Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Stuart M. Miller, M.D., Date: July 25, 1996
Petitioner,

Docket No. C-95-173
Decision No. CR428

-v-

The Inspector General.

DECISION

In this decision I sustain the five year exclusion from
participating in Medicare and other federally-funded health
care programs which the Inspector General (I.G.) imposed
against Petitioner.

I. Background

On July 25, 1995, the I.G. advised Petitioner that he was
being excluded for a period of five years. The I.G. imposed
the exclusion pursuant to section 1128(b) (3) of the Social
Security Act (Act). The I.G. told Petitioner that she had
determined that the exclusion was authorized by section
1128(b) (3), because Petitioner had been convicted of a
criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled
substance. The I.G. advised Petitioner that the length of
the exclusion was based on the presence in Petitioner’s case
of factors which the I.G. alleged to be aggravating. These
included the following:

1. The criminal acts resulting in Petitioner’s
conviction were committed over a period of one year
or more.

2. The acts that resulted in Petitioner’s
conviction, or similar acts, had a significant
adverse physical, mental or financial impact on one
or more program beneficiaries or other individuals,
or the Medicare or State health care programs.
2

3. The sentence resulting from Petitioner’s
conviction included a term of incarceration.

Petitioner requested a hearing. I held a prehearing
conference, at which the parties agreed that the only
testimony that would be offered would be Petitioner’s
testimony on his own behalf. The parties agreed also that
the hearing could be conducted by telephone. On March 14,
1996, I conducted a hearing by telephone at which Petitioner
testified. At the hearing, the I.G. offered eight exhibits
(I.G. Ex. 1 - 8), which I received into evidence. Petitioner
offered twelve exhibits (P. Ex. 1 - 12), which I received
into evidence.

I afforded the parties the opportunity to submit posthearing
briefs, and each party submitted a posthearing brief. Prior
to submitting his posthearing brief, Petitioner contacted the
staff attorney assigned to work with me in hearing and
deciding this case. Petitioner advised the staff attorney
that he thought there might exist mitigating factors in his
case which he had not testified about during the hearing.

In order to assist Petitioner in identifying any mitigating
factors, the existence of which he might be able to prove, I
asked the staff attorney to mail to Petitioner a copy of the
relevant regulation, 42 C.F.R. § 1001.401, which describes
all mitigating factors that might apply in the case of an
individual who is excluded pursuant to section 1128(b) (3).
However, in his posthearing brief, Petitioner did not assert
that he could prove the presence of any of the mitigating
factors that are described in the regulation.

II. Issues, findings of fact and conclusions of law

The issues in this case are whether the I.G. was authorized
to exclude Petitioner pursuant to section 1128(b)(3) of the
Act, and whether the five-year exclusion that the I.G.
imposed is reasonable. In deciding to sustain the exclusion,
I make the following findings of fact and conclusions of law
(Findings). I discuss each Finding in detail below.

1. The I.G. was authorized to exclude Petitioner under
section 1128(b)(3) of the Act, based on Petitioner’s
conviction of criminal offenses related to the unlawful
distribution or dispensing of controlled substances.

2. The I.G. proved the existence of an aggravating
factor in that Petitioner committed some of his crimes
over a period of more than one year.
3

3. The I.G. proved the existence of a second
aggravating factor in that Petitioner was sentenced to a
period of incarceration as a consequence of his
conviction of criminal offenses related to the unlawful
distribution or dispensing of controlled substances.

4. Petitioner neither alleged nor proved the existence
of any mitigating factor.

5. The presence in this case of aggravating factors not
offset by any mitigating factor establishes Petitioner
to be untrustworthy to provide care to program
beneficiaries or recipients or to participate in
federally funded health care programs.

6. A five-year exclusion is reasonable in light of the
evidence which proves Petitioner not to be trustworthy.

III. Discussion

A. The I.G.’s authority to exclude Petitioner (Finding

ay

Petitioner has not denied that the I.G. is authorized to
exclude him under section 1128(b)(3) of the Act. The
authority to exclude Petitioner is established also by the
evidence.

Section 1128(b) (3) of the Act authorizes the I.G., acting as
the delegate of the Secretary of the Department of Health and
Human Services (the Secretary), to exclude any individual who
is convicted of a criminal offense under federal or State law
relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance. Here,
the evidence establishes unequivocally that Petitioner was
convicted of two criminal offenses related to the unlawful
distribution or dispensing of controlled substances.

On May 13, 1994, a criminal information was filed against
Petitioner in the United States District Court for the
Eastern District of Pennsylvania. I.G. Ex. 2; I.G. Ex. 3 at
1. The information charged Petitioner with the following two
counts:

1. From in or about January 13, 1994, to in or
about February 28, 1994, Petitioner knowingly,
intentionally, and unlawfully distributed and
dispensed by means of prescriptions:

approximately 1,000 tablets of Percocet, containing
oxycodone, a Schedule II narcotic controlled
substance; and, approximately 7,000 tablets
4

containing diazepam, a Schedule IV depressant
controlled substance.

2. Between approximately 1987 and February 1994,
Petitioner knowingly, intentionally, and unlawfully
distributed: approximately 350,000 tablets of
Adipex-P or its generic equivalent, phentermine, a
Schedule IV stimulant controlled substance; and
approximately 30,000 tablets of Valium or its
generic equivalent, diazepam, a Schedule IV
depressant controlled substance.

I. G. Ex. 2.

On November 18, 1994, Petitioner pled guilty to both of these
counts of the information. I. G. Ex. 5 at 1.

B. The presence of aggravating factors (Findings 2 - 3)

As I describe at Part I of this decision, the I.G. alleged
the presence of three aggravating factors in her notice
letter to Petitioner which, if proved, would be relevant to
deciding whether the length of the exclusion imposed against
Petitioner by the I.G. is reasonable. At the hearing, the
I.G. advised me that she would not offer proof as to the
second of the three aggravating factors identified by the
I.G. in her notice letter, that Petitioner’s conduct had a
significant adverse physical, mental or financial impact on
one or more program beneficiaries or other individuals, or
the Medicare or State health care programs. Transcript (Tr.)
at 18. Therefore, there remains the question of whether the
I.G. proved the presence of the other two aggravating factors
identified in the notice letter.

The Secretary has published regulations at 42 C.F.R. Part
1001 which establish criteria for determining the length of
exclusions which the I.G. may impose pursuant to section 1128
of the Act. The regulation which governs exclusions imposed
pursuant to section 1128(b)(3) is 42 C.F.R. § 1001.401. The
regulation provides that, in the absence of factors that the
regulation describes to be either aggravating or mitigating,
an exclusion imposed pursuant to section 1128(b) (3) must be
for a period of three years. 42 C.F.R. § 1001.401(c)(1). In
ah individual case, an exclusion may be for more than or less
than three years, depending on whether factors which the
regulation identifies as aggravating or mitigating exist in
that case. Id.

Petitioner concedes that the two aggravating factors that the
I.G. asserts are present in this case are present here.
Petitioner’s posthearing brief at 5. Even so, I have
evaluated the evidence offered by the I.G., and I conclude
5

that the I.G. proved the presence of the two aggravating
factors which the I.G. asserts are present.

First, the I.G. proved that Petitioner committed some of his
criminal offenses over a period of more than one year, thus
proving the presence of an aggravating factor as described in
42 C.F.R. § 1001.401(c)(2) (i). Petitioner was convicted of
criminal offenses which spanned a period of about six years.
He pled guilty to unlawfully distributing Schedule IV
controlled substances over a period beginning in
approximately 1987 and ending in February 1994. I.G. Ex. 2
at 3, I.G. Ex. 5 atl.

Second, the I.G. proved that Petitioner was sentenced to
incarceration for his crimes, thus proving the presence of an
aggravating factor as described in 42 C.F.R. §
1001.401(c) (2) (iii). Petitioner was sentenced to a prison
term of 57 months (57 months on count 1, to run concurrently
with 36 months on count 2). I.G. Ex. 5 at 2.

c. The absence of mitigating factors (Finding 4)

Petitioner neither alleged nor proved the presence of any
factors which, under 42 C.F.R. § 1001.401, I might consider
to be mitigating. The regulation which governs exclusions
imposed pursuant to section 1128(b)(3) of the Act identifies
two possible mitigating factors which may be established ina
given case and which are relevant to deciding whether the
length of an exclusion is reasonable:

(i) The (excluded] individual’s . . . cooperation
with Federal or State officials resulted in --

(A) Others being convicted or excluded from
Medicare or any of the State health care programs,
or

(B) The imposition of a civil money penalty
against others; or

(ii) Alternative sources of the type of health care
items or services furnished by the [excluded]
individual . . . are not available.

