Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Richard L. Hogan
(OI File No. 5-08-40290-9),

Petitioner,
v.
The Inspector General.
Docket No. C-15-383
Decision No. CR3935

Date: June 3, 2015

DECISION

The Inspector General (IG) of the Department of Health and Human Services excluded
Richard L. Hogan (Petitioner) from participating in Medicare, Medicaid, and all other
federal health care programs for a minimum period of 18 years. Petitioner requested a
hearing to dispute the exclusion. For the reasons explained below, I conclude that the IG
has a basis for excluding Petitioner and that the 18-year exclusion period is not
unreasonable in light of three aggravating factors present in this case.

I. Case Background and Procedural History

In a letter dated August 29, 2014, the IG notified Petitioner that, pursuant to 42 U.S.C.

§ 1320a-7(a)(1), he was being excluded from participation in Medicare, Medicaid, and all
federal health care programs for a period of 18 years effective September 18, 2014. IG
Ex. 1. The IG based the exclusion on Petitioner’s conviction of a criminal offense in the
United States District Court for the Eastern District of Michigan (District Court) related
to the delivery of an item or service under Medicare or a state health care program,
including the performance of management or administrative services relating to the
delivery of items or services, under any such program. The IG cited three aggravating
factors as a basis for increasing the exclusion period from five to 18 years:

(1) Petitioner’s criminal conduct caused a loss to a government program of $5,000 or
more; (2) the acts resulting in Petitioner’s conviction were committed over a period of
one year or more; and (3) the District Court’s sentence of Petitioner included a term of
incarceration. IG Ex. | at 1-2.

Petitioner, proceeding pro se, filed a request for a hearing with the Civil Remedies
Division (CRD) to dispute the exclusion. Petitioner argued that the exclusion was
improper because he is innocent of the underlying criminal offense and is appealing the
criminal conviction. Petitioner attached to his hearing request a copy of his appellate
brief in his criminal case. The CRD Director administratively assigned this case to me
for hearing and decision. On January 7, 2015, I convened a prehearing conference by
telephone, the substance of which is summarized in my January 16, 2015 Amended Order
and Schedule for Filing Briefs and Documentary Evidence (Amended Order). During the
prehearing conference, I accepted the document attached to Petitioner’s hearing request
as P. Ex. 1. Amended Order § 4. Pursuant to the Amended Order, the IG electronically
filed a brief (IG Br.) on February 13, 2015, with IG Exs. | through 5, and certified that he
sent a copy to Petitioner by first-class mail. Petitioner, who is currently incarcerated,
filed a brief by mail (P. Br.) on February 27, 2015, with no exhibits attached.’ The IG
filed a reply brief (IG Reply) on April 13, 2015.

IL. Issues
This case presents the following issues:
1. Whether the IG has a basis to exclude Petitioner based on his conviction for an

offense related to the delivery of an item or service under Medicare or a state
health care program; and

2. If there is a basis for the exclusion, whether an eighteen-year exclusion period
is unreasonable.

III. Decision on the Record
Petitioner did not object to any of the IG’s five proposed exhibits. Therefore, I admit IG

Exs. 1-5 into the record. The IG did not object to the document attached to Petitioner’s
hearing request, referred to as P. Ex. 1. Therefore, I admit P. Ex. 1 into the record.

' Petitioner labeled his brief as an exhibit, but for clarity I will refer to that document as
his brief rather than as an evidentiary exhibit.
Neither party has expressly requested an in-person (video) hearing nor explained why an
in-person hearing would be necessary. Amended Order § 4. Accordingly, because there
is no need for any in-person hearing, I issue this decision based on the written record.

IV. Jurisdiction

I have jurisdiction to decide the issues in this case. 42 C.F.R. §§ 1001.2007(a)(1)-(2),
1005.2(a); see also 42 U.S.C. § 1320a-7(f)(1).

V. Findings of Fact, Conclusions of Law, and Analysis”

I. A jury found Petitioner guilty of engaging in a conspiracy to commit health
care fraud from October 2009 to April 2012, and the District Court sentenced
Petitioner to 60 months of incarceration and ordered him to pay $988,529.15
in restitution.

On December 11, 2012, a federal grand jury indicted Petitioner on one count of
conspiracy to commit health care fraud (18 U.S.C. §§ 1347, 1349). IG Ex. 3. According
to the indictment, Petitioner managed and assisted his co-conspirators in the management
of New Century Adult Day Program Services (New Century), and his co-conspirators
filed claims for payments for psychotherapy and related services that were not medically
necessary and induced the referrals of Medicare beneficiaries to New Century through
illegal kickbacks. IG Ex. 3 at 3-5. Petitioner allegedly performed these acts from about
October 2009 to April 2012. IG Ex. 3 at 3. Asa result of the conspiracy and the co-
conspirators’ criminal conduct, Medicare allegedly paid $983,652.36 in improper claims.
IG Ex. 3 at 5.

On October 18, 2013, following a trial, a jury found Petitioner guilty of conspiracy to
commit health care fraud. IG Ex. 4. The District Court sentenced Petitioner to 60
months of incarceration; two years of supervised release at the conclusion of his
incarceration; an assessment of $100; and payment of $988,529.15 in restitution. IG

Ex. 5. The District Court ordered that the restitution amount was to be paid to the United
States Department of Health and Human Services. IG Ex. 5 at 5.

2. Petitioner was conviction of a criminal offense related to the delivery of a
health care item or service under the Medicare program, therefore, exclusion
is required under 42 U.S.C. § 1320a-7(a)(1).

The IG must exclude an individual from participation in any federal health care program
if that individual was convicted under federal or state law of a criminal offense related to
the delivery of an item or service under Medicare or a state health care program.

> My findings of fact and conclusions of law appear in bold and italics.
42 U.S.C. § 1320a-7(a)(1). Petitioner does not dispute that a jury convicted him of
conspiracy to commit health care fraud. Instead, he argues that he is actually innocent of
the offense, and that his conviction is currently under appeal and may have a successful
outcome. P. Br. at 1-2. He disputes the IG’s authority to exclude him while “there are
still measures of relief available via appeal.” P. Br. at 1.

For purposes of exclusion, individuals are deemed “convicted” of an offense “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 . . . [.]” 42 U.S.C.
§ 1320a-7(i)(1). In the present matter, a jury found Petitioner guilty of conspiracy to
commit health care fraud, and the District Court issued a judgment of conviction and
sentenced Petitioner pursuant to that conviction. IG Ex. 5. It should be noted that for the
purposes of section 1320a-7, the mere fact that a jury convicted Petitioner (IG Ex. 4) is
sufficient to conclude that he was “convicted” without regard to a pending appeal.

