SUBJECT:

Kathryn Clara Halladay,

Petitioner,

The Inspector General

DECISION

This case is before me on the Inspector General's (I.G.'s) motion for summary judgment. The parties have submitted briefs and exhibits in support of their positions and I have reviewed their pleadings carefully. Having done so, I find no material facts in dispute and conclude that the I.G.'s position is correct as a matter of law. Accordingly, I grant the I.G.'s motion for summary judgment and sustain the I.G.'s determination to exclude Petitioner, Kathryn Clara Halladay, from participating in Medicare, Medicaid, and all other federal health care programs for a period of 10 years.

By letter dated February 28, 2001, the I.G. of the United States Department of Health and Human Services notified Petitioner that she was to be excluded, for a period of 10 years, from participation in Medicare, Medicaid, and all other federal health programs pursuant to section 1128(a)(1) of the Social Security Act (Act) because Petitioner had been convicted of a criminal offense related to the delivery of an item or service under Title XVIII of the Act (the Medicare program). The basis for the I.G.'s action was Petitioner's conviction in United States District Court for the Eastern District of California of having violated 42 U.S.C. � 1320a-7b by making false statements involving a federal health care program.

The statute under which the I.G. proceeded, establishes a five-year minimum mandatory exclusion of persons or entities convicted of such violations but also provides that the I.G. may enlarge the term of exclusion for an additional period if certain aggravating factors are shown to be present. In this case, the I.G. asserts that the presence of three aggravating factors warrants five additional years to the five-year mandatory period of exclusion and thus has determined that Petitioner should be excluded from all federal health programs for 10 years.

By letter dated April 27, 2001, Petitioner timely sought review of the I.G.'s determination. The sufficiency of Petitioner's hearing request has not been challenged and no other jurisdictional issues have been raised or become apparent to me.

I held a prehearing conference in this case on June 19, 2001. After discussing the case with counsel, I determined that it might be subject to disposition in the context of summary judgment. Accordingly, I established a schedule by which the parties might submit motions, briefs, and documentary evidence in support of their positions. Although that original schedule has been modified somewhat since the conference, the period for filing pleadings has now closed. I admit I.G. Exhibits (Exs.) 1-5 into evidence, noting that I.G. Exs. 1 and 4 are identical to the documents included in Petitioner's hearing request as Attachments 1 and 2, respectively. Petitioner has tendered no additional proposed exhibits.

Because I believe that the I.G.'s Motion for Summary Judgment is supported by the settled facts and by well-established law, I grant the Motion, and thereby sustain the I.G.'s determination to exclude Petitioner from participation in all Medicare, Medicaid, and other federal health care programs for a period of 10 years.

ISSUES

The legal issues before me in this case are:

1. Whether Petitioner's conviction authorizes the I.G. to exclude Petitioner from Medicare, Medicaid, and all other federal health care programs pursuant to section 1128(a)(1) of the Act; and

2. Whether aggravating factors are present which operate to make the I.G.'s extension of the exclusion to 10 years reasonable.

CONTROLLING STATUTES AND REGULATIONS

Section 1128(a)(1) of the Act requires the exclusion from participation in Medicare, Medicaid, and all other federal health care programs of any individual or entity convicted of a criminal offense related to the delivery of an item or service under Title XVIII of the Act or under any State health care program. This exclusion is mandatory and must be imposed for a minimum of five years. Section 1128(c)(3)(B) of the Act. The Act defines "conviction" as including those circumstances "when a judgment of conviction has been entered against the individual or entity by a Federal, State, or local court." Section 1128(i)(1) of the Act. This definition is repeated at 42 C.F.R. � 1001.2.

The minimum mandatory five-year exclusion period is subject to enlargement: 42 C.F.R. � 1001.102 allows the I.G. to extend the five-year period if certain aggravating factors are demonstrated. If the I.G. proposes to rely on any of the specified aggravating factors to seek an enlargement of the exclusionary period, then the subject of the proposed exclusion is permitted to assert the presence of certain mitigating factors and thereby to seek to limit the exclusion to the five-year mandatory minimum. Those aggravating and mitigating factors are set out in detail at 42 C.F.R. � 1001.102(b)(1)-(9) and (c)(1)-(3). The aggravating factors relied on by the I.G. in this case are:

(1) the acts resulting in the conviction . . . resulted in financial loss to a government program of $1,500 or more;

(2) the sentence imposed by the court included incarceration; and

(3) the individual . . . has at any time been overpaid a total of $1,500 or more by Medicare, Medicaid, or any other Federal health care program as a result of intentional improper billings.

