Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
The Inspector General
- v. -
Timothy L. Stern, M.D.,
Respondent.
DATE: March 18, 1992
Docket Nos. C-119 and C-177
Decision No. 1314
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE
DECISION
Both Timothy L. Stern, M.D. (Respondent), and the Inspector General
(I.G.)
of the Department of Health and Human Services requested review
by an
Appellate Panel of the Departmental Appeals Board of an October
10, 1991
decision by Administrative Law Judge (ALJ) Charles E. Stratton.
See Timothy
L. Stern, M.D., DAB CR154 (1991) (ALJ Decision). The ALJ
affirmed a
determination by the I.G. that Respondent had violated
section 1128A of the
Social Security Act. The ALJ imposed a civil
monetary penalty of
$140,000 on Respondent, ordered Respondent to pay an
assessment of $45,000,
and excluded Respondent from participation in the
Medicare and Medicaid
programs for a period of seven years.
SUMMARY OF OUR DECISION
Based on the analysis below, we affirm the ALJ's finding that
Respondent
submitted claims to Medicare for services which he knew, should
have
known or had reason to know were not provided as claimed. There
is
substantial evidence in the record that supports the ALJ's decision
that
Respondent performed acupuncture treatments on his patients
but
nevertheless submitted claims for services described generally as
local
nerve blocks and office visits when Respondent knew, had reason to
know
or should have known that these services were not provided as
claimed.
We find that the ALJ, in reaching this decision, was not
biased. We,
however, remand this case to the ALJ for the sole purpose
of
reconsidering the sanctions to be imposed. In his re-evaluation the
ALJ
should substantiate the sanctions in light of the factors identified
in
the statute and regulations. The ALJ should also clarify whether any
of
14 claims should be deleted from the number of claims that would
justify
sanctions and should take into account our deletions and
modifications
in the FFCLs concerning mitigating factors.
BACKGROUND
Statutory and Regulatory Framework 1/
Section 1128A of the Social Security Act (Act), the Civil
Monetary
Penalties Law (CMPL), authorizes imposition of penalties and
assessments
on persons who submit false claims to the Medicare program or
State
health care programs (Medicaid) or who engage in other activities
which
adversely affect the integrity of the program or the quality of
care
provided. Section 1128A(a) establishes liability for any person
that --
(1) presents or causes to be presented . . . a claim . . .
that
the Secretary determines --
(A) is for a medical or other item or service that
the
person knows or should know was not provided as
claimed
[.]
The CMPL provides that such an individual shall be subject to a
civil
penalty of up to $2,000 for each such item or service, as well as
an
assessment of up to twice the amount claimed for each item or service
in
lieu of damages sustained by the United States because of the
claim.
Section 1128A(a) of the Act; 42 C.F.R. ..1003.103 and 1003.104.
In
addition, the Secretary may exclude the individual from participation
in
the Medicare and Medicaid programs. Section 1128A(a) and 42
C.F.R.
.1003.105.
In determining the appropriate amount of penalty and assessment to
be
imposed and the appropriate period of exclusion, the
regulations,
reflecting section 1128A(d) of the Act, direct the finder of
fact to
take into account the following factors:
1) The nature of the claim or request for
payment and the
circumstances under which it was presented;
2) The degree
of culpability of the
persons submitting the claim or request
for payment;
3) The history of prior offenses of the
person
submitting the claim or request for payment;
4) The
financial condition of the person
presenting the claim or
request for payment; and
5) Such other matters as justice
may
require.
42 C.F.R. .1003.106(a). Guidelines for taking into account the
above
factors, which describe circumstances in connection with those
factors
which can be mitigating or aggravating, are set forth in 42
C.F.R.
.1003.106(b) and (c).
The I.G. has the burden of proving by a preponderance of the
evidence
Respondent's liability under the CMPL. 42 C.F.R.
.1003.114(a).
Respondent, on the other hand, has the burden of producing and
proving
by a preponderance of the evidence any circumstances that would
justify
reducing the amount of the penalty or assessment, or the period
of
exclusion. 42 C.F.R. .1003.114(d).
Case History 2/
Respondent, a medical doctor, received a certification from New York
State
in 1979 to practice acupuncture. In 1980 Respondent opened, as
its sole
practitioner, a pain clinic in Rochester, New York, called
Rochester Pain
Medicine.
During the years 1983 through 1986 Respondent submitted 688
claims,
involving 31 Medicare beneficiaries, to Medicare for services which
the
I.G. later determined were not performed as claimed. 3/ These
claims
represented $35,324 in services Respondent provided at Rochester
Pain
Medicine and submitted to Medicare for reimbursement. In each
patient
encounter that resulted in a claim, Respondent performed an
acupuncture
procedure. 4/ Acupuncture is not a covered service under
the Medicare
program. On the Medicare claim forms he submitted,
Respondent generally
described his services performed as either a "local
nerve block" or an
"office visit."
On January 18, 1989, the I.G. proposed to impose against Respondent
civil
monetary penalties of $425,000, an assessment of $70,648, and an
exclusion
from participation in the Medicare and Medicaid programs for a
20-year
period. Discussing the factors, as specified in 42 C.F.R.
..1003.106
and 1003.107, considered in determining these amounts and the
duration of the
exclusion, the I.G. listed several aggravating factors
and no mitigating
factors.
On March 15, 1989, Respondent requested a hearing before an ALJ.
The
ALJ held a hearing and issued his decision on October 10, 1991. 5/
Summary of the ALJ's Decision
The ALJ Decision was supported by 191 Findings of Fact and Conclusions
of
Law (FFCLs).
Generally, the ALJ determined that for 688 Medicare claims
Respondent
performed acupuncture services, a non-reimbursable service under
the
Medicare program. Respondent, however, when filling out Medicare
claim
forms, listed his services as either "office visits," "local
nerve
blocks," or "consultations." The ALJ determined that all of the
688
claims were false or improper under the CMPL, and that Respondent
had
the requisite intent when he filed the false claims. The ALJ found
that
Respondent knew that a true and accurate description of the services
he
provided would result in denial of Medicare reimbursement, so
that
Respondent, with disregard for the Medicare regulations,
submitted
claims which he knew, had reason to know or should have known,
were
false or improper as to the types of services provided.
The ALJ further found that while the I.G. had proved some
significant
aggravating circumstances, Respondent also proved some
mitigating
factors. Additionally, the ALJ determined that there were
no
constitutional, jurisdictional, or procedural barriers to the
I.G.'s
bringing of this action against Respondent.
The ALJ imposed a civil monetary penalty of $140,000 on Respondent,
an
additional assessment of $45,000, and excluded Respondent from
the
Medicare and Medicaid programs for seven years.
The Parties' Proposed Exceptions to the ALJ's Decision
Respondent petitioned the Panel to review eight exceptions to the
ALJ's
decision. The I.G. requested that the Panel review three
categories of
exceptions. The Panel determined to review five
exceptions taken by
Respondent and described by him as follows:
o The ALJ cites "drug addiction" as a mitigating factor
in
reducing the penalty but does not treat it in the
appropriate
fashion.
o The ALJ contradicts himself in his discussion of
"office
visits" and he ignores the arguments which make them
a
legitimate Medicare charge.
o The ALJ is confused about Respondent's arguments in favor
of
charging Medicare for "local infiltration of anesthesia."
o The ALJ completely dismisses all of Respondent's
major
witnesses as not being credible.
o The ALJ did not allow "due process" to take place in
his
decision, since he did not address any of the 695
claims
specifically.
