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                              Karim Maghareh, Ph.D. and BestCare Laboratory Services, LLC, DAB CR5797 (2021)
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Karim Maghareh, Ph.D. and BestCare Laboratory Services, LLC, DAB CR5797 (2021)








  
  
    

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





Karim Maghareh, Ph.D. and BestCare Laboratory Services, LLC,
Petitioners,

v.

The Inspector General.
Docket No. C-20-785Decision No. CR5797January 26, 2021

        
              
    

      DECISION

Although this case has a somewhat lengthy and exceptional procedural history, on the merits, it is not that complicated.

Petitioner, BestCare Laboratory Services, LLC, is a clinical laboratory located in Webster, Texas (a suburb of Houston), that operates labs and specimen-processing centers throughout the state.  Petitioner, Karim Maghareh, is its founder, owner, and chief executive officer.  The laboratory participates in the Medicare program as a supplier of services.  For years, it submitted to the Medicare program false claims for travel reimbursement.  *United States ex. rel. Drummond v. BestCare Laboratory Services, LLC*, 950 F.3d 277 (5th Cir. 2020).  Based on 571 false claims, the Inspector General (IG) proposes to exclude Petitioners BestCare and Maghareh from participating in Medicare, Medicaid, and all federal health care programs for 15 years, as authorized by section 1128(b)(7) of the Social Security Act (Act).  Petitioners appeal the proposed exclusion.

The IG moves for summary judgment, which Petitioners oppose.  For the reasons discussed below, I grant the IG's motion.  I find that an in-person hearing would serve no purpose.  As both the federal district court and the Fifth Circuit Court of Appeals concluded in a case arising from the same billing scheme, the matter presents no genuine

**Page 2**

dispute as to any material fact, and the movant is entitled to judgment as a matter of law.  *United States v. BestCare*, 950 F.3d at 280; *see United States ex. rel. Drummond v. BestCare Laboratory*, Civil Action No. H-08-2441, 2014 WL 5359789 (S.D. Tex. Aug. 21, 2014).

I also find that the IG is authorized to exclude Petitioners Maghareh and BestCare from program participation, and that the 15-year period of exclusion is not unreasonably long.

Background

In a letter dated August 21, 2015, the IG notified Petitioners that he proposed excluding them from participating in Medicare, Medicaid, and all federal health care programs for a period of 15 years because, from August 21, 2009, through January 26, 2010, they submitted 633 false claims (later reduced to 571) to the Medicare program, claiming that the lab's technicians had traveled 400 miles or more.  In fact, technicians had not traveled any of those miles.  IG Ex. 1.

The letter explained that section 1128(b)(7) of the Act authorizes the exclusion.  IG Ex. 1.

Petitioners requested review.  The case went through the usual administrative process, with review by an administrative law judge followed by Petitioners' appeal to the Departmental Appeals Board.  Petitioners lost at both levels and appealed to federal district court.  There, they cited the Supreme Court decision in *Lucia v. SEC*, 138 S. Ct. 2044 (2018), and argued that the final agency decision was not valid because the administrative law judge made critical rulings in the case before he was properly appointed (although he was validly appointed at the time he issued his decision).  The court agreed and, in an order dated May 8, 2020, remanded the case to the Departmental Appeals Board for a new hearing.  *Karem Maghareh v. Azar*, Civ. No. 4:19-CV-00238, 2020 WL 2842029 (S.D. Tex. May 8, 2020).  In turn, the Board remanded the case to the Civil Remedies Division, and it has been assigned to me.  I have had no prior involvement in the matter.

The IG has submitted her motion for summary judgment and brief in support (IG Br.) with 25 exhibits (IG Exs. 1-25), which include IG Ex. 19a, an mp3 digital audio file of parts of a telephone conversation between Petitioner Maghareh and a Medicare contractor's employee.  Petitioners filed a prehearing brief (P. Br.), responded to the IG's motion and brief (P. Response), and submitted 40 exhibits with five attachments (P. Exs. 1-40 and attachments A-E).  The IG filed a reply brief (IG Reply).1

**Page 3**

**Discovery**.  In a request for production, Petitioners asked the IG to produce documents regarding my appointment as an administrative law judge.  In an order, dated October 7, 2020, I pointed out that the IG would not be expected to possess my appointment documents, and, although I had them, nothing in the statute or regulations entitles a party to discovery from the judge.  Rather, the regulations authorize limited requests, directed *to a party*.  42 C.F.R. § 1005.7(a).  In responding to Petitioners' discovery request, the IG confirmed that she did not possess the appointment documents.  I am, nevertheless, happy to share them, and they have been added to this record.  E-file documents 4a and 4b.