42 C.F.R. � 1001.102(b)(1), (5), and (7).

The I.G.'s reliance on these aggravating factors allows Petitioner to assert, if she chooses to do so, certain factors that might support mitigation of the extended exclusion. As I have noted above, those potentially mitigating factors are set out in detail at 42 C.F.R. � 1001.102(c)(1)-(3), but none of them have been asserted specifically by Petitioner in these proceedings. Instead, Petitioner takes the position that material factual questions surrounding the three cited aggravating factors remain unresolved and somewhat obliquely suggests that her mental health at the time of the offense may have been entitled to consideration as a mitigating factor pursuant to 42 C.F.R. � 1001.102(c)(2).

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I find and conclude as follows:

1. Kathryn Clara Halladay, Petitioner, has been convicted of making false statements involving a federal health care program, a criminal offense within the meaning of section 1128(a)(1) of the Act, in United States v. Halladay, CRF 99-5239 REC (E.D. Cal. 1999). I.G. Ex. 2.

2. A Judgment in a Criminal Case was filed in that cause on or about June 22, 2000, following the United States District Judge's pronouncement of sentence, at a sentencing hearing, held on or about June 19, 2000. I.G. Ex. 4; Finding 1.

3. On or about February 28, 2001, the I.G. notified Petitioner that she was to be excluded from participation in Medicare, Medicaid, and all other federal health care programs for a period of 10 years, pursuant to the authority section 1128(a)(1) of the Act. I.G. Ex. 1.

4. The I.G.'s action and notification relied on the presence of three aggravating factors, set out at 42 C.F.R. � 1001.102(b)(1), (5), and (7) respectively, to support the enlargement of the period of exclusion from five years to 10 years. I.G. Ex. 1.

5. Petitioner was convicted of a criminal offense relating to the delivery of an item or service under Title XVIII of the Act or under a State health care program, within the meaning of sections 1128(a)(1) and 1128(i) of the Act. I.G. Exs. 1-5; Findings 1-4.

6. By reason of her conviction, Petitioner was subject to, and the I.G. was authorized to impose, a period of exclusion of not less than five years. Act, sections 1128(a)(1) and 1128(c)(3)(B).

7. As part of her sentence in the criminal proceedings, Petitioner was ordered to pay restitution in the sum of $29,495.42, which sum represents the loss to the Medicare program during December 1995 directly caused by Petitioner's criminal conduct. I.G. Ex. 4.

8. Because this loss to the Medicare program was in excess of $1,500, the aggravating factor set out in 42 C.F.R. � 1001.102(b)(1) is present.

9. Petitioner was sentenced to reside and participate in a residential community corrections center, which sentence is defined as a sentence of "incarceration" by 42 C.F.R. � 1001.2. I.G. Ex. 4.

10.Because Petitioner was sentenced to a term of incarceration, the aggravating factor set out in 42 C.F.R. � 1001.102(b)(5) is present.

11.The restitution ordered in the sum of $29,495.42 represents the amount paid to Petitioner during the month of December 1995 by the Medicare program as the result of her intentional improper billings. I.G. Ex. 4.

12. Because the amount paid by the Medicare program to the Petitioner as the result of her intentional improper billings was in excess of $1,500, the aggravating factor set out in 42 C.F.R. � 1001.102(b)(7) is present. I.G. Ex. 4.

13. None of the mitigating factors set out in 42 C.F.R. � 1001.102(c)(1)-(3) are present.

14. The I.G.'s exclusion of Petitioner for a period of 10 years is supported by fact and by law and is reasonable as a matter of law. I.G. Exs. 1-5; Findings 1-13.

15.There are no remaining disputed issues of material fact and summary judgment is therefore appropriate in this matter.

DISCUSSION

As I have noted above, there are two issues before me in this case: first, whether the I.G. is authorized to exclude Petitioner from Medicare, Medicaid, and all other federal health care programs because of her conviction; and second, whether the aggravating factors defined by regulation are present and support the I.G.'s enlargement of the period of Petitioner's exclusion. As to the first issue, there is no serious debate.