The Panel determined to review the following exceptions made by
the
I.G.:
o The ALJ erred in finding certain mitigating circumstances
--
A. Evidence of Respondent's drug addiction.
B.
Evidence that "other services" were provided.
C.
Evidence of impact on beneficiaries.
o The ALJ erred by improperly applying established criteria
and
failing to consider certain evidence in determining
the
sanctions to be imposed -- A. The purpose of the CMPL is
to
provide the Secretary a mechanism to deter fraud
and
abuse and to recover damages sustained as a result
of
fraud and abuse. B. Established statutory
and
regulatory criteria dictate how penalties
and
assessments are to be determined. C. The ALJ
has
departed from established criteria in determining
the
appropriate penalties and assessments to be imposed.
D.
The ALJ has departed from established criteria
in
determining the length of exclusion to be imposed.
ANALYSIS
Below we have, where appropriate, consolidated several of the
exceptions
for our analysis. Thus, where a party's exceptions overlap,
or where
both parties have taken exception to the same general finding by
the
ALJ, we have considered those exceptions together.
Office Visits and Local Nerve Blocks
The central issue before the ALJ was whether Respondent had performed
the
services for which he submitted claims to the Medicare program.
Respondent
had submitted claims listing the services performed as either
"local nerve
block" or "office visit" or "consultation." 6/ None of the
claims had
the service provided described as acupuncture or
electro-acupuncture.
Medicare disallowed the claims on the basis that
Respondent's services
actually were acupuncture treatments, a service
not covered under the
Medicare program.
During a lengthy hearing the ALJ heard the testimony of
numerous
witnesses, including other doctors, patients, I.G.
investigators,
employees of the local Medicare carrier, and Respondent
himself. The
ALJ accepted into evidence numerous medical records
concerning the
patients whose claims were at issue. From this testimony
and evidence
the ALJ concluded that Respondent had in fact performed a type
of
acupuncture, electro-acupuncture, on his patients and had disguised
the
acupuncture treatments on the Medicare claim forms by describing
his
treatments as either local nerve blocks or office visits. In
support of
this determination the ALJ made a number of FFCLs, including:
7/
17. In each patient encounter that resulted in a
claim,
Respondent performed either electro-acupuncture or a
procedure
he called "electrical stimulation," which consisted of
inserting
4-16 acupuncture needles into the skin at various areas of
the
body, attaching the needles to an electric current source
using
electrodes and wires, and applying electric current to
the
needles for 10-20 minutes. 8/
18. During some of the patient encounters resulting in
claims
at issue, Respondent injected the electrically stimulated
area
with a small amount of an anesthetic agent called
"marcaine,"
just prior to the electro-acupuncture treatments.
83. Office visits, like all services, must be
medically
necessary in order to be reimbursed by Medicare.
85. Under Medicare, a doctor is not entitled to
reimbursement
for an office visit simply based on the amount of time he
spent
with the patient; there must be some medically necessary
service
provided, including documentation of that service.
86. As a general rule, Medicare regulations would not
provide
reimbursement for an office visit if the only purpose of
the
visit were a non-covered service such as acupuncture; an
office
visit would be allowed and reimbursed for other
medically
necessary services rendered in addition to a
non-covered
service.
97. Respondent's records reflect that he was
providing
electro-acupuncture to his patients rather than the
services
claimed.
101. Many of the notations of "marcaine" in
Respondent's
medical records were added to the records after the
original
notations that electro-acupuncture had been performed.
127. Respondent added local injections of marcaine to
his
electro-acupuncture therapy only because he felt the
injection
of an anesthetic agent would legitimize his claims as
nerve
blocks.
The ALJ stated in his discussion:
I conclude that Respondent's patients came to him primarily
for
the alleviation of pain and that Respondent alleviated
their
pain by performing some form of electro-acupuncture. His
local
injection of marcaine or anesthesia was an adjunct to
his
electro-acupuncture treatments; it was done to
assure
reimbursement and was not medically necessary, within
the
meaning of the Medicare rules.
ALJ Decision at 31.
On appeal Respondent contended that the ALJ was totally confused about
the
services for which Respondent claimed Medicare reimbursement.
While
acknowledging that he performed electro-acupuncture on his
patients,
Respondent denied that he ever sought reimbursement from Medicare
for
acupuncture treatments. Rather, Respondent maintained that the
claims
he submitted were for legitimate, Medicare-covered services that
he
rendered to his patients in addition to acupuncture. Respondent
argued
that the ALJ's confusion is shown by the fact that the ALJ,
while
finding as a mitigating factor that Respondent did in fact perform
other
reimbursable services for his patients (discussed below),
nevertheless
determined that the questioned claims were contrivances to mask
the
acupuncture treatments and that all the other medical services
provided
at the time of the acupuncture treatment were therefore
unreimbursable.
Respondent contended that even if the reimbursable medical
services he
provided were combined with unreimbursable procedures, Respondent
is
entitled to charge Medicare for the reimbursable part of the
treatment.
Respondent additionally argued that the ALJ misunderstood the
issue
concerning Respondent's administration of nerve blocks to his
patients.
Respondent contended that he injected .25 ccs of marcaine into
his
patients and listed this procedure under the code W3600,
local
infiltration of anesthesia, in his claims to Medicare.
Respondent
contended that the ALJ became sidetracked as to the question of
whether
.25 ccs of marcaine could be considered a nerve block when the
real
issues were whether Respondent actually administered the marcaine
and
whether Respondent misrepresented the injections in his records
and
claims.
Our review of the record and of the parties' arguments on appeal
convince
us that there is substantial evidence to support the ALJ's
findings that
Respondent did not provide nerve blocks and office visits
as claimed.
9/ The ALJ properly emphasized that in order for there to
be
reimbursement by Medicare the services provided must be medically
necessary
and supported by appropriate documentation. The ALJ found
that
Respondent's treatments for which he submitted claims were either
not
medically necessary or unsupported by documentation.
Respondent's
attempts to portray his services as reimbursable local nerve
blocks or
office visits simply do not stand up in light of the numerous
factors
identified in the FFCLs, including the way Respondent operated
his
medical practice.
Respondent's office activities clearly demonstrate that
Respondent
contrived with the requisite intent to submit claims to Medicare
for
services that were not provided as claimed. Respondent knew that
the
Medicare program did not consider acupuncture treatments to be
medically
necessary and therefore did not cover acupuncture services.
The record
shows that Respondent attempted to get around this bar on
acupuncture
reimbursement by submitting claims for services other than
acupuncture.
Respondent required his patients to pay him immediately for
each
treatment. FFCL No. 29. All the patients, in a survey
conducted by the
United States Probation Office in preparation for
Respondent's
sentencing for his 1987 conviction, stated that they were told
by
Respondent or a member of his staff on their initial visit to
Rochester
Pain Medicine that Medicare would cover a large percentage of the
costs
of each treatment. I.G. Exhibits (Exs.) 1-31. The patients
described
the nature of the treatment they received from Respondent as
acupuncture
or electrical stimulation. Id. Respondent (or his
employees) would
then complete the Medicare claims form and the patients were
told that
they would receive reimbursement later from Medicare. Nearly
all the
patients indicated in the survey that they would not have come
to
Respondent for treatment if they had known that Medicare would
not
reimburse them for the acupuncture treatments. Id.