During our prehearing conference, Petitioners stipulated that they did not object to the validity of my appointment and would not pursue any additional *Lucia* challenges as part of their appeal.  Order Summarizing Pre-Hearing Conference at 1 (Dec. 15, 2020).

Petitioners have also asked me to issue subpoenas for unnamed witnesses and to direct those witnesses to produce a broad but non-specific range of documents.  The submission is not so much a subpoena request as a request for production of documents from third parties, the Medicare contractors.  As noted above, the regulation that authorizes discovery requires that requests for production of documents be directed to a party.  42 C.F.R. § 1005.7(a).

Subpoenas can be directed to individuals who are not parties to the litigation so long as "the testimony [is] reasonably necessary for the presentation of a party's case."  42 C.F.R. § 1005.9(a).  The subpoena may require the individual to produce evidence authorized by section 1005.7.  42 C.F.R. § 1005.9(b).  However, the subpoena request must "specify" the evidence to be produced; it must designate the witnesses and "describe the address and location with sufficient particularity to permit such witnesses to be found."  42 C.F.R. § 1005.9(d).

I may deny discovery if I find that:  the documents sought are irrelevant, unduly costly or burdensome to produce; granting discovery will unduly delay the proceeding; or the party seeks privileged information.  The burden here is on Petitioners to show that discovery should be allowed.  42 C.F.R. § 1005.7(e); *see* 42 C.F.R. § 1005.9(b) (authorizing section 1005.7 discovery as part of a subpoena request).

The IG objects to Petitioners' request for subpoenas on several grounds:  Petitioners did not claim that they would call any contractor witnesses to testify nor have they shown that such testimony would be relevant or reasonably necessary for the presentation of their case.  Moreover, although Petitioners assert that the evidence sought would show the government's own interpretation of the billing rules and that they, in fact, cooperated with government guidelines, the Fifth Circuit Court of Appeals resolved those issues in *United States ex. rel. Drummond v. BestCare*, 950 F.3d 277, an action brought under the False Claims Act, 31 U.S.C. § 3730(b).  The IG also points out that Petitioners are requesting duplicates of discovery sought and obtained during that False Claims Act case,

**Page 4**

and have had these documents (which total more than 2,000 pages) in their possession since 2013.  IG's Response to Petitioner's Objections at 2.

Petitioners do not exactly deny possessing the documents, but characterize the IG's objections as "conclusory" and claim that complying with the request imposes no "additional burden" on the IG or the third-parties that would "outweigh" the issuance of these subpoenas.2
  According to Petitioners, the documents produced "*may contain* evaluations, comments, or results of audits" by the contractors, showing that the auditors approved the claims upon which these exclusions are based.  P. Reply in Support of Issuance of Requested Subpoenas at 3 (emphasis in original).

There are many reasons to deny Petitioners the discovery they seek.  They all but concede that they have no particular witnesses in mind but "may" call someone from one of the contractors' offices, depending on the outcome of the subpoena request.  P. Reply in Support of Issuance of Requested Subpoenas at 2.  This description obviously does not meet the specificity requirements of the regulation.

Moreover, inasmuch as the federal rules for discovery are far more expansive than the regulations that govern discovery in these proceedings, I find it highly unlikely that, during the federal court proceedings, Petitioners were not given all of the documents they now seek.

Nor do I agree that producing the documents (for a second time, but years later) would impose no additional burden on third-parties.  (Indeed, parsing out the discovery request, by itself, is somewhat burdensome.)  I find that granting Petitioners' subpoena request would be unduly costly and burdensome and would unduly further delay this case, which was initiated more than five years ago.

Most significant, I agree that the discovery sought is irrelevant.  Petitioners hope to discover evidence to justify their billing practices.  As discussed below, two federal courts have ruled definitively that those practices could not be justified – no one could reasonably conclude that it was lawful to bill the Medicare program for miles not traveled.  As I explain below, the federal appellate court decision controls, and, even if it didn't, its reasoning (and that of the district court) is sound and should be followed.  *BestCare*, 950 F.3d 277; *see BestCare*, 2014 WL 5359789.

For all of these reasons, I deny Petitioners' request for subpoenas.

**Page 5**

Discussion

***1. The IG is entitled to summary judgment because the Court of Appeals for the Fifth Circuit has determined, based on undisputed evidence, that Petitioners knowingly submitted multiple false and fraudulent claims to the Medicare program; Petitioners may not relitigate that issue in this forum.  The IG therefore has a basis for excluding them from program participation.  Act § 1128(b)(7).***3

**Summary judgment**.  "All it means for a decision to be based on a grant of summary judgment is that there are *no issues that would benefit from being resolved in an evidentiary hearing*."  *Fal-Meridian, Inc. v. U.S. Dep't of Health & Human Servs.*, 604 F.3d 445, 449 (7th Cir. 2010) (emphasis added).