42 US.C. § 1320a-7(i)(3).

Further, Petitioner’s conviction was for an offense “related to” the delivery of an item or
service under Medicare. The term “related to” simply means that there must be a nexus
or common sense connection. See Quayum v. U.S. Dep’t of Health and Human Servs., 34
F. Supp. 2d 141, 143 (E.D.N.Y. 1998); see also Friedman v. Sebelius, 686 F.3d 813, 820
(D.C. Cir. 2012) (describing the phrase “related to” in another part of section 1320a-7 as
“deliberately expansive words,” “the ordinary meaning of [which] is a broad one,” and
one that is not subject to “crabbed and formalistic interpretation”) (internal quotes
omitted).

The jury specifically found Petitioner guilty of conspiracy to commit health care fraud in
violation of 18 U.S.C. §§ 1347 and 1349. By finding Petitioner guilty of conspiracy to
commit health care fraud, the jury concluded beyond a reasonable doubt that he conspired
to commit criminal conduct “in connection with the delivery of or payment for health
care benefits, items, or services. ...” 18 U.S.C. § 1347(a). Submitting a false claim to
Medicare is “related to” the delivery of an item or service under the Medicare program.
See Travers v. Shalala, 20 F.3d 993, 998 (9th Cir. 1994) (conviction for filing claims
with the Medicaid program is “a program-related offense” and “such financial
misconduct is exactly what Congress sought to discourage” through imposing
exclusions); Greene v. Sullivan, 731 F. Supp. 835, 838 (E.D. Tenn. 1990) (“There is no
question that Mr. Greene’s crime [of filing false claims] resulted in a Medicaid
overpayment and was a program-related crime triggering the mandatory exclusion under
Section 1320a-7(a).”); see also Manocchio v. Kusserow, 961 F.2d 1539 (11th Cir. 1992)
(Upholding a mandatory exclusion involving a conviction for Medicare fraud). It follows
that conspiring to submit a false claim to Medicare is also “related to” the delivery of an
item or service under the Medicare program. Cf Anderson v. Thompson, 311 F. Supp. 2d
1121, 1126-27, 1131 (D. Kan. 2004) (affirming mandatory exclusion based on a
conviction for conspiracy to violate the anti-kickback statute). Further, the fact that the
District Court ordered Petitioner to pay restitution to the Department of Health and
Human Services (i.e., the federal department responsible for administering Medicare) is
additional reason to conclude that Petitioner’s criminal conviction is related to the
delivery of items or services in the Medicare program. Blessing Okuji, DAB CR2343, at
5 (2011); Alexander Nepomuceno Jamias, DAB CR1480 (2006). Accordingly, I
conclude that the criminal conduct for which Petitioner was convicted was related to the
delivery of a health care item or service under the Medicare program. See 42 U.S.C.

§ 1320a-7(a)(1). Therefore, the record fully supports Petitioner’s mandatory exclusion.
IG Exs. 2-5.

Petitioner’s argument that the IG does not have the authority to exclude him while the
appeal of his criminal conviction is pending is without merit. The statute in which
Congress required the exclusion of individuals from the Medicare program expressly
states that an individual is convicted of an offense “regardless of whether there is an
appeal pending or whether the judgment of conviction or other record relating to criminal
conduct has been expunged.” 42 U.S.C. § 1320a-7(i)(1). Thus, for purposes of the
exclusion statute, Petitioner has been “convicted” of conspiracy to commit health care
fraud even though his direct appeal is still pending. Also, I do not have the authority to
stay the exclusion while Petitioner’s appeal is pending. See 42 C.F.R. § 1005.4(c)(4).
The effective date of an exclusion is established by regulation and I am bound to follow
that provision. 42 C.F.R. §§ 1001.2002(b); 1005.4(c)(1). If Petitioner is successful in his
appeal, he may seek reinstatement from the IG. 42 C.F.R. § 1001.3005(a)(1). In
addition, Petitioner’s claim that he is innocent of the crime for which he was found guilty
is an impermissible collateral attack on his conviction that the regulations prohibit me
from considering. 42 C.F.R. § 1001.2007(d).

3. Petitioner must be excluded for a minimum of five years.

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(1), Petitioner must be excluded for a minimum of five years. 42 U.S.C.
§ 1320a-7(c)(3)(B).

4. The IG has established three aggravating factors in this case that support an
exclusion period beyond the five-year statutory minimum.

The regulations establish aggravating factors that the IG may consider to lengthen the
period of exclusion beyond the five-year minimum for a mandatory exclusion. 42 C.F.R.
§ 1001.102(b). Only if an aggravating factor justifies an exclusion longer than five years
may mitigating factors be considered as a basis for reducing the period of exclusion to no
less than five years. 42 C.F.R. § 1001.102(c).

In this case, the IG advised Petitioner in the August 29, 2014 exclusion notice that there
were three aggravating factors that justified excluding him for more than five years: first,
the acts resulting in his convictions, or similar acts, caused, or were intended to cause, a
financial loss to a government program of $5,000 or more; second, the acts resulting in
the conviction occurred over a period of one year or more; and third, the sentence
imposed by the court included incarceration. IG Ex. 1; 42 C.F.R. § 1001.102(b)(1), (2),
(5). The IG cited the nearly three-year period that the conspiracy lasted, the District
Court’s restitution order of $988,529.15 against Petitioner, and his 60- month prison
sentence as the factual basis for the existence of the three aggravating factors. IG Ex. 1
at 1-2.

a. The IG has established the aggravating factor stated in 42 C.F.R.

§ 1001.102(b)(1) -- financial loss to a government program of $5,000

or more.
The IG has provided evidence that demonstrates the acts resulting in Petitioner’s criminal
conviction caused a financial loss to a government program of $5,000 or more. See
42 C.F.R. § 1001.102(b)(1). A jury found Petitioner guilty of a conspiracy to submit
false claims to Medicare, which resulted in $983,652.36 in fraudulently obtained
payments from the Medicare program. IG Ex. 3 at 5. In addition, the record shows that
the District Court sentenced Petitioner to pay restitution totaling $988,529.15 to the
Department of Health and Human Services, the department that administers the Medicare
program. IG Ex. 5 at 5. It is well-established that an amount ordered as restitution
constitutes proof of the amount of financial loss to a government program. See e.g., Juan
de Leon, Jr., DAB No. 2533, at 5 (2013). Regardless of whether the restitution order is
joint and several among Petitioner and his co-conspirators — although there is no
evidence that it is — the District Court’s sentence of Petitioner plainly establishes that he
is responsible for the total restitution amount. IG Ex. 5 at 5-7; see also United States v.
Ingles, 445 F.3d 830, 839 (5th Cir. 2006) (affirming joint and several restitution order
where one co-defendant was ultimately responsible for more restitution than other co-
defendant). In addition, the regulations provide that the entire amount of financial loss is