42 C.F.R. § 1001.401(c) (3) (i),(ii). The regulation provides
that only the factors which are identified in the regulation
as possible mitigating factors may be considered to be
mitigating in an individual case. 42 C.F.R. §

1001.401(c) (3).
6

Petitioner offered evidence concerning allegedly extenuating
circumstances that pertain to his case. This evidence
addresses the hardship that has resulted or will result to
Petitioner and his family as a consequence of Petitioner’s
conviction and incarceration. P. Ex. 2 - 4. It addresses
Petitioner’s remorse for his crimes. P. Ex. 2; Tr. at 39 -
40, 43. It addresses Petitioner’s character, including the
esteem and affection that patients and family members hold
for him. P. Ex. 3 - 12. It addresses also Petitioner’s
emotional state during the time that he committed his crimes.
P. Ex. 2; Tr. at 33, 35 - 36.

I have reviewed this evidence closely. Although Petitioner
characterized this evidence to be mitigating evidence, it
does not relate to any of the mitigating factors that are
identified in 42 C.F.R. § 1001.401(c)(3). Tr. at 44. For
this reason, I may not consider this evidence as relevant in
deciding whether the exclusion imposed against Petitioner by
the I.G. is reasonable.

D. Whether the length of the exclusion is reasonable
(Findings 5 - 6)

The purpose of an exclusion imposed pursuant to section 1128
of the Act is remedial, and not punitive. The objective of
any exclusion is to protect federally funded health care
programs and beneficiaries and recipients of those programs
from an untrustworthy individual and to preserve the
integrity of those programs. The regulation which governs
exclusions imposed pursuant to section 1128(b)(3) of the Act
establishes a presumption that an individual who is excluded
pursuant to that section will be untrustworthy for at least
three years. 42 C.F.R. § 1001.401(c) (1). The presence of
aggravating or mitigating factors in an individual case may
be evidence that an exclusion of more or less than three
years is reasonable.

The presence of an aggravating factor or factors in a case
may be a basis for deciding that an exclusion of more than
three years is reasonable. However, it does not necessarily
follow from the presence of an aggravating factor or factors
that an exclusion of more than three years is reasonable.
The regulation does not direct that an exclusion of more than
three years must be imposed where an aggravating factor or
factors is proved. In the case where the presence of an
aggravating factor is proved, I must examine the evidence
that relates to that factor in order to decide what it says
about the excluded individual’s trustworthiness.

Here, there are two aggravating factors. Petitioner was
sentenced to incarceration for a period of 57 months. He
perpetrated some of his crimes over a period of about six
7

years. I have considered carefully the evidence that relates
to these aggravating factors. I find that the evidence
establishes Petitioner not to be trustworthy. The evidence
supports my conclusion that an exclusion of five years is
reasonable.

It is apparent from the transcript of Petitioner’s sentencing
proceeding that the judge who sentenced Petitioner applied
federal sentencing guidelines to Petitioner’s case, without
making explicit findings as to the need for punishment of the
duration that was imposed. I.G. Ex. 4 at 23 - 25; P. Ex. 1
at 1- 3. In fact, the judge expressed some regret at the
necessity for the sentence. Id. But this does not mean that
the evidence of the duration of Petitioner’s sentence is
irrelevant to the issue of Petitioner’s trustworthiness.

The federal sentencing guidelines in some respect constitute
Congress’ judgment as to the trustworthiness of individuals
who are convicted of federal crimes to operate in society.
The fact that the guidelines required a sentence of 57 months
in this case is evidence that Congress determined that an
individual who commits the kind of crime that Petitioner
committed is a highly untrustworthy individual.

More direct evidence of Petitioner’s lack of trustworthiness
is demonstrated by the fact that he perpetrated his crimes
over a six-year period. The inference that I draw from this
evidence is that Petitioner’s crimes were calculated and
deliberate. They were not spontaneous or spur-of-the moment
acts. The duration of Petitioner’s crimes is evidence that
Petitioner is an individual who is capable of deliberately
placing his personal needs above the law, and who is capable
of doing so for a long period of time.

It may be true, as Petitioner asserts, that he committed his
crimes in order to keep his medical practice afloat and to
provide necessary income to support his family from his first
marriage. Tr. at 33 - 34. However, even if that was
Petitioner’s motivation for committing his crimes, the fact
that he committed those crimes over such a protracted period
establishes that Petitioner is capable of prolonged illegal
conduct where he determines that it is in his self interest
to engage in such conduct. Therefore, I find the evidence of
the duration of Petitioner’s crimes to be strong evidence
that Petitioner is untrustworthy.

On balance, I find that the evidence in this case proves that
an exclusion of five years is reasonable. The degree of
untrustworthiness proved by the evidence relating to the two
aggravating factors established in this case is ample grounds
for imposing a relatively lengthy exclusion, in order to
8

protect federally funded health care programs and the
beneficiaries and recipients of these programs.

Iv. Conclusion
I find that the I.G. was authorized to exclude Petitioner

pursuant to section 1128(b)(3) of the Act. I find that an
exclusion of five years is reasonable.

/s/

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

In the Case of:
Keith 0. Irby, Date: July 24, 1996
Petitioner,

Docket No. C-96-253
Decision No. CR427

-ve

The Inspector General.

DECISION

I decide that I am without authority to hear and decide
Petitioner’s May 2, 1996 request for a hearing.

I. Background

On July 13, 1994, I issued a decision in the cases of
Petitioners Keith and Michelle Irby. Keith 0. Irby and
Michelle P. Irby, R.Ph., DAB CR321 (1994). On August 10,
1994, Petitioner Keith Irby filed a request for “Appeal and
Rehearing." Petitioner Michelle Irby did not request either
an appeal or a rehearing in her case.

On August 25, 1994, I denied the request by Petitioner Keith
Irby (whom I refer to hereinafter as "Petitioner") that I
rehear his case. I considered Petitioner Keith Irby's
assertions concerning findings I made in my July 13, 1994
decision in his case, and I concluded that my findings are
amply supported by the record. On August 26, 1994, the
Appellate Division of the Departmental Appeals Board docketed
Petitioner's request for appellate review of my July 13, 1994
decision. On September 26, 1994, an appellate panel of the
Board declined to review my July 13, 1994 decision in
Petitioner's case.
2

On May 2, 1996, Petitioner wrote to me. P. Ex. 1.' In his
letter, he requested “a complete departure from mandatory
sanctions and suspensions imposed by the [administrative law
judge], based on . . . new information and discovery --” P.
Ex. 1 at 1.

Petitioner’s May 2, 1996 letter is a request that I reopen
and revise my July 13, 1994 decision in his case.* I
directed the Inspector General (I.G.) to respond to
Petitioner’s May 2, 1996 letter. In her response, the I.G.
argued that I am without authority to hear and decide
Petitioner’s request. On July 7, 1996, Petitioner submitted
a rebuttal statement. P. Ex. 2. In addition, on July 8,
1996, Petitioner submitted a document entitled "Petitioner
Conjunctive Relief and Deposition Request." P. Ex. 3.

II. Issue, findings of fact and conclusions of law

The issue is whether I have authority to hear and decide
Petitioner's May 2, 1996 request to reopen and revise my July
13, 1994 decision. In concluding that I do not have such
authority, I make the following findings of fact and
conclusions of law (Findings). These Findings address only
the question of my authority to hear and decide Petitioner's
May 2, 1996 request to reopen and revise my July 13, 1994
decision in Petitioner’s case. I make no findings concerning
the merits of Petitioner’s May 2, 1996 request that I reopen
and revise my July 13, 1994 decision, inasmuch as I have no
authority to do so. I discuss my Findings below, at Part III
of this decision.

1. Petitioner requested Departmental Appeals Board
(DAB) review of my July 13, 1994 decision in his case,

' Although Petitioner did not designate his May 2,
1996 letter as an exhibit, I have identified it as P. Ex. 1,
because it appears to contain statements by Petitioner that
Petitioner considers to be evidentiary. Likewise, I have
identified Petitioner's July 7, 1996 and July 8, 1996
submissions as P. Ex. 2 and P. Ex. 3 respectively because
they appear also to contain statements by Petitioner that
Petitioner considers to be evidentiary. For purposes of
making a record, I am receiving into evidence P. Ex. 1 - 3.