Summary judgment is appropriate if a case presents no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law.  *Kimbrell Colburn*, DAB No. 2683 at 4 (2016); *Bartley Healthcare Nursing & Rehab.*, DAB No. 2539 at 3 (2013) (citing*Celotex Corp. v. Catrett*, 477 U.S. 317, 322-25 (1986)); *Ill. Knights Templar Home*, DAB No. 2274 at 3-4 (2009), and cases cited therein.

The moving party may show the absence of a genuine factual dispute by presenting evidence so one-sided that it must prevail as a matter of law or by showing that the non-moving party has presented no evidence "sufficient to establish the existence of an element essential to [that party's] case, and on which [that party] will bear the burden of proof at trial."  *Livingston Care Ctr. v. Dep't of Health & Human Servs.,*388 F.3d 168, 173 (6th Cir. 2004) (quoting *Celotex Corp. v. Catrett*, 477 U.S. at 323-24).  To avoid summary judgment, the non-moving party must then act affirmatively by tendering evidence of specific facts showing that a dispute exists.  *Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,*475 U.S. 574, 586 n.11 (1986); *Vandalia Park,*DAB No. 1939 (2004); *Lebanon Nursing & Rehab. Ctr.,*DAB No. 1918 (2004); *Crestview Parke Care Ctr*., DAB No. 1836 at 5 (2002).

In examining the evidence for purposes of determining whether summary judgment is appropriate, I must draw all *reasonable* inferences in the light most favorable to the non-moving party.  *Brightview Care Ctr.*, DAB No. 2132 at 2, 9 (2007); *Livingston Care Ctr.*, 388 F.3d at 172; *Guardian Health Care Ctr.,*DAB No. 1943 at 8 (2004); *see also Brightview*, DAB No. 2132 at 10 (entry of summary judgment upheld where inferences and views of non-moving party are not reasonable).  However, drawing factual inferences

**Page 6**

in the light most favorable to the non-moving party *does not require that I accept the non-moving party's legal conclusions*.  *W. Tex. LTC Partners, Inc.*, DAB No. 2652 at 6-7, 14-15; *cf. Guardian Health Care Ctr.*, DAB No. 1943 at 11 ("A dispute over the conclusion to be drawn from applying relevant legal criteria to undisputed facts does not preclude summary judgment if the record is sufficiently developed, and there is only one reasonable conclusion that can be drawn from those facts."); *see Green Valley Health Care & Rehab. Ctr.*, DAB No. 2947 at 8 (2019) (quoting*Johnson v. Perez*, 823 F.3d 701, 705 (D.C. Cir. 2016) (noting that a genuine factual dispute does not exist "when a putatively disputed body of evidentiary material could not, even assuming a sympathetic factfinder, reasonably support a finding crucial to the nonmoving party's legal position.")).  Where a party's factual assertions are "blatantly contradicted by the record," the court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.  *Scott v. Harris*, 550 U.S. 372, 380 (2007).

That a case presents the question of whether Petitioners acted "knowingly" does not preclude summary judgment.  Each case must be evaluated like any other to determine whether a genuine issue of material fact exists.  *BestCare*, 950 F.3d at 281 (finding that the presence of an "intent issue" does not preclude summary judgment).

Finally, deciding a case on summary judgment *does not mean* that it is decided without a hearing, and, in applying the principles of summary judgment to administrative proceedings, courts have been careful to avoid any suggestion that the case is decided without a hearing.  Throughout their decisions, they refer to deciding the case without an "oral hearing" or without an "evidentiary hearing."  Although a case may be decided on summary judgment (or based on the written record), an administrative law judge, by considering the evidence and applying the law, has granted the petitioner a hearing, as required by sections 205(b) and 1128(f) of the Act.  *See, e.g., CNG Transmission Corp. v. FERC*, 40 F.3d 1289, 1293 (D.C. Cir. 1994) (holding that a "paper hearing" satisfies statutory requirements for "notice and opportunity for hearing.").

**The exclusion statute and regulations**.  Under section 1128(b)(7) and 42 C.F.R. § 1001.901, the IG may exclude from participating in federal health care programs an individual or entity that the IG determines has committed an act described in section 1128A of the Act.  Section 1128A authorizes the IG to exclude those who present, or cause to be presented, to federal health care programs (Medicare, Medicaid) false or fraudulent claims, that they know, or should know, are false and fraudulent.  Act §§ 1128A(a)(1), 1128(b)(7).