It is evident from this survey why Respondent undertook the course
of
action that led him to submit claims for local nerve blocks and
office
visits. Respondent would have lost a lucrative part of his
practice if
his patients were not reimbursed by Medicare for visiting him
for
treatment. Therefore, Respondent told his patients that Medicare
would
reimburse them for most of the costs of the treatment they received
from
Respondent. If the patients did not receive reimbursement
from
Medicare, they would cease utilizing Respondent's services.
Therefore
Respondent had to devise a plan to circumvent Medicare's ban
on
reimbursement of acupuncture treatments. Respondent did this
by
establishing an office policy on billing procedures.
This clear-cut pattern of Respondent's claiming for his
services
undermines his position that he provided the services he
claimed.
Respondent's office manager testified that prior to 1984 staff of
the
local Medicare carrier had instructed her to bill Respondent's
services
as local nerve blocks under the procedure code 52980. Tr.II at
1096.
No claims were submitted during this period as office visits. Id.
at
1097. The office manager further testified that during a March
1985
meeting with staff of the local Medicare carrier she and Respondent
were
informed that Respondent could claim the first six office
procedures
with a patient as local nerve blocks, under procedure code W3600,
with
all the remaining treatments claimed as office visits. Id. at
1117. A
memorandum prepared a week later after the meeting by an
employee of the
carrier, however, contradicted the office manager's
testimony. The
memorandum declares that the criteria for office visits
was discussed
and that Respondent was informed that:
[T]he service must be reasonable and medical necessity
must
exist for the condition. . . . no less than a blood
pressure
check, weight, temperature and "hands on" physical
examination
of area/areas of patient complaint or concern is
required.
History and physical examination must be documented in
patients'
records.
I.G. Ex. 47, at 1. This memorandum further states that Respondent
was
informed that Medicare allows two diagnostic nerve blocks a year
per
patient, and up to six localized infiltrations of anesthesia per
year,
provided that "the dosage, type of medication, and area injected must
be
noted in patients' records." Id. The ALJ found that the
testimony of
the office manager was not objective and that Respondent had
failed to
prove his assertions about the instructions he received from
the
carrier. FFCL Nos. 116-122.
Respondent admitted that his billing practice for each of his
pain
patients was to claim the initial visit as a consultation, the next
six
visits by each patient as local nerve blocks, and each
subsequent
treatment as an office visit. Tr.II at 1591.
Respondent's medical
records for his patients, however, do not support
Respondent's claim
that he administered nerve blocks nor do they describe
what occurred
during the office visits. The ALJ found that the medical
records for
most of the patients had been augmented at some later time by
the
addition of a notation of .25 ccs of marcaine for each visit where
a
local nerve block was alleged to have been administered. FFCL No.
101;
see, e.g., I.G. Ex. 27-4, at 5. Later, when Respondent submitted
a
claim to Medicare for a local nerve block, Respondent attached
a
typewritten statement labeled "Operative Report." This
statement
invariably read that the patient had been administered a
superficial
nerve block with an injection of marcaine "to interrupt the pain
pathway
to the central nervous system to decrease any inflammation locally,
and
to increase blood flow locally." See, e.g., I.G. Ex. 25-1, at
2. There
was no information in the medical records, however, apart from
the
after-the-fact notation of .25 ccs of marcaine, that documents
the
actual administration of a nerve block. The ALJ noted that
medical
experts had testified that the proper record of a nerve block
should
include considerable information: diagnosis; caliber and length
of
needle used; region of the body injected; type, amount,
and
concentration of drug used; and what happened after the
administration
of the block. ALJ Decision at 37. There was
nothing in the medical
records that reflected the activity described in the
Operative Reports
submitted by Respondent.
Contrary to Respondent's arguments, we find that the ALJ properly
examined
the question of whether an injection of .25 ccs of marcaine
could be
considered a nerve block. That issue goes directly to whether
Respondent
actually intended to perform a nerve block or was merely
using the marcaine
as justification for the submission of a claim. In
the latter case
there would be no medical necessity for the injection of
the marcaine.
Respondent testified that 100 percent of his patients were receiving
nerve
blocks of .25 ccs or more of marcaine along with their electrical
stimulation
treatments. Tr.II at 1440-1441. Respondent's patients
stated the
treatment they received from Respondent was acupuncture or
electrical
stimulation, not nerve blocks. I.G. Exs 1-31. Respondent
was
submitting claims, up to six per patient each year, that he was in
fact
providing such nerve blocks. The ALJ was convinced by the
testimony of
medical experts at the hearing that such a limited dosage
of marcaine could
not constitute, medically, a nerve block and that the
terms "local" or
"superficial nerve block" have no medical meaning.
FFCL Nos. 74 and
123. We have no reason to disturb the ALJ's findings
on the credibility
of these witnesses. It is readily apparent that if
Respondent did, in
fact, administer marcaine to his patients, the
marcaine was not intended to
be an independent treatment, but rather to
serve as justification for
Respondent's claim to Medicare. The fact
that notations adding the word
"marcaine" were placed in the patients'
records at a date later than the
purported treatment demonstrates that
the marcaine was not the primary
treatment administered at the visit
and, in fact, further calls into question
whether the patients were ever
actually administered marcaine. Even if
it were true that the patients
were administered marcaine, Respondent failed
to document that there was
any medical necessity for the local infiltration
of marcaine, thus
rendering any such claim unreimbursable under Medicare
policies.
Furthermore, although Respondent claimed that he provided
other
reimbursable services to his patients during the office visits for
which
he submitted claims to Medicare, it is striking that the claims
for
these "office visits" began only after a patient exhausted
the
reimbursable limit of six localized infiltrations of anesthesia.
We
conclude that the evidence fully supports the ALJ's finding that
these
"office visits" were nothing more than acupuncture treatments.
The
patient surveys indicate that for the most part patients came
to
Respondent for acupuncture treatments only and not for any
other
services. An official of the local carrier testified that
Medicare
policy prohibits reimbursement for an office visit if the only
purpose
of the visit was a non-covered service such as acupuncture.
Tr.I at
138-139.
At the March 1985 meeting with the local Medicare carrier Respondent
was
instructed what had to take place for an office visit to be
reimbursable
under Medicare: "no less than a blood pressure check,
weight,
temperature and `hands on' physical examination of area/areas of
patient
complaint or concern." I.G. Ex. 47, at 1. Respondent's
records for his
patients, however, do not demonstrate that Respondent sought
this
elementary information. In the claims Respondent submitted to
Medicare
for these "office visits," he did not mention what specific
reimbursable
services he provided during the office visits. The clear
implication is
that Respondent used the generic term "office visit" to mask
the
acupuncture treatment he actually delivered to his patients.
Thus, we conclude that the ALJ did not err in his analysis of the
issues
of "office visits" and "local nerve blocks." We conclude that
the ALJ
correctly determined that Respondent used these terms on the
Medicare
claims he submitted to circumvent the Medicare prohibition
on
reimbursement for acupuncture treatments.
Alleged Bias on the Part of the ALJ
In his decision the ALJ made the following FFCL:
166. Respondent is not a credible witness.
The ALJ based this FFCL on 17 separate assessments of
Respondent's
credibility. FFCL Nos. 149-165. The ALJ wrote:
I did not find Respondent to be credible, because of his
history
of deception, the overwhelming evidence
contradicting his testimony, and because of
his
demeanor
throughout the hearing.
ALJ Decision at 31.
Earlier in his decision the ALJ made the following FFCLs:
106. I did not find Ms. Gans' testimony at the hearing to
be
credible.
116. Charlene Cook's testimony was not an
objective,
independent version of events and was not credible; Ms. Cook
had
a long-standing, close affiliation with respondent and, at
the
time of the hearing, was still employed by him.