2 Petitioner’s letter is ambiguous, in that it might
be construed to be a request that I reopen and revise my
decisions in both his case and that of Petitioner Michelle
Irby. However, Petitioner Michelle Irby did not sign the
letter and she has not indicated that she desires that
Petitioner Keith Irby represent her. I conclude, in the
absence of an affirmative request from Petitioner Michelle
Irby that I reopen and revise my July 13, 1996 decision, that
Petitioner Michelle Irby has not requested that I reopen and
revise my decision in her case.
3

and on September 26, 1994, the appellate panel declined
to do so.

2. Petitioner made his May 2, 1996 request that I
reopen and revise my July 13, 1994 decision more than 60
days after the date of the notice of the decision.

3. I do not have authority to hear and decide
Petitioner's May 2, 1996 request to reopen or revise my
July 13, 1994 decision in Petitioner’s case under
regulations contained in 42 C.F.R. Part 498.

4. I do not have authority to hear and decide
Petitioner's May 2, 1996 request to reopen or revise my
July 13, 1994 decision in Petitioner's case under
regulations contained in 42 C.F.R. Part 1005.

TII. Discussion

Petitioner made his original hearing request in 1990. The
regulations which governed the conduct of hearings in cases
involving the I.G., which were in effect prior to 1992, are
at 42 C.F.R. Part 498.3? Beginning in 1992, new regulations
governing the conduct of hearings in cases involving the I.G.
were published at 42 C.F.R. Part 1005.

The regulations contained in Part 1005 would appear to govern
Petitioner’s current request, because he made the request
after the publication date of the Part 1005 regulations, and
the Part 1005 regulations are procedural, and not substantive
regulations. However, in order to be fair to Petitioner, and
to be sure that there remain no open questions in his case, I
have evaluated his request that I reopen and revise my July
13, 1994 decision under both the Part 498 and the Part 1005
regulations. I conclude that I lack authority under either
Part 498 or Part 1005 to reopen and revise my decision in
Petitioner’s case.

A. The relevant facts (Findings 1 - 2)

I do not consider to be relevant here the facts that
Petitioner alleges in his submissions dated May 2, 1996, July
7, 1996, or July 8, 1996. See P. Ex. 1, P. Ex. 2, P. EX. 3.
The issue before me is whether I have the authority to
consider these alleged facts. As I discuss below, my
authority to do so depends on the timing of Petitioner's
request.

3 The Part 498 regulations continue to govern
hearings in cases involving the Health Care Financing
Administration.
4

For purposes of this decision, the relevant facts are as
follows. I issued my decision in Petitioner’s case on July
13, 1994. Petitioner requested DAB appellate review of my
decision, and the appellate panel declined to do so on
September 26, 1994. On May 2, 1996 Petitioner requested me
to reopen and revise my July 13, 1994 decision in his case.
Thus, more than 60 days elapsed between the date of the
notice of the July 13, 1994 decision and the date that
Petitioner requested me to reopen and revise the decision on
May 2, 1996.

B. Petitioner’s request, considered under the Part 498
regulations (Finding 3)

Under 42 C.F.R. § 498.100(a), an administrative law judge or
appellate panel decision may be reopened, within 60 days from
the date of the notice of decision, upon the motion of the
administrative law judge or the appellate panel or upon the
petition of a party to the hearing.‘ The meaning of this
section is clarified by 42 C.F.R. § 498.100(b), which
provides that only the appellate panel may reopen its
decision.’ Where an appellate panel has issued a final
decision in a case, only it has the authority to reopen that
decision.

As I read 42 C.F.R. § 498.100, beginning on September 26,
1994, the date of the appellate panel’s decision to decline
to review my July 13, 1994 decision, I no longer had
authority to reopen and revise my July 13, 1994 decision.
The authority to reopen and revise that decision became
vested with the appellate panel, inasmuch as its decision to
decline review became the final decision in the case. 42
C.F.R. § 498.100(b).

Furthermore, even if I had the authority to reopen a decision
which I had made in a case despite a subsequent appellate
panel decision in that case, I would not have that authority
here. My authority to reopen a decision ends 60 days after
the date of the notice of the decision. Petitioner's May 2,
1996 request to reopen and revise my July 13, 1996 decision

4 The text of the regulation refers not to the DAB,
but to the “Appeals Council.” The reference is to the
Appeals Council of the Office of Hearings and Appeals of the
Social Security Administration. The text was published at a
time when the Secretary of the Department of Health and Human
Services (the Secretary) had delegated authority to the
Appeals Council to hear appeals from decisions of
administrative law judges made pursuant to section 1128 of
the Social Security Act. However, the Secretary has
subsequently redelegated the authority to the DAB to hear and
decide such appeals.

5 As with the previous section, this section refers
to the Appeals Council.
5

in his case was made more than 60 days after the date of the
notice of the decision. Thus, I no longer have authority
under 42 C.F.R. § 498.100(a) to reopen and revise my July 13,
1994 decision, and I may not consider Petitioner’s request
that I do so.

Cc. Petitioner’s request, considered under the Part 1005
requilations (Finding 4)

Unlike the Part 498 regulations, the Part 1005 regulations
contain no language relating specifically to reopening or
revising an administrative law judge or an appellate panel
decision. See 42 C.F.R. §§ 1005.4, 1005.20, 1005.21. The
regulations provide that, unless appealed, an administrative
law judge decision will become final and binding on the
parties 30 days from the date that the administrative law
judge serves the parties with a copy of the decision. 42
C.F.R. § 1005.20(d). The regulations provide additionally
that a decision by an appellate panel will become final and
binding 60 days from the date that it serves the parties with
a copy of its decision. 42 C.F.R. § 1005.21(j).

A logical reading of 42 C.F.R. § 1005.20(d) is that it
permits the administrative law judge to consider reopening
and revising a decision during the 30-day time period prior
to the decision becoming final and binding, or during the
dates between the date of service of a decision on the
parties and the date of appeal of that decision.® However,
it is also logical to read the regulations as precluding the
administrative law judge from reopening or revising a
decision after that decision becomes final and binding or
after DAB appellate review is sought.

Petitioner's May 2, 1996 request to reopen my July 13, 1994
decision was not made within 30 days of my serving a copy of
that decision on him. Moreover, his May 2, 1996 request was
made after he sought DAB appellate review. Therefore, I am
without authority to hear and decide Petitioner's May 2, 1996
request to reopen and revise my July 13, 1994 decision under
the Part 1005 regulations.

6 I do not have authority to interpret regulations
which affect the handling of appeals at the DAB. Therefore,
I am making no decision concerning whether an appellate
panel might have authority to reopen or revise its decision
in a case, under 42 C.F.R. § 1005.21(j).
Iv. Conclusion

I conclude that I have no authority to hear and decide
Petitioner’s May 2, 1996 request that I reopen and revise my
July 13, 1994 decision in his case. Therefore, I dismiss his
request for a hearing.

/s/

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Arcadia Acres, Inc. Date: June 26, 1996
Petitioner,

Docket No. C-96-160
Decision No. CR424

-v-

Health Care Financing
Administration.

DECISION

The threshold issue before me is whether Arcadia Acres, Inc.
(Arcadia) has a right to an evidentiary hearing on the merits of
the Health Care Financing Administration's (HCFA) March 4, 1996
determination that Arcadia was not in substantial compliance with
federal requirements for nursing homes participating in the
Medicare and Medicaid programs when it was surveyed on November
21, 1995 and January 18, 1996.

HCFA moved to dismiss Arcadia's hearing request! on the basis
that, as Arcadia was apprised in a separate notice issued by
HCFA, no remedy was in fact imposed against Arcadia based on
those survey results. Even though HCFA had notified Arcadia of

' The parties filed their submissions in accordance with
the schedule I established. Order and Schedule for Filing Briefs
and Documentary Evidence (April 25, 1996). Herein, I will refer
to HCFA's Motion to Dismiss as "HCFA Motion," to Arcadia's
Memorandum in Opposition to Respondent's Motion to Dismiss as
“Arcadia Response," and to HCFA's Reply to Petitioner's
Memorandum in Opposition to HCFA's Motion to Dismiss as "HCFA
Reply."