The I.G.'s exhibits demonstrate that Petitioner, acting with the advice of counsel, executed a Memorandum of Plea Agreement on or about August 16, 1999. By that Memorandum, Petitioner agreed to plead guilty to a single-count Information charging her with violation of 42 U.S.C. � 1320a-7b and specifically acknowledged that "she caused bills to be submitted to Golden Cross (Health Care of California) for occupational therapy services not rendered, and she fabricated documents to support the false billings. The false billings for services not rendered in September 1995 resulted in a loss to Medicare for the month of December 1995 in the amount of $29,495.42." I.G. Ex. 2 at 4. She further acknowledged that an essential element of the offense to which she agreed to plead guilty was that "the false statements and representations were of a material fact for use in determining rights to a benefit or payment under the federal Medicare program." I.G. Ex. 2 at 3. The Memorandum was filed on or about August 18, 1999, in United States v. Halladay, CRF 99-5239 REC (E.D. Cal. 1999).

Although the record before me does not establish the date on which the Information was filed or the date of Petitioner's guilty plea, it does show that she appeared for sentencing on June 19, 2000. An extended colloquy developed at the hearing among the Assistant United States Attorney, Petitioner's two attorneys, a probation officer, and the sentencing United States District Judge, over sentencing alternatives and the amount of actual loss to the federal program. I.G. Ex. 5. The amount-of-loss questions were directly tied to the application of federal sentencing guidelines. The higher figure, set at over $232,000 by one estimate, would have invoked a higher potential for imprisonment; the lower figure of $29,495.42 was the specific amount admitted by Petitioner and insisted upon by her attorneys both before and at the sentencing hearing. I.G. Exs. 3, 5. The sentence announced orally at the end of this colloquy was set out in a standard-form Judgment in a Criminal Case filed June 22, 1999. In that Judgment, Kathryn Clara Halladay was sentenced to a 36-month term of probation and was ordered to pay restitution to the Medicare program in the agreed-upon sum of $29,495.42. She was required to pay a $25.00 Special Assessment. As a special condition of supervision while on probation, she was required to "reside and participate in a residential community corrections center . . . for a period of six months." I.G. Ex. 4 at 3; I.G. Ex. 5 at 22.

Petitioner has not challenged the sufficiency of her conviction to support the minimum mandatory five-year exclusion required by section 1128(a)(1) of the Act. The record establishes, in any case and without contradiction, that Petitioner was convicted of Medicare-related fraud in relation to the delivery of an item or service under the Medicare program. Thus, implicitly at least, there is no challenge to the I.G.'s imposition of a five-year period of exclusion under the authority conveyed in section 1128(c)(3)(B) of the Act and 42 C.F.R. � 1001.102(a).

It is the second issue that requires detailed examination because Petitioner asserts that there remain unresolved and material issues of fact surrounding the allegedly aggravating factors relied on by the I.G. for the enlargement of the period of exclusion to 10 years. The facts that Petitioner characterizes as unresolved and material are: (1) the amount of monetary loss to the Medicare program; (2) the nature of that part of her sentence which required Petitioner to reside for six months in a community corrections center; (3) whether Petitioner actually realized a profit from her fraudulent activities; and (4) whether Petitioner's culpability in the scheme was reduced by a "mental, emotional, or physical condition" of which the I.G. should have been aware and to which the I.G. should have given explicit and favorable consideration.

It will be recalled that the language of the regulation that defines the first aggravating factor is neither subtle nor complex: 42 C.F.R. � 1001.102(b)(1) allows the I.G. to rely on "loss to a government program or to one or more entities of $1,500 or more. (The entire amount of financial loss to such programs or entities, including any amounts resulting from similar acts not adjudicated, will be considered regardless of whether full or partial restitution has been made)." Petitioner's argument over the amount of loss proven here by the I.G. seems to ignore the proposition to which all parties agreed in the criminal proceedings, and that is that her fraudulent billings resulted in a loss to the program of at least $29,495.42. Although losses in excess of $232,000 were mentioned as the global scope of the Petitioner's scheme as it operated over approximately eight months, and although this point generated some confusion at the sentencing hearing because of its potential for invoking more severe sentencing guidelines, losses in that amount were never proven, nor were they reflected in the court-ordered restitution. The larger sum is simply not before me, and it has no reason to be. The sum of $29,495.42 was acknowledged by the parties as the amount of loss during one month of the scheme's operation, was insisted upon by Petitioner as the correct amount at her sentencing and was accepted by the sentencing United States District Judge as the correct amount. The I.G.'s proof on this point goes well beyond the prima facie reliance on the amount of restitution as a measure of loss to a program approved in Thomas P. Whitfield, DAB CR539 (1998). It establishes the amount at $29,495.42 without contradiction of any sort whatsoever, and establishes it at a level well in excess of the $1,500 threshold of material dispute. The possibility that Petitioner's scheme may have involved false claims totaling much more may be interesting, and may remain unresolved on the record before me, but it is not material to my determination that a definite loss amount has been established, and that the amount established supports the I.G.'s invoking it as an aggravating factor.

