Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Date: September 12, 1990
Docket No. C-221
In the Case of:
Francis Shaenboen, R.Ph.,
Petitioner,
- v. -
The Inspector General.
DECISION
In this case, governed by section 1128 of the Social Security Act (Act), Petitioner
filed a timely request for
a hearing before an Administrative Law Judge (ALJ) to contest the February 26,
1990 notice of
determination (Notice) issued by the Inspector General (I.G.) which excluded
Petitioner from participating
in the Medicare and Medicaid programs for five years.
Based on the entire record before me, I conclude that summary disposition is
appropriate in this case, that
Petitioner is subject to the minimum mandatory exclusion provisions of sections
1128(a)(1) and
1128(c)(3)(B) of the Act, and that Petitioner's exclusion for a minimum period
of five years is required by
federal law.
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section 1128 of the Social Security Act (Act) is codified at 42 U.S.C. 1320a-7
(West U.S.C.A., 1989
Supp.). Section 1128(a)(1) of the Act provides for the exclusion from Medicare
and Medicaid of those
individuals or entities "convicted" of a criminal offense "related
to the delivery of an item or service" under
the Medicare or Medicaid programs. Section 1128(c)(3)(B) requires a five year
minimum period of
exclusion for those excluded under section 1128(a)(1).
II. The Federal Regulations.
The governing federal regulations (Regulations) are codified in 42 C.F.R.,
Parts 498, 1001, and 1002
(1989). Part 498 governs the procedural aspects of this exclusion case; Parts
1001 and 1002 govern the
substantive aspects.
Section 1001.123 requires the I.G. to give a party written notice that he or
she is excluded from
participation in Medicare, beginning 15 days from the date on the notice, whenever
the I.G. has conclusive
information that a practitioner or other individual has been convicted of a
crime related to his or her
participation in the delivery of medical care or services under the Medicare,
Medicaid, or the social
services program.
BACKGROUND
The I.G.'s Notice alleged that Petitioner was convicted of a criminal offense
related to the delivery of an
item or service under the Medicaid program, and advised Petitioner that the
law required a five-year
minimum exclusion from participation in Medicare and Medicaid programs for individuals
convicted of a
program-related offense. Petitioner requested a hearing to contest the I.G.'s
determination and the case was
assigned to me for a hearing and decision.
I conducted a prehearing conference in this case on April 19, 1990 and issued
a prehearing Order on May
2, 1990, which established a schedule for filing motions and responses. The
I.G. filed a motion for
summary disposition and a memorandum in support thereof on May 23, 1990. The
Petitioner filed a
response on July 12, 1990. I heard oral argument in this case on July 25, 1990.
ADMISSIONS
Petitioner admits that he was "convicted" within the meaning of section 1128(i) of the Act.
ISSUE
The issues in this case are:
1. Whether 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.
2. Whether the I.G. is required to exclude Petitioner under the provisions
of section 1128(a)(1) of the
Act.
3. Whether the 1987 amendments to section 1128 of the Act, mandating a minimum
five year exclusion
for program-related convictions, apply to this case.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Having considered the entire record, the arguments and the submissions of the
parties, and being advised
fully herein, I make the following Findings of Fact and Conclusions of Law:
1. Petitioner is a pharmacist and at the time of the events underlying his
conviction was president of Racey
Pharmacy, Inc., Garden City, Michigan. I.G. Ex. 1,2, I.G. Ex. 2,4.
2. On July 30, 1987, a 43 count criminal complaint was filed against Petitioner
and Racey Pharmacy, Inc.
in the 21st District Court for the County of Wayne, charging them with defrauding
the Michigan
Department of Social Services, Medical Assistance Program for the medically
indigent (Medicaid) and
Blue Cross/Blue Shield of Michigan, by submitting bills for prescription drugs
which had not been
prescribed or dispensed, and which Petitioner knew to be false. I.G. Ex. 1.
3. On November 21, 1988, in the Recorder's Court for the City of Detroit, Petitioner
pled nolo contendere
to Counts 1 and 30 of the complaint; Count 1 involved attempted violation of
the Medicaid False Claim
Act, and Count 30 involved attempted violation of the Health Care False Claim
Act. I.G. Ex. 2, I.G. Ex. 3.
4. Petitioner's plea was accepted by the court. I.G. Ex. 2, 14.
5. Petitioner, individually and on behalf of Racey Pharmacy, Inc., was sentenced
to six months probation,
and was required to pay investigative costs and restitution to Medicaid in the
amount of $18,001.75 and to
Blue Cross in the amount of $16,317.50. I.G. Ex. 4.
6. On or about March 18, 1990, the I.G. excluded Petitioner from participating
in the Medicare and
Medicaid programs for a period of five years. I.G. Ex. 6.
7. The Secretary of the Department of Health and Human Services (DHHS) has
delegated to the I.G. the
authority to determine, impose and direct exclusions pursuant to section 1128
of the Act. 48 Fed. Reg.
21662 (May 13, 1983); 42 U.S.C. 3521 et seq.