"Knowingly" means that a person "has actual knowledge of the act, acts in deliberate ignorance of the act, or acts in reckless disregard of the act."  "Should know" or "should have known" means that "a person either acts in deliberate ignorance of the truth or falsity of the information or acts in reckless disregard of the truth or falsity of the information."  No proof of specific intent to defraud is required.  42 C.F.R. § 1003.110;

**Page 7**

*United States v. Krizek*, 111 F.3d 934, 942 (D.C. Cir. 1997) (holding that reckless disregard is measured by an objective standard and thus "may be established without reference to the subjective intent of the defendant.").

Unlike other types of section 1128 exclusions, individuals excluded under section 1128(b)(7) are generally entitled to ALJ review *before* an exclusion is imposed.  42 C.F.R. § 1001.2003(b).

**Petitioners' fraudulent billing scheme**.  BestCare operates a diagnostic laboratory in Webster, Texas (a Houston suburb), where it tests specimens.  It employs technicians in other cities (Dallas, San Antonio, Waco, Austin, and El Paso), who gather specimens from nursing home residents throughout the state.  IG Ex. 13 at 37-39 (Maghareh investigative testimony).  The technicians ship the specimens in bulk to Houston, at a cost of about $100 per batch.4
  A BestCare worker from the Webster laboratory retrieves the batches from Houston's airport.  IG Ex. 13 at 172, 199-200 (Maghareh investigative testimony).

Medicare will reimburse a laboratory for travel costs incurred by its staff.  It pays a fee "to cover the transportation and personnel expenses for *trained personnel to travel*" to collect blood or other samples from Medicare beneficiaries who are homebound or reside in nursing homes.  Act § 1833(h)(3)(B) (42 U.S.C. § 1395l(h)(3)(B)) (emphasis added).

Here, Petitioners admit that they billed the Medicare program for technician travel that never took place and were reimbursed for the hundreds of miles the *specimens* traveled, in bulk, via air freight.  In addition, BestCare often failed to prorate mileage, treating a single shipment of multiple samples as though each sample had been shipped separately.  *BestCare*, 950 F.3d at 279.  As the district court pointed out (and Petitioners do not dispute), Petitioners repeatedly billed the Medicare program $1,500 in travel expenses for a $43 blood test.  *See* IG Ex. 13 at 188-189 (Maghareh investigative testimony).  When asked whether that was reasonable, Petitioner Maghareh replied that he assumed it was "because Medicare thought so too, and they paid us."  The district court found that "[n]o reasonable person [would] agree."  *BestCare*, 2014 WL 5359789; IG Ex. 13 at 193 (Maghareh investigative testimony).5
  Without specifically addressing that particular bit

**Page 8**

of testimony, the Court of Appeals ruled that the district court "did not err" in its judgments.  *BestCare*, 950 F.3d at 283.
The scheme went on for years, with the Medicare program paying Petitioners more than ten million dollars.  IG Ex. 2; *see BestCare*, 950 F.3d at 280.  This case involves a small number of those fraudulent claims – 571 false claims for trips of at least 400 miles, submitted from August 21, 2009, through January 26, 2010.  Medicare paid Petitioners $258,846.64 for these claims.  IG Ex. 2; *see BestCare*, 950 F.3d at 282.6

**The federal court decisions and issue preclusion (collateral estoppel)**.  In 2008, Richard Drummond, on behalf of the United States, brought a *qui tam* whistleblower suit, under the False Claims Act, against Petitioners.  The case was still pending in 2011, when the United States intervened, pursuant to 31 U.S.C. § 3730(b)(4)(A).  The United States charged Petitioners with fraud, unjust enrichment, and payment by mistake for claims submitted between August 4, 2005, and January 26, 2010, as well as violations of the False Claims Act for claims submitted between August 4, 2005, and June 30, 2008.  *United States ex. rel. Drummond v. BestCare Laboratory*, 950 F.3d at 279.  The government sought summary judgment, filing separate motions:  one based on fraud, unjust enrichment, and payment by mistake (common law claims); and the other based on violations of the False Claims Act.  In separate decisions, the district court granted both motions, awarding damages of $10,600,000 for fraud, unjust enrichment and payment by mistake (*United States ex. rel. Drummond v. BestCare Laboratory*, 2014 WL 5359789 (2014)) and damages of $30,571,635 for violations of the False Claims Act.  *United States ex. rel. Drummond v. BestCare Laboratory,* Civil Action No. H-08-2441, 2018 WL 1609578(S.D. Tex. Apr. 3, 2018); *see BestCare*, 950 F.3d at 280.

Petitioners asked the district court to reconsider its decision on the fraud, unjust enrichment, and payment by mistake counts.  The court refused.  *See BestCare*, 950 F.3d at 280.

Petitioners appealed, and, in a decision dated February 17, 2020, the Fifth Circuit affirmed both rulings ("The district court did not err in granting the Government's motions for summary judgment").  The appeals court characterized Petitioner's arguments as bordering "on the absurd" and concluded that Petitioners "spent years submitting false claims to the Government.  Now they must pay."  *United States ex. rel. Drummond v. BestCare Laboratory*, 950 F.3d at 282, 285.