Respondent argued that the ALJ's findings that all Respondent's
major
witnesses as well as Respondent himself were "not credible" showed
that
the ALJ was not impartial and had pre-judged Respondent before
the
hearing began. To support this charge against the ALJ,
Respondent
pointed to one FFCL cited by the ALJ in his assessment that
Respondent
was not credible.
152. In assessing Respondent's credibility, I considered
that,
in entering into a plea agreement in 1987, Respondent
admitted
guilt to one count of mail fraud . . . encompassing five
false
claims for seven services . . . and to one count of
distribution
of a controlled substance . . . .
Respondent vehemently argued that his testimony and the testimony
of
several of his witnesses showed that Respondent was forced to enter
into
this plea agreement. Respondent explained that the testimony
proved
that he never believed himself guilty of the mail fraud charge and
that
he admitted to that charge only because of the prosecution's threat
to
send him to prison on the narcotics charge. Respondent maintained
that,
despite the testimony of the prosecutor, his probation officer, and
his
psychiatrist, the ALJ totally ignored this testimony in finding
that
Respondent's prior conviction called into question
Respondent's
credibility in this proceeding.
Respondent also contended that the ALJ summarily dismissed the
testimony
of Respondent's expert medical witness on the subject of nerve
blocks
and downplayed or ignored in his decision the testimony of
numerous
other witnesses Respondent called in his defense. Respondent
maintained
that this showed an obvious bias on the ALJ's part and asked the
panel
to investigate the ALJ's lack of impartiality.
In Edward J. Petrus, Jr., M.D., and The Eye Center of Austin, DAB
1264
(1991), the Board set forth the standard for disqualifying a judge on
a
charge of bias:
The law has long been well-settled that, in order to
disqualify
a judge, bias must stem from an extrajudicial source.
The
Supreme Court has held that:
The alleged bias and prejudice to be disqualifying
must
stem from an extrajudicial source and result in
an
opinion on the merits on some other basis than what
the
judge learned from his participation in the case . . . .
United States v. Grinnell Corp., 384 U.S. 563, 583 (1966);
see
also Tynan v. United States, 376 F.2d 761 (D.C. Cir.
1967),
cert. denied, 389 U.S. 845 (1967); Duffield v. Charleston
Area
Medical Center, 503 F.2d 512, 517 (4th Cir. 1974).
At 23. Here Respondent did not point to any extra-judicial source
as
support for his claim that the ALJ was biased. Rather, Respondent
only
referred to the ALJ's findings where the ALJ found
Respondent's
witnesses not credible.
We find any suggestion that the ALJ was in any way biased
against
Respondent to be totally baseless. In making this finding we
note at
the outset that in his appearance before the ALJ, Respondent for
the
large part acted pro se. Although at times assisted by his brother,
an
attorney, Respondent examined most of the witnesses and presented
most
of his evidence himself. Any reading of the transcript of the
hearing
will show that the ALJ exhibited an inordinate amount of patience
and
forbearance toward Respondent because of Respondent's unfamiliarity
with
the legal process in general and the rules of evidence in
particular.
The ALJ was clearly aware of Respondent's pro se status and made
every
effort to ensure that Respondent received a full and fair opportunity
to
present his case. See Petrus at 26.
During the hearing the ALJ gave Respondent great leeway in his
examination
of the witnesses. The ALJ made several rulings favorable
to
Respondent. For example, over the I.G.'s strenuous objections, the
ALJ
at Respondent's request bifurcated the hearing. The net effect of
this
bifurcation was to give Respondent five months to prepare his
defense
after hearing the I.G.'s presentation.
Respondent faults the ALJ for his findings that Respondent and
his
witnesses were not credible. As to Respondent himself, the ALJ gave
17
separate reasons why he doubted Respondent's credibility. See FFCL
Nos.
149-165. As for the other witnesses, the ALJ had the opportunity
of
observing and evaluating these witnesses, and provided specific
reasons
why he doubted their credibility.
The ALJ clearly weighed the testimony of Respondent's medical
expert
witness against the I.G.'s two medical experts and found the
I.G.'s
witnesses' testimony "persuasive." ALJ Decision at 37.
Respondent's
medical expert had never reviewed Respondent's medical records,
while
the I.G.'s experts had reviewed the medical records at issue and
had
concluded that Respondent had not performed nerve blocks. Id. at
36-37.
As to the testimony concerning the reasons for Respondent's acceptance
of
the plea agreement, the transcript does not support Respondent's
position
that he pleaded guilty to mail fraud only to avoid a prison
sentence for the
narcotics charge. The prosecuting attorney denied any
recollection that
in the course of the discussions leading to the plea
agreement Respondent
indicated that he was not guilty of defrauding the
Medicare program.
Tr.II at 964. The probation officer and Respondent's
psychiatrist
testified only to the fact that Respondent told them later
that was the
reason for his consent to the plea agreement. Tr.II at 988
and
1084. They had no independent knowledge of what transpired during
the
discussions leading to the plea agreement. The ALJ apparently did
not
find this testimony persuasive compared with Respondent's sworn
statement in
the submission of his plea agreement to a federal judge
that he was guilty of
mail fraud as well as the distribution of
narcotics. I.G. Ex. 88.4, at
15. Respondent there stated that he was
not being threatened or forced
to plead guilty and that he knew the
consequences of his guilty plea.
Id. at 13-15.
As to the testimony of other witnesses the ALJ found not credible, the
ALJ
gave persuasive reasons for his findings. The ALJ found Ms. Gans to
be
easily confused and her oral testimony in direct contradiction to
written
statements she had given the I.G. FFCL Nos. 105 and 107. The
ALJ
found the testimony of Respondent's long-time employee Charlene Cook
not
objective because of her status with Respondent. FFCL No. 116.
These
were reasonable conclusions by the ALJ and indicate no bias on the
ALJ's
part.
Respondent charged that the ALJ "ignored" the testimony of two other
of
his witnesses, Dr. Wong and Dr. Hung. A reading of the transcript
shows
that these two witnesses, both acupuncturists, testified to
their
experiences with the Medicare program. These witnesses did
not
personally know Respondent nor the circumstances that led the I.G.
to
bring action against Respondent. Respondent apparently believes that
a
judge is required to comment on the testimony of all the witnesses
that
appear before him in a proceeding. The ALJ could have
reasonably
determined that the testimony of these witnesses was not relevant
to the
issue before him, which was whether Respondent actually rendered
the
services he claimed.
In conclusion, we find nothing in the ALJ's treatment of Respondent or
of
Respondent's witnesses to support a claim of bias against Respondent.
The Sanctions Imposed by the ALJ
Both parties took exception to how the ALJ arrived at his determination
of
the sanctions to be imposed on Respondent. Respondent claimed
that,
inasmuch as he was confronted with a possible penalty of $2,000 for
each
claim and the ALJ found 688 claims to have been falsely submitted,
the
ALJ should have been required to address separately each claim
in
question and to rule on the merits why the ALJ considered each
claim
fraudulent. Respondent asserted that he was denied due process by
this
incompleteness of the ALJ's decision. Respondent asserted
that
testimony and evidence presented at the hearing demonstrate at the
least
that not all of the claims were fraudulent, yet the ALJ issued
a
decision encompassing all the claims without distinguishing
these
claims. Respondent requested that each of the claims be
reviewed
separately and that a decision be rendered on each of the
claims.