I have accepted into the record all of the supporting evidence
submitted by each party for the limited purpose of ruling on
HCFA's Motion. However, I have re-marked the exhibits to conform
to the requirements referenced in my Order of April 25, 1996.
Therefore, I have redesignated what was previously marked by
Arcadia as its Exhibits A through E as Arcadia's Exhibits (Ex.) 1
through 5. I have redesignated what was previously marked by
HCFA as its Attachments I through V as HCFA Ex. 1 through 5.
2

the imposition of remedies by letter dated March 4, 1996, HCFA
later changed its mind and informed Arcadia by letter dated April
1, 1996, that HCFA was not imposing any remedy against Arcadia.
Citing 42 C.F.R. § 498.3(b) (12), HCFA argued that, as a matter of
law, Arcadia has no right to an administrative hearing because a
hearing to contest HCFA's findings of deficiencies is available
only if HCFA has actually taken at least one of the enforcement
actions specified by regulation. HCFA Reply, at 8 - 11.

In its opposition to HCFA's motion, Arcadia contended that HCFA's
findings of deficiencies will have prospective consequences for
the facility, such as impacting on the amount of future penalties
HCFA might impose. Arcadia contended also that there are current
consequences of HCFA's findings, such as forcing Arcadia to make
HCFA's findings of deficiencies available to its residents.
According to Arcadia: 1) a regulatory equivalent of a "hit and
run" has occurred (Arcadia Response, at 1); 2) HCFA is seeking to
“wash its hands" of the matter after the surveying agency has
"done wrong" (id. at 7); 3) the procedural due process rights of
Arcadia will be left "without a guardian" if HCFA's motion is
granted (id. at 9); 4) Arcadia has been subjected to
“administrative arrest" and "punishment" in having had to undergo
surveys and take follow-up actions "to free itself of absurd
deficiencies" (id. at 9 - 10); and 5) Arcadia has been "buffeted
by the winds of . . . surveys without the shelter of a hearing"
(id. at 10). Arcadia asked that we proceed to a hearing on the
findings of deficiencies in order to protect against "injustice"
resulting from unjust and inadequate survey results (id. at 1)
and because, "{i]f not in the instant appeal, where else will
Arcadia Acres have a forum?" (id. at 9).

DISCUSSION

I have analyzed the parties' arguments, legal authorities, and
supporting evidence under two issues:

a) whether HCFA's March 4, 1996 notice letter, if
considered alone, contained a determination which
entitled Arcadia to a hearing before me;

and

2 Under the facts of this case, I do not find it
necessary to decide the hypothetical question of whether Arcadia
will become entitled to a hearing under the regulations on the
issue of its noncompliance if, in the future, remedies are
actually imposed by HCFA in reliance upon the prior unadjudicated
findings of noncompliance issued by HCFA. However, I note that
my legal interpretations applicable to the present facts would
permit Arcadia to obtain a hearing in this forum on the merits of
any past unadjudicated findings of noncompliance if and when HCFA
relies on them in the future to impose specified remedies against
Arcadia.
3

b) whether Arcadia has a right to a hearing based on
HCFA's March 4, 1996 notice letter, notwithstanding
HCFA's subsequent decision contained in its April 1,
1996 notice letter that no remedy would be imposed
against Arcadia.

Having concluded that the first issue must be answered in the
affirmative and the second issue must be answered in the
negative, I grant HCFA's Motion.

I agree with HCFA that a health care provider's right to a
hearing arises solely under HCFA's regulations. I find that the
regulation codified at 42 C.F.R. § 498.3(b)(12) is dispositive of
the issues before me. As relevant to the facts of this case, the
regulation makes applicable the administrative hearing procedures
only if HCFA has made an initial determination on the following
matters:

the finding of noncompliance leading to the
imposition of enforcement actions specified in
§ 488.406 of this chapter....

42 C.F.R. § 498.3(b) (12).

Arcadia is not entitled to a hearing in this case because,
according to the April 1, 1996 notice letter, HCFA has decided to
impose no enforcement action specified in 42 C.F.R. § 488.406.
The regulation at 42 C.F.R. § 498.3(b)(12) states in unambiguous
terms that, absent a finding of noncompliance leading to the
imposition of enforcement actions, HCFA's determination is not
subject to review under 42 C.F.R. Part 498.

Even if the meaning of "leading to" might appear ambiguous if
read in isolation, the Secretary's comments in promulgating 42
C.F.R. § 498.3(b) (12) give clear meaning to the phrase "leading
to." Specifically, in response to public comments on the
enforcement regulations as proposed, the Secretary explicitly
disavowed the intent to make every finding of noncompliance
appealable:

Comment: Several commenters wanted a right to appeal all
deficiencies even if no remedy was imposed.

Response: We are not accepting this suggestion because if
no remedy is imposed the provider has suffered no injury
calling for an appeal....

59 Fed. Reg. 56158 (1994) (emphasis added).

Moreover, the limitation on hearing rights imposed by 42 C.F.R. §
498.3(b) (12) is entirely consistent with the prohibition against
an appeal of "the finding that a provider . . . determined to be
in compliance with the conditions of participation... has
4

deficiencies." 42 C.F.R. § 498.3(d)(1).3 There is no dispute
that Arcadia has continued to participate in the Medicare and
Medicaid programs as a provider of health care services
notwithstanding HCFA's finding of deficiencies. By letter dated
April 1, 1996, HCFA notified Arcadia of the determination that
Arcadia had come into substantial compliance with program
requirements as of February 27, 1996. HCFA Ex. 5.

I am issuing the following findings of fact and conclusions of
law to explain my reasoning that, even though HCFA's March 4,
1996 notice letter conferred hearing rights upon Arcadia to
challenge the noncompliance determined by HCFA, Arcadia's hearing
rights were extinguished by HCFA's subsequent issuance of its
April 1, 1996 notice letter. Moreover, as I find below, Arcadia
has been accorded all rights and process to which it was due
under the governing regulations.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Findings of background facts and procedural history

1. Based on a survey completed on November 21, 1995,
the Ohio Department of Health (ODH) notified Arcadia,
by letter dated December 12, 1995, of the following
information:

a. that Arcadia was not in
substantial compliance with
federal requirements for nursing
homes participating in the
Medicare and Medicaid programs;

b. that Arcadia must submit to ODH a plan
of correction addressing each cited
deficiency;

c. that ODH would recommend to HCFA
that the remedy of denial of payment
for new admissions (DPNA) be imposed
effective January 30, 1996, if Arcadia
failed to correct its deficiencies and
come into substantial compliance with
federal requirements by January 10,
1996; and

3 42 C.F.R. § 498.3(d) lists examples of those
administrative actions which are not subject to the appeals
procedures of 42 C.F.R. Part 498.
HCFA Ex.

1.

5

d. that Arcadia had the right to challenge
the cited deficiencies through the
"informal dispute resolution process" (IDR)
under 42 C.F.R. § 488.331 and rule 3701-63-
02 of the Ohio Administrative Code.

2. By letter dated January 29, 1996, ODH notified
Arcadia of the following information:

HCFA Ex.

2.

a. that despite Arcadia's allegation of
substantial compliance by January 9, 1996,
a survey conducted on January 18, 1996,
found that Arcadia was not in substantial
compliance with certification requirements;

b. that Arcadia must submit to ODH a plan
of correction addressing each cited
deficiency;

c. that ODH was recommending to HCFA that
the remedies of DPNA and termination of
Arcadia's Medicare and Medicaid provider
agreements be imposed by HCFA, effective
February 21, 1996 and May 21, 1996,
respectively; and

d. that Arcadia had the right to challenge
any newly cited deficiencies through the
IDR process provided by 42 C.F.R. § 488.331
and rule 371-63-02 of the Ohio
Administrative Code.

3. By letter dated March 4, 1996, HCFA notified
Arcadia of the following information:

a. that, in accordance with ODH's
recommendation, HCFA was imposing the
remedy of DPNA under the Medicare and
Medicaid programs, effective March 24, 1996
and continuing until either Arcadia was
determined to be in substantial compliance
or its provider agreement was terminated;

b. that, if Arcadia did not attain
substantial compliance by May 21, 1996,
HCFA would terminate Arcadia's
participation in the Medicare and Medicaid
programs;
6

c. that HCFA was in receipt of Arcadia's
allegation of compliance and plan of
correction and found these to be
acceptable;

d. that HCFA had asked ODH to conduct a
revisit survey in order to verify Arcadia's
compliance;

e. that, if Arcadia disagreed with HCFA's
determination, Arcadia had a right to
request a hearing before an administrative
law judge (ALJ) of the Departmental Appeals
Board (DAB) within 60 days of receiving
HCFA's March 4, 1996 notice letter; and

f. that the procedures governing Arcadia's
hearing rights are set out at 42 C.F.R. §
498.40 et seq.