8. Since the material facts are undisputed in this case, the classification
of Petitioner's conviction of a
criminal offense as subject to the authority of 1128(a) is a legal issue.
9. Summary disposition is appropriate in this case. 56 F.R.C.P.
10. Petitioner was convicted of a criminal offense within the meaning of section
1128(a) and 1128(i) of
the Act.
11. 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.
12. Petitioner's conviction occurred after the enactment of the 1987 amendments
instituting the mandatory
exclusion provision of section 1128(c)(3)(B), for section 1128(a)(1) exclusions.
13. The I.G. is not barred by the ex post facto clause of the United States
Constitution from imposing an
exclusion with a minimum mandatory term of five years.
14. A minimum mandatory exclusion of five years is required in this case by
sections 1128(a)(1) and
1128(c)(3)(B) of the Act.
DISCUSSION
I. Petitioner's Conviction "Related to the Delivery of an Item or Service"
Within the Meaning of Section
1128(a)(1) of the Act.
Having concluded that Petitioner was "convicted" of a criminal offense,
I must determine whether the
evidence demonstrates a relationship between the judgment of conviction and
"the delivery of an item or
service" under the Medicare or Medicaid programs as provided in Section
1128(a)(1) of the Act.
I have relied on the plea agreement and other Court documents as the best evidence
of the nature of the
offense for which Petitioner was convicted. See, Charles W. Wheeler and Joan
K. Todd, DAB App. 1123
at 10 (1990). These documents, read in their totality, demonstrate that the
criminal offenses to which
Petitioner pled guilty were "related to the delivery of an item or service"
under Medicare or Medicaid.
Petitioner's "conviction" was for attempting to submit bills to Medicaid
and to Blue Cross for prescription
drugs which had not been dispensed or prescribed. FFCL 2.
Convictions for criminal offenses involving false or fraudulent claims, such
as the offense here, are clearly
"related to the delivery of items or services" within the ambit of
section 1128(a)(1) because such claims
"directly and necessarily follow ... from the delivery of the item or service."
Dewayne Franzen, DAB App.
1165 (1990); Jack W. Greene, DAB App. 1078 (1989). In Greene, the Departmental
Appeals Board
(DAB) held that "the false Medicaid billing and the delivery of drugs to
a Medicaid recipient are
inextricably intertwined and therefore 'related' under any reasonable reading
of that term." In the instant
case, the Court realized how inextricably intertwined Petitioner's conviction
was with the program by
ordering Petitioner to pay $18,001.75 in restitution to the program. FFCL 5.
I find and conclude that Petitioner's offenses were "related to the delivery
of an item or service" under the
Medicare and Medicaid programs within the meaning of section 1128(a)(1) of the
Act.
II. The I.G. is Required To Exclude Petitioner Under The Provisions Of Section
1128(a)(1) Of The Act.
Sections 1128(a)(1) and 1128(c)(3)(B) of the Act require the I.G. to exclude
individuals and entities from
the Medicare and Medicaid programs when individuals and entities have been "convicted"
of a criminal
offense "related to the delivery of an item or service" under the
Medicare or Medicaid programs. See
Greene supra.
Petitioner entered a plea of nolo contendere to a criminal offense which I
have found and concluded to be
"related to" the Medicaid program. That plea was accepted by the Recorder's
Court for the City of Detroit
on November 21, 1988. FFCL 3,4. Since it is undisputed that Petitioner was "convicted"
within the
meaning of section 1128(i)(3) of the Act and the criminal offense was "related
to the delivery of an item or
service" under Medicare, I conclude that Petitioner is an individual subject
to the provisions of section
1128(a)(1) and the I.G. was required to exclude him from the Medicare and Medicaid
programs.
III. The 1987 Amendments to Section 1128 of the Act Mandating A Minimum Five-Year
Exclusion For
Program-Related Convictions Apply To This Case.
Petitioner does not contest that he was convicted within the meaning of section
1128(a)(1). Rather,
Petitioner contends that the mandatory five year exclusion provisions of section
1128(c)(3)(B) cannot be
applied, because the activity underlying his conviction took place prior to
the enactment of the mandatory
exclusion provisions and such action constitutes an unconstitutional ex post
facto law as applied to him.
Although I do not have the authority to declare the 1987 amendments unconstitutional,
I do have the
authority to interpret and apply the federal statute and regulations. See Betsy
Chua, M.D,, DAB Civ. Rem.
C-139 (1990) and Hai Nhu Bui, DAB Civ. Rem. C-103 (1990), citing Jack W. Greene,
supra.