The I.G., on the other hand, argued that the ALJ erred in his method
of
determining the sanctions to be imposed in this case. The
I.G.
contended that the ALJ improperly applied the established statutory
and
regulatory criteria for determining the amount of penalties
and
assessments, that the ALJ erred by inadequately considering the
amount
of the government's damages, and that the ALJ's imposition of
a
seven-year program exclusion reflects the ALJ's inadequate
consideration
of the aggravating evidence in the record. The I.G.
argued that the
ALJ's decision did not reflect that any systematic analysis
of the
government's damages was ever undertaken by the ALJ in determining
the
amount of penalty and assessment to be imposed upon Respondent.
10/
Accordingly, the I.G. took specific exception to portions of the
ALJ's
analysis set forth in the decision at pages 53-54 and to the ALJ's
order
that substantially reduced Respondent's civil monetary
penalties,
assessment, and exclusion from the Medicare and Medicaid
programs. The
I.G. requested that the ALJ's order be modified to
determine penalties
and assessments consistent with the language and intent
of the CMPL and
implementing regulations, and to determine a length of
program exclusion
reflecting the circumstances of Respondent's conduct.
With respect to Respondent's argument that each claim be
reviewed
separately, we find that with the possible exception of 14 out of
688
claims, the FFCLs in the decision fully establish for each of the
claims
that Respondent submitted or caused to be submitted a claim for an
item
or service which he knew, had reason to know, or should have known
were
not provided as claimed. Thus, we conclude that it was not
necessary
for the ALJ to discuss each claim individually. This is
clearly not
necessary where a combination of reasons as described in the
FFCLs apply
to hundreds of claims and it is clear that the reasons are
sufficient to
support the ultimate conclusion for each of the claims.
Here, the FFCLs
provide numerous detailed and frequently overlapping reasons
in support
of the ultimate conclusion concerning at least 674 claims.
In FFCL Nos. 132 and 181 the ALJ found that 14 claims were
for
reimbursable services, although "most" of them at a lower level
of
service than claimed. These claims were specifically identified in
the
record. Tr.I at 1541-1549. The ALJ also found generally that
all of
the 688 claims were false or improper and that none of the claims
in
question were properly described. FFCL Nos. 136 and 137. The
finding
on the 14 claims, however, leaves open the possibility that a few
of
these 14 were reimbursable at the level claimed. On remand, the
ALJ
should clarify whether any of the 14 claims should be deleted from
the
number of claims that would justify the penalty, assessment,
and
exclusion, and make appropriate modifications in relevant FFCLs.
With respect to the issue of the proper method of determining
the
sanctions, the ALJ, in FFCL No. 167, specifically recognized that
the
statute established a maximum amount for the penalty and
assessment
based on the number of false or improper claims and the total
dollar
amount falsely or improperly claimed. Moreover, in FFCL Nos. 172
and
173, the ALJ concluded that it was an aggravating factor that there
were
a substantial number of false or improper claims involved and that
the
amount claimed for the services at issue was substantial. In
lowering
the penalty from $425,000 to $140,000, however, the ALJ does
not
identify the proper penalty per claim or in any way relate the number
of
false or improper claims to the penalty as a whole as the statute
seems
to contemplate. In addition to specifying a penalty "of not more
than
$2,000 for each item or service" (section 1128A(a), emphasis added),
the
statute requires that in determining the amount of any penalty
or
assessment, the Secretary shall take into account three
separate
factors, including "the nature of claims and the circumstances
under
which they were presented" (section 1128A(d)). Moreover, the
statute
specifies that the person shall be subject to an assessment of not
more
than "twice the amount claimed for each item or service" in lieu
of
damages sustained (section 1128A(a)). The statute further
authorizes
imposition of program exclusions as a result of the same
proceeding
leading to a penalty and an assessment.
The regulations in effect when this proceeding was initiated reiterate
the
statutory factors that the Secretary shall take into account in
setting the
penalty and assessment amounts and the length of any
exclusion (42 C.F.R.
..1003.106(a)(1) and 1003.102(a)) and provide
guidelines for taking into
account these factors (42 C.F.R.
.1003.102(b)). The guidelines provide
the conditions under which either
a greater or a lesser penalty and
assessment should be considered within
the statutory authority to impose a
penalty of up to $2,000 per item or
service and an assessment of up to twice
the amount claimed. Finally,
the regulations provide non-binding
guidelines for calculating the
amount of the penalty and assessment. 42
C.F.R. .1003.106(c). The
preamble to the final regulation characterized
the purpose of making the
guidelines non-binding as "provid[ing] for the
exceptional case." 48
Fed. Reg. 38827, at 38832 (August 26,
1983). The preamble also stated
that as a general matter, "penalties
and assessments should never be
less than double the amount of
damages." Id. at 38827-38828.
While we agree with the ALJ that the statute leaves him
considerable
discretion in determining the amount of the penalty and
assessment, this
does not mean that his determination of the amount does not
have to be
supported by an analysis articulated in the decision. We
find that the
cumulative effect of the statute and regulations requires that
the ALJ
relate the penalty, assessment, and the exclusion to the number of
false
or improper claims that were made and to the factors identified in
the
statute and regulations that the Secretary must consider.
11/
Furthermore, although the regulations provide certain
non-binding
guidelines, we find that the ALJ should explain why the
guidelines
should not be applied if the ALJ chooses not to apply them.
We also
find that the ALJ should consider whether the penalties and
assessment
here would be less than double the amount of damages, and, if
so,
whether the Secretary's concerns as expressed in the regulations
and
preamble have been fully implemented.
We are therefore remanding this case to the ALJ for the sole purpose
of
reconsidering what sanctions should be imposed upon Respondent
and
explaining the basis for determining the sanctions to be imposed.
In
explaining his rationale for the sanctions to be imposed, however,
we
further direct the ALJ to take into consideration our discussion
below
concerning mitigating factors and to determine whether any of the
14
claims discussed previously should be excluded from the claims that
were
not provided as claimed.
The ALJ's Findings of Mitigating Factors
I. Respondent's Drug Addiction
Both parties challenged the ALJ's findings concerning Respondent's
drug
addiction.
The ALJ made the following FFCL:
182. It is a mitigating factor that Respondent was
drug
addicted during the period of time in which the 688 claims
at
issue in this proceeding were submitted and that the
addiction
clouded his judgment.
In the initial decision the ALJ wrote:
While Respondent's drug addiction does not excuse his
behavior
or change the fact that he violated the CMPL, it is a
mitigating
factor in considering the amount of the penalties and
assessment
that Respondent was drug addicted during the period of time
in
which the 688 claims at issue in this proceeding were
submitted.
Had Respondent been drug-free, I doubt that this case would
have
occurred.
While I consider Respondent's drug-impaired judgement to
be
mitigating for purposes of the penalties and assessment, I
must
consider it differently for purposes of the length of
exclusion.
In determining the length of the exclusion, it is important
to
consider the degree to which Respondent is trustworthy
and
rehabilitated. As I stated earlier, while there is
evidence
that Respondent has remained drug-free for several years and
has
made progress, Respondent still has work to do before he
is
totally rehabilitated.
ALJ Decision at 56-57 (Citations omitted).
The I.G. argued that the ALJ erred in considering Respondent's
drug
addiction as a mitigating factor in reducing the amount of the
penalty
and assessment and the length of Respondent's exclusion.
Respondent, on the other hand, argued that if the ALJ meant what he
wrote
-- "Had respondent been drug-free, I doubt that this case would
have
occurred." -- then the ALJ should have treated Respondent's drug
addiction as
a much more significant item than just a mitigating
circumstance.