HCFA Ex. 3.

4. On March 15, 1996, prior to the effective dates of
the remedies identified in HCFA's March 4, 1996 notice
letter (HCFA Ex. 3, Finding 3), Arcadia requested a
hearing before an ALJ of the DAB for the following
reasons:

a. to dispute the deficiencies found
during the surveys conducted on November
21, 1995 and January 18, 1996; and

b. to request "an evidentiary hearing on
the remedies imposed."

HCFA Ex. 4, at 2.

5. By letter dated April 1, 1996, HCFA notified
Arcadia that, as a result of the revisit survey
conducted by ODH on February 27, 1996:

a. Arcadia was found to be in substantial
compliance with program participation
requirements; and

b. HCFA had determined that the remedies
of DPNA and termination of Arcadia's
participation agreement would not be
imposed.

HCFA Ex. 5.

6. Arcadia refused to withdraw its hearing request
after receiving HCFA's April 1, 1996 notice letter.
7

See, e.g., Order and Schedule for Filing Briefs and
Documentary Evidence (April 25, 1996).

Findings and conclusions on the issue of whether HCFA's March 4,
1996 notice letter, if considered alone, contained an initial
determination which entitled Arcadia to a hearing before me

7. The issues raised by Arcadia's request for hearing
are limited to those matters contained in HCFA's March
4, 1996 notice letter. Findings 4, 5.

8. Arcadia's hearing request was timely filed with
respect to HCFA's March 4, 1996 notice letter. See 42
C.F.R. § 498.40(a).

9. Arcadia is a nursing home voluntarily participating
in the Medicare and Medicaid programs. See HCFA Ex. 3,
4.

10. In exchange for the right to receive Medicare and
Medicaid payments for providing health care services
under the Medicare and Medicaid programs, Arcadia
subjected itself to the relevant obligations and
limitations enumerated in regulations promulgated by
the Secretary of the Department of Health and Human
Services (Secretary). Finding 9; see generally, 42
C.F.R. § 498.1 ("Statutory basis").

11. Part 498 of volume 42 of the Code of Federal
Regulations specifies the appeals procedures for
determinations that affect providers participation in
the Medicare and Medicaid programs. 42 C.F.R. Part
498.

12. Unless a disputed administrative action taken by
HCFA is among those listed in 42 C.F.R. § 498.3(b), the
action cannot be considered an "initial determination"
by HCFA and is not subject to the appeals process of 42
C.F.R. Part 498. 42 C.F.R. § 498.3(d).

13. As relevant to the facts of this case, an "initial
determination" is defined as a finding by HCFA of
"noncompliance leading to the imposition of enforcement
actions specified in 42 C.F.R. § 488.406 of this
chapter... ." 42 C.F.R. § 498.3(b) (12); Findings 3,
4.

14. The other regulatory definitions of “initial
determination" contained in 42 C.F.R. § 498.3 are not
relevant to the facts of this case. See Findings 3 -
5, 7.
8

15. DPNA and termination of a provider agreement are
among the remedies listed in 42 C.F.R. § 488.406. 42
C.F.R. § 488.406(a).

16. The procedural rights accorded by 42 C.F.R. §
498.3(b) (12) are consistent with the regulation
codified at 42 C.F.R. § 498.5(b), which specifies also
that any provider dissatisfied with an "initial
determination" to terminate its provider agreement is
entitled to a hearing before an ALJ. Findings 12, 13,
15.

17. When imposing a remedy, HCFA is required to notify the
provider of: 1) the nature of noncompliance; 2) which
remedy is imposed; 3) the effective date of the remedy; and
4) the provider's right to appeal the determination leading
to the remedy. 42 C.F.R. § 488.402(f); see 42 C.F.R. §
488.456(c)(2) (before terminating a provider agreement based
on deficiencies which do not pose immediate jeopardy to
patients, HCFA must provide notice to the facility at least
15 calendar days before the effective date of termination).

18. HCFA's March 4, 1996 notice letter, entitled
"Notice of Imposition of Remedies," conforms to the
requirements for notice HCFA must provide when it is
imposing remedies against a provider. HCFA Ex. 3;
Findings 3, 17.

19. On March 4, 1996, HCFA imposed remedies against
Arcadia as a result of the noncompliance found during
the November 21, 1995 and January 18, 1996 surveys.
Findings 3, 18.

20. HCFA's March 4, 1996 notice letter contained an
appealable initial determination within the meaning of
42 C.F.R. § 498.3(b) (12). Findings 3, 11 - 19.

21. Based only on the contents of HCFA's March 4, 1996
notice letter, Arcadia had the right to file its March
15, 1996 hearing request contesting the findings of
noncompliance that resulted in HCFA's imposition of
remedies. Findings 3, 11 - 20; 42 C.F.R. § 498.40(a).

22. A provider may not appeal HCFA's determination as
to which remedy to impose. 42 C.F.R. § 498.3(b) (12),
488.408(g) (2).

23. Arcadia did not have the right to a hearing to contest
the remedies imposed by HCFA in the March 4, 1996 notice
letter. HCFA Ex. 4 at 2; Findings 4, 22.
9

Findings and conclusions on the issue of whether Arcadia has a
right to a hearing based on HCFA's March 4, 1996 notice letter,
notwithstanding HCFA's subsequent decision and April 1, 1996
notice letter that no remedy would be imposed against Arcadia

24. Arcadia has not disputed HCFA's conclusion that,
in issuing its March 4, 1996 "Notice of Imposition of
Remedies," HCFA was unaware of ODH's February 27, 1996
revisit and finding of substantial compliance. HCFA
Reply, at 7.

25. Because ODH had conducted a revisit survey on
February 27, 1996, and found Arcadia in substantial
compliance, HCFA notified Arcadia by notice letter
dated April 1, 1996, that HCFA had rescinded the
remedies previously imposed against Arcadia. HCFA Ex.
5.

26. Arcadia was in substantial compliance prior to the
dates on which the remedies of DPNA and termination
were scheduled to take effect (March 24, 1996 and May
21, 1996, respectively). Findings 3, 25.

27. According to HCFA's March 4, 1996 notice letter,
termination of Arcadia's provider agreement would not
take effect if Arcadia achieved substantial compliance
by May 21, 1996. HCFA Ex. 3, at 2.

28. According to HCFA's March 4, 1996 notice letter,
DPNA (if it took effect on March 24, 1996, as
scheduled) would end either when Arcadia was found to
have achieved substantial compliance or when its
provider agreement had been terminated. HCFA Ex. 3, at
2.

29. Whether or not HCFA provided Arcadia with formal
notice that DPNA and termination would not be imposed,
the February 27, 1996 determination that Arcadia had
achieved substantial compliance satisfied the
requirement specified by HCFA for Arcadia to avoid the
imposition of the remedies. Findings 24 - 28.

30. There is no evidence or allegation that HCFA
actually implemented any remedy against Arcadia prior
to notifying Arcadia by letter dated April 1, 1996,
that the remedies had been rescinded.

31. HCFA's April 1, 1996 notice letter corrected the
consequences of HCFA's oversight with respect to the
results of the February 27, 1996 survey, and it
formally confirmed for Arcadia the fact that neither
the DPNA nor the termination remedy would go into
effect under the conditions specified in HCFA's March
4, 1996 notice letter. Findings 24 - 30.
10

32. In response to public comments regarding the
regulations governing this case, the Secretary specifically
rejected the suggestion that there should be a right to
appeal all findings of deficiencies even if no remedy is
imposed because, "[i]f no remedy is imposed, the provider
has suffered no injury calling for an appeal." 59 Fed. Reg.
56158 (1994).

33. The language of 42 C.F.R. § 498.3(b) (12), which
requires a "finding of noncompliance leading to the
imposition of enforcement action specified in § 488.406
of this chapter . ..," does not mean that Arcadia may
receive an evidentiary hearing on HCFA's findings of
deficiencies after HCFA has decided to rescind all
remedies without having ever implemented them. Finding
32.

34. The appeals procedures of 42 C.F.R. Part 498 do
not apply to any finding by HCFA that a provider is in
compliance with the conditions of participation but has
deficiencies. 42 C.F.R. 498.3(d) (1).

