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# Jeffrey S. Stein, M.D., DAB CR5153 (2018)

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## Department of Health and Human Services     DEPARTMENTAL APPEALS BOARD          Civil Remedies Division        

## Jeffrey S. Stein, M.D.	(OI File No. H-17-41815-9),	Petitioner,

## v.

## The Inspector General.

### Docket No. C-18-576Decision No. CR5153August 3, 2018

### DECISION

Petitioner, Jeffrey S. Stein, M.D., was convicted of tax evasion and endeavoring to obstruct and impede the due administration of the internal revenue laws in the U.S. District Court for the Southern District of New York (federal district court). As charged in the information to which Petitioner pled guilty, Petitioner attempted to obstruct the audit of his federal tax returns by creating bogus invoices in support of expenses claimed by his medical practice. To create the bogus invoices, Petitioner used the identities of patients to which he had access because he provided medical treatment to them. Based on these convictions, the Inspector General (I.G.) has excluded Petitioner for eight years from participating in Medicare, Medicaid, and all federal health care programs, as authorized by Section 1128(a)(3) of the Social Security Act (Act).1 Petitioner appeals the exclusion. For the reasons discussed below, I find that the I.G. properly excluded Petitioner and that the eight-year exclusion is not unreasonable.

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### I. Background

Petitioner Jeffrey S. Stein, M.D., is a medical doctor specializing in vascular surgery. I.G. Exhibit (Ex.) 2 at 2. In February 2013, Petitioner was notified by the Internal Revenue Service (IRS) that his tax returns from 2010 and 2011 were selected for audit. I.G. Ex. 2 at 6. In order to justify misrepresentations previously made to his accountant about expenses claimed on Petitioner's tax returns, Petitioner fabricated invoices for services purportedly furnished to his medical practice. I.G. Ex. 2 at 7-8. Among the documents Petitioner fabricated were invoices falsely representing that four disabled military veterans (including two former patients of Petitioner) had been paid for various medical services rendered to Petitioner's medical practice. *Id.* Petitioner had access to the identities of the military veterans because he provided medical services to veterans under a contract with the United States Department of Veterans Affairs (V.A.). I.G. Ex. 2 at 2. Petitioner's accountant submitted the false invoices to the IRS during the audit of Petitioner's taxes. I.G. Ex. 2 at 9.

As a result of these actions, among others, a criminal information was brought against Petitioner charging him with one count of endeavoring to obstruct and impede the due administration of the internal revenue laws, and a second count of tax evasion. I.G. Ex. 2 at 1, 10. Petitioner waived prosecution by indictment and pled guilty to both counts in federal district court. I.G. Ex. 3 at 1; I.G. Ex. 4 at 1. Petitioner was sentenced to two terms of eighteen months of incarceration, served concurrently, and to pay $245,443 in restitution. I.G. Ex. 4 at 2, 5.

In a letter dated December 29, 2017, the I.G. notified Petitioner that he was excluded from participating in Medicare, Medicaid, and all federal health care programs for a period of ten years2 because he had been convicted of a "criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct" connected to the delivery of a health care item or service, including the performance of management or administrative services relating to the delivery of such items or services. I.G. Ex. 1 at 1. The letter explained that Section 1128(a)(3) of the Act authorizes the exclusion. *Id.* Petitioner timely requested review. I convened a telephone prehearing conference and issued an Order and Schedule for Filing Briefs and Documentary Evidence (Briefing Order).

Pursuant to my Briefing Order, the I.G. submitted a written argument (I.G. Br.) and five proposed exhibits (I.G. Exs. 1-5). Petitioner filed a response (P. Br.) and five proposed exhibits (P. Exs. 1-5). In a letter to Petitioner dated June 11, 2018, the I.G. amended its original exclusion letter to remove an aggravating factor and adjust the term of exclusion to eight years. I.G. Ex. 6. The I.G. filed a reply to Petitioner's brief (I.G. Reply) and

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filed the amended exclusion letter as a sixth exhibit (I.G. Ex. 6). Neither party objected to the proposed exhibits offered by the opposing party. Therefore, in the absence of objections, I admit into evidence I.G. Exs. 1-6 and P. Exs. 1-5.