Citing the American Medical Association, Respondent
labeled his drug
addiction a "disease." 12/ Respondent noted that
during the hearing a
psychiatrist, in response to the ALJ's questioning,
replied in the
affirmative that a long-standing drug addiction could
result in false claims
being submitted. Tr.II at 1088. Respondent
contended that on
appeal additional experts should testify as to the
significance of drug
addiction.
It is uncontested that Respondent had problems with drug addiction
during
the period in question. During the hearing Respondent described
his
drug addiction in great detail. Tr.II at 1323-1333. This
testimony
indicates the following. Beginning in 1978 Respondent used
his position
as a physician to obtain such drugs as dilaudid, codeine,
stadol, and
demerol for his own personal use. Respondent became
addicted to these
drugs. His addiction resulted in his being dismissed
from hospitals in
Massachusetts and Michigan and in the loss of his license
to practice
medicine in those states. In 1987, after being indicted for
mail fraud
for submitting false claims to Medicare, Respondent was also
indicted
for the unlawful distribution of narcotics. Respondent pleaded
guilty
to these offenses, and ultimately lost his license to practice
medicine
in New York. Over a period of 10 years Respondent entered into
four
drug treatment programs, with the last program apparently
being
successfully completed in 1987. Respondent has asserted that he
has
been free of drugs since the fall of 1987.
From the remarks in his decision we conclude that the ALJ
considered
Respondent's drug addiction to have been a contributing factor
in
Respondent's submission of false Medicare claims. There in nothing
in
the record, however, to support this conclusion. Respondent
never
stated, either in his written submissions or in his testimony at
the
hearing, that his addiction to drugs specifically led him to
file
Medicare claims that were later found to be false. Indeed, the
thrust
of Respondent's whole case has been that all the questioned claims
were
for reimbursable Medicare services.
Respondent steadfastly contended that he committed no wrongdoing in
the
filing of the questioned claims. Only when arguing in the
alternative,
that is, if the ALJ should find that fraudulent claims were
filed, did
Respondent contend, in a general fashion, that drug addiction
should be
considered a mitigating factor in the imposition of any
sanctions. See,
e.g., Respondent's Post-Hearing Brief at 178-180; Tr.II
at 428-443,
923-925. Respondent has never given any indication that his
drug
addiction played any role in the submission of the claims. The
whole
tenor of Respondent's arguments was that all the services he
performed
were legitimate medical procedures worthy of Medicare
reimbursement.
In his decision the ALJ appeared to be suggesting that Respondent's
drug
addiction so clouded his judgment that Respondent was incapable
of
forming the requisite intent to file fraudulent claims. The
only
evidence in the record possibly supporting such a conclusion is
the
testimony of Respondent's psychiatrist in response to questions from
the
ALJ:
ALJ: Well, in your professional expertise would you say
it
would be more likely for an impaired physician who was
addicted
to opiate drugs to file false or improper claims?
Witness: I wouldn't say so.
ALJ: Not anymore likely than a physician who is not impaired?
Witness: Well, yeah, I guess you got it there. I think,
you
know, physicians who are not impaired wouldn't be likely to
file
inappropriate claims at all, so to the extent that an
impaired
physician might be doing something deviant, then, I think,
there
is a possibility.
ALJ: Would it also be more likely that an impaired
physician,
as compared to a physician who is not impaired, would be
more
likely to make mistakes or engage in grossly negligent
behavior?
Witness: He'd certainly be more likely to make
mistakes,
because his ability to concentrate on what he was doing would
be
impaired, since the prime focus of his existence was
the
securing for himself of the addicting substance.
Tr.II at 1088-1089.
At best, this testimony shows only, in general terms, that a physician
who
takes drugs might make mistakes. It is worth noting that
this
psychiatrist, cognizant of all the details of Respondent's
drug
addiction, never claimed that the specific filing of the claims at
issue
was in any way attributable to Respondent's drug addiction. Tr.II
at
1055-1064. In the absence of any evidence to the contrary, the issue
of
Respondent's drug addiction is irrelevant to the specific offenses
with
which he was charged. There is simply nothing in the record to
indicate
that when Respondent filed the claims at issue his judgment was
clouded
by drugs. There is nothing in the record showing that
Respondent was so
affected by his addiction that he was unable to form the
mens rea or
intent to deliberately file fraudulent claims so that he
lacked
culpability for his offenses. On the contrary, the fact that
Respondent
used the terms "nerve block" and "office visit" to describe
his
procedures with his patients, and used "office visit" when
the
reimbursable number of "nerve blocks" had been reached, shows a
clear,
purposeful judgment. 13/
The I.G., in contesting the ALJ's finding of drug addiction as
a
mitigating factor, argued that there have been no cases under the
CMPL
or the civil False Claims Act, 31 U.S.C. .3729 et seq., where
drug
addiction has been adjudged to be a mitigating factor. The I.G.
noted
that, in federal sentencing guidelines, drug or alcohol abuse is not
a
reason for imposing a sentence below the guidelines. The I.G.
advanced
the theory that allowing drug addiction to be considered a
mitigating
factor would frustrate the general deterrent goals of the
CMPL.
We find much merit in the I.G.'s arguments. An unsubstantiated
finding
that drug addiction is a mitigating factor (with no specific showing
on
how it affected culpability) would send the wrong message to
the
provider community. Providers of Medicare services should not
be
permitted to explain away fraudulent billings with generalized
excuses
of drug addiction or other substance abuse.
Respondent's position before us that the issue of drug addiction as
a
disease needs further clarification through the additional testimony
of
other expert doctors lacks merit. Respondent had the opportunity
to
explore this area before the ALJ, and Respondent did not
substantiate
why he should be permitted to present additional evidence on
this issue.
Moreover, Respondent's position on this subject is further
weakened by
his failure to elicit from his own psychiatrist any type of
affirmation
that Respondent's drug addiction specifically caused Respondent
to
submit fraudulent claims.
In conclusion, we find that FFCL No. 182 is not supported by
substantial
evidence in the record and lacks adequate legal
justification. We
therefore delete FFCL No. 182 from the decision.
II. Respondent's Provision of "Other Services"
The ALJ made the following FFCLs:
179. It is a mitigating factor that medical records
submitted
by the parties showed indications that some other
medical
services besides electro-acupuncture or injections of
marcaine
were provided in numerous encounters leading to the claims
in
question.
180. It is [a] mitigating factor that Respondent provided
many
medical services to his patients which would have
been
reimbursable if properly documented.
181. It is a mitigating factor that one of the I.G.'s
medical
experts identified 14 claims which he considered to
be
reimbursable, although most of them at a lower level of
service
than claimed.
In regard to these FFCLs the ALJ wrote:
The medical records submitted by the parties show that, in
a
significant number of the claims in question, some other
medical
services besides electro-acupuncture or injections of
marcaine
were provided. Those notations in the medical records
were
corroborated by testimony from Respondent's patients,
including
those patients testifying on behalf of the I.G. Also,
one of
the I.G.'s medical experts identified 14 services on
claims
which he considered to be sufficiently documented to
be
reimbursable, although most of them at a lower level of
service
than claimed. Thus, I have mitigated primarily because
I
believe that Respondent indeed provided many medical services
to
his patients which would have been reimbursable if
properly
documented.
ALJ Decision at 56 (Citations omitted).
