Timothy L. Stern, M.D., DAB No. 1314 (1992)
	 Department of Health and Human Services
	       DEPARTMENTAL APPEALS BOARD
		   Appellate Division
_________________________ ) In the Case of:          )     DATE:  March
18, 1992 ) The Inspector General    )     Docket Nos. C-119 and )
			 C-177 - v. -             )     Decision No.
      1314 ) Timothy L. Stern, M.D.,  ) ) Respondent.      )
_________________________)
	       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.