35. 42 C.F.R. § 498.4 states that a nursing facility is
"subject" to the appeals process of 42 C.F.R. Part 498 if it
has in effect an agreement to participate in both Medicare
and Medicaid and is a non State-operated nursing facility
that is subject to compliance action as a result of HCFA's
review of the State's survey finding.

36. 42 C.F.R. § 498.4 does not mean that Arcadia may
receive a hearing on HCFA's findings of deficiencies after
HCFA has decided to rescind all remedies without having ever
implemented them. Findings 32 - 34.

37. HCFA has the authority to reopen and revise an
initial determination on its own initiative, within 12
months after the notice date of the initial
determination. 42 C.F.R. §§ 498.30, 498.32.

38. An initial determination issued by HCFA is not
binding if it has been revised in accordance with 42
C.F.R. § 498.32. 42 C.F.R. § 498.20(b) (3).

39. The regulations contain no criteria to which
HCFA's notices of reopenings and revisions of initial
determinations must conform.

40. HCFA's April 1, 1996 notice letter indicates that
HCFA had reassessed its initial determination on its
own initiative and had decided to rescind the remedies
specified in its March 4, 1996 notice letter. Findings
5, 31.
11

41. Whether or not a notice of reopening and revising
a determination must meet specific requirements of
form, HCFA's April 1, 1996 notice letter was issued
within 12 months of its March 4, 1996 initial
determination and served the same purpose as a notice
of reopening and revising a determination. Findings 3,
5, 37, 39, 40.

42. The entirety of HCFA's March 4, 1996 notice letter
had no legal force or effect after HCFA issued its
April 1, 1996 notice letter. Findings 24 - 29, 37 -
40.

43. Read in combination, HCFA's notice letters of
March 4, 1996 and April 1, 1996, mean that while HCFA
has made findings of noncompliance based on the surveys
of November 21, 1995 and January 18, 1996, HCFA has not
imposed against Arcadia any remedy within the meaning
of 42 C.F.R. § 488.406. HCFA Ex. 3, 5; Findings 3, 5,
33 - 36, 42.

44. As of April 1, 1996, there was no determination issued
by HCFA to Arcadia that was subject to the hearing rights
specified under 42 C.F.R. Part 498. 42 C.F.R. §

498.3(b) (12); Findings 31 - 43.

45. After HCFA issued its April 1, 1996 notice letter,
Arcadia was without a right to a hearing to contest the
noncompliance found during the November 21, 1995 and
January 18, 1996 surveys. Findings 21, 44.

46. The possibility that HCFA might impose remedies
against Arcadia in the future, based on the results of
the November 21, 1995 and January 18, 1996 surveys, is
speculative at best and outside any definition of an
initial determination entitling Arcadia to a hearing
under 42 C.F.R. Part 498. 42 C.F.R. § 498.3.

47. Neither the current nor the potential prospective
harm alleged by Arcadia based on the findings of
noncompliance entitles Arcadia to a hearing under the
regulations. See Arcadia Response, 1 - 12; 42 C.F.R.
§§ 488.406, 498.3.

48. Dismissal of Arcadia's hearing request in its
entirety is appropriate under 42 C.F.R. § 498.70(b),
due to the absence of Arcadia's right to a hearing on
any of the issues raised in its hearing request.
Findings 4, 22, 23, 45 - 47.

49. Arcadia has been accorded all rights and process
due it under the regulations. Findings 1 - 48.
12
CONCLUSION
For the foregoing reasons, I grant HCFA's Motion to Dismiss.

This case, which is based on Arcadia's March 15, 1996 hearing
request, is hereby DISMISSED.

/s/
Mimi Hwang Leahy

Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
viNita R. Warren, DATE: June 19, 1996
Petitioner,

Docket No. C-96-058
Decision No. CR423

-v-

The Inspector General.

DECISION

By letter dated November 30, 1995,! the Petitioner
herein, was notified by the Inspector General (I.G.), of
the U.S. Department of Health & Human Services, that it
had been decided to exclude Petitioner for a period of
five years from participation in the Medicare program and
from participation in the State health care programs
described in section 1128(h) of the Social Security Act
(Act), which are referred to herein as "Medicaid." The
I.G.'s rationale was that exclusion, for at least five
years, is mandated by sections 1128(a)(1) and
1128(c)(3)(B) of the Act because Petitioner had been
convicted of a criminal offense related to the delivery
of an item or service under Medicaid.

' The notice letter contained an error, and a
second letter explaining and correcting the error was
mailed to Petitioner on January 19, 1996. I.G. Ex. 3.
Although the first paragraph of the notice letter
correctly states that the exclusion was the result of
Petitioner's conviction of a "criminal offense related to
the delivery of an item or service under Medicaid," the
third paragraph states that the conviction was for a
"criminal offense relating to neglect or abuse of
patients in connection with the delivery of a health care
item or service." The January 19, 1996 letter makes
clear that the exclusion is based upon section 1128(a) (1)
of the Act and states that Petitioner has been convicted
of a criminal offense related to the delivery of an item
or service under Medicaid.
2

Petitioner filed a request for review of the I.G.'s
action by an administrative law judge of the Departmental
Appeals Board (DAB). The I.G. moved for summary
disposition.

Because I determined that there are no facts of
decisional significance genuinely in dispute, and that
the only matters to be decided are the legal implications
of the undisputed facts, I have granted the I.G.'s motion
and decided the case on the basis of the parties' written
submissions.’

I find no reason to disturb the I.G.'s determination to
exclude Petitioner from participation in the Medicare and
Medicaid programs for a period of five years.

PETITIONER'S ARGUMENT

In her request for a hearing and during the telephone
prehearing conference call on February 5, 1996,
Petitioner admitted that she was convicted of a
misdemeanor for receiving a bribe for giving out
unauthorized information. Petitioner contends that the
offense for which she was convicted did not warrant
exclusion under section 1128(a)(1) of the Act.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Maryland's Medicaid program is administered by the
Maryland Department of Health and Mental Hygiene (DHMH) .
I.G. Ex. 9.

2. Chesapeake Health Plan Inc. (Chesapeake) is a
private HMO (health maintenance organization)
incorporated in the State of Maryland. I.G. Exs. 8 - 10.

3. Pursuant to an HMO contract between Chesapeake and
DHMH, Chesapeake may enroll people eligible for Medicaid.
DHMH will then pay Chesapeake a monthly capitation fee
for each enrollee for the services rendered by
Chesapeake. In return, Chesapeake is responsible for

2 The I.G. submitted a "Memorandum of Law in
Support of the I.G.'s Motion for Summary Disposition,"
proposed findings of facts and conclusions of law, and 15
exhibits. I designate the I.G.'s exhibits as "I.G. Ex."
Petitioner did make a submission and Petitioner did not
object to any of the documents submitted by the I.G.
Thus, I admit I.G. Exs. 1 - 15.
3

providing, arranging, and paying for all medical items
and services to which enrollees are entitled under the
Medicaid State plan. I.G. Exs. 8 - 10.

4. HMOs in Maryland are allowed to recruit individuals
to increase their business. I.G Exs. 8 - 10.

5. James Donovan was a marketing representative
employed by Chesapeake. I.G. Exs. 9, 10.

6. Chesapeake paid Donovan a commission based on the
number of Medicaid recipients he successfully enrolled
each month. I.G. Exs. 9, 10.

7. HMOs generally use traditional marketing methods in
publicizing their services. The HMOs are not entitled to
lists of names or addresses of Medicaid recipients,
inasmuch as these are protected by State privacy laws.

8. Petitioner is a social worker who, at all times
relevant to this proceeding, was employed by the State of
Maryland, Department of Human Resources, as a case worker
in the Palmer Park Department of Social Service (DSS) of
in Prince George's County. I.G. Exs. 9, 10.

9. As a DSS caseworker, Petitioner determined the
eligibility of applicants for Medicaid and other
entitlements. I.G. Exs. 9, 10.

10. At DSS, Petitioner had access to a computer data
base, which contained information on Medicaid recipients,
including their names and addresses, as well as the names
and ages of their family members, income, assets, and the
family members' Medicaid numbers. I.G. Exs. 9, 10.

11. DSS employees are prohibited by Maryland law from

disclosing any information about Medicaid recipients to
anyone outside of the DSS offices. I.G. Exs. 6, 7, 9,

10.

12. Petitioner was approached by Mr. Donovan who
explained to her that it was his job to enroll Medicaid
recipients into Chesapeake and that he could more readily
market his services if he knew Medicaid recipients' names
and addresses. I.G. Exs. 9, 10.