### II. Discussion

***A. Petitioner must be excluded pursuant to section 1128(a)(3) of the Act because he was convicted of a felony criminal offense related to fraud and financial misconduct that was connected to the delivery of a health care item or service.3***

The Act requires the Secretary of Health and Human Services (Secretary) to exclude certain individuals from participation in any Federal health care programs, as defined in Section 1128B(f) of the Act. Act § 1128(a). The I.G. excluded Petitioner pursuant to section 1128(a)(3) of the Act. I.G. Ex. 1. Section 1128(a)(3) mandates exclusion if the following elements are established: 1) an individual or entity has been convicted of a felony offense after August 21, 1996; 2) that offense was related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct; and 3) the offense was in connection with the delivery of a health care item or service or with respect to any act or omission in a government health care program (other than Medicare or Medicaid). The Secretary has delegated this exclusion authority to the I.G. 42 C.F.R. § 1001.101(c).

***1. Petitioner was convicted of felony criminal offenses after August 21, 1996.***

Petitioner concedes that he was convicted. P. Br. at 1-2. Petitioner pled guilty to tax evasion and endeavoring to obstruct and impede the due administration of the internal revenue laws, and the federal district court adjudicated him guilty on July 31, 2015. I.G. Ex. 4 at 1. Tax evasion is a felony offense. 26 U.S.C. § 7201. Endeavoring to obstruct and impede the due administration of the internal revenue laws is a felony offense. 26 U.S.C. § 7212(a), 18 U.S.C. § 3559(a)(5). Petitioner's guilty plea and the court's finding of guilt meet the definition of "conviction" under subsections 1128(i)(2) and (3) of the Act.

***2. The felony criminal offenses of which Petitioner was convicted were related to fraud and financial misconduct.***

Petitioner was convicted of tax evasion and endeavoring to obstruct the IRS audit of his tax returns. As to the tax evasion count, the U.S. Attorney charged that Petitioner

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"willfully and knowingly did attempt to evade and defeat a substantial part of the income tax due and owing ... by preparing and causing to be prepared, signing and causing to be signed, and filing and causing to be filed with the IRS, *false and fraudulent* U.S. Individual Income Tax Returns  ... which returns claimed fictitious and falsely inflated business expenses ...." I.G. Ex. 2 at 10-11 (emphasis added). Similarly, Petitioner attempted to obstruct the IRS audit of his tax returns by, among other things, creating "fabricated and fictitious documents and information as part of a corrupt effort to convince the IRS Auditor that the expenses claimed on [the tax returns of Petitioner and his wife] were legitimate." I.G. Ex. 2 at 7. It is apparent that filing fraudulent tax returns with the IRS and fabricating false documents in support of such fraudulent tax returns are related to fraud and to financial misconduct.

***3. The felony criminal offense of endeavoring to obstruct and impede the due administration of the internal revenue laws was committed in connection with the delivery of a health care item or service.***

As described by the U.S. Attorney in the criminal information, Petitioner engaged in the following conduct:

Using the names of four disabled military veterans (including two former patients) whose identities he obtained as a result of his work for the V.A., [Petitioner] created bogus invoices in the names of those veterans ("the Bogus Invoices"). The Bogus Invoices falsely recited that the individuals whose names were contained on the invoices had performed ... and been paid ... for various medical services rendered to [Petitioner's] medical practice ... In truth and fact, none of the individuals whose names were placed on the Bogus Invoices provided any of the services recited in the fabricated invoices, which totaled $126,525.

I.G. Ex. 2 at 7-8. I find that these facts demonstrate Petitioner's criminal offense was in connection with his treatment of V.A. patients as part of his medical practice.