> The record does not contain evidence that clearly explains why the District Court’s
restitution order is more than the amount of government loss cited in the Indictment.
Compare 1G Ex. 5 at 6 with IG Ex. 3. The amount of the discrepancy ($4,876.79) is
inconsequential when considering the substantial amount of overall loss that the
government sustained as a result of Petitioner’s conspiracy and criminal conduct. In
terms of the aggravating factor at issue, the discrepancy is the difference between 197
times the $5,000 trigger for the aggravating factor, and 198 times that amount — both
substantially over the minimum amount of loss required for the aggravating factor to

apply.
what provides a basis for an aggravating factor. See 42 C.F.R. § 1001.102(b)(1) (“the
entire amount of financial loss to... programs . . . will be considered regardless of
whether full or partial restitution has been made.”). Therefore, the IG has sustained its
burden of proving financial loss to a government program of $5,000 or more.

b. The IG has established the aggravating factor stated in 42 C.F.R.
§ 1001.102(b)(2) -- the criminal acts resulting in Petitioner’s
conviction lasted a period of one year or more.

The IG offered the Indictment that charged Petitioner with conspiracy to commit health
care fraud as well as his conviction of that offense as evidence that his criminal acts
lasted one year or more. See IG Ex. 3. The Indictment states that the conspiracy lasted
for nearly two-and-a-half years, from October 2009 through April 2012. IG Ex. 3 at 3.
The jury convicted Petitioner of that offense. Moreover, Petitioner acknowledged in his
criminal appeal that he was involved with New Century since May 2010, which would be
approximately two years of criminal conduct. P. Ex. 1 at 3. Therefore, the evidence
before me establishes that the acts resulting in Petitioner’s conviction occurred over a
period of one year or more.

c. The IG has established the aggravating factor stated in 42 C.F.R.
§ 1001.102(b)(5) -- the sentence imposed against Petitioner included a
period of incarceration.

The record demonstrates, and Petitioner does not dispute, that the District Court
sentenced Petitioner to 60 months of imprisonment. IG Ex. 5 at 2. Indeed, Petitioner is
assigned to the Federal Correctional Institute—Elkton in Lisbon, Ohio, pursuant to the
sentence that the District Court imposed.* Amended Order 4. I conclude, therefore,
that the IG has proven this aggravating factor. See 42 C.F.R. § 1001.102(b)(5).

d. There are no mitigating factors in this case.

Because I found that aggravating factors are present in this case, I next consider whether
there are any mitigating factors under 42 C.F.R. § 1001.102(c) to offset the aggravating
factors. The regulations specifically outline what factors may be considered mitigating
and none of Petitioner’s arguments relate to any of those mitigating factors. See

42 C.F.R. § 1001.102(c). Petitioner has not argued that any mitigating factors exist.
Accordingly, I find that Petitioner has not met his burden to establish that any mitigating
factors would justify reducing the period of exclusion.

* During the pendency of this case, Petitioner has been residing in and receiving mail
through the Federal Medical Center in Butner, North Carolina. Petitioner represented
during the prehearing conference in this case that he would likely be returned to the
Federal Correctional Institute—Elkton in the future. See Amended Order §j 4.
5. An 18-year exclusion period is not unreasonable.

I must uphold the IG’s determination as to the length of exclusion if it is not
unreasonable. 42 C.F.R. § 1001.2007(a)(1)(ii). This means that: “So long as the amount
of time chosen by the [JIG is within a reasonable range, based on demonstrated criteria,
the ALJ has no authority to change it under this rule. We believe that the deference

§ 1001.2007(a)[] grants to the [JIG is appropriate, given the []IG’s vast experience in
implementing exclusions under these authorities.” 57 Fed. Reg. 3327, 3321 (Jan. 29,
1992). It is important to note that it is the quality of the aggravating (or mitigating)
factors that is most important when considering the length of exclusion and not the sheer
number of aggravating factors that are present in a given case. As the Secretary of Health
and Human Services stated in the preamble to the final rule establishing the exclusion
regulations:

We do not intend for the aggravating and mitigating factors to
have specific values; rather, these factors must be evaluated
based on the circumstances of a particular case. For example,
in one case many aggravating factors may exist, but the
subject’s cooperation with the [JIG may be so significant that
it is appropriate to give that one mitigating factor more
weight than all of the aggravating. Similarly, many
mitigating factors may exist in a case, but the acts could have
had such a_ significant physical impact on program
beneficiaries that the existence of that one aggravating factor
must be given more weight than all of the mitigating. The
weight accorded to each mitigating and aggravating factor
cannot be established according to a rigid formula, but must
be determined in the context of the particular case at issue.

57 Fed. Reg. at 3314-3315.

Based on the jury’s guilty verdict, the conspiracy of which Petitioner was a part
ultimately resulted in a $983,652.36 loss to Medicare. Furthermore, the District Court
ordered Petitioner to pay restitution of $988,529.15. IG Ex. 5 at 6. The amount of loss
represents more than 197 times the $5,000 threshold for the loss to be considered
aggravating. See 42 C.F.R. § 1001.102(b)(1). Restitution in an amount so substantially
greater than the regulatory standard is sufficient to support a significantly increased
length of exclusion. See Anderson, 311 F. Supp. 2d at 1130 (considering a “program-
related loss [that] was more than forty times the amount of loss necessary to find an
aggravating factor” as helping to justify a 15-year exclusion). While Petitioner does not
appear to have directly submitted the fraudulent claims to Medicare, he was part of the
conspiracy that facilitated those false claims. See IG Ex. 3. The District Court’s
restitution order against Petitioner demonstrates that his role in the conspiracy was a
significant factor in a scheme that resulted in a very substantial amount of loss.

In addition, the conspiracy Petitioner participated in lasted for at least two years. There
were many false claims being produced and submitted to Medicare over this time. The
prolonged criminal conduct demonstrates Petitioner’s high level of untrustworthiness
because it shows that his involvement was not simply a mistake or that he was
temporarily involved in the scheme. He conspired over an extended period to defraud the
Medicare program repeatedly, which is a significant factor that supports an increase to
the exclusion period.

Petitioner’s sentence of 60 months of incarceration for his crime constitutes the final
piece of aggravating evidence. IG Ex. 5 at 3. Petitioner’s sentence represents a
substantial period of time, which indicates the seriousness of his offense.

