Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Falah R. Garmo, R.Ph.,
Petitioner,
- v. -
The Inspector General.
DATE: December 20, 1990
Docket No. C-222
DECISION
Petitioner was notified by the Inspector General (I.G.)
in a letter dated March 19, 1990 that he would be
excluded from participation in the Medicare program and
any federally-assisted State health care program (such as
Medicaid), as defined in section 1128(h) of the Social
Security Act (Act), for a period of five years. 1/ The
I.G. further advised Petitioner that his exclusion was
due to his conviction in the United States District Court
for the Eastern District of Michigan, Southern Division,
of a criminal offense related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance. Petitioner was informed that
exclusions from Medicare and Medicaid programs after such
a conviction are authorized by section 1128(b)(3) of the
Act.
Petitioner timely requested a hearing before an
Administrative Law Judge (ALJ) to contest the
determination by the I.G. to exclude him from Medicare
and Medicaid for five years. The parties agreed to have
this case decided on the basis of submitted exhibits, in
lieu of an in-person hearing. Based on the evidence in
the record and the applicable law, I conclude that an
exclusion of five years is reasonable and appropriate.
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section 1128 of the Act is codified at 42 U.S.C. 1320a-7
(West U.S.C.A., 1989 Supp.). Section 1128(a) 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) provides for a five-year minimum period of
exclusion for those excluded under section 1128(a)(1).
Section 1128(b) of the Act provides for permissive
exclusions for convictions, infractions, or undesirable
behavior, such as convictions relating to fraud, license
revocation, failure to supply payment information, or, as
in this case, a criminal offense related to the unlawful
manufacture, distribution, prescription, or dispensing of
a controlled substance under section 1128(b)(3).
II. The Federal Regulations.
The governing federal 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.
ADMISSIONS
During the telephone prehearing conference on June 14,
1990, Petitioner admitted that he was convicted of an
offense relating to a controlled substance.
ISSUES
The issues in the case are:
1. Whether Petitioner's exclusion is in violation of
the ex post facto clause of the United States
Constitution.
2. Whether the length of the exclusion is reasonable
and appropriate.
FINDINGS OF FACT AND CONCLUSIONS OF LAW 2/
1. At all times relevant to this case, Petitioner was a
registered pharmacist who operated a pharmacy in the
State of Michigan. P. Br. 1. 3/
2. On January 30, 1989, in the United States District
Court for the Eastern District of Michigan, Southern
Division, Petitioner pled guilty to count six of a seven-
count indictment. The remaining charges against
Petitioner were dismissed. I.G. Ex. 1.
3. Count six charged that on April 22, 1986, while
acting as a pharmacist, Petitioner did knowingly,
intentionally, and unlawfully distribute 100 dosages of
Phenaphen #2 with codeine and 100 dosages of Ascriptin #3
with codeine, without legitimate prescriptions or other
legitimate authorizations. These drugs are both Schedule
III controlled substances. I.G. Ex. 2/3.
4. On April 6, 1989, Petitioner was sentenced to a term
of one year and one day imprisonment, followed by a two-
year special parole; fined $30,000.00; and charged a
special assessment fee of $50.00. I.G. Ex. 3.
5. On June 29, 1989, the Attorney General of the State
of Michigan filed an eleven-count administrative
complaint with the State Department of Licensing and
Regulation Board of Pharmacy (Board), alleging that
Petitioner was convicted of a criminal offense of
knowingly, intentionally, and unlawfully distributing
controlled substances, a violation of the Public Health
Code. I.G. Ex. 4.
6. The administrative complaint stated that the Public
Health Code provided that a license to manufacture,
distribute, prescribe, or dispense a controlled substance
should be denied or revoked by the administrator if the
licensee has been convicted of a felony under a state or
federal law related to a controlled substance. I.G. Ex.
4/2.
7. The administrative complaint proposed that the Board
revoke Petitioner's pharmacist and controlled substance
licenses for a year for each of the eleven counts and
fine him $5,000.00 on each of the first seven counts.
I.G. Ex. 4/6-7.
8. On September 25, 1989, Petitioner acknowledged in a
signed Stipulation (which is part of a document entitled
"Consent Order and Stipulation") that the allegations
contained in the administrative complaint were true and
that he had been convicted of a violation of the Public
Health Code. I.G. Ex. 5/4.