13. On several occasions between January 1994 and
September 1994 Petitioner gave Mr. Donovan computerized
lists of the information he sought pertaining to Medicaid
recipients and she in turn was paid for providing such
information to him. I.G. Ex. 9 - 12.
4

14. In February 1995, the Medicaid Fraud Control Unit of
the State of Maryland began an investigation of the
selling of names and addresses of Medicaid recipients to
Chesapeake representatives. I.G. Ex. 9.

15. On June 13, 1995, a criminal indictment was filed in
the Circuit Court of Baltimore City charging Petitioner
with receiving bribes and rewards from January 1994 to
September 1994, the purpose and intent of which were to
influence her in the performance of her official duties
to her employer by inducing her to disclose confidential
information on Maryland Medicaid recipients in violation
of Article 27, section 22 of the Annotated Code of
Maryland. I.G. Exs. 11, 12.

16. Petitioner and the Office of the Attorney General
entered into a plea agreement, whereby Petitioner agreed
to plead guilty to the criminal information charging her
with receiving a reward from persons seeking to influence
her in the performance of her official duties. I.G. Ex.
13.

17. The guilty plea was accepted by the judge for the
Circuit Court for Baltimore City and the judgment of
conviction was entered on August 16, 1995. I.G. Exs. 11,
14.

18. Petitioner was sentenced to serve six months, which
sentence was suspended. Petitioner was released on
supervised probation for a period of one year, ordered to
perform 200 hours of community service, and ordered to
pay court costs. I.G. Ex. 14.

19. Petitioner's plea of guilty which was accepted by
the court and the entry of the judgment of conviction
both satisfy the definition of conviction found in
section 1128(i) of the Act for purposes of mandatory
exclusion. Findings 17, 18.

20. Petitioner's conviction for improperly disclosing
the names of Medicaid recipients to the representative of
a Medicaid HMO is related to the delivery of an item or
service under the Medicaid program, within the meaning of
section 1128(a)(1) of the Act. Findings 1 - 19.

21. The Secretary is required by section 1128(a)(1) of
the Act to exclude Petitioner from participation in
Medicare and to direct the State to exclude her from
participation in State health care programs because of
her conviction in a program-related offense.
5

22. The mandatory minimum period of an exclusion of a
person convicted of a program-related offense is five
years. Act, section 1128(c) (3) (B).

23. The Secretary has delegated to the I.G. the duty to

impose the mandatory exclusion of a person convicted of a
program-related offense. 48 Fed. Reg. 21,661 (1983); 42

C.F.R. § 1001.101.

24. Petitioner is subject to a mandatory minimum
exclusion of five years for her conviction of a criminal
offense related to the delivery of an item or service
under the Medicaid program. Findings 1 - 23.

APPLICABLE LAW

Sections 1128(a)(1) and 1128(c) (3)(B) of the Act make it
mandatory for any individual who has been convicted of a
criminal offense related to the delivery of an item or
service under the Medicare or Medicaid programs to be
excluded from participation in such programs for a period
of at least five years.

DISCUSSION

The law relied upon by the I.G. to exclude Petitioner
requires, initially, that the person charged have been
convicted of a crime. Section 1128(i) of the Act
provides that an individual will be deemed convicted
under any of the following circumstances:

(1) when a judgment of conviction has been entered
against the individual or entity by a Federal,
State, or local court, regardless of whether there
is an appeal pending or whether the judgment of
conviction or other record relating to criminal
conduct has been expunged;

(2) when there has been a finding of guilt against
the individual or entity by a Federal, State, or
local court;

(3) when a plea of guilty or nolo contendere by the
individual or entity has been accepted by a Federal,
State, or local court; or

(4) when the individual or entity has entered into
participation in a first offender, deferred
adjudication, or other arrangement or program where
judgement of conviction has been withheld.
6

In this case, sections 1128(i)(1) and (3) of the Act are
clearly applicable. The Circuit Court of Baltimore City,
Maryland accepted the Petitioner's plea of guilty on
August 18, 1995 and entered a judgment of conviction
against her for receiving a bribe. I.G. Exs. 11, 13 -
15. The fact that Petitioner pled guilty to a crime and
the court accepted her plea constitutes a conviction
within the meaning of section 1128(i)(3) of the Act.
Also, the entry of the judgment of conviction by the
court is within the definition of conviction as set forth
in section 1128(i)(1) of the Act. The Petitioner was
therefore convicted of a criminal offense within the
meaning of both sections 1128(i)(1) and (3).

Next, the statute requires that the criminal activity
must have been related to the delivery of a health care
item or service under the Medicare or Medicaid program.
On this issue, the regulations are clear that program-
related offenses include "the performance of management
or administrative services relating to the delivery of
items or services under any such program." 42 C.F.R. §
1001.101.

An appellate panel upheld an administrative law judge's
reasoning that "(t]he determination of whether a
conviction is related to the delivery of an item or
service under the Medicaid program ‘must be a common
sense determination based on all relevant facts as
determined by the finder of fact, not merely a narrow
examination of the language within the four corners of
the final judgment and order of the criminal trial

court.'" Surabhan Ratanasen, M.D., DAB 1138 at 5 (1990)
(citing Jack W. Greene, DAB 1078 (1989), aff'd sub nom.

Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990)).

Most relevant to the facts herein are DAB decisions
uniformly upholding section 1128(a)(1) exclusions for
convictions of receiving kickbacks or bribes for
referrals of Medicaid or Medicare business. These cases
are comparable to Petitioner's case. Asadollah
Amrollahifar, Ph.D, DAB CR238 (1992). See also Niranjana
B. Parikh, M.D., et al., DAB 1334 (1992); Arthur V.
Brown, M.D., DAB CR226 (1992); John J. Tolentino, M.D.,
et_al., DAB CR180 (1992). Thus, the receipt of such
unlawful remuneration is an offense related to the
Medicare and Medicaid programs. In Amrollahifar, a
psychologist was convicted for receiving money in
exchange for the "stickers" of Medicaid recipients. The
petitioner in Amrollahifar gave these stickers to a
medical supply company who used the stickers to obtain
payment from Medicaid for supplies that were
unauthorized, unnecessary, and inflated in price. The
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administrative law judge held that "the delivery of items
under Medicaid played an essential and integral role in
petitioner's criminal conduct and conviction" and that
“without this connection, petitioner would not have
obtained the stickers in question and would not have
subsequently sold them to [the medical supply company.]"
Amrollahifar, at 4. Similarly, in Petitioner's case, the
bribes were offered and received to enable Chesapeake to
market its HMO services to Medicaid recipients, whom it
might not have identified without Petitioner's improper
disclosure.

The acts which led to Petitioner's conviction would
likely never have occurred absent her connection to the
Medicaid program. Therefore, I conclude that the
delivery of HMO items and services under Maryland's
Medicaid program played an essential and integral role in
Petitioner's criminal conduct, such that her conviction
is related to the delivery of items or services under
Medicaid, within the meaning of section 1128(a)(1) of the
Act.

CONCLUSION

Petitioner's exclusion, for at least five years, is
mandated by sections 1128(a)(1) and 1128(c)(3)(B) of the
Act because of her conviction of a criminal offense
related to the delivery of an item or service under the
Medicaid program.

/s/

Joseph K. Riotto
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

In the Case of:
Michael Blake Runyon, D.P.M., DATE: June 13, 1996
Petitioner,

Docket No. C-96-093
Decision No. CR422

-v-

The Inspector General.

DECISION ON REMAND

Background

The procedural history of this case is contained in my prior
decision, DAB CR392 (1995), and in the decision of the
appellate panel of the Departmental Appeals Board (DAB) 1555
(1996), which remanded the case to me for further
proceedings.

In my decision, I determined that Petitioner's conviction for
receiving unlawful remuneration (kickbacks) from Sunmac, a
medical supply business, for referring his podiatric patients
to Sunmac for TENS (transcutaneous electronic nerve
stimulators) units was sufficiently related to the delivery
of an item or service under Medicare to justify exclusion
under section 1128(a)(1) of the Social Security Act (Act).

In his appeal of my decision, Petitioner contended that his
criminal conviction was not related to the delivery of items
or services under Medicare. The appellate panel remanded the
case so that I could clarify whether the remuneration which
the Petitioner was convicted of receiving related to Medicare
patients.