The I.G., while conceding the existence of some evidence in the
record
that Respondent did render "some other medical services,"
nevertheless
argued that, given the record as a whole, the ALJ erred in
assigning
excessive weight and unwarranted significance to this
evidence. The
I.G. contended that Respondent's medical records are a
questionable
reflection of what services were provided because the records
were
incomplete, illegible, and altered at a later date. The I.G.
further
argued that, while its own medical expert testified that in 14
instances
some level of reimbursement may have been justified, 14 items out
of 688
claims is only approximately two percent, a rate too low to support
the
ALJ's finding, as a mitigating factor, that "other services"
were
provided by Respondent. The I.G. additionally argued that there is
no
basis in either the CMPL or its implementing regulations for such
a
finding of mitigation.
In his response to the I.G.'s exceptions, Respondent characterized
his
practice as a general medical practice, with a specialty in
treating
pain problems. Respondent argued that when his patients came
to him
seeking relief from pain he treated them with a variety of modalities
at
his disposal, including local nerve blocks, prescription of drugs,
and
electrical stimulation. Additionally, Respondent claimed that
he
treated his patients for ailments unrelated to easing pain.
Respondent
contended that he performed minor surgery, ordered numerous
diagnostic
tests, referred patients to other specialists for treatment,
and
prescribed drugs to 95 percent of the patients who visited him.
We find that, under the circumstances in this appeal, the ALJ's use
of
"other services" as a mitigating factor was not based on
substantial
evidence or on an adequate legal rationale. FFCL Nos. 179
and 180 refer
only to "indications" from patient testimony and records of
other
services being provided which "would" have been reimbursable
"if
properly documented." FFCL No. 181 finds that there were 14 claims
that
had been sufficiently documented to be considered to be
reimbursable,
"although most of them at a lower level of service than
claimed." 14/
Thus, the record here supports only the finding that other services
were
in fact provided in 14 claims or approximately two percent of the
688
claims involved. The possibility Respondent provided other
reimbursable
services in a larger percentage of claims remains unproven
and
speculative, even though each of the claims was subjected to
the
scrutiny of the I.G.'s investigatory process and the ALJ hearing
review
and even though Respondent had the burden of demonstrating the
existence
of mitigating factors by a preponderance of the evidence and
was
presumably the custodian of the necessary medical records to
document
his claims. Ultimately, it was through one of the I.G.'s
witnesses, not
one of Respondent's, that the 14 claims with other
reimbursable services
were identified. Moreover, other FFCLs raise
substantial questions
about the adequacy of Respondent's medical records
generally and the
credibility of patient testimony in support of
Respondent. See, e.g.,
FFCL Nos. 98, 101, and 106. Thus, we
conclude that substantial evidence
in the record supports only the finding
that other services were
provided in two percent of the claims. This
percentage is too small in
our view to justify the use of other services as a
mitigating factor
under the facts here.
We also conclude that the ALJ provided an insufficient legal rationale
for
relying upon the provision of other services as a mitigating factor
under the
circumstances here. The ALJ identified this as one of "other
factors as
justice may require." It is not self evident why justice
would require
treating these other services as mitigating here even if
the claims were
fully documented as reimbursable in a number greater
than 14.
The ALJ found that the patients involved here came to Respondent for
the
primary purpose of receiving electro-acupuncture. FFCL Nos. 66 and
111.
Any other services that Respondent may have provided were
therefore
merely incidental to his administration of
electro-acupuncture
treatments to his patients. These other services
were apparently
provided because of the happenstance of the patients needing
some
additional, minor medical attention.
We also note that the I.G. has identified other instances where
section
1128A permits imposition of the same range of penalty as would
apply
here even though the physician may have provided some type
of
reimbursable service in conjunction with a false or fraudulent claim
or
even though the physician may have provided a service that would
have
been reimbursable if there had not been an issue relating to
the
physician's licensure or exclusion. Although we are not prepared
to
conclude, as the I.G. suggests, that provision of reimbursable
services
in conjunction with a false or improper claim can never be a
mitigating
factor, we do conclude that the ALJ did not substantiate the use
of such
services as a mitigating factor here.
Accordingly, we find that the ALJ erred in finding Respondent's
provision
of other services as a mitigating factor, and we therefore
delete FFCL Nos.
179, 180, and 181 from the decision.
III. Respondent's Impact on Beneficiaries
The ALJ made the following FFCL:
183. It is a mitigating factor that many
beneficiaries
benefitted from Respondent's services and found him to be
a good
doctor.
In support of this finding, the ALJ wrote:
I am also influenced by the fact that many of
Respondent's
patients found his treatments to be beneficial and were
very
satisfied with Respondent's services. In addition, I
am
influenced by what I consider to be Respondent's concern for
his
patients.
Even though I have found that Respondent's injections
of
marcaine were not medically necessary, it is a mitigating
factor
that these injections, according to Dr. Gillies' testimony,
were
beneficial because they increased the blood flow to the
area
injected. It is also a mitigating factor that
Respondent
considered his electro-acupuncture and injections of
marcaine to
be an effective treatment for pain.
ALJ Decision at 56.
The I.G. contended that this finding by the ALJ was unsupported by
the
record. The I.G. argued that the ALJ's decision cited
several
statements of patients to support his finding, but a closer
examination
of these statements casts doubt on whether any benefit was
actually
received by the patients. Apart from what the I.G. considered
to be the
dubious medical efficacy of acupuncture, the I.G. argued
that
Respondent's patients actually suffered from their dealings with
him.
We find that FFCL No. 183 is not supported either by substantial
evidence
or by an adequate legal rationale. Respondent here had the
burden of
proving any mitigating factors by a preponderance of the
evidence. In
finding that "many" of the patients benefited from
Respondent's services and
found him to be a good doctor, the ALJ cited
evidence relating to only seven
of the 31 patients involved. In survey
results from all of the
patients, 23 of the 31 patients indicated no or
only some benefit (or only
temporary benefit) from Respondent's
treatments. Moreover, only one of
the 31 patients would have gone to
Respondent and would have received the
treatments, if the patients had
known that the treatments were not covered by
Medicare. I.G. Ex. 12-27,
at 2. Thus, we question whether these
is substantial evidence in the
record to support the finding that "many" of
the patients benefited from
the treatment and found Respondent to be a good
doctor.
We also conclude that there is insufficient legal rationale in support
of
FFCL No. 183, which the ALJ found to be a matter for mitigation "as
justice
may require." In FFCL No. 176 the ALJ concluded that Respondent
had
assured his patients that their treatments would be reimbursed by
Medicare,
and thereby had induced them to undergo the treatments and pay
his fees at
the time of treatment. As we discussed above, the patients
almost
universally indicated that they would not have procured the
acupuncture
treatments if they had known that the treatments were not
reimbursable.
We find that these factors strongly undercut the use of
patient benefit as a
mitigating factor required by justice under the
circumstances here.
Because of Respondent's conduct, his patients incurred
considerable
expense for treatments which Medicare did not cover, treatments
which
the patients stated that they would have refused if they had known
that
they would have to bear the full cost for them. We fail to see how
this
could be seen as benefiting the patients in the long run.
Indeed,
Respondent's misleading conduct may even have deterred these
very
patients from seeking efficacious treatment elsewhere that would
have
been reimbursable under the program.
We further question whether Respondent's belief that his use
of
electro-acupuncture and marcaine was an effective treatment of
pain
should be considered a mitigating factor here, particularly where
the
Medicare program has explicitly determined that acupuncture is not
a
covered service and had specifically advised Respondent.
Accordingly, we find that FFCL No. 183 is not supported by
substantial
evidence or by an adequate legal rationale, and we therefore
delete FFCL
No. 183 from the decision.