There have thus been final court decisions that resolve the issue before me:  whether Petitioners knowingly presented false or fraudulent claims to the Medicare program.

**Page 9**

Based on the doctrine of issue preclusion (also known as collateral estoppel), Petitioners are precluded from relitigating that issue in this forum.  *Parklane Hosiery Co., Inc. v. Shore*, 439 U.S. 322 (1979) (holding that where the petitioner corporation and its officers had a "full and fair" opportunity to litigate their case in an action brought by the Securities and Exchange Commission, they were "collaterally estopped" from relitigating the issues resolved in an action brought by a shareholder); *see Rudra Sabaratnam and Robert I. Bourseau*, DAB No. 2139 at 6-7 n.8 (2007).

In *Sabaratnam*, DAB No. 2139 (2007), the IG excluded the petitioners from program participation under section 1128(b)(7).  While the case was pending before an administrative law judge, a federal district court issued its decision in a case brought against the petitioners under the False Claims Act.  The court found that the petitioners violated the False Claims Act by submitting false or fraudulent claims to the Medicare program.  Relying on the doctrine of issue preclusion, the administrative law judge concluded that the petitioners committed acts described in section 1128A by knowingly filing false claims for Medicare reimbursement.  DAB CR1660 (2007).  The petitioners appealed on other grounds.  However, in affirming the ALJ decision, the Board noted that the IG may rely on the doctrine of issue preclusion to meet its burden of proving that petitioners committed an act described in section 1128A.  *Sabaratnam*, DAB No. 2139 at 6-7 n.8 (2007).  The Board concluded by modifying the ALJ's findings to read (in part):

Because the United States District Court reached its final, full determination of identical factual issues after they had been fully litigated, and because its resolution of those issues was essential to the United States District Court's valid final judgment, its resolution of those issues precludes Petitioners from relitigating those issues here.

*Id* at 21.

Petitioners here argue that the Fifth Circuit decision in *BestCare* does not govern these proceedings because the court case resolved claims submitted between August 4, 2005, and June 30, 2008, whereas this case involves later claims, submitted from August 21, 2009, through January 26, 2010.  However, the reimbursement rules did not change between those periods, and the agency directives did not change.  Compare, for example, the instructions issued prior to June 30, 2008 (IG Ex. 3 at 5; IG Ex. 5 at 3; IG Ex. 6 at 3; IG Ex. 7 at 11) with those issued after June 30, 2008 (IG Ex. 4 at 3; IG Ex. 8 at 10).  They are identical:  "At no time will the laboratory be allowed to bill for more miles than

**Page 10**

are reasonable *or for miles not actually traveled by the laboratory technician*."  IG Ex. 6 at 3 (emphasis added).7

So it's hard to make the case that, by submitting claims for miles not traveled from August 2005 through June 2008, Petitioners knowingly submitted false claims (as the courts ruled), but, when they continued this practice after August 21, 2009, they were acting in good faith.  Nevertheless, Petitioners attempt to do so here.  They point to evidence of a November 2008 telephone conversation between Petitioner Maghareh and an employee of the Medicare contractor.  Petitioners claim that, during that conversation, the employee approved BestCare's billing practices and that the evidence of the conversation creates a material fact in dispute as to whether they *knowingly* submitted false claims.  IG Exs. 19, 19a; P. Ex. 1; P. Ex. 2 at 14 (Maghareh Decl. ¶ 37).

Petitioners argued this to the Fifth Circuit in the False Claims Act case:  "Defendants say those conversations show they acted in good-faith reliance on the Government's representations, without knowledge that they were submitting false claims."  *BestCare*, 950 F.3d at 283.  The appellate court rejected the argument, pointing out that the case before it involved a small "subset of . . . fraudulent billings," those made between August 4, 2005, and June 30, 2008, whereas the telephone conversation occurred after June 30, 2008.  "So [the conversation] could not have affected the defendants' submission of claims between August 4, 2005, and June 30, 2008, which is all that matters for the Government's summary-judgment motion involving the False Claims Act."  *Id*. at 280, 283.

Because the Fifth Circuit did not explicitly consider the impact of the November 2008 telephone conversation, Petitioners maintain that they are not precluded (by principles of issue preclusion/collateral estoppel) from arguing here that the November 2008 conversation creates a material fact in dispute as to whether they knowingly submitted false claims from August 21, 2009, through January 26, 2010.