By letter dated January 30, 1996, I gave the parties until
March 6, 1996 to file whatever statements they wished to make
on the remand of this case. The I.G. submitted a
"Supplemental Memorandum in Support of the I.G.'s Motion for
Summary Disposition upon Remand to the Administrative Law
Judge" (supplemental memorandum). Petitioner did not make a
2

submission or object to the brief and exhibit submitted by
the I.G.

Findings of fact and conclusions of law

1. Adrian Tigmo is a Deputy Attorney General assigned to
the Bureau of Medi-Cal Fraud of the California Attorney
General's Office in Los Angeles, California. I.G. Ex. 20 at
1

2. The Bureau of Medi-Cal Fraud was created to investigate
and prosecute provider-related offenses involving the
Medicaid (known as Medi-Cal in California) program. I.G. Ex.
20 at 1.

3. Medi-Cal does not prosecute private insurance cases,
unless they are part of a program-related offense on which
Medi-Cal has filed charges. I.G. Ex. 20 at l.

4. Adrian Tigmo prosecuted the criminal case against
Petitioner and has personal knowledge of the joint
investigation of Petitioner by the Bureau of Medi-Cal Fraud
and the Office of Inspector General. Mr. Tigmo is familiar
with the charges filed against Petitioner and the factors
leading to Petitioner's conviction on February 24, 1994 in
the Municipal Court of Los Angeles County, Van Nuys,
California. I.G. Ex. 20 at 1 - 2.

5. The nature and scope of the investigation against
Petitioner centered on government paid medical services
billed to the Medicare program, along with some Medi-Cal
nexus, i.e., Medicare/Medi-Cal crossover patients. I.G. Ex.
20 at 2.

6. According to Mr. Tigmo, during plea bargain
negotiations, Petitioner was provided with over 45
investigative reports involving the joint Bureau of Medi-Cal
and Office of Inspector General's investigation of Petitioner
and Sunmac, which set forth Petitioner's involvement with
Sunmac in a scheme to defraud the Medicare program. I.G. Ex.
20 at 2.

' In the I.G.'s supplemental memorandum, the I.G.
includes the declaration of Adrian Tigmo and designates it as
I.G. Ex. 19. However, there is an I.G. Ex. 19 already in the
record. Thus, I designate Adrian Tigmo's declaration as I.G.
Ex. 20. Petitioner has not objected to this exhibit. I admit
I.G. Ex. 20 into evidence.
3

7. The investigative reports focused on interviews of
Petitioner's patients, all of whom were Medicare
beneficiaries. There were no interviews with privately
insured patients as part of the prosecution against
Petitioner. I.G. Ex. 20 at 2; Finding 6.

8. Petitioner pleaded no contest to receiving unlawful
remuneration for sending business to Sunmac in violation of
California Business and Professions Code Section 650. The
transcript of that no contest plea shows that the only victim
in this case to receive restitution was the government. I.G.
Ex. 20 at 3; I.G. Ex. 17 at 11.

9. The dismissed counts of prescription forgeries (Counts
two through five of the Complaint) involved Petitioner's
Medicare patients and the forgery set forth in Count five of
the Complaint occurred on or about December 20, 1989 and
related to prescriptions for TENS units for a Medicare
beneficiary, J.D. I.G. Ex. 20 at 4; I.G. Exs. 14, 17.

10. Mr. Tigmo stated that Petitioner pled guilty to Count
six which used the date and circumstances of Count five,
which explains the dates of both being identical.
Petitioner, having been advised of the allegations against
him and having been advised and represented by privately
retained counsel, stipulated to a factual basis for the plea
of no contest to count six. I.G. Ex. 20 at 4; I.G. Ex. 17.

11. Mr. Tigmo's declaration explained that the selection of
the date set forth in Count six (December 20, 1989) was an
acquiescence to defense counsel's desire to change the
allegations in Count five (but use the same identified
Medicare beneficiary, J.D., and date of December 20, 1989) to
a mutually agreed upon offense for a no contest plea
involving a violation of the California Business and
Professions Code Section 650. I.G. Ex. 20 at 5; I.G. Ex. 13
at 24 - 26.

12. Mr. Tigmo indicated that "[c]ount 6 was merely a
substitution of Count 5, agreed upon by both parties prior to
coming to court on February 24, 1994." I.G. Ex. 20 at 6.

13. On December 20, 1989, Petitioner completed and signed a
form entitled "Certification of Medical Necessity
Transcutaneous Electrical Nerve Stimulator (Tens)" for his
patient J.D. Petitioner had to also enter his Medicare
number on this form. I.G. Ex. 13 at 24 - 25; see also I.G.
Ex. 13 at 3; I.G. Ex. 2 at 61.

14. On December 20, 1989, Petitioner wrote a prescription
for J.D. for a "Tens unit rental 2 mos Osteoarthritis." I.G.
Ex. 13 at 26.
4

15. I find that J.D. was a Medicare beneficiary. I.G. Ex.
20; see also I.G. Ex. 13; Findings 6 - 14.

16. Petitioner informed J.D. that there would be no cost to
her for the TENS unit that she was provided, thus waiving co-
payments as a matter of course. I.G. Ex. 20 at 5; I.G. Ex. 2
at 47, 75 - 77.

17. The date of the offense that Petitioner was convicted of
in Count six related to the date of the prescription for a
Sunmac TENS unit for Medicare beneficiary J.D. I.G. Ex. 20
at 5; Findings 13 - 14.

18. The offense of which Petitioner was convicted --
receiving remuneration in exchange for patient referrals --
constitutes a conviction of a criminal offense related to the
delivery of items of services under Medicare within the
meaning of section 1128(a)(1) of the Act and justifies
application of the exclusion provision. Findings 5 - 17.

Discussion

On remand, the I.G. introduced a statement from Adrian Tigmo,
an attorney who had prosecuted Petitioner for fraud. He
noted that Petitioner had initially been charged with five
counts of fraud. He further noted that at least 45 cases
involving Petitioner were investigated and that all involved
false claims against either the Medicare or Medi-Cal programs
-- none involved false claims against private insurers.

I find J.D. to be a Medicare beneficiary based on the
declaration of Mr. Tigmo as well as the evidence of record.
The record reveals that Petitioner completed a form entitled
"Certification of Medical Necessary [CMN] Transcutaneous
Electrical Nerve Stimulator (TENS)" which the treating
physician has to complete in order for a Medicare or Medi-Cal
patient to rent a TENS unit. I.G. Ex. 13 at 2 - 3, 24 - 25;
Runyon, DAB CR392 at 3 - 4. The authorizing prescription and
CMN must be submitted to the fiscal intermediary, along with
a claim form for a TENS rental and subsequent TENS order for
supplies. I.G. Ex. 3. In this case, the evidence of record
shows that Petitioner completed a CMN for J.D. on December
20, 1989. I.G. Ex. 13 at 24 - 25. Right under the place for
the name of the physician are the words "Medicare I.D.#" and
that information was filled in by Petitioner or his office.
Id. Furthermore, on December 20, 1989, Petitioner issued a
prescription to a J.D. that prescribes "Tens unit rental 2
Mos osteoarthritis." Id. at 26. I conclude from this that
J.D. was a Medicare beneficiary, and in order to treat her
osteoarthritis, Petitioner prescribed a TENS unit and
5

completed the necessary paperwork, which included his
Medicare number for reimbursement purposes.

The declaration of Adrian Tigmo explains that the sixth count
against Petitioner filed at the request of his attorney as
part of the plea bargain process in fact exactly matched the
circumstances of J.D., a Medicare beneficiary, who, on or
about the date alleged in the indictment, received a Sunmac
TENS unit through Petitioner, and that Petitioner was
compensated by Sunmac with Medicare money very shortly
thereafter. I.G. Ex. 20; I.G. Ex. 13 at 24 - 26. Petitioner
adduced no evidence whatever contradicting this account
offered by the I.G. and I regard it as sufficient to show the
connection between Medicare funds and the criminal charges
brought against this Petitioner.

Conclusion

Sections 1128(a)(1) and 1128(c)(3)(B) of the Act mandate that
the Petitioner herein be excluded from the Medicare and
Medicaid programs for a period of at least five years because
of his criminal conviction for accepting unlawful
remuneration. Jack W. Greene, DAB CR19 (1989), aff'd DAB
1075, aff'd sub nom., Green v. Sullivan, 731 F. Supp. 835
(E.D. Tenn. 1990). The five-year exclusion is, therefore,
sustained.

/s/

Joseph K. Riotto
Administrative Law Judge