The prohibition against ex post facto laws applies to criminal or penal laws
which impose punishment that
is applied retroactively. In Betsy Chua M.D., supra, as in the instant case,
the petitioner objected to
application of the mandatory exclusion on ex post facto grounds, premised on
the assertion that Congress
intended the imposition of the five year mandatory minimum exclusion to be a
punishment. The purpose
of the exclusion law and the amendments thereto, however, is not to punish,
but to protect program
integrity by preventing untrustworthy providers from having ready access to
the Medicare and Medicaid
trust funds. See Chua, supra at 10, citing Orlando Ariz and Ariz Pharmacy Inc.,
DAB Civ. Rem. C-115
(1990). See also H.R. Rep. No. 158, 97th Cong., 1st Sess. Vol. III, 329, 344
(1981); S. Rep. No. 139, 97th
Cong., 1st Sess. 461-462, reprinted in 1981 U.S. Code Cong. & Admin. News
727-728; Preamble to the
Regulations at 48 Fed. Reg. 38827 to 38836 (August 26, 1983). Exclusion in this
instance is a civil, not a
penal, remedy, and is not subject to ex post facto considerations. As I held
in Chua, even if the amendment
were penal, however, Congress intended the mandatory minimum exclusion provision
to apply
prospectively from the date of the statute's enactment to all convictions occurring
on or after the effective
date of the 1987 amendment.
Petitioner acknowledges that he is cognizant of my earlier determination. However,
he has asked me to
review the entire Act, not just the provision contained in 42 U.S.C. 1320a-7A,
to determine whether the
five year exclusion is a civil or a penal provision.
Petitioner asserts that, when passing the 1987 amendments, Congress also passed
amendments relative to
criminal sanctions as contained in 42 U.S.C. 1320a-7B. Petitioner argues that
there are analogies between
the two, and that a comparison of the sanctions contained in the two sections
would establish that the
purpose of the exclusion law is punishment, and that imposition of such a punishment
on the basis of
activity occurring prior to the enactment of the statute is an unconstitutional
ex post facto application of the
law to him. P. Br. 1,2,3,4,5,6. I do not agree. Section 1320a-7B refers to recipients
of program funds, not
to providers. It does not pertain to this case where Petitioner is a provider
of, not a recipient of, goods and
services. The relationship between a provider and the Medicare and Medicaid
programs is a contractual
one, whereas the relationship between a recipient and the programs is one of
entitlement. A comparison
between the two is meaningless in the context of whether section 1128(a)(1)
and section 1128(c)(3)(B)
would be unconstitutional as applied to Petitioner.
Petitioner further argues that the statute is too broad-based and that Petitioner
is punished by being
indirectly precluded from participating in the program by working for another
pharmacy as a salaried
employee, even though he would have no responsibility for billing. P. Br. 3,
4. Counsel for the I.G.
denied during oral argument that Petitioner is precluded from working at another
pharmacy. The I.G.'s
counsel stated that: 1) Petitioner is only precluded from filling prescriptions
for Medicaid or Medicare
recipients; 2) no pharmacy in the Detroit area would be precluded from hiring
Petitioner, and other
pharmacists working with Petitioner would be allowed to fill prescriptions for
Medicaid and Medicare
recipients; and 3) the pharmacy employing Petitioner would only be precluded
from billing for
prescriptions Petitioner might fill for Medicare or Medicaid recipients.
Petitioner also argues that there is no correlation between the exclusion and
program protection, based on
his assumption that he would automatically be allowed reinstatement provided
he maintain his license to
practice pharmacy. Petitioner's argument here is without merit. At the end of
Petitioner's exclusion, he
will be eligible only to apply for reinstatement. See 42 C.F.R. 1001.130, 1001.132,
1002.230, 1002.232.
Congress enacted the five year minimum mandatory exclusion provision precisely
in order to ensure
program protection. Reinstatement to the Medicare and Medicaid programs is not
automatic. It is
determined, at least in part, by Petitioner's conduct during his exclusion.
Before reinstatement, the
programs will determine whether Petitioner's conduct during his exclusion shows
that he will provide
goods and services in a trustworthy manner.
Petitioner's final argument is that if, indeed, the exclusion provision was
enacted to protect the integrity of
the program, as opposed to punishment, the program would not be protected from
persons convicted prior
to the August 1987 date of the amendment, who are not subject to the minimum
mandatory provision of
the Act. However, while the amendments now mandate a five year exclusion in
these cases, the prior
statute certainly provided for a period of exclusion for these infractions.
As I have found that this is not a penal statute retroactively applied to Petitioner,
the issue of whether the
I.G. had the authority to exclude Petitioner under section 1128(a)(1) is a legal
issue. I have concluded that,
as a matter of law, Petitioner was properly excluded and that the length of
his exclusion is mandated by
law. There are no genuine issues of material fact which would require the submission
of additional
evidence, and there is no need for an evidentiary hearing in this case. Accordingly,
the I.G. is entitled to
summary disposition as a matter of law. See Charles W. Wheeler and Joan K. Todd,
DAB App. 1123 at 10
(1990), and Rule 56 F.R.C.P.
CONCLUSION
Based on the law and undisputed facts in the record of this case, I conclude
the I.G. properly excluded
Petitioner from the Medicare and Medicaid programs for the minimum mandatory
period of five years
under the provisions of section 1128(a)(1) and 1128(c)(3)(B) of the Act.
IT IS SO ORDERED.
Charles E. Stratton
Administrative Law Judge