Although the Fifth Circuit discussion focused on the district court's False Claims Act ruling, it was not as limited as Petitioners suggest.  The appellate court explicitly affirmed *both* district court rulings granting summary judgment to the U.S. government.  *BestCare*, 950 F.3d at 283.  One of those rulings resolved the government's claims for fraud, unjust enrichment and payment by mistake.  The fraudulent billings considered in that ruling   involved trips made between August 4, 2005, and *January 26, 2010*, so they include the claims the IG relied on for this exclusion.  *BestCare*, 950 F.3d at 280.  In ruling on those claims, the district court addressed the impact of the November 2008 and other telephone

**Page 11**

conversations.  The court noted that Petitioners did not seek a formal approval based on the facts of its practice.  The court, which apparently had before it the partial recording of the November 2008 conversation (IG Exs. 19, 19a), ruled that, *even assuming that Petitioners accurately characterized the telephone conversations*, those conversations did not justify billing for expenses not incurred.  The court's conclusion was scathing:

Those conversations cannot justify billing for expenses not incurred.  Equity requires that a person relying on an assurance to have changed his position to his detriment.  *Assuming the conversations indicated approval, the only thing that BestCare did in reliance was to lie more*.

*BestCare*, 2014 WL 5359789 at *2 (2014) (emphasis added).

Because it decided the case on summary judgment, the district court was bound to draw all reasonable inferences in the light most favorable to Petitioners (that the conversations indicated approval), which it did.

Moreover, even if the Fifth Circuit's decision (including its approval of the district court's ruling on the common law claims) did not have preclusive effect, I would grant the IG's motion for summary judgment.  I agree with the courts that the language of the statute "clearly forbids BestCare's billing practices" and that the statutory text "is what matters."  I agree, based on the undisputed evidence, that BestCare knowingly violated the Medicare statute's limitations on travel reimbursements.  *BestCare*, 950 F.3d at 281; Act § 1833(h)(3)(B) (limiting travel reimbursement to "expenses for trained personnel to travel" to collect blood or other samples from Medicare beneficiaries who are homebound or reside in nursing homes).  I also agree with the courts that the Medicare agency's sub-regulatory guidance expressly and repeatedly prohibit billing for "miles not actually traveled by the laboratory technician."  IG Ex. 3 at 5; IG Ex. 4 at 3; IG Ex. 5 at 3; IG Ex. 6 at 3; IG Ex. 7 at 11; IG Ex. 8 at 10; *see BestCare*, 950 F.3d at 282 (finding "no way to read the [Medicare] Manual to suggest BestCare can bill Medicare for miles *not* actually traveled by anyone.").

Having listened to Petitioners' recording and read the transcript of the November 2008 telephone conversation, I agree with the district court that no reasonable person could have concluded that the contractor representative approved Petitioners' billing scheme.  Indeed, it seems (as the district court suggested) that Petitioner Maghareh purposely withheld critical information regarding that scheme.

He taped neither the beginning nor the end of the conversation.  He testified that he was unfamiliar with the recording equipment and hit the wrong button, so began recording mid-conversation.  He also claimed that the recording cut off automatically before the conversation ended.  IG Ex. 13 at 245-46, 256-58 (Maghareh investigative testimony).  In

**Page 12**

addition, an indeterminate portion of the conversation is inaudible.  IG Ex. 19 at 6; *See* IG Ex. 13 at 270-75 (Maghareh investigative testimony).

As the recording begins, it seems that Petitioner Maghareh has expressed interest in flat-rate reimbursement for technician travel.  The contractor's employee reads a provision ("Any contractor should establish local policy to pay based on a flat rate only") and explains that Petitioner Maghareh should contact individual medical directors for more information on flat-rate reimbursement, telling them that "you would like to know how to go about setting up a flat rate fee for trips from one spot to another spot and how you'd go about doing that."  IG Ex. 19 at 2, 5; *see* IG Ex. 9; IG Ex. 13 at 267 (Maghareh investigative testimony) (agreeing that the first three to five minutes of the conversation concerned a flat rate).  The employee explains that the flat-rate fee could vary depending on the provider.  IG Ex. 19 at 5.  Petitioner Maghareh tells the representative that he wants "to take advantage of this opportunity" because "[w]e have too many driving around."  IG Ex. 19 at 6.

They then allude to an earlier conversation that the contractor employee apparently had with a BestCare employee.  In that conversation, the contractor employee advised that, although the codes were set up for ground mileage, it was permissible to fly and compute reimbursement based on the ground mileage.8
  Even after the contractor employee made this unambiguous statement, Petitioner Maghareh pressed him, asking the same question – with a slight variation – three times:  "[I]t's okay to figure the ground mileage and then use it for specimen flying"; "So . . . it don't matter what city . . . they just have to figure out the ground mileage from BestCare Houston to the other place and then use that mileage"; and, finally, "And just fly the specimen itself?"  IG Ex. 19 at 7.  The contractor employee answered "Right" or "That's right" to the question each time it was asked.  Petitioners now claim that because the employee answered "That's right" to the third iteration of the question, BestCare was justified in billing for miles not traveled.  As the district court indicated, this is nonsense.