I conclude that the three proven aggravating factors are entitled to significant weight, and
that the amount of program loss and Petitioner’s length of incarceration are particularly
aggravating. Petitioner’s crime had a substantial financial impact on the Medicare
program. Based on the record before me, Petitioner is not trustworthy to participate in
federal health care programs and, therefore, the length of exclusion imposed by the IG is
not unreasonable.

VI. Conclusion

For the foregoing reasons, I affirm the IG’s determination to exclude Petitioner for 18
years from participating in Medicare, Medicaid, and all federal health care programs
pursuant to 42 U.S.C. § 1320a-7(a)(1).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In re CMS LCD COMPLAINT:
Hyperbaric Oxygen

Docket No. C-15-1248
Decision No. CR3932
Date: June 3, 2015
DECISION DISMISSING LCD COMPLAINT

An Aggrieved Party’s doctor filed a letter challenging an unidentified Local Coverage
Determination (LCD) for Hyperbaric Oxygen Therapy. After providing an opportunity
for the Aggrieved Party to amend it, I must dismiss the Aggrieved Party’s amended
complaint as unacceptable because the challenge still does not meet the regulatory
requirements.

Background

The Centers for Medicare & Medicaid Services (CMS) administers the Medicare
program and contracts with carriers and intermediaries (Medicare contractors) to act on
its behalf in determining and making payments to providers and suppliers of Medicare
items and services. Social Security Act (Act) §§ 1816, 1842. Medicare contractors issue
LCDs, written determinations addressing whether, on a contractor-wide basis, a particular
item or service is covered through Medicare. Act § 1869(f)(2)(B); see also 42 C.F.R.

§ 400.202.

A Medicare beneficiary who could be denied coverage for an item or service based on an
LCD may challenge that LCD before an administrative law judge (ALJ) as an aggrieved
party. The aggrieved party initiates the review by filing a written complaint that meets the
criteria specified in the governing regulations. 42 C.F.R. §§ 426.400; 426.410(b)(2). After
the LCD complaint is docketed, the ALJ evaluates whether the complaint is “acceptable.”
42 C.F.R. § 426.410(b). An ALJ does not have authority to review the merits of an
“unacceptable complaint.” See 42 C.F.R. §§ 426.405(d)(7); 426.410(c)(2). If the
complaint is determined to be unacceptable, the ALJ must provide the aggrieved party an
opportunity to amend the compliant. 42 C.F.R. § 426.410(c)(1). If the ALJ also
determines that the amended complaint is unacceptable, the ALJ must issue a decision
dismissing the LCD complaint. 42 C.F.R. § 426.410(c)(2). Ifa complaint is determined
unacceptable after one amendment, the beneficiary is precluded from filing again for six
months after being informed that the complaint is unacceptable. 42 C.F.R. § 426.410(c)(3).

On January 16, 2015, the Aggrieved Party’s doctor filed the LCD challenge on behalf of
one of his patients who was a Medicare beneficiary. The Medicare beneficiary, in his
opinion, would benefit from Hyperbaric Oxygen Therapy (HBO) for her Complex
Regional Pain Syndrome (CRPS) and Reflex Sympathetic Dystrophy (RSD). The case
was assigned to me on March 16, 2015.

I evaluated the complaint as required by 42 C.F.R. § 426.410(b), (c) and (d) and found
that it was unacceptable. I advised the Aggrieved Party, through an order dated March
23, 2015, why the complaint was unacceptable, and I granted her an opportunity to
amend it. I also advised the Aggrieved Party that if she did not submit an amended,
acceptable complaint, I was required to issue a decision dismissing the complaint as
unacceptable. See 42 C.F.R. § 426.410(c). On April 22, 2015, the Aggrieved Party filed
her amended complaint.

Discussion

I find the Aggrieved Party’s amended complaint is unacceptable, and I must
dismiss it because it does not meet all of the regulatory requirements for an
acceptable challenge to the LCD.

In her amended complaint, the Aggrieved Party discussed her personal need for HBO
and, in support of her challenge, also provided the following documents: a list of the
medical treatments she received; a January 16, 2015 letter from Dr. Paul Thombs and a
April 22, 2015 letter from Dr. Marti Friednash indicating that based on one study, HBO
therapy may be helpful to patients with CRPS, and a screen shot from the Medicare
contractor’s (Novitas Solutions, Inc.) provider website.

Upon reviewing the Aggrieved Party’s April 22, 2015 amended complaint, I find that it
still does not comply with all of the regulatory requirements needed for an acceptable
LCD challenge. The Aggrieved Party still has not identified the title and number of the
LCD that she is challenging, nor the specific provision of the LCD that adversely affected
her, as required by 42 C.F.R. § 426.400(c)(4)(ii) and (iii). The Aggrieved Party also did
not explain why the provisions of the LCD are not valid under the reasonableness
standard, as required by 42 C.F.R. § 426.400(c)(5). Additionally, the Aggrieved Party
did not provide copies of clinical or scientific evidence that support her complaint (other
than the article submitted with Dr. Thombs’ letter) along with an explanation as to why
she thinks the evidence shows that the LCD is not reasonable, as required by 42 C.F.R.

§ 426.400(c)(6)(i).

While the Aggrieved Party and her physicians may believe that the Aggrieved Party
might benefit from HBO therapy to help with pain relief and improve her physical
conditions, that is not enough to support an acceptable challenge to an LCD.
Accordingly, I must dismiss the Aggrieved Party’s complaint as unacceptable.

/s/
Joseph Grow
Administrative Law Judge


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

Adeona Clinical Laboratory, LLC,
(CLIA No.: 14D1051026),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1133
Decision No. CR3919

Date: May 29, 2015

DECISION

Petitioner, Adeona Clinical Laboratory, LLC, appeals the determination of the Centers
for Medicare & Medicaid Services (CMS) to cancel Petitioner’s approval to receive
Medicare payments for laboratory services and to revoke Petitioner’s Clinical Laboratory
Improvement Amendments of 1988 (CLIA) certificate. I find there is a legitimate basis
for CMS to cancel Petitioner’s approval to receive Medicare payments and to revoke
Petitioner’s CLIA certificate because the undisputed evidence establishes that Petitioner
intentionally sent proficiency testing samples to another laboratory for testing and
reported the results as its own.

I. Background

Petitioner had been performing high complexity testing as an accredited CLIA laboratory.
On February 26, 2014, CMS notified Petitioner of its determination that Petitioner was
not in compliance with applicable CLIA conditions of participation based on the findings
from a January 22, 2014 survey by the Illinois Department of Public Health (IDPH).
CMS Ex. 1, at 1-3. CMS found that based on the survey, Petitioner was not in
compliance with the following CLIA conditions: 42 C.F.R. § 493.801: Enrollment and
Testing of Samples; 42 C.F.R. § 493.1441: Laboratories performing high complexity
testing, laboratory director; and 42 C.F.R. § 493.1250: Analytic Systems.

