SUBJECT:

John Roberti, Jr., and Suzanne Roberti,

Petitioner,

The Inspector General

DECISION

I sustain the Inspector General's (I.G.) determination to exclude Petitioners, John Roberti, Jr. and Suzanne Roberti, from participation in Medicare, Medicaid, and other federal health care programs for an indefinite period pursuant to section 1128(b)(5) of the Social Security Act (Act).

I. Background

By letters dated August 31, 2001, the I.G. notified Petitioners that they were being excluded, pursuant to section 1128(b)(5) of the Act, from participation in Medicare, Medicaid, and other federally funded health care programs because they had been "excluded, suspended, or otherwise sanctioned" by the State of Oregon Department of Human Resources Office of Medical Assistance Programs (State Agency) from participation in the State health care program (Medicaid) for reasons bearing on professional competence, professional performance, or financial integrity. I.G. Exs. 1, 2. Petitioners requested hearings and their cases were assigned to me for decision.

I held a prehearing conference by telephone at which the parties agreed that these related cases -- C-02-230 and C-02-231 -- should be consolidated. The parties also agreed that their cases could be heard and decided based on written submissions. See Scheduling Order dated February 21, 2002. The parties subsequently submitted briefs (I.G. Br., P. Br., and I.G. Reply), accompanied by documentary evidence. The I.G. filed seven exhibits (I.G. Exs. 1-7) as part of her submission. Petitioners filed three exhibits (P. Exs. 1-3). In the absence of objection, I receive into evidence I.G. Exs. 1-7 and P. Exs. 1-3.

Petitioners owned and operated a company, named "HealthTek," that sold durable medical equipment, pharmacy, and other consumable medical supplies. I.G. Ex. 5, at 1. Petitioner John Roberti served as president and Petitioner Suzanne Roberti served as vice-president and secretary of the closely-held corporation. Id.; See also P. Br. at 3-4. In a criminal information dated August 25, 2000, the State of Oregon charged HealthTek with making false claims for Medicaid Health Care Payments, in violation of Or. Rev. Stat. � 165.692(1). Specifically, the information charged that HealthTek:

knowingly made and caused to be made claims for health care payments . . . that contained false statements and false representations of material fact, to-wit, that goods had been provided to patients when they had not.

I.G. Ex. 5, at 10. On the same day (August 25, 2000), Petitioners, on behalf of the corporate defendant, entered a plea of "no contest" to the charge, and the Marion County Circuit Court entered a judgment of conviction against the corporate defendant. As part of the plea agreement, Petitioners agreed that their corporation would plead "no contest" to the criminal count, and that they and their corporation would pay the State of Oregon $600,000 in restitution and investigative/attorney costs. I.G. Ex. 5. By separate agreements, Petitioners each agreed to be permanently excluded from the Medicare and Medicaid programs. I.G. Exs. 6, 7. The court incorporated into the judgment of conviction Petitioners' agreements to be excluded, and ordered restitution and fines totaling $569,600. I.G. Ex. 6, at 1. ⁽¹⁾

Thus, effective the date of the conviction, Petitioners were excluded from participation in the State Medicaid program.
II. Issue

The parties agree that Petitioners were excluded from participation in the State Medicaid program. The sole issue in dispute is whether the exclusion was related to Petitioners' "professional competence, professional performance, or financial integrity."

III. Findings of Fact and Conclusions of Law

I make findings of fact and conclusions of law (Findings) to support my decision in this case, and set forth each Finding below, in italics, as a separate heading.

A. Petitioners' exclusions from the State Medicaid program provide a basis for their exclusions under section 1128(b)(5) of the Act.

The Act authorizes the Secretary to exclude, from participation in any federal health care program ⁽²⁾, an individual or entity that has been suspended or excluded from participation, or otherwise sanctioned, under a State health care program for reasons bearing on the individual's or entity's professional competence, professional performance, or financial integrity. Act, section 1128(b)(5)(B). The I.G.'s implementing regulations reiterate the Act's grant of authority, and explain that the term "otherwise sanctioned" covers "all actions that limit the ability of the person to participate" and includes situations where the person voluntarily withdraws in order to avoid a formal sanction. 42 C.F.R. � 1001.601(a). In determining the appropriateness of these exclusions, I should determine the reasons the State suspended Petitioners, and whether those reasons bear on their professional competence, professional performance, or financial integrity. George Iturralde, M.D., DAB No. 1374, at 10-11 (1992); Olufemi Okonuren, M.D., DAB No. 1319, at 8 (1992).

