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                              James W. Heroman, M.D., DAB CR6378 (2023)
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James W. Heroman, M.D., DAB CR6378 (2023)








  
  
    

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





James W. Heroman, M.D.,
(OI File No. 4-16-40191-9),
Petitioner,

v.

The Inspector General.
Docket No. C-23-571Decision No. CR6378October 26, 2023

        
              
    

      DECISION

Petitioner, James W. Heroman, M.D., is a physician, licensed to practice in the State of North Carolina.  He owned and operated an ophthalmology practice, with offices in Charlotte and Concord, North Carolina.  He pleaded guilty to one count of receiving and delivering a misbranded drug, Lucentis.  Based on his guilty plea, the Inspector General (IG) has excluded him for 13 years from participating in Medicare, Medicaid, and all federal health care programs, as authorized by section 1128(a)(1) of the Social Security Act (Act).  Petitioner appeals the exclusion.  For the reasons discussed below, I find that the IG properly excluded Petitioner Heroman and that the 13-year exclusion falls within a reasonable range.

Background

In a letter dated June 30, 2023, the IG notified Petitioner that he was excluded from participating in Medicare, Medicaid, and all federal health care programs for a period of 13 years because he had been convicted of a criminal offense related to the delivery of an item or service under Medicare or a state health care program.  The letter explained that section 1128(a)(1) of the Act authorizes the exclusion.  IG Ex. 1.

Page 2

Petitioner timely requested review.

The IG has submitted a brief (IG Br.) and five exhibits (IG Exs. 1-5).  Petitioner responded to the IG's brief (P. Br.) and submitted six exhibits (P. Exs. 1-6).  The IG filed a reply.

**Exhibits**.  In the absence of any objections, **I admit into evidence IG Exs. 1-5**.

The IG objects to my admitting four of Petitioner's proffered exhibits:

**P. Ex. 1** is Petitioner's affidavit.  In it, Petitioner proffers three assertions:

When he purchased his ophthalmology practice, Petitioner did not know that it illegally purchased some of the drugs he prescribed.  When he eventually found out (which was when the FDA began investigating), he stopped the illegal activity.  P. Ex. 1 at 1-3 (Heroman Decl. ¶¶ 4-10);
	Petitioner performs a vital service for which there is a growing need.  P. Ex. 1 at 3-5 (Heroman Decl. ¶¶ 11-17, 20); and
	Except for this conviction, Petitioner has never been accused of fraud and is no longer in a management position, so is not likely to commit future fraud.  P. Ex. 1 at 5 (Heroman Decl. ¶¶ 18-19).**P. Ex. 2** is Petitioner's curriculum vitae.

**P. Ex. 3** is a written declaration from Petitioner's current employer.  He reiterates Petitioner's assertions about the growing need for ophthalmologists.

**P. Ex. 5** is a written declaration from Petitioner's criminal attorney, who reiterates Petitioner's assertions that he didn't understand that he was breaking the law.

The IG argues that these documents are irrelevant and immaterial and that they impermissibly collaterally attack Petitioner's underlying conviction.  I agree.

I must exclude irrelevant or immaterial evidence.  42 C.F.R. § 1005.17(c).  The regulations preclude collateral attacks on Petitioner's underlying conviction, which means that evidence submitted to undermine the conviction is necessarily irrelevant.  42 C.F.R. § 1001.2007(d).  This would include any claims that Petitioner did not know about the mislabeled drugs.  *See* IG Ex. 3 at 3 ("At all times relevant . . . Defendant knew that [his practice] was ordering, receiving in interstate commerce, and delivering unapproved foreign market Lucentis for pay or otherwise in the United States.").

Page 3

With respect to the proffered evidence addressing the need for ophthalmology services, if certain criteria are met, the statute and regulations allow waiver of an exclusion that imposes hardship on a medically-underserved community.  Act § 1128(c)(3)(B).  The IG may grant *a state health care program's request* to waive an exclusion if "[t]he individual or entity is the sole community physician or the sole source of essential specialized services in a community" and "[t] he exclusion would impose a hardship on beneficiaries (as defined in section 1128A(i)(5) of the Act) of that program."  42 C.F.R. § 1001.1801(b)(1)-(2).  Significantly, for our purposes, "[t]he decision to grant, deny[,] or rescind a request for a waiver is not subject to administrative or judicial review."  42 C.F.R. § 1001.1801(f); Act § 1128(c)(3)(B).  Thus, any such request for waiver must be made directly to the IG by the state health care program, not by Petitioner, and the IG's determination with respect to any waiver is not reviewable in this or any other forum.  I have no authority to consider the issue, and any evidence regarding the need for Petitioner's services is irrelevant.