Nor is there merit in Petitioner's assertion that there remains a disputed issue of material fact in connection with the nature of her sentence to "reside and participate in a community corrections center." The terms of her sentence requiring that she do so are explicit and unchallenged. I.G. Ex. 4 at 3; I.G. Ex. 5 at 22. Such a sentence is defined as "incarceration" by the terms of 42 C.F.R. � 1001.2. There is no suggestion in this regulation that it contemplates a distinction between confinement imposed directly in the absence of probation and confinement imposed as a condition to a term of probation, and I am unaware of any authority to support the drawing of such a distinction. Petitioner has offered no support for her position beyond the mere assertion of it, and in any case the question is a legal one, not one arising from a disputed issue of material fact. Here, it is quite undisputed that Petitioner was sentenced to a six-months' term of confinement in a community corrections center. That undisputed factual nexus raises the purely legal question of whether such a sentence is the legal equivalent of "incarceration" and 42 C.F.R. � 1001.2 resolves that legal question in the affirmative.

The precise language of Petitioner's next assertion deserves examination because it relies on a term neither recognized nor contemplated by the controlling regulation, in this instance 42 C.F.R. � 1001.102(b)(7). At page 3 of Petitioner's Opposition to I.G.'s Brief in Support of Motion for Summary Disposition, Petitioner argues: "[u]nfortunately for the I.G. not even the United States District Court judge found that Petitioner has profited even a penny. The I.G. offers nothing to substantiate its claim and has failed to prove that it properly weighed the aggravating factors set forth at 42 C.F.R. � 1001.102(b)(7) against Petitioner. Therefore, the I.G. has failed to clearly (italics in original) establish that there is no genuine issue as to any material fact, and its Motion must be denied."

In sum, Petitioner asserts that the I.G. has failed to show that she " profited even a penny," and implicitly argues that such a showing is material to my decision. Significantly, she does not deny, and did not deny in United States District Court, being paid the amount of $29,495.42. The regulation concerning aggravating factors makes no reference to "profit," gross or net, and does not insist that illegal receipts from intentional and improper billings to Medicare exceed the costs of such fraudulent conduct. The regulation requires only a showing that a total overpayment of $1,500 or more has been paid at any time to an individual or entity as the result of intentional improper billings. Not all criminal enterprises are as profitable or successful as their perpetrators may have intended, and the regulation does not require that they should be before they can support an extended exclusion. Receipt of payment for intentionally false billings is the gravamen of the Regulation, and it has been demonstrated here beyond the point of serious or material dispute.

Although it is not directly in point, the Departmental Appeals Board's decision in Paul W. Williams, Jr., DAB 1785 (2001) is helpful here: the Board had little difficulty in turning back the suggestion that a Petitioner who repaid Medicare a greater sum than he had been proven to have fraudulently obtained from it was not, therefore, subject to the "$1,500.00 program-loss" provisions of 42 C.F.R. � 1001.102(b)(1). The Board remarked that it could find "no merit to (the) suggestion that . . . the magnitude of the theft becomes irrelevant if the government succeeds in obtaining recovery after discovering its loss," and expressed its understanding of the regulation's philosophy thus: "[t]he aggravating factor presupposes that a person who has stolen a significant amount is likely to be less trustworthy than a person who has stolen a small amount." In order to accept Petitioner's argument here, I would necessarily have to believe that a person who fails to turn a profit at crime is more trustworthy than a person who succeeds in such a criminal enterprise. I am simply not prepared to read the regulation in that fashion. Just as in Williams, the regulation is intended as a guide to assessing truthfulness in billing matters and criminal willingness to abuse the billing system and it measures those characteristics by the amount of money wrongfully obtained through a scheme of intentionally false billings, not by a wrongdoer's skill in managing such a scheme. Petitioner's scheme may not have been profitable, but whether it was or not is immaterial.

