions or their consequences. Given the gravity of Petitioner's
crimes, and his
continued failure accept responsibility for them, it is reasonable to conclude
that Petitioner will continue to
pose a threat to the integrity of federally funded health care programs for
the foreseeable future. Therefore,
the lengthy exclusion imposed in this case provides reasonable protection for
those programs and for their
beneficiaries and recipients. A lengthy exclusion may have the additional benefit
of deterring other
providers of services from engaging in the conduct engaged in by Petitioner.
I am mindful of the fact that the exclusion imposed and directed against Petitioner
is for a lengthy period of
time. However, the crimes perpetrated by Petitioner were exceedingly serious,
and wrought substantial
damage to the integrity of health insurance programs. These crimes also potentially
jeopardized the health
and well-being of numerous individuals. Moreover, they were motivated by considerations
of personal
gain. It is not unreasonable to infer from the nature of these offenses, from
the circumstances under which
they were committed, and from Petitioner's failure to acknowledge full responsibility
for his conduct, that
Petitioner is a manifestly untrustworthy individual. Therefore, substantial
protection must be created to
guard against even the possibility that Petitioner could in the future perpetrate
against Medicare or
Medicaid, or the beneficiaries and recipients of these programs, the misdeeds
which resulted in his
conviction.
My conclusion that the exclusion in this case is reasonable takes into account
character evidence which
Petitioner offered at his hearing. This evidence included the testimony of Petitioner's
former attorney, as
well as that of a family acquaintance, and one of Petitioner's former employees.
Although I do not doubt
the good faith of these witnesses, their assurances as to Petitioner's trustworthiness
are outweighed by the
evidence which establishes the seriousness of Petitioner's crimes and Petitioner's
failure to completely
acknowledge responsibility for those crimes.
Petitioner argues that, inasmuch as he has already been punished for his crimes,
a lengthy exclusion would
simply constitute a second punishment in violation of the double jeopardy provision
of the United States
Constitution. He bases this argument on the United States Supreme Court's decision
in United States v.
Halper, 109 S.Ct. 1892 (1989).
In Halper, the Supreme Court held that a civil penalties award under the False
Claims Act may violate the
double jeopardy doctrine if it is based on the same transaction as the prior
federal conviction, and if there
was not even a remote relationship between the amount of the penalty imposed
and the cost to the
government resulting from the defendant's conduct.
This case is distinguishable from Halper. It is true that, as was the case
with the defendant in Halper, the
remedy imposed by the I.G. pursuant to section 1128 is premised on the same
facts which resulted in a
federal criminal conviction of Petitioner. However, unlike in Halper, the remedy
imposed by the I.G. and
sustained here is not punitive. Rather, it constitutes a reasonable mechanism
to protect the integrity of
federally funded health care programs and their beneficiaries and recipients
from an untrustworthy
provider. It serves the same remedial end, and is therefore analogous to, revocation
of a professional
license for misconduct. It also is analogous to a civil remedy of contract termination
for a systematic
breach of contract. Therefore, the exclusion imposed and directed against Petitioner
is not double
jeopardy. Dewayne Franzen, DAB App. 1165 (1990); see Greene v. Sullivan, No.
CIV-3-89-758 (E.D.
Tenn. Feb. 22, 1990)
Petitioner also asserts that, as the exclusion law does not contain explicit
instructions to the Secretary as to
the length of exclusions to be imposed pursuant to section 1128(b), it is ambiguous.
Therefore, according
to Petitioner, a "rule of lenity" should apply to preclude the imposition
against him of a lengthy exclusion.
Petitioner's argument is misplaced. While the law does not specify the minimum
or maximum length of
permissive exclusions, it does embody remedial criteria by which such exclusions
are to be determined and
evaluated. Moreover, the rule cited by Petitioner is a rule which has been used
by courts to interpret and
apply penal statutes. The exclusion law is not a penal statute. See United States
v. Universal C.I.T. Credit
Corp., 344 U.S. 218 (1952).
Petitioner argues that the length of the exclusion in this case makes the remedy
punitive. Although the
exclusion is lengthy, it is not punitive, because, given the facts, it is reasonable.
Petitioner also argued at the hearing that the length of this exclusion imposed
and directed against him is
unreasonable when compared with those exclusions which may have been imposed
and directed against
other participants in the conspiracy of which Petitioner was convicted. I did
not allow Petitioner to obtain
discovery from the I.G. as to any such exclusions, in part because his request
was not timely, but also
because, in my opinion, it was not reasonably calculated to lead to the discovery
of relevant evidence. No
evidence was offered which compared the specific circumstances justifying exclusions
in other cases with
the facts upon which Petitioner's exclusion was premised. However, I do not
consider evidence as to
exclusions imposed and directed against other participants in the conspiracy
of which Petitioner was
convicted to be relevant to the issue of reasonableness of the length of the
exclusion imposed and directed
against Petitioner.
First, the exclusion against Petitioner would in no circumstance be unreasonable
simply because that
exclusion is lengthier (or shorter) than that imposed against other participants
in the same conspiracy. An
administrative remedy is not invalid in a particular case because it is more
severe than remedies imposed in
other cases. Butz v. Glover, 411 U.S. 182, 187 (1973). Furthermore, the exclusion
in this case is
reasonable in light of the facts in evidence. The possibility that exclusions
imposed in other cases may
differ from the exclusion imposed in this case does not derogate from my conclusion
that this exclusion is
justified by the record.
I recognize that the exclusion imposed against Petitioner will possibly prevent
him from meaningfully
practicing his profession of pharmacist for the duration of the exclusion. This
may have a severe financial
impact on Petitioner. However, the remedial considerations of the law must take
precedence over the
personal consequences that an exclusion may have for an excluded party.
CONCLUSION
Based on the evidence in this case and the law, I conclude that the 15-year
exclusion imposed against
Petitioner from participating in Medicare and Medicaid is reasonable. Therfore,
I sustain the exclusion
imposed against Petitioner, and I enter a decision in favor of the I.G.
_____________________________
Steven T. Kessel
Administrative Law Judge