I therefore decline to admit P. Exs. 1, 2, 3, and 5.  In the absence of objections, **I admit into evidence P. Exs. 4, and 6**.

The parties agree that an in-person hearing is not necessary.  IG Br. at 9; P. Br. at 7.

Discussion

***1. Petitioner must be excluded from program participation for a minimum of five years because he was convicted of a criminal offense related to the delivery of an item or service under Medicare.  Act § 1128(a)(1)***.1

Under section 1128(a)(1) of the Act, the Secretary of Health and Human Services *must* exclude an individual who has been convicted under federal or state law of a criminal offense related to the delivery of an item or service under Medicare or a state health care program.  42 C.F.R. § 1001.101(a).

Beginning no later than September 9, 2013, and continuing through September 8, 2021, Petitioner Heroman was the sole owner and operator of an ophthalmology clinic, with offices in Charlotte and Concord, North Carolina.  IG Ex. 2 at 1; IG Ex. 3 at 1; P. Ex. 4 at 1.  From September 9, 2013, through on or about June 27, 2018, his practice purchased the

Page 4

prescription drug, Lucentis, from a foreign source, "knowing that it was intended for distribution in countries other than the United States."  IG Ex. 2 at 1; IG Ex. 3 at 1.2

The drug Petitioner purchased was less expensive than that sold in the United States but had not been approved for use in the United States by the Food and Drug Administration (FDA).  It was "misbranded" in that its packaging did not include FDA-required warnings.  IG Ex. 2 at 1, 4; IG Ex. 3 at 2.  Through his clinics, Petitioner Heroman "administered, delivered, and proffered delivery" of the drug for pay and otherwise.  IG Ex. 2 at 4; IG Ex. 3 at 2.  Through his practice, Petitioner billed the Medicare program for the unapproved and less expensive drug as if it were FDA-approved.  He kept the difference in price as profit.  IG Ex. 2 at 2; IG Ex. 3 at 2.

Petitioner was charged with one count of receiving and delivering misbranded Lucentis, in violation of 21 U.S.C. §§ 331(c) and 333(a)(1).  IG Exs. 3, 4.  He pleaded guilty, admitting that he received and distributed a drug that the FDA had not approved for distribution or use in the United States and that his practice billed Medicare for that drug.  IG Ex. 2 at 2; IG Ex. 3 at 3.  On January 11, 2023, the federal district court for the Western District of North Carolina accepted Petitioner's plea and entered judgement against him.  IG Ex. 5.

The court sentenced Petitioner to serve 12 months of probation, 50 hours of community service, and ordered him to pay $450,000 in restitution to the Medicare program.  IG Ex. 5 at 2-5.

There is thus no doubt that the Petitioner was convicted of a federal criminal offense related to the delivery of an item or service under the Medicare program.  I need not look beyond the four corners of the criminal court record to reach this conclusion.  In pleading guilty, Petitioner admitted that he billed the Medicare program for the unapproved and more expensive drug and that he kept the difference in price as profit.  IG Ex. 2 at 2; IG Ex. 3 at 2.  The court ordered him to pay $450,000 in restitution to the Medicare program.  IG Ex. 5 at 5.

Petitioner, nevertheless, maintains that his crime was not "related to" the delivery of an item or service under Medicare or a state health care program.  He points out that nothing in section 331(c) of the Food, Drug, and Cosmetics Act – to which he pleaded guilty – "ties this misdemeanor offense to a crime against the . . . Medicare program."  P. Br. at 4.  The Departmental Appeals Board has repeatedly rejected this argument.

Page 5

It is beyond well-settled that, in determining whether a conviction is program-related within the meaning of section 1128(a)(1), I am not limited to the language of the statute under which the individual was convicted.  *Dr. Timothy Baxter*, DAB No. 3074 at 15-16 (2022); *Yolanda Hamilton, M.D.*, DAB No. 3061 at 10 (2022); *Shaun Thaxter*, DAB No. 3053 at 11 (2021); *Funmilola Mary Taiwo*, DAB No. 2995 at 8 (2020); *Summit S. Shah, M.D.*, DAB No. 2836 at 7 (2017) ("The Board has long held . . . that an ALJ is free to look beyond the narrow constructs of a state's criminal statutes."); *Janet R. Constantino*, DAB No. 2666 at 7-8 (2015) (holding that the basis for the underlying conviction may be established by judicial records or other probative evidence); *Lyle Kai, R.Ph.*, DAB No. 1979 at 5 (2005), *aff'd*, *Kai v. Leavitt*, No. 05-00514 (D. Haw. July 17, 2006); *Narendra M. Patel*, *M.D.*, DAB No. 1736 (2000) (stating that the Departmental Appeals Board has "repeatedly" held that the basis for an exclusion need not appear in the court records but may be demonstrated "by extrinsic evidence of the underlying facts and circumstances"), *aff'd, Patel v. Thompson*, 319 F.3d 1317 (11th Cir. 2003).