That letter specifically notified Petitioner that CMS determined Petitioner improperly
referred proficiency testing (PT) samples to another laboratory for analysis in violation of
42 C.F.R. § 493.801(b)(4). CMS further found that Petitioner’s condition-level
noncompliance constituted immediate jeopardy and was likely to cause serious harm to
the individuals served by Petitioner’s laboratory and to the health of the general public.
CMS stated that the deficiencies found were determined to be of such a serious nature
that they substantially limit Petitioner’s capability to render accurate and reliable services
and to protect the health and safety of its clients. Thus, CMS proposed revocation of
Petitioner’s CLIA certificate, cancellation of its approval to receive Medicare payments
for its services, and provided Petitioner 20 days to submit in writing any evidence or
information explaining why CMS should not impose the sanctions.

By letter dated March 24, 2014, CMS notified Petitioner that it had reviewed the
information Petitioner provided, a Plan of Correction received on March 20, 2014, but
found that the submission did not refute CMS’s bases for its determination of
noncompliance with CLIA conditions. CMS Ex. 1, at 4. Therefore, CMS informed
Petitioner that because of Petitioner’s failure to comply with CLIA certificate
requirements and performance standards as evidenced by the finding of improper referral
of the laboratory’s PT samples to another laboratory for analysis, and the laboratory’s
failure to meet all condition-level requirements of CLIA, it determined to revoke
Petitioner’s CLIA certificate and its approval to receive Medicare payments. The letter
also notified Petitioner that both sanctions would be effective as of the date of an
administrative law judge (ALJ) decision if the appeal upholds CMS’s determination of
noncompliance. CMS Ex. 1, at 5.

On April 28, 2014, Petitioner filed an appeal, and this case was assigned to me for

hearing and decision on May 19, 2014. Pur:
Order (Prehearing Order), CMS timely filed
Prehearing Brief (CMS Br.) together with it:
Petitioner timely filed its Prehearing Brief a
Br.) together with one exhibit marked as Ad
Petitioner’s cross motion (CMS Reply).

II. Issue

Whether the undisputed evidence

suant to my Acknowledgment and Prehearing
a Motion for Summary Judgment and

$ supporting exhibits, CMS Exs. 1-15.

nd Cross Motion for Summary Judgment (P.
leona Ex. 1. CMS submitted a reply to

establishes that CMS had a legitimate basis

for revoking Petitioner’s CLIA certificate and for cancelling Petitioner’s

approval to receive Medicare payments.
III. Findings of Fact and Conclusions of Law

I. This case is appropriate for summary judgment because there is no
dispute of material fact for me to decide.

CMS filed a motion for summary judgment, and Petitioner filed a cross-motion for
summary judgment. Both parties contend that summary disposition is appropriate
because there are no issues of material fact in dispute and each party contends it is
entitled to judgment as a matter of law. The Departmental Appeals Board (the Board)
has explained the applicable standard:

Summary judgment is appropriate when the record shows that there is no
genuine issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. ... The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of law. . .
. To defeat an adequately supported summary judgment motion, the non-
moving party may not rely on the denials in its pleadings or briefs, but must
furnish evidence of a dispute concerning a material fact — a fact that, if
proven, would affect the outcome of the case under governing law. ... In
determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).
The role of an ALJ in deciding a summary judgment motion differs from the ALJ’s role
in resolving a case after a hearing. The ALJ should not assess credibility or evaluate the
weight of conflicting evidence. Holy Cross Vill. at Notre Dame, DAB No. 2291, at 4-5
(2009).

Here, Petitioner did not come forward with specific evidence to dispute the material facts
that CMS alleges: that it intentionally referred its PT samples to another laboratory for
testing and reported those PT results as if it had tested the samples in its own laboratory.’

' CMS cites in its brief and motion for summary judgment that Petitioner also violated
the conditions for multiple other requirements constituting immediate jeopardy. I do not
discuss these violations because failure to comply with even a single condition is
sufficient to impose a principal sanction. Canal Med. Lab., DAB No. 2041, at 13 (2006)
(“CMS has discretion to impose one or more of the principal . . . sanctions based on a
laboratory’s failure to comply with even a single applicable condition.”).
Petitioner argues that CMS failed to follow the requisite procedures and alleges that CMS
cannot impose the principal sanctions here until it first imposes alternative sanctions to
bring a non-compliant laboratory into compliance. Thus the issues in this case are issues
of law related to the CLIA requirements. Accordingly, summary judgment is
appropriate.

2. CMS had a legitimate basis for revoking Petitioner’s CLIA
certificate and cancelling Petitioner’s Medicare payments
because the undisputed evidence establishes that Petitioner
intentionally referred its proficiency testing samples to another
laboratory for testing.

The CLIA statute provides that the Secretary may suspend, revoke, or limit the CLIA
certificate of a laboratory if it does not meet statutory and regulatory requirements. 42
U.S.C. § 263a(i)(1)(C). The applicable regulations authorize CMS to impose one or
more of the alternative or principal sanctions specified in 42 C.F.R. §§ 493.1806 and
493.1807 when it determines that a laboratory has condition level deficiencies. 42 C.F.R.
§§ 493.1804(b) and 493.1806(a). When CMS revokes a laboratory’s CLIA certificate, it
must cancel the laboratory’s approval to receive Medicare payments for its services. 42
C.F.R. §§ 493.1808(a) and 493.1842(a).

CLIA directs the Secretary to establish requirements for PT programs for all laboratories.
42 U.S.C. § 263a(f)(3). In order to receive CLIA certification, a laboratory must agree to
“treat proficiency testing samples in the same manner as it treats materials derived from
the human body referred to it for laboratory examinations or other procedures in the
ordinary course of business.” 42 U.S.C. § 263a(d)(1)(E). To ensure the integrity of the
PT program, the statute gives the Secretary the discretion to revoke the CLIA certificate
of any laboratory for intentional referral of PT samples. 42 U.S.C. § 263a(i)(4).