Appellate panels of the Departmental Appeals Board (DAB) have held that the phrase "in connection with the delivery of a health care item or service" which appears in section 1128(a)(3) is broad and requires the same common sense nexus which is required for an offense to be "related to the delivery of an item or service" under section 1128(a)(1) of the Act. *Kenneth M. Behr*, DAB No. 1997 at 7 n.5 (2005). Such a connection is present when the offense occurs "in the context of an individual's participation in the chain of delivery of health care items or services." *Id.* at 9. This includes offenses which could not have been accomplished but for an individual's position in the chain of delivery. *See Erik D. DeSimone, R.Ph.*, DAB No. 1932 (2004); *Kim Anita Fifer*, DAB CR1016 (2003). In *Fifer*, the administrative law judge upheld the exclusion, pursuant to section 1128(a)(3), of a nursing home employee who committed identity theft by stealing

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personal identifying information belonging to residents of the facilities at which she worked. *Fifer*, DAB CR1016. The administrative law judge reasoned that health care facilities rely on the honesty and integrity of employees to provide necessary care to vulnerable patients. *Id.* at 2. Thus, the excluded individual's abuse of her "positions of trust" to steal the identities of patients for whom she provided care had a connection, even though indirect, with the delivery of health care services. *Id.* Similarly, in the present case, Petitioner was in a position of trust as a contract physician providing care to veterans entitled to V.A. benefits. Petitioner abused his position by appropriating the personal information of four veterans (including two individuals to whom he had provided health care services) to further his tax evasion scheme. Petitioner would not have been in a position to misuse the veterans' personal information had he not been part of the chain of delivery of V.A. health care benefits. For these reasons, Petitioner's offenses are connected to the delivery of health care items or services.4 Accordingly, the I.G. had a legitimate basis for excluding Petitioner under Section 1128(a)(3) of the Act.

***B. The eight-year exclusion imposed by the I.G. falls within a reasonable range.***

***1. The I.G. has established three aggravating factors***

The I.G. considered four of the aggravating factors enumerated in 42 C.F.R. § 1001.102(b) when deciding to exclude Petitioner for eight years, rather than the five‐year statutory minimum. I.G. Ex. 1 at 2. Petitioner concedes that three of these aggravating factors are established: 1) his offense caused a financial loss of greater than $50,000 (42 C.F.R. § 1001.102(b)(1)); 2) the conduct for which he was convicted lasted for a period of more than one year (42 C.F.R. § 1001.102(b)(2)); and 3) he was incarcerated as a result of his offense (42 C.F.R. § 1001.102(b)(5)). P. Br. at 6. Petitioner argues that the I.G. may not rely on the factor identified at 42 C.F.R. § 1001.102(b)(9), based on his exclusion from the New York State Medicaid program, since the state has reversed its exclusion decision. *Id.* The I.G.'s reply brief acknowledges that Petitioner's exclusion from Medicaid was reversed on appeal. I.G. Reply at 5. In addition, the I.G. issued an amended exclusion letter removing 42 C.F.R. § 1001.102(b)(9) as an aggravating factor and adjusting the term of exclusion from ten to eight years. I.G. Ex. 6.

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***2. Petitioner did not establish any mitigating factors.***