9. On October 18, 1989, the Board issued a Consent
Order (which is part of a document entitled "Consent
Order and Stipulation") and ordered (1) suspension of
Petitioner's pharmacist's license for a minimum of three
years, (2) revocation of Petitioner's controlled
substance license, (3) a fine of $5,000.00, and (4)
dismissal of seven counts in the administrative
complaint, leaving four counts outstanding. I.G. Ex. 5.
10. On November 2, 1989, the I.G. advised Petitioner
that he was considering being excluded from participating
in the Medicare and Medicaid programs as a result of his
conviction of a criminal offense, pursuant to section
1128(b)(3) of the Act. The I.G. informed Petitioner that
he could provide mitigating factors before a final
determination on the exclusion issue was made. I.G. Ex.
6.
11. On November 10, 1989, Petitioner wrote a letter to
the I.G. alleging mitigating factors and claiming that
". . . the circumstances surrounding the allegations and
the plea-based conviction occurred in a momentary place
in time (April of 1986), and did not occur prior or
subsequent thereto. [Petitioner] was a practicing
pharmacist for eight years with no other hint of
inappropriate, unethical or illegal conduct, before or
after April, 1986. The isolated circumstances which led
to the plea-based conviction reflect an aberration in
[Petitioner's] character, not a permanent flaw." I.G.
Ex. 7.
12. Petitioner was convicted of a criminal offense
relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance,
within the meaning of section 1128(b)(3) of the Act.
FFCL 2.
13. Pursuant to section 1128(b)(3) of the Act, the
Secretary of the Department of Health and Human Services
(Secretary) has authority to impose and direct an
exclusion against Petitioner from participating in
Medicare and Medicaid. Social Security Act, section
1128(b)(3).
14. The Secretary delegated to the I.G. the duty to
impose and direct exclusions pursuant to section 1128 of
the Act. 48 Fed. Reg. 21662 (May 13, 1983).
15. On March 19, 1990, the I.G. advised Petitioner that
he was excluding him from participating in the Medicare
and Medicaid programs for five years, pursuant to section
1128(b)(3) of the Act. I.G. Ex. 8.
16. A purpose of section 1128(b)(3) of the Act is to
protect beneficiaries and program funds by excluding
individuals or entities who by conduct have demonstrated
a risk that they may engage in fraud, substandard
services, abuse, or unsafe practices in connection with
controlled substances until such time as those excluded
can demonstrate that such risk no longer exists. S. Rep.
No. 109, 100th Cong. 1st Sess. 2, reprinted in 1987 U.S.
Code Cong. & Admin. News 682.
17. There is no length or period of exclusion mandated
by statute for section 1128(b)(3) exclusions. The
exclusion provisions of section 1128 of the Act do not
establish a minimum nor maximum period of exclusion to be
imposed and directed in cases where the I.G. has
discretion to impose and direct exclusions. Social
Security Act, section 1128(b)(1)-(14).
18. Petitioner was convicted of a serious criminal
offense, resulting in his incarceration. FFCL 4.
19. The conduct engaged in by Petitioner endangered the
health and safety of the individuals who obtained
Phenaphen #2 with codeine and Ascriptin #3 with codeine.
FFCL 3.
20. The I.G.'s determination that a relatively lengthy
exclusion is justified in this case in order to deter
other providers from engaging in unlawful conduct is
reasonable. I.G. Br. 16; FFCL 15-16; see 42 C.F.R.
1001.125(b)(1)-(7).
21. Evidence offered by Petitioner's psychologist,
indicating that at the time of the incident Petitioner
had been suffering from situational depression and that
Petitioner's conduct in April 1986 was entirely atypical,
does not establish that the I.G.'s determination
concerning the appropriate length of exclusion to impose
on Petitioner is unreasonable. P. Ex. A.
22. The fact that the sentence resulting from the
criminal conviction included incarceration is an
aggravating factor considered in determining an
appropriate length of exclusion. FFCL 4.
23. That Petitioner's pharmacist's license was suspended
for three years, and his controlled substances license
was revoked, are aggravating factors considered in
determining an appropriate length of exclusion. FFCL 9.
24. Petitioner has not established that, in light of
mitigating factors, the I.G.'s determination concerning
the appropriate length of exclusion to impose on
Petitioner is unreasonable. FFCL 11, 21-23.
25. The I.G.'s determination, that given Petitioner's
conduct he cannot be trusted as a Medicare or Medicaid
provider for five years, is reasonable. FFCL 18-19; FFCL
See 42 C.F.R. 1001.125(b)(1)-(7).
ANALYSIS
I. Petitioner's exclusion does not violate the ex post
facto clause of the United States Constitution.