Petitioners deny that they were excluded for any reason set forth in section 1128(b)(5) of the Act. Citing a letter from a Senior Assistant Attorney General for the State of Oregon, they claim that the State Agency took its action against them because Petitioner John Roberti agreed to take "moral responsibility" for the "unauthorized actions of an employee of HealthTek, Inc." In essence:

As we discussed Friday, I understand that John Roberti does not acknowledge criminal responsibility for the billing fraud committed by HealthTek, but is willing to take steps to acknowledge his admitted moral responsibility.

P. Ex. 1, at 1. According to Petitioners, Petitioner John Roberti was required to take responsibility by a state prosecutor offended by Petitioner John Roberti's "personal relationship" with the rogue employee. P. Br. at 4. I find Petitioners' position without merit.

Section 1128(b)(5) of the Act does not require criminal liability nor even a civil adjudication of culpability, but only a "common sense connection" between the State's actions and Petitioners' financial integrity. That Petitioner John Roberti did not acknowledge criminal responsibility is irrelevant. Petitioners' corporation was convicted of a crime involving financial misdeeds. As a result of the judgment of conviction and by agreement of the parties, Petitioners, as individuals, were excluded from participation in the State Medicaid program. I.G. Ex. 3. I find these facts sufficient to establish the "common sense" connection between the exclusions and the Petitioners' financial integrity. ⁽³⁾ See George Iturralde, M.D., DAB No. 1374 (1992).

In a similar situation, Administrative Law Judge (ALJ) Kessel rejected petitioners' assertion that the statute requires a final adjudication of culpability before the I.G. may impose an exclusion under section 1128(b)(5) of the Act. Judge Kessel pointed out:

An exclusion is an "exclusion" within the meaning of the section, whether it is imposed by a State agency based on an adjudication, or whether it is agreed to as a settlement of a State action, as is the case here.

Donna Scotti, et al., DAB CR481, at 4 (1997). Moreover, Scotti involved no criminal indictment or conviction. The corporation and its principals agreed to be excluded from participation in the State Medicaid program, specified in the settlement agreement that they "did not admit to committing specific acts of wrongdoing," and the State agency acknowledged that it did not contend that "specific acts of wrong-doing, or specific practices were committed by . . . [Petitioners]." Id. Nevertheless, Judge Kessel held that, because the exclusions were predicated on findings of financial misconduct resulting in overpayments to the corporation, they were imposed for reasons bearing on the petitioners' financial integrity. The settlement agreement "did not take place in a vacuum," but was occasioned by the State agency's determinations of misconduct. Petitioners entered into the settlement to avoid potentially more severe penalties. Id., at 5.

B. The exclusion period may not be less than the period during which Petitioners are excluded or suspended from Medicare and Medicaid.

The I.G. advised Petitioners that they will remain excluded from participation until they have been reinstated into the Oregon State program. For a person excluded under section 1128(b)(5) of the Act, the statute and regulations mandate that the period of exclusion "will not be for a period of time less than the period during which the individual or entity is excluded or suspended from a Federal or State health care program." Act, section 1128(c)(3)(E); 42 C.F.R. � 1001.601(b)(1). I therefore have no authority to shorten the length of the exclusion period.

IV. Conclusion

For the reasons stated above, I conclude that the Petitioners were excluded from the State Medicaid program for reasons bearing on their financial integrity. Therefore, I affirm the I.G.'s determination and find that the I.G. had a basis to exclude Petitioners from participation in Medicare, Medicaid, and other federal health care programs for an indefinite period pursuant to section 1128(b)(5) of the Act.

Carolyn Cozad Hughes

Administrative Law Judge

1. Apparently the State of Oregon had prepared a fact summary listing 276 false claims worth $2.76 million in civil penalties, and prosecutions were looming in both State and federal court. However, Petitioners reached their agreement with the state of Oregon before the prosecutions had moved very far, with the plea negotiations taking place prior to any indictment or information being issued, hence, the information bears the same date as the judgment of conviction. In entering their plea, Petitioners waived their right to have the case presented to a grand jury. See P. Ex. 2, at 2.

2. The Act defines a "Federal health care program" in this context to mean

"(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government . . . ; or (2) any State health care program, as defined in section 1128(h). Act, section 1128B(f); see Act, section 1128(b)."

3. In the alternative, I find a common-sense connection between the misdeeds of Petitioners' closely-held corporation and their professional competence and performance. Even if their own financial integrity were not a factor in the submission of false claims by the corporation, they were clearly remiss in their obligations as owners and operators of the corporation.