Significantly, Petitioner Maghareh did not ask whether BestCare could bill for miles that the technician did not travel.  He did not ask if the lab could ship samples via air freight but bill Medicare as if a technician had driven (or flown) them hundreds of miles.  He didn't even ask if the lab could fly the specimen *by* itself, which might have suggested –

**Page 13**

albeit obliquely – the actual scheme.9
  And at no point did the contractor employee say that Petitioners could bill for miles that a technician did not travel.

Moreover, the advice that immediately followed this exchange shows that the contractor employee was not suggesting that Petitioners could bill for miles not traveled.  He reminds Petitioner that the lab must eliminate mileage for non-Medicare services and then suggests that Petitioners might be better off establishing a flat rate.  IG Ex. 19 at 8-9.  Had he understood what Petitioners were billing, he would not have suggested that flat rate reimbursement would be the more cost-effective approach.

At best, this conversation is too vague to justify Petitioners deviating from the explicit requirements of the statute and sub-regulatory issuances.  No reasonable person would conclude, based on a one-word response to an imprecise question, that he could justifiably enrich himself by ignoring the Medicare statute and billing directives.

***2. Based on the regulatory factors, a 15-year exclusion is not unreasonably long.***

Having found a basis for the exclusion, I now consider whether a 15-year exclusion falls within a reasonable range.  In determining the length of an exclusion under section 1128(b)(7), the IG considers the following factors:  1) the nature and circumstances surrounding the actions that are the bases for liability, including the period of time over which the acts occurred, the number of acts, whether there is evidence of a pattern, and the amount claimed; 2) the degree of culpability; 3) whether the individual or entity has a documented history of criminal, civil, or administrative wrong doing, although the absence of a prior record is a neutral factor (Medicare participants are not rewarded for not violating the rules); 4) the individual or entity has been the subject of any other adverse action by any federal, state, or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposing the exclusion; and 5) other matters as justice may require.  42 C.F.R. § 1001.901(b).

Applying these factors here, the 15-year exclusion imposed is remarkably restrained.

**The nature and circumstances surrounding the actions that are the basis for liability**.  That Petitioners engaged in a pattern of fraudulent billing that spanned many years was conclusively established by the federal courts.  Petitioners made claims for travel knowing that they were false.  Although the false claims upon which this exclusion is based represent a fraction of the much broader scheme of fraudulent billing, they were

**Page 14**

substantial:  571 claims, each involving a claim that a technician traveled 400 miles or more, when, in fact, the technician had traveled zero miles.  *See BestCare*, 950 F.3d at 280 (noting that the government limited its damages calculation to a modest subset of BestCare's fraudulent billing).  And, even this small fraction of total claims cost the Medicare program $258,846.64.

To put this in context, other types of section 1128 exclusions consider "aggravating" – and therefore a basis for lengthening the period of exclusion—acts that result in financial losses of $50,000 or more.  Act § 1128(c)(3)(D); 42 C.F.R. § 1001.102(b)(1).  In considering this factor, the Board has characterized amounts substantially greater than the statutory standard as "exceptional[ly] aggravating" and entitled to significant weight.  *Jeremy Robinson*, DAB No. 1905 (2004); *Donald A. Burstein, PhD.*, DAB No. 1865 (2003).

Here, even limiting my consideration to the small fraction of Petitioners' total false and fraudulent claims results in program costs that more than justify a significant period of exclusion.

**The degree of culpability**.  As the discussion above establishes, for years, Petitioners knowingly claimed Medicare payment for technician travel that never occurred.  They have come forward with no evidence suggesting that they are not fully culpable in submitting the false claims.

Indeed, the undisputed evidence underscores a very high degree of culpability.  The federal courts repeatedly emphasized how "indisputable" the violations were, with the Court of Appeals characterizing the case as "open-and-shut."  *BestCare*, 950 F.3d at 281.  It also found that "no plausible reading" of CMS's sub-regulatory instructions "could support [Petitioners'] billing practices'" and that Petitioners' arguments to the contrary "border[ed] on the absurd."  *Id*.

The district court recounted additional examples of Petitioners' deliberate fraud:  finding out that some tests were performed in San Antonio and Dallas, rather than shipped to Webster, Petitioner Maghareh instructed staff to bill them as though technicians had traveled to Webster to run the tests.  *BestCare,* 2018 WL 1609578  at *2.  The court also observed that whenever a BestCare employee questioned Petitioner Maghareh about his billing scheme, Petitioner Maghareh fired the questioner.  *Id*. at *2; *BestCare*, 2014 WL 5359789 at *2.