The record demonstrates that the conduct for which
Petitioner was "convicted" occurred in 1986, and that the
final disposition of the proceedings resulting in the
criminal conviction did not occur until April 1989. On
August 18, 1987, during the pendency of Petitioner's
criminal proceedings, Section 1128 of the Act was amended
by the Medicare and Medicaid Patient and Program
Protection Act of 1987, Public Law 100-93, 101 Stat. 680.
The 1987 amendments extended the reach of the law to
entities, added new categories of mandatory exclusions,
specified a minimum five-year exclusion for cases in
which mandatory exclusions were imposed, and enumerated
circumstances in which the Secretary had discretion to
impose exclusions. Social Security Act, sections
1128(a); 1128(b)(1)-(14).
Petitioner argues that the Act is unconstitutional as
applied to him. Petitioner argues that application of
the Act to this case amounts to an ex post facto
violation of the Constitution, as the sanctions imposed
are penal in nature and based on purported criminal
conduct occurring before the date of the law's enactment.
I.G. Ex. 7.
The I.G. argues that: (1) this tribunal is without
jurisdiction to consider constitutional issues (I.G. Br.
8); (2) the constitutional prohibition against ex post
facto laws applies only to criminal or penal laws which
impose a penalty and that the exclusion law is remedial
in nature and its purpose is to protect the Medicare and
Medicaid program from financial loss (I.G. Br. 9); (3)
if I determine that the statute constituted an ex post
facto application of the law, I must then decide if the
statute deprives Petitioner of his constitutional rights,
since Petitioner's conviction took place after the
enactment of the Act (I.G. Br. 12). The I.G. contends
that Petitioner has stated that the acts for which he was
convicted occurred prior to the enactment of the Act.
The I.G. maintains that the statute places emphasis on
the conviction for the acts rather than the acts
themselves. I.G. Br. 12.
I have carefully considered the contentions of the
parties and the relevant law. The scope of my review in
these cases is stated in 42 C.F.R. 1001.128(a). This
section limits an appeal in this type of case to the
issues of (1) whether a petitioner was in fact convicted;
(2) whether the conviction was related to his or her
participation in the delivery of medical care or services
under the Medicare, Medicaid, or social services program;
and (3) whether the length of the suspension (exclusion)
is reasonable. These issues relate to the propriety of
the imposition of the exclusion in a particular case and
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), aff'd
DAB App. 1204 (1990); Hai Nhu Bui, DAB Civ. Rem. C-103
(1990), (citing Jack W. Greene, DAB Civ. Rem. C-56, aff'd
DAB App. 1078 (1989), aff'd Greene v. Sullivan, 731 F.
Supp. 835 (E.D. Tenn. 1990)).
The prohibition against ex post facto laws applies to
criminal or penal laws which impose punishment that is
applied retroactively. 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 programs. See Francis Shaenboen,
R.Ph., DAB Civ. Rem. C-221 at p. 7 (1990); 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 727-738; Preamble to the
Regulations at 48 Fed. Reg. 38827 to 38836 (August 26,
1983). Contrary to Petitioner's assertion, the exclusion
in this instance is a civil remedy, not a penal remedy,
and is not subject to ex post facto considerations. Even
if the amendment were penal, however, Congress intended
that the mandatory and permissive exclusion provisions
apply prospectively from the date of the statute's
enactment to all convictions occurring on or after the
effective date of the 1987 amendment. See Shaenboen and
Chua, supra. See also Donald O. Bernstein, D.C., DAB
Civ. Rem. C-40 (1989), aff'd sub nom. Bernstein v.
Sullivan, 914 F.2d 1395 (10th Cir. 1990).
It is unnecessary for me to decide whether the exclusion
law may be applied retroactively in particular cases,
because it is evident that it was not retroactively
applied in this case. In this case, Petitioner pled
guilty to, and was convicted of, a criminal offense
related to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance
under section 1128(b)(3). Petitioner's conviction
occurred on April 6, 1989, nearly a year and a half after
Congress amended section 1128. The I.G.'s authority to
impose and direct exclusions against Petitioner arises
from his conviction for a criminal offense. Therefore,
the act which gave the I.G. grounds to exclude Petitioner
occurred after the date that Congress enacted statutory
revisions.
II. A five-year exclusion is appropriate and reasonable
in this case.
Since Petitioner has admitted, and I have concluded, that
Petitioner was "convicted" of a criminal offense for
which the I.G. may impose an exclusion, pursuant to
section 1128(b)(3) of the Act, the remaining issue is
whether the five-year exclusion is reasonable and
appropriate. For the reasons set out below, I conclude
that a five-year exclusion is reasonable.