We have therefore found that all the mitigating factors cited by the
ALJ
in FFCL Nos. 179-183 were erroneous and unsupported by
substantial
evidence in the record. Accordingly, we delete those
FFCLs. We also
modify FFCL No. 184, so that it now reads:
184. The Respondent did not prove any of the mitigating
factors
he alleged.
On remand, the ALJ should, in setting the amount of penalty and
assessment
to be imposed on Respondent, take into account these
deletions and
modifications in the FFCLs concerning mitigating factors.
Having deleted all
of the mitigating factors cited by the ALJ, we do not
mean to imply that the
ALJ must impose the maximum penalty authorized by
statute or even the
sanctions initially imposed by the I.G. The I.G.,
in setting the
initial penalty amount of $425,000 (equalling $601.98 per
claim) recognized
that substantially less than the maximum authorized
penalty of $2000 per
claim may be appropriate even where only
aggravating factors exist.
Thus, in the context of this particular case, the ALJ would still
have
considerable discretion in determining the amount or scope of
any
penalty, assessment or exclusion. For example, although the ALJ
found
that the extensive number of false or improper claims filed
by
Respondent over a lengthy period of time was an aggravating factor,
he
might also consider whether the penalty amount should be
substantially
lower than the maximum since these claims affected only 31
patients.
Likewise, the ALJ might consider whether Respondent's
financial
condition would still have some bearing on the penalty amount
even
though the ALJ had concluded that his financial condition was not
proven
as a mitigating factor.
CONCLUSION
Based on the analysis above, we affirm the ALJ's finding that
Respondent
submitted claims to Medicare for services which he knew, should
have
known or had reason to know were not provided as claimed. There
is
substantial evidence in the record that supports the ALJ's decision
that
Respondent performed acupuncture treatments on his patients
but
nevertheless submitted claims for services described generally as
local
nerve blocks and office visits when Respondent knew, had reason to
know
or should have known that these services were not provided as
claimed.
We find that the ALJ, in reaching this decision, was not
biased. We,
however, remand this case to the ALJ for the sole purpose
of
reconsidering the sanctions to be imposed. In his re-evaluation the
ALJ
should substantiate the sanctions in light of the factors identified
in
the statute and regulations. The ALJ should also clarify whether any
of
14 claims should be deleted from the number of claims that would
justify
sanctions and should take into account our deletions and
modifications
in the FFCLs concerning mitigating factors.
_____________________________ Judith
A.
Ballard
_____________________________ Cecilia
Sparks
Ford
_____________________________ Donald
F.
Garrett Presiding Panel Member
1. A revision of the regulations at 42 C.F.R. Parts 1001, 1002,
1003,
1004, 1005, 1006, and 1007 went into effect January 29, 1992. 57
Fed.
Reg. 3298 (January 29, 1992). Neither party argued that these
revised
regulations applied to this case. The revised regulations were
not in
effect during the time the ALJ presided over Respondent's case.
2. This summary of the facts is not intended as a substitute for
the
more detailed factual findings in the ALJ decision.
3. The I.G. originally questioned 706 claims by Respondent.
At the
hearing before the ALJ, the I.G. dropped 11 claims from its
case,
leaving 695 claims at issue. The ALJ found that seven of these
claims
were identical to claims encompassed by Respondent's criminal
conviction
in 1987 of one count of mail fraud encompassing five false claims
for
seven services and of one count of distribution of a
controlled
substance. The ALJ, citing U.S. v. Halper, 490 U.S. 435
(1989),
eliminated the seven claims from this action, leaving 688 claims
in
dispute.
4. Respondent called his procedure "electrical stimulation,"
which
consisted of inserting 4 to 16 acupuncture needles into the skin
at
various areas of the body, attaching the needles to an electric
source
using electrodes and wires, and applying electric current to the
needles
for 10 to 20 minutes. In the ALJ decision, this procedure was
termed
"electro-acupuncture."
5. At Respondent's request, the ALJ bifurcated the hearing. The
first
segment of the hearing was held in Rochester, New York, from July
30
through August 3, 1990. References in this decision to the
transcript
of that portion of the hearing will be cited as Tr.I (page
number). The
second segment of the hearing, also held in Rochester,
occurred January
7 through January 12, 1991. References to the
transcript of that
segment will be cited as Tr.II (page number).
6. The ALJ called the number of claims described as a "consultation"
a
"handful" in relation to the much larger number of claims described as
a
"local nerve block" or "office visit." ALJ decision at 28.
For
purposes of this decision, we treat the claims submitted
as
consultations as office visits.
7. We have attempted here to identify only the primary FFCLs
relating
to office visits and nerve blocks and not all the FFCLs made by the
ALJ
on these issues.
8. Throughout this decision, we omit the ALJ's citations to the
Act,
regulations, other FFCLs, or the record before him from our
restatement
of his FFCLs.
9. Our discussion here does not address the 14 claims which in FFCL
No.
181 were found to be reimbursable, although most of them at a
lower
level of service than claimed.
10. The I.G. argued that, in addition to the overpayments
Respondent
received due to his false claims which the Medicare program has
never
recovered, the government incurred extensive damages over the number
of
years Respondent has had to be monitored, investigated, and
prosecuted.
The I.G. further estimated that the government incurred, at a
minimum,
expenses of $165,000 in investigating and prosecuting
Respondent.
I.G.'s Request for Review of the Decision of the ALJ at 49.
11. Thus, for example, while the ALJ identified specific mitigating
and
aggravating factors, he did not explain how these factors caused him
to
select the particular penalty, assessment, and exclusion he imposed.
12. Respondent contended that the regulations state that any
disease,
physical or mental, constitutes a mitigating factor.
Respondent's Reply
to I.G.'s Exceptions and Supporting Reasons at 8.
None of the
regulations in effect at the time of the ALJ Decision, 42
C.F.R.
..1003.106 and 1003.107, however, makes provision for disease as
a
mitigating factor. Revised regulations, effective January 29,
1992,
provide that, in cases of exclusions based on convictions of
specified
offenses, it may be considered a mitigating factor in determining
the
length of an exclusion if the record in the criminal
proceeding
demonstrates that the court determined that an individual had a
mental,
emotional or physical condition, before or during commission of
the
offense that reduced the individual's culpability. 42
C.F.R.
..1001.102, 1001.201, and 1001.301. The preamble to these
regulations
explains that "such a condition will only be considered if the
court
reached the conclusion that such a factor existed which reduced
the
offender's culpability; the mere appearance of such an allegation in
the
pre-sentencing report would not be enough." 57 Fed. Reg. 3298, at
3315
(January 29, 1992). These regulations make no specific mention of
drug
addiction as such. As we discuss below, we can find no basis in
the
record for concluding that Respondent's drug addiction reduced
his
culpability for his offenses. Thus, even if the revised regulations
had
been in effect and the rule on "mental condition" were applicable
to
Respondent's exclusion, it would not have justified the finding
that
Respondent's drug addiction was a mitigating factor.
13. We note that the ALJ seemed to be implying that when
Respondent
filled out the Medicare claims forms his judgment might have
been
impaired by drugs. As another mitigating factor, discussed below,
the
ALJ found that Respondent performed other valuable medical services
to
his patients. Apparently the ALJ believed that Respondent, at
those
times when he performed such services as acupuncture or
prescribing
drugs, exercised judgment undisturbed by his drug
addiction. The
inconsistency of these allegedly mitigating factors is
striking.