Petitioners were thus culpable; their culpability underscores the threat their continued participation would pose to the Medicare program and justifies a very long period of exclusion.

**Page 15**

**Other adverse action based on the same set of circumstances**.  Petitioners were the subject of another adverse action by the federal courts:  the federal court action alleging fraud, unjust enrichment, payment by mistake, and violations of the False Claims Act.  Judgment was entered against them, and they have been ordered to pay $30.6 million for the long-running scheme.

**Other matters as justice may require**.  Petitioners' fraud was long-lasting and widespread.  In addition to billing for miles not traveled, they failed to prorate mileage, treating a single shipment of multiple samples as though each sample had been shipped separately.  *BestCare*, 950 F.3d at 279.  In some instances, they billed excessive mileage for samples that were not even shipped, but were tested locally.  In submitting their fraudulent claims for miles not traveled, they also claimed round-trip mileage reimbursement for one-way shipments.  No reasonable person "could possibly think" that any of this was permissible.  *Id.* at 283.

Based on these factors, then, 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.  *Jeremy Robinson*, DAB No. 1905 at 5 (2004) (ALJ review must reflect the deference accorded to the IG by the Secretary); *Joann Fletcher Cash*, DAB No. 1725 at 16-17 (2000) (citing 57 Fed. Reg. 3298, 3321 (Jan. 29, 1992)).  A "'reasonable range' refers to a range of exclusion periods that is more limited than the full range authorized by the statute 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)).

Here, Petitioners' actions demonstrate that they present a significant risk to the integrity of healthcare programs.  The IG may reasonably determine that longer periods of exclusion are necessary, not only to protect federal funds, but "to staunch an increasing amount of health care fraud."  *Robinson*, DAB No. 1905 at 10 n.8.  As I have noted elsewhere, the statistics on Medicare fraud are sobering:

The National Health Care Anti-Fraud Association, an organization composed of both public and private health insurers and regulators, conservatively estimates that 3% of all health care spending in the United States is lost due to fraud.  If such an estimate is accurate, health care fraud cost our economy a staggering $68 billion in 2007, the most recent year for which figures are available.

*Christopher George Collins*, DAB CR2515 at 6 (2012).  Lengthy periods of exclusion are an appropriate means by which the IG can attempt to protect the integrity of the Medicare program from offenders, such as Petitioners, who cause significant financial losses to the Medicare program.

**Page 16**

Conclusion

The IG properly excluded Petitioners from participating in Medicare, Medicaid and other federal health care programs.  I find, at a minimum, that the 15-year exclusion falls within a reasonable range.  Based on the undisputed facts presented and the rulings of the federal courts, it is certainly not unreasonably long.


          /s/
        Carolyn Cozad Hughes

                      Administrative Law Judge
      1. Because I decide this case on summary judgment, I need not rule on the parties' objections to exhibits and witnesses.  Lilia Gorovits, M.D., P.C., DAB No. 2985 at 3 n.4 (2020); Ill. Knights Templar Home, DAB No. 2274 at 6-7 (2009). back to note 1
                      2. The IG's objections are hardly "conclusory."  Either the documents have been produced or they have not.  That's a question of fact, and Petitioners obviously know the answer. back to note 2
                      3. My findings of fact/conclusions of law are set forth, in italics and bold, in the discussion captions of this decision. back to note 3
                      4. Even after BestCare opened satellite labs in San Antonio and Dallas, Petitioners continued to ship specimens to the Webster lab for testing.  Occasionally, they compounded the fraud by testing locally but billing for mileage as if they had delivered the specimens to Webster.  See BestCare, 2018 WL 1609578 at *2. back to note 4
                      5. I agree with the district court.  Petitioners were suggesting that the very fact of successfully committing fraud (as so many Medicare fraudsters do – at least for a while) means that even obvious fraud is not fraud. back to note 5
                      6. The numbers are not disputed.  In addition, the IG presents a summary of the claims, which were submitted under CPT (current procedural terminology) code P9603, the billing code for trips of twenty miles or more.  IG Ex. 2; See BestCare, 950 F.3d at 282. back to note 6
                      7. Before the district court, Petitioners argued that the rule does not say that the sample has to be conveyed by a person, which the court characterized as "an argument that would embarrass a middle-school debater."  BestCare, 2014 WL 5359789 at *2.  I agree. back to note 7
                      8. This all assumes that the technician must travel to procure the sample and then must travel to return it to the lab.  See IG Ex. 3 at 6-7 for examples.  Every example describes a technician traveling. back to note 8
                      9. Of course, the lab could – and probably should – send the specimen by itself.  It just can't bill Medicare as if a technician had to fly to obtain it and then had to fly to deliver the sample to the lab. back to note 9 Back to top
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