The regulations enumerate the only mitigating factors I may consider when the period of exclusion is more than five years. 42 C.F.R. § 1001.102(c); *see also Hussein Awada, M.D.,* DAB No. 2788 at 6 (2017). Petitioner has not offered evidence to establish any of the listed mitigating factors. P. Br. at 6. Instead, Petitioner offers the order of the New York State Board for Professional Medical Conduct and a number of letters of personal reference in support of his argument that the length of his exclusion should be reduced. *See* Docket Entry 1.c. in DAB E-File; *see also* P. Exs. 1-5. It is Petitioner's position that the length of his exclusion is unreasonable because his crimes did not affect his clinical competence or the quality of patient care he delivered; because he is remorseful for his criminal conduct; and because his exclusion will deprive patients of the opportunity to receive "exemplary care from a physician dedicated to their well-being." P. Br. at 9. Petitioner's arguments and evidence do not relate to a mitigating factor recognized under the regulations. Instead, Petitioner's arguments are essentially equitable in nature. Equitable considerations are not a basis to reduce the length of Petitioner's exclusion, however. I may not "review the I.G.'s decision to impose an exclusion . . . on the ground that the excluded person is a good person or well-thought of in the profession or suffering from the loss of his/her vocation." *Donna Rogers*, DAB No. 2381 at 6 (2011); *see also Stefan Murza, D.C.*, DAB No. 2848 at 4 (2018).

***3. Based on the presence of three aggravating factors and no mitigating factors, an eight-year exclusion is not unreasonable.***

The I.G. has broad discretion in determining the length of an exclusion. *See, e.g., Awada*,DAB No. 2788 at 5. So long as the period of exclusion imposed by the I.G. is within a reasonable range, based on demonstrated criteria, I have no authority to change it. *Joann Fletcher Cash,* DAB No. 1725 at 16‐17 (2000) (citing 75 Fed. Reg. 3298, 3321 (1992)); *see also Jeremy Robinson,* DAB No. 1905 at 5 (2004).

Exclusions imposed pursuant to section 1128 and its implementing regulations serve to protect the integrity of federal health care programs from untrustworthy individuals. *See, e.g., Awada,* DAB No. 2788 at 5. Contrary to Petitioner's arguments, the conduct for which he was convicted demonstrates that he poses a potential risk to the integrity of health care programs, justifying an exclusion longer than five years. *See Cash,* DAB No. 1725; *see also Awada,* DAB No. 2788. Petitioner used patient information, to which he had access based on his position of trust as a V.A. physician, to create fraudulent invoices in an attempt to cover up his income tax evasion. Based on this conduct, he was ordered to pay a significant sum in restitution and was sentenced to a period of incarceration. These factors underscore the seriousness of his dishonest scheme. It is not unreasonable to infer from Petitioner's criminal conduct that he may pose a risk to the integrity of patient data systems maintained by Medicare or other federal health care programs, since he was willing to use data from the V.A. (another federal health system)

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in the commission of the offense for which he was convicted. Moreover, Petitioner's submission of fraudulent tax returns to the IRS calls into question whether he can be trusted to submit accurate and honest claims for reimbursement to Medicare and other federally-funded health care programs. The I.G. imposed an exclusion of eight years—three years longer than the minimum mandatory period of exclusion. In effect, the exclusion imposed adds one year to Petitioner's exclusion for each of the established aggravating factors. Based on the record before me, I cannot find that this period is unreasonable.

### III. Conclusion

For the reasons explained above, I conclude that the I.G. properly excluded Jeffrey Stein, M.D. from participation in Medicare, Medicaid, and all federal health care programs, and I sustain the eight-year exclusion, effective January 18, 2018.

Leslie A. WeynAdministrative Law Judge

                                              1. The current version of the Social Security Act can be found at https://www.ssa.gov/OP_Home/ssact/ssact-toc.htm. Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section. 
                            - back to note 1
                                                  2. As described below, the I.G. later reduced the period of Petitioner’s exclusion to eight years. 
                            - back to note 2
                                                  3. My findings of fact/conclusions of law appear as lettered and numbered headings in bold italic type. 
                            - back to note 3
                                                  4. It could also be argued that Petitioner's offenses were in connection with the delivery of health care items and services because the income which Petitioner attempted to conceal by his crimes was derived from his practice of medicine. See I.G. Ex. 2 at 2-3. While the record is not fully developed on this point, it seems reasonable to infer that the majority of Petitioner’s income would have been generated by the delivery of health care items and services. 
                            - back to note 4