The applicable regulations for the time period in question here require, as a condition for
participation in the Medicare program, that a laboratory must enroll in a proficiency
testing program and must examine proficiency testing samples it receives from the PT
program in the same manner as it tests patient samples.” 42 C.F.R. § 493.801(b)(2013).
This section further provided:

The laboratory must not send PT samples or portions of samples to another
laboratory for any analysis which it is certified to perform in its own
laboratory. Any laboratory that CMS determines intentionally referred its
proficiency testing samples to another laboratory for analysis will have its

> There were amendments to the CLIA regulations, but these amendments were not
effective until July 11, 2014 and therefore do not apply to the January 2014 survey and
the March 24, 2014 notice letter here. 79 Fed. Reg. 25463 (May 2, 2014).
certification revoked for at least one year. Any laboratory that receives
proficiency testing samples from another laboratory for testing must notify
CMS of the receipt of those samples.

42 CFR. § 493.801(b)(4)(2013). Similarly, 42 C.F.R. § 493.1840(b)(2013) required that
CMS must revoke a laboratory’s CLIA certificate for at least one year if it determines the
lab intentionally referred its PT samples to another laboratory for analysis. Any failure to
successfully participate in proficiency testing is per se a condition-level deficiency for
which a sanction may be imposed. See Canal Med. Lab., DAB No. 2041, at 9 (2006).

At the time of the survey, CMS had certified Petitioner under its CLIA certificate to
perform general chemistry testing. During a tour of Petitioner’s laboratory from the
survey completed on January 22, 2014, Petitioner’s testing personnel informed the
surveyor that its Olympic AU400, the analyzer instrument it used for general chemistry
testing, was broken and it had not been used since June 18, 2013. CMS Ex. 3, at 3; CMS
Ex. 15, at 1-2. Petitioner nevertheless submitted results from its PT program, conducted
by Wisconsin State Laboratory of Hygiene (WSLH)), for 21 different general chemistry
analytes for a testing event in June 2013 and a testing event in September 2013. CMS
Ex. 3, at 3-12; CMS Ex. 15, at 2-3. The surveyor found corroborating test reports from
another laboratory with the results from these testing events. Petitioner then recorded
these results on the WSLH Proficiency Testing forms as its own and transmitted them to
WSLH as if it had performed these tests and found these results itself. CMS Ex. 15, at 2-
3; CMS Exs. 5, 6. 7, 8, 9, and 10. At that time, Petitioner had not informed WSLH or
CMS that its analyzer instrument was broken and that it was incapable of performing
these tests.

Petitioner states that it is an undisputed fact that “Adeona sent proficiency samples and
human specimens to O’Hare Clinical Lab Services, Inc. (““OCL”), for testing.” P. Br. at
3. However, Petitioner asks that I infer Petitioner accidentally sent the PT samples to the
other laboratory based on an attachment to the Statement of Deficiencies (SOD). P. Br.
at 10-11; CMS Ex. 4, at 8. Yet, Petitioner does not specifically allege or come forward
with evidence, such as an employee affidavit, suggesting it unintentionally sent the
samples to OCL. Petitioner also does not dispute that it then reported those results to
WSLH as its own. Therefore, I am not required by the summary judgment standard to
make these unsupported inferences in favor of Petitioner. See Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n.11 (1986) (“To avoid summary judgment,
the non-moving party must then act affirmatively by tendering evidence of specific facts
showing that a dispute exists.”).
3. The undisputed evidence establishes CMS provided Petitioner
appropriate notice that it was imposing the principal sanctions based
on the improper proficiency testing referral.

Petitioner also contends that I should grant its motion for summary judgment because
CMS allegedly failed to give it prior notice that CMS based its revocation action on the
fact that Petitioner intentionally referred its PT samples to another laboratory. P. Br. at 8-
9.

The relevant documents unequivocally demonstrate that Petitioner received clear, proper
and ample notice that it intentionally referred proficiency testing samples and was not in
compliance with the CLIA condition at 42 C.F.R. § 493.801. CMS Exs. 1, 3. In the
February 26, 2014 notice of proposed sanctions, CMS stated that Petitioner’s
noncompliance with the condition of Enrollment and Testing of Samples is specifically
supported when it cited 42 C.F.R. § 493.801(b)(4) (Tag D2013) for Petitioner’s improper
referral of proficiency testing samples to another laboratory for analysis. CMS Ex. 1.
That regulation states that “[a]ny laboratory that CMS determines intentionally referred
its proficiency samples to another laboratory for analysis will have its certification
revoked.”

Moreover, the SOD from the survey of the laboratory, enclosed with the February 26,
2014 notice, cites Petitioner as out of compliance with Tag D2013, Testing of Proficiency
Samples, pursuant to 42 C.F.R. § 493.801(b)(4). CMS Ex. 3. The SOD specifically
articulates the relevant regulatory provision. CMS Ex. 3, at 2. The SOD then stated why,
based on the evidence reviewed, the surveyor found Petitioner out of compliance with
this section and why he found Petitioner intentionally referred its PT samples to another
laboratory. CMS Ex. 3, at 3-12.

CMS does not need to prove intent to violate a CLIA referral requirement in order to find
an intentional referral of PT samples occurred. See Victor Valley Cmty. Hosp. / Clincal
Lab. and Tomacz Pawlowski, M.D. DAB No. 2340, at 11 (2010). CMS need only show
that PT samples were sent or referred to another laboratory for purposes of analysis.
Wade Pediatrics, DAB No. 2153 (2008), aff'd, Wade Pediatrics v. Dep’t. of Health &
Human Servs., 567 F. 3d 1202 (10th Cir. 2009); White Lake Family Medicine, DAB No.
1951, at 12 (2004). Petitioner presented no evidence that it informed CMS or WSLH that
it could not perform general chemistry tests because its analyzer instrument was broken.
Instead, it sent its PT samples to another laboratory, took their results, and reported those
results back to the PT program as its own without indicating it did not perform the tests
itself.
4. CMS had the authority to first impose the principal sanctions of
revocation and cancellation of Petitioner’s Medicare approval to
receive Medicare payments because CMS found Petitioner in violation
ofa CLIA condition.

CMS may impose one or more of the sanctions specified in 42 C.F.R. § 493.1806 ona
laboratory that is out compliance with one or more CLIA conditions. Section 493.1806
specifically states:

Available sanctions: All laboratories.

(a) Applicability. CMS may impose one or more of the sanctions specified
in this section on a laboratory that is out of compliance with one or more
CLIA conditions.
(b) Principal sanction. CMS may impose any of the three principal CLIA
sanctions, which are suspension, limitation, or revocation of any type of
CLIA certificate.
(c) Alternative sanctions. CMS may impose one or more of the following
alternative sanctions in lieu of or in addition to imposing a principal
sanction, except on a laboratory that has a certificate of waiver.

(1) Directed plan of correction, as set forth at § 493.1832.

(2) State onsite monitoring, as set forth at § 493.1836.