Petitioner claims that, in *Travers v. Sullivan*, 801 F. Supp. 394 (E.D. Wash. 1992), a federal court found it "not proper for the court to delve into the facts surrounding the conviction."  P. Br. at 4.  Putting aside the fact that, here, the conviction itself establishes relatedness, Petitioner's reading of *Travers* is simply wrong.  The issue there was *not* whether the IG could rely on extrinsic evidence in determining if a conviction was program-related.  The issue was whether not allowing a petitioner to attack collaterally his underlying conviction violated his due process rights.  The court concluded that it did not.3  *Travers*, 801 F. Supp. at 403.

Petitioner also asserts that his exclusion should have been permissive rather than mandatory.  P. Br. at 5.  Section 1128(a)(1) mandates that whenever a conviction is within its scope, the IG *must* impose an exclusion, whether or not the conviction otherwise fits within the permissive exclusion provisions.  *Lorna Fay Gardner*, DAB No. 1733 at 5 (2000); *see Gregory J. Salko, M.D.*, DAB No. 2437 at 3 (2012) and cases cited therein; *Tamara Brown*, DAB No. 2195 at 7 (2008).  And because Petitioner is subject to a mandatory exclusion, he is not subject to a permissive exclusion.  Section 1128(b)(1), which governs permissive exclusions, applies only to crimes that are not related to federal or state healthcare programs or to crimes other than those specifically described in section 1128(a).  Act § 1128(b)(1); *Craig Richard Wilder*, DAB No. 2416 at 7 (2011).

Page 6

An exclusion brought under section 1128(a)(1) must be for a minimum period of five years.  Act § 1128(c)(3)(B); 42 C.F.R. § 1001.2007(a)(2).  I now consider whether the length of his exclusion, beyond five years, falls within a reasonable range.

***Based on the aggravating factors present in this case, and no mitigating factor, the 13-year exclusion falls within a reasonable range.***Among the factors that may serve as a basis for lengthening the period of exclusion are the two that the IG relies on in this case:  1) the acts resulting in the conviction, or similar acts, caused a government program or another entity financial losses of $50,000 or more; and 2) the acts that resulted in the conviction, or similar acts, were committed over a period of one year or more.  42 C.F.R. § 1001.102(b)(1), (2).  The presence of an aggravating factor or factors, not offset by any mitigating factor or factors, justifies lengthening the mandatory period of exclusion.  "Simply meeting the threshold for an aggravating factor is a clear indication of untrustworthiness."  *Mrugeshkumar Shah, M.D.*, DAB No. 3079 at 10 (2022); *Hussein Awada, M.D.*, DAB No. 2788 at 10 (2017).

Petitioner does not deny the two aggravating factors; instead, he reiterates that the exclusion is improper and that, if any exclusion were appropriate, it should have been permissive.  P. Br. at 5.  I have already rejected these arguments.

**Program financial loss (42 C.F.R. § 1001.102(b)(1))**.  The sentencing court ordered Petitioner to pay $450,000 in restitution to the Medicare program.  IG Ex. 5 at 5.  Restitution has long been considered a reasonable measure of losses.  *Awada,* DAB No 2788 at 7; *Farzana Begum, M.D.*, DAB No. 2726 at 16 n.8 (2016), *aff'd, Begum v. Hargan*, No. 16 CV 9624, 2017 WL 5624388 (N.D. Ill. Nov. 21, 2017); *Juan de Leon, Jr.*, DAB No. 2533 at 5 (2013); *Wilder*, DAB No. 2416 at 9.

As I explained in an earlier case, an exclusion is designed to protect program integrity and program beneficiaries:

[T]he regulation recognizes [that] the amount of program losses reflects, in part, the seriousness of the individual's crime and thus the level of threat he poses to program integrity.  While the process is inexact, so long as the IG reasonably translates the aggravating factor into an increase in the period of exclusion, I must affirm [the] determination.  That a corrupt practitioner and the schemes in which he participates can cause health care programs substantial losses underscores the importance of excluding the unscrupulous.  Over time, health care programs simply cannot withstand these losses.

Page 7

*Brandon Michael Coburn*, DAB CR5247 at 4 (2019).

Financial losses of even one dollar over the $50,000 threshold justify extending the length of the period of exclusion.  *Edwin L. Fuentes*, DAB No. 2988 at 13 (2020).  Here, $450,000 represents an enormous loss – nine times the threshold amount.  Such losses, by themselves, justify increasing the period of exclusion well beyond the five-year minimum.  *See* *Thaxter*, DAB No. 3053 at 31-32; *Robert Kolbusz, M.D.*, DAB No. 2759 at 6-7 (2017); *Jeremy Robinson*, DAB No. 1905 (2004); *Donald A. Burstein, Ph.D.*, DAB No. 1865 (2003).