As I stated in Victor M. Janze, M.D., DAB Civ. Rem. C-212
at p. 8 (1990), (citing Charles J. Burks, M.D., DAB Civ.
Rem. C-111 (1989)), in making a determination regarding
the length of the exclusion, it is helpful to look at the
purpose behind the exclusion law. Congress enacted
section 1128 of the Act to protect the Medicare and
Medicaid programs from fraud and abuse and to protect the
beneficiaries and recipients of those programs from
incompetent practitioners and inappropriate or inadequate
care. S. Rep. No. 109, 100th Cong., 1st Sess. 1;
reprinted in 1987 U.S. Code Cong. & Admin. News 682, 708.
The key term to keep in mind is "protection," the
prevention of harm. See Webster's II New Riverside
University Dictionary 946 (1984). As a means of
protecting the Medicare and Medicaid programs and their
beneficiaries and recipients, Congress chose to mandate,
and in other instances to permit, the exclusion of
individuals and entities. Through the exclusion law,
individuals or entities who have caused harm, or may
cause harm, to the program or its beneficiaries or
recipients are no longer permitted to receive
reimbursement for items or services which they provided
to Medicare beneficiaries or Medicaid recipients. Thus,
individuals are removed from a position which provides a
potential avenue for causing harm to the programs. An
exclusion also serves as a deterrent to other individuals
and entities against deviant behavior which may result in
harm to the Medicare and Medicaid programs or their
beneficiaries and recipients.
No statutory minimum mandatory exclusion period exists
for section 1128(b)(3) exclusions. The I.G. asserts that
the Secretary has published proposed regulations which
would make five years a starting point for determining
the exclusion period of permissive exclusions for
convictions relating to fraud, obstruction of an
investigation, and controlled substances. I.G. Br. 5-6.
See also Fed. Reg. 12204, 12207, 12217, and 12208.
Further, the I.G. claims that under these proposed
regulations, the base period of exclusion might be
increased or decreased in a specific case depending upon
aggravating and/or mitigating factors. I.G. Br. 6.
These proposed regulations, however, have not been
finally adopted. It would not be appropriate for me to
assume that they will be adopted in their proposed form.
Moreover, it is not clear that, if and when these
proposed regulations are adopted, they would apply
retroactively to exclusions imposed prior to the date of
their adoption. I must make an independent assessment of
the reasonableness of the exclusion, taking into
consideration all of the factors discussed above.
The determination of when an individual should be trusted
and allowed to reapply for participation as a provider in
the Medicare and Medicaid programs is a difficult issue
and is one which is subject to much discretion; there is
no mechanical formula. The federal regulations provide
some guidance which may be followed in making this
determination. The regulations provide that the length
of Petitioner's exclusion may be determined by reviewing
(1) the number and nature of the offenses; (2) the nature
and extent of any adverse impact the violations have had
on beneficiaries; (3) the amount of the damages incurred
by the Medicare, Medicaid, and social services programs;
(4) the existence of mitigating circumstances; (5) the
length of sentence imposed by the court; (6) any other
facts bearing on the nature and seriousness of the
violations; and (7) the previous sanction record of
Petitioner. See 42 C.F.R. 1001.125(b). These
regulations were adopted by the Secretary (and his
delegate, the I.G.) to implement the Act prior to the
1987 Amendment. The regulations specifically apply only
to exclusions for "program related" offenses. To the
extent that they have not been repealed or modified,
however, they embody the Secretary's intent that they
continue to apply, at least as broad guidelines, to the
cases in which discretionary exclusions are imposed. See
Janze, supra at 9; Leonard N. Schwartz, R.Ph., DAB Civ.
Rem. C-62 at p. 12 (1989).
By not mandating that exclusions from participation in
the Medicare and Medicaid program be permanent, Congress
has allowed the I.G. the opportunity to give individuals
a "second chance." The placement of a limit on the
period of exclusion allows an excluded individual or
entity the opportunity to demonstrate that he or she can
and should be trusted to participate in the Medicare and
Medicaid programs as a provider of items and services to
beneficiaries and recipients.
There are substantial reasons for a lengthy exclusion
in this case, including aggravating factors. When
Petitioner was authorized to prescribe controlled
substances, he was put in a public position of great
trust. Petitioner abused that trust when he prescribed
100 dosages of Phenaphen #2 with codeine and 100 dosages
of Ascriptin #3 with codeine with potentially serious
consequences for anyone who might have received those
pills. I.G. Ex. 2. On that occasion, Petitioner
received $250.00 cash after giving a customer, an
undercover agent for the Federal Bureau of Investigation
(FBI), a bag containing the above drugs. I.G. Ex. 9.