Petitioner's final point is raised in the context of one of the mitigating factors recognized by the regulations but it is advanced indirectly and in a misapprehension of her own obligation to proffer evidence. She argues that the I.G. was obliged to consider her mental, emotional, or physical state during the scheme and to treat that state as a mitigating factor pursuant to 42 C.F.R. � 1001.102(c)(2). Again, the specific language in which Petitioner couches her position is revealing: " . . . based on the Judgment (I.G. Ex. 4), the I.G., at a minimum, (italics in original) should have conducted an investigation as to the importance of . . . Petitioner's mental health treatment and whether the Court was of the opinion that Petitioner's culpability was reduced based on her emotional condition . . . ." That is, Petitioner asserts that it was the I.G.'s obligation to develop evidence of the sentencing District Judge's assessment of Petitioner's mental health at relevant times.

The first flaw in this position is that the I.G. is under no obligation to present evidence suggesting the presence of any mitigating factors recognized by the regulations. The Board's view on that point is well-known, having been most clearly articulated in Barry D. Garfinkel, DAB No. 1572 (1996): "[t]he ALJ properly stated that the Petitioner had the burden of proving any mitigating factor by a preponderance of the evidence, since the mitigating factor is in the nature of an affirmative defense." See also Andrew H. Lewis, DAB CR625 (1999); James H. Holmes, DAB CR270 (1993). Simply put, the Board's settled rule means that if "the court determined" that Petitioner's culpability had been reduced by reason of mental, emotional, or physical conditions, then it was up to the Petitioner, and to no other party, to produce evidence here that such a determination had been made. Insofar as Petitioner argues that the obligation lay elsewhere, I must reject that argument.

But Petitioner's oblique approach to the mitigation issue attempts to do more than simply shift the burden of proof, because she argues that there is, in fact, evidence of a judicial finding sufficient to invoke 42 C.F.R. � 1001.102(c)(2). This evidence consists exclusively of the District Judge's inclusion in both his oral pronouncement of sentence (I.G. Ex. 5 at 22) and the Judgment filed three days later (I.G. Ex. 4 at 3) of a special condition of probation requiring that "[a]s directed by the probation officer, the defendant shall participate in a program of mental health treatment, which may include the taking of prescribed psychotropic medication."

It will be observed that this language is conditional on the direction of the probation officer, and contains no direct mandatory provision requiring that Petitioner receive any therapy or treatment of any kind. It will also be noted that the proviso contains no reference, explicit or implicit, to the actual existence of an observed or claimed "mental, emotional, or physical condition," much less one existing "before or during"execution of Petitioner's scheme to defraud. There is no effort whatsoever in the proviso to link any such condition, at any relevant time, to a reduction in Petitioner's culpability. And most significantly, the remarks of the sentencing District Judge as the sentencing hearing came to its close belie any possible suggestion that he might believe the Petitioner to have been in a state of diminished responsibility at the time of her crime. I.G. Ex. 5 at 23, 24.

The state of the record is simply not sufficient to support the inference Petitioner would have me draw, even if I were free to draw inferences in the absence of an explicit finding in the criminal proceedings, a proposition very much in doubt. There was no finding of reduced culpability, and no judicial determination that any "mental, emotional, or physical condition" existed at all. The mitigation permitted by 42 C.F.R. � 1001.102(c)(2) requires far more than Petitioner has been able to hint at. It requires an explicit determination that one or more of the enumerated conditions actually existed at a relevant time, and actually operated to diminish Petitioner's culpability. Under 42 C.F.R. � 1001.102(c)(2), the criminal proceedings must show that the criminal court determined that a mental, emotional or physical condition reduced culpability for the crime before mitigation is found." Frank R. Pennington, DAB No. 1786 (2001). Since there is no such explicit determination in the criminal record, Petitioner's argument in favor of mitigation fails.

CONCLUSION

For the reasons set forth above, I grant the I.G.'s motion for summary judgment and sustain the I.G.'s exclusion of Petitioner from participation in Medicare, Medicaid, and all other federal health care programs for a period of 10 years, pursuant to section 1128(a)(1) of the Act.

Richard J. Smith

Administrative Law Judge