(3) Civil money penalty, as set forth at §493.1834.
(d) Civil suit. CMS may bring suit in the appropriate U.S. District Court to
enjoin continuation of any activity of any laboratory . . . if CMS has reason
to believe that continuation of the activity would constitute a significant
hazard to the public health.

For laboratories that participate in the Medicare program that are found out of
compliance with one or more CLIA conditions, the additional principal sanction of
cancellation of the laboratory’s approval to receive Medicare payments for its services is
available. 42 C.F.R. § 493.1807(a).

Petitioner’s cross-motion for summary judgment relies on two basic arguments: 1) CMS
was precluded from imposing principal sanctions, such as revocation and cancellation of
Medicare payments, because it did not first give Petitioner a revisit with regard to CMS’s
immediate jeopardy determination and because CMS did not file an injunction in Federal
Court. Petitioner relies on 42 C.F.R. § 493.1812, as requiring CMS to impose alternative
sanctions against it prior to imposing principal sanctions. P. Br. at 6. Petitioner argues

that this regulation provides that if the laboratory’s deficiencies pose immediate jeopardy,
CMS requires the laboratory to take immediate action to remove the jeopardy and may

impose one or more alternative sanctions to help bring the laboratory into compliance. P.
Br. at 6. Petitioner further argues that therefore CMS cannot “suspend the laboratory’s
CLIA certificate until after” CMS has determined pursuant to a revisit survey that the
laboratory has not eliminated the jeopardy. P. Br. at 6 citing Center Clinical Laboratory,
DAB CR358, at 13 (1995). Petitioner therefore contends that CMS’s principal sanctions
of revocation of the CLIA certificate and cancellation of Petitioner’s Medicare approval
must be lifted as untimely because CMS failed to comply with its own enforcement
procedures, and I should deny CMS’s motion for summary judgment. P. Br. 6-9.

However, the Board reversed the ALJ’s finding in Center Clinical Laboratory on which
Petitioner relies, explaining that section 493.1812 does not require CMS to first respond
with procedures pertaining to an alternative sanction in every instance of immediate
jeopardy. Center Clinical Laboratory, DAB No. 1526, at 8 (1995). The Board
explained, with respect to 42 C.F.R. 493.1812(b), that:

[T]his provision of the regulations, which admittedly is not as clear as it
might be, simply does not apply to the situation where [CMS] decides to
impose an immediate suspension. Rather, it was designed to respond to the
type of immediate jeopardy situation where [CMS] in its discretion does
not impose an immediate principal sanction such as suspension but rather
an alternative sanction that may or may not ultimately lead to a principal
sanction. . . Section 493.1812(a), however, does not require [CMS] to
respond with procedures pertaining to an alternative sanction in every
instance of an immediate jeopardy.

Id. 1 find CMS thus appropriately exercised its authority here to impose principal
sanctions without first imposing alternative sanctions.

IV. Conclusion

I find that CMS had a legitimate basis to cancel Petitioner’s approval of Medicare
payments and to revoke Petitioner’s CLIA certificate, effective as of the date of this
decision for at least one year, because the undisputed evidence supports that Petitioner
improperly referred proficiency testing to another laboratory and reported the other
laboratory’s results as its own. I further conclude, as a matter of law, that CMS was not
required to impose alternate sanctions prior to its imposition of the principal sanctions.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-2096)

Complainant
v.

Gary Best Stockyards Inc. / Gary Best
d/b/a Koo-Koos Nest,

Respondent.
Docket No. C-15-577
Decision No. CR3918

Date: June 1, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Gary Best Stockyards Inc. / Gary Best d/b/a Koo-Koos Nest,
at 3045 East Sangamon Avenue, Springfield, Illinois 62702, and by filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Koo-Koos Nest impermissibly used a vending
machine in a non-exempt facility, sold cigarettes to minors, and failed to verify that
cigarette purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., and its implementing regulations,
21 C.F.R. pt. 1140. CTP seeks to impose a $2,000 civil money penalty against
Respondent Koo-Koos Nest. Respondent has failed to comply with judicial directions to
comply with discovery requests. I therefore strike Respondent’s answer and issue this
decision of default judgment.
I. Procedural History

The Respondent timely filed an answer to CTP’s complaint on January 5, 2015. I issued
an Acknowledgement and Prehearing Order (APHO) on January 23, 2015, that set
deadlines for parties’ submissions, including the February 23, 2015 deadline to request
that the opposing party provide copies of documents relevant to this case. The APHO
further stated that a party receiving such a request must provide the requested documents
no later than 30 days after the request. Also, item #16 “Sanctions for failure to comply
with orders,” stated that these included but were not limited to the dismissal of the
complaint or answer if a party failed to comply with any order.

CTP served Respondent with its request for documents on February 18, 2015. On March
25, 2015, CTP filed a Motion to Compel Discovery, requesting " that an order be entered
to require Respondent to comply with the Request for Production of Documents in its
entirety." CTP also moved to hold deadlines in abeyance, citing the need for “sufficient
time to review the requested documents.”

On April 8, 2015, I advised both parties that Respondent had until April 15, 2015 to
either reply to CTP's Motion to Compel Discovery, or produce the requested documents.
I further advised that failure to comply with discovery requests could result in sanctions.

On April 24, 2015, I ordered Respondent to comply with CTP's Request for Production
of Documents by May 1, 2015. I also reiterated that noncompliance may result in
sanctions, including the issuance of an Initial Decision and Default Judgment finding
Respondent liable for the violations listed in the Complaint and imposing a civil money
penalty. The Respondent failed to comply with the discovery requests, and CTP
subsequently moved to impose sanctions.

On May 7, 2015, I advised both parties that Respondent had until May 15, 2015 to reply
to CTP’s Motion to Impose Sanctions, and failure to comply could result in sanctions.
To date, Respondent has failed to comply with discovery requests.

IL. Striking Respondent’s Answer

Respondent has neither complied with discovery requests, nor provided any explanation
for noncompliance, despite being ordered to do so. On April 8, 2015, I directed
Respondent to either reply to CTP's Motion to Compel Discovery, or produce the
requested documents. Then on April 24, 2015, I ordered Respondent to comply with
discovery requests. Even more, on May 7, 2015, I advised Respondent to reply to CTP’s
Motion to Impose Sanctions for noncompliance of discovery requests. Along with these
three judicial directions, I informed Respondent that noncompliance could result in an
effective dismissal of this case.
The harshness of the sanctions I impose upon either party must relate to the nature and
severity of the misconduct or noncompliance, and I find Respondent’s failure to comply
with discovery requests sufficient to warrant striking the answer and issuing a decision.
21 C.F.R. § 17.35. [hereby strike Respondent’s answer, and assume the facts alleged in
CTP’s complaint to be true. See 21 C.F.R. §§ 17.35(c) (3), 17.11(a).