The record contains written investigative reports of the
agent and the nature of the drug transactions he made
with Petitioner. I.G. 9.
Regulations do not define what circumstances may be
considered as mitigating. See 42 C.F.R. 1001.114(b)(4).
However, given Congressional intent to exclude
untrustworthy individuals from participation in Medicare
and Medicaid programs, it is reasonable to conclude that
mitigating circumstances should constitute those
circumstances which demonstrate an individual or entity
to be trustworthy.
Petitioner offers the following circumstances surrounding
his conviction as mitigating factors: (1) " . . .the
conduct which gave rise to his criminal charges
constituted a single aberration from an otherwise
unblemished record and life" (P. Br. 4); (2) in March
1986, he purchased a shipment of pharmaceuticals from a
failed pharmacy; it was a bad investment and he suffered
a financial loss when he discovered that the inventory
was dated and contained primarily obscure products
(P. Br. 1-2); (3) one of his regular customers,an
undercover FBI agent) persisted in his attempt to
purchase medication from Petitioner without a
prescription and was eventually successful (P. Br. 1);
and (4) his mental health during the period he committed
these criminal offenses was fragile and his psychologist
submitted findings from an examination suggesting that
his behavior was " . . . a typical and situationally
specific" (P. Ex. A)
The fact that Petitioner did not have a prior criminal
record is essentially neutral, neither adding to nor
detracting from the seriousness of his unlawful
transactions in controlled substances. The fact that
he succumbed to stress and unlawfully sold controlled
substances is an aggravating, not a mitigating, factor.
See Schwartz, supra.
None of the circumstances asserted to be mitigating by
Petitioner derogate from the conclusion that, in light of
the offenses he committed, he is an individual who should
not be trusted to administer Medicare or Medicaid funds.
The circumstances cited by Petitioner essentially
address elements of his case which show that he is a
relatively sympathetic individual. While these factors
certainly should have some bearing on the extent to which
Petitioner is punished for his crimes, they have little
to do with the question of whether Petitioner can now or
in the near future be trusted to dispense controlled
substances to program beneficiaries.
Petitioner contends that, under the circumstances of his
case, it is appropriate that no exclusion be imposed and,
in the alternative, if an exclusion is imposed, it should
be limited to two years. P. A. 1. He also argues that if
an exclusion is imposed it should begin to run from the
date of the conviction. P. Br. 12.
In the instant case, a lengthy period of exclusion is
necessary in order to protect the Medicare and Medicaid
programs and to give Petitioner the time to show that he
can again be trusted to provide items and services to
program beneficiaries and recipients. The ALJ has no
power to change the beginning date of the exclusion. See
Samuel W. Chang, M.D., DAB App. 1198 at p. 9. Further,
the District Court deemed Petitioner's conduct so grave
that it fined him $30,000.00, incarcerated him for one
year and a day, and then felt it had to monitor him
through probation for another two years. FFCL 4.
Further, Michigan suspended his controlled substance
license for three years, revoked Petitioner's pharmacist
license, and fined Petitioner $5,000.00. FFCL 9.
CONCLUSION
Based on the evidence in this case and the law, I
conclude that the I.G.'s determination to exclude
Petitioner from participation in the Medicare program,
and to direct that Petitioner be excluded from
participation in State health care programs, for five
years, is reasonable and appropriate. Therefore, I am
entering a decision in favor of the I.G. in this case.
Charles E. Stratton
Administrative Law Judge
* * * Footnotes * * *
1. "State health care program" is defined by
section 1128(h) of the Social Security Act to cover three
types of federally-assisted programs, including State
plans approved under Title XIX (Medicaid) of the Act. I
use the term "Medicaid" hereafter to represent all State
health care programs from which Petitioner was excluded.
2. Some of my statements in the sections
preceding these formal findings and conclusions are also
findings of fact and conclusions of law. To the extent
that they are not repeated here, they were not in
controversy.
3. Petitioner's Answer P. An. (page)
to I.G.'s Brief
Petitioner's Brief P. Br. (page)
Petitioner's Exhibits P. Ex. (letter)
I.G.'s Brief I.G. Br. (page)
I.G.'s Exhibits I.G. Ex. (number)/(page)
Findings of Fact and FFCL (number)
Conclusions of Law