**Duration of criminal conduct (42 C.F.R. § 1001.102(b)(2))**.  We consider the length of Petitioner's participation in the criminal scheme in order to distinguish the individual whose lapse in integrity is short-lived from those who display a lack of integrity over a longer period of time.  "Participation in, or even knowing but silent acquiescence in, a continuing fraudulent scheme that could be expected to cause repeated misrepresentations and repeated harm over a period of time evidences a continuing lack of integrity."  *Burstein*, DAB No. 1865 at 8.

Here, Petitioner's illegal activity began on September 9, 2013, and continued through June 27, 2018, almost five years later, which justifies significantly increasing the period of his exclusion.  IG Ex. 2 at 1; IG Ex. 3 at 1.

I thus find that the aggravating factors in this case definitively establish that Petitioner is untrustworthy and more than justify a substantial increase in the length of his exclusion beyond the five-year minimum.

**No mitigating factor**.  The regulations consider mitigating just three factors:  1) a petitioner was convicted of three or fewer misdemeanor offenses and the resulting financial loss to the program was less than $5,000; 2) the record in the criminal proceedings demonstrates that the court determined that a petitioner had a mental, physical, or emotional condition that reduced his culpability; and 3) a petitioner's cooperation with federal or state officials resulted in others being convicted or excluded, or additional cases being investigated, or a civil money penalty being imposed.  42 C.F.R. § 1001.102(c).  Characterizing the mitigating factor as "in the nature of an affirmative defense," the Board has ruled that Petitioner has the burden of proving any mitigating factor by a preponderance of the evidence.  *Barry D. Garfinkel*, *M.D.*, DAB No. 1572 at 8 (1996).

No mitigating factors offset the significant aggravating factors present in this case.  The program's financial loss was significantly more than $5,000.  No evidence suggests that Petitioner had a mental, physical, or emotional condition that reduced his culpability.  He has not shown that his cooperation with federal officials, if any, resulted in others being investigated, convicted, or excluded.

Page 8

Based on the two aggravating factors and the absence of any mitigating factor, I must determine whether the exclusion period imposed by the IG falls within a reasonable range.  So long as that period falls within a reasonable range, my role is not to second-guess the IG's judgment.  *Robinson*, DAB No. 1905 at 5 (ALJ review must "reflect the deference accorded to the [IG] by the Secretary.").

A "'reasonable range' refers to a range of exclusion periods that is more limited than the full range authorized by the statute [i.e. from a minimum of five years to a maximum of permanent] and that is tied to the circumstances of the individual case."  *Joseph M. Rukse, Jr., R.Ph.*, DAB No. 1851 at 11 (2002) (citing*Gary Alan Katz, R.Ph*., DAB No. 1842 at 8 n.4 (2002)).  The goal here is to protect federal health care programs and beneficiaries from potential harm.  *Joann Fletcher Cash*, DAB No. 1725 (2000).

The underlying facts here more than justify a 13-year exclusion.  For almost *five years*, Petitioner illegally prescribed an unapproved drug and billed the Medicare program as if he were prescribing the more expensive and approved drug, pocketing the difference in price as profit.  His illegal conduct caused the Medicare program considerable financial losses – $450,000.  He has thus shown an ongoing lack of integrity and poses a threat to health care programs.  I therefore conclude that the 13-year exclusion falls within a reasonable range.

Conclusion

The IG properly excluded Petitioner from participating in Medicare, Medicaid, and other federal health care programs.  So long as the period of exclusion is within a reasonable range, based on demonstrated criteria, I have no authority to change it.  *Cash*, DAB No. 1725 at 7 (citing 57 Fed. Reg. 3298, 3321 (1992)).  I find that the 13-year exclusion falls within a reasonable range.

Endnotes

1 My findings of fact and conclusions of law are set forth, in italics and bold, in the discussion captions of this decision.

2 Lucentis is a prescription medication given by injection to treat macular degeneration, diabetic retinopathy, and other eye conditions.  It can have serious side effects.  IG Ex. 2 at 3; IG Ex. 3 at 2-3; Lucentis, https://www.lucentis.com/ (Last visited October 20, 2023).

3 In an earlier decision in the same case, the court determined that Petitioner's "no-contest" plea, which he entered pursuant to a first offender deferred-adjudication program, was a "conviction" within the meaning of section 1128(a)(1) and that, although his crime was primarily financial, it was program-related.  *Travers v. Sullivan,* 791 F. Supp. 1471 (E.D. Wash. 1992).
  
          /s/
        Carolyn Cozad Hughes

                      Administrative Law Judge Back to top
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