Ill. Default Decision

Striking Respondent’s answer leaves the complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11. Accordingly, I must determine whether the allegations in the
complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the complaint are true and
conclude that default judgment is merited based on the allegations of the complaint.
21 C.F.R. § 17.11. Specifically:

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 9, 2014, CTP served the
complaint on Respondent Koo-Koos Nest by United Parcel Service.

e Respondent owns Koo-Koos Nest, an establishment that sells tobacco products
and is located at 3045 East Sangamon Avenue, Springfield, Hlinois 62702.
Complaint 3.

e During an inspection of Respondent’s establishment on January 13, 2014, an
FDA-commissioned inspector observed a violation for using a vending machine in
a non-exempt facility. “Specifically, during the inspection, the owner told the
inspector that minors are allowed to enter the facility with an adult before 9:00
PM.” Complaint ¥ 10.

¢ On March 6, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from January 13, 2014. The letter explained that the
observation constituted a violation of the regulation found at 21 C.F.R.
§ 1140.14(c), and that the named violation was not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violation, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 10.

¢ Gary Best responded to the Warning Letter on May 7, 2014, by phone. “Mr. Best
indicated that he no longer allows minors to enter the premises at any time, even
when accompanied by a parent. Mr. Best also stated that he would add signage to
the establishment to indicate that it is now an adult-only facility that does not
allow minors to enter.” Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on June 13, 2014,
at approximately 4:58 PM, FDA-commissioned inspectors documented that “‘a
person younger than 18 years of age was able to purchase a package of Marlboro
Menthol cigarettes from a vending machine in Respondent’s establishment . . . [.]”
The inspectors also documented that “the minor’s identification was not verified
before the sale... .” Complaint 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations provide that
a retailer may sell cigarettes or smokeless tobacco only in direct, face-to-face exchange
without the assistance of any electronic or mechanical device (such as a vending
machine), 21 C.F.R. § 1140.14(c), except where no person younger than 18 years of age
is present in or allowed to enter the establishment at any time, 21 C.F.R.

§ 1140.16(c)(2)(ii). The regulations prohibit the sale of cigarettes to any person younger
than 18 years of age. 21 C.F.R. § 1140.14(a). The regulations also require retailers to
verify, by means of photo identification containing a purchaser’s date of birth, that no
cigarette purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respondent violated the prohibition against using
a vending machine in a non-exempt facility, 21 C.F.R. § 1140.14(c), on January 13, 2014,
and June 13, 2014. Respondent violated the prohibition against selling cigarettes to
persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on June 13, 2014. On that
same date, Respondent also violated the requirement that retailers verify, by means of
photo identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s
actions constitute violations of law that merit a civil money penalty.

CTP has requested a fine of $2,000, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $2,000 is warranted and
so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Thomas Gregory Martin,
Petitioner,
v.
The Inspector General.
Docket No. C-15-617
Decision No. CR3912

Date: May 28, 2015

DECISION

I sustain the determination of the Inspector General (1.G.) to exclude Petitioner, Thomas
Gregory Martin, from participating in Medicare and other federally funded health care
programs for a period of five years.

I. Background

Petitioner requested a hearing to challenge the I.G.’s determination to exclude him. The
IG. filed a brief, and five exhibits that are identified as I.G. Ex. 1 —I.G. Ex. 5. Petitioner
filed a brief and an exhibit identified as Exhibit A and three attachments identified as
Attachment A and Attachments B1 and B2. Petitioner’s Exhibit A and Attachment A are
not admitted since these submissions are identical to I.G. Exs. 3 and 5. I admit the I.G.’s
exhibits and Petitioner’s Attachment B1 and B2 into the record. Neither party requested
an in-person hearing.

II. Issue, Findings of Fact and Conclusions of Law

A. Issue

The issue to be resolved is whether there is a basis for the I.G. to exclude Petitioner
pursuant to section 1128(a)(3) of the Social Security Act (Act). Where the period of
exclusion is the minimum statutory period, no issue exists as to the length of the
exclusion.

B. Findings of Fact and Conclusions of Law

The I.G. excluded Petitioner pursuant to the provisions of section 1128(a)(3) of the Act.
This section mandates the exclusion of any individual who is convicted of a felony
occurring after August 21, 1996, in connection with the delivery of a health care item or
service or with respect to any act or omission in a health care program other than
Medicare or a State Medicaid program, operated by or financed in whole or in part by
any federal, state, or local government agency, relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct.

The evidence offered by the I.G. and not rebutted by Petitioner proves that, on December
2, 2013, Petitioner pled guilty to the federal felony offense of Receipt of Misbranded
Prescription Drugs from Interstate Commerce in violation of 21 U.S.C. §§ 331(c) and
333(a)(2) and 18 U.S.C § 2. I.G. Ex. 3. On March 28, 2014, the United States District
Court for the Eastern District of Missouri accepted Petitioner’s plea and entered a
judgment of conviction against Petitioner. I.G. Ex. 3.

Petitioner was convicted of receipt of misbranded prescription drugs from interstate
commerce “with intent to defraud and mislead” under 21 U.S.C. §§ 331(c) and 333(a)(2)
and 18 U.S.C. § 2. LG. Ex. 4 at 2. Petitioner was the owner, manager and operator of a
medical clinic called Aestheticare LLC (Aestheticare), located in St. Louis, Missouri.
1.G. Ex. 5 at 1. Aestheticare provided treatment to patients, including injections of the
prescription drug, Onabotulinumtoxin A, commonly known as Botox Cosmetic (Botox).
Petitioner was contacted via facsimile by a company that offered to sell “Botox
(Turkish),” a version of the Food and Drug Administration (FDA) approved prescription
drug Botox. Botox (Turkish) has not been approved by the FDA. Petitioner purchased
non-FDA approved prescription drugs, Botox (Turkish), from this company and
Aestheticare provided those drugs to their patients. I.G. Ex. 5 at 5. In his plea
agreement, Petitioner admitted that he purchased “prescription drugs from an unlicensed
wholesale drug distributor . . . [and] through the clinic, ultimately provided th[o]se drugs
to patients.” I.G. Ex. 4 at 3.

Petitioner’s plea and conviction describe all of the elements of a conviction mandating
exclusion under section 1128(a)(3). He was convicted of a felony that occurred after
August 21, 1996.' The conviction plainly related to delivery of health care items or
services. Petitioner admitted that he purchased “prescription drugs from an unlicensed
wholesale drug distributor . . . [and] through the clinic, ultimately provided th[o]se drugs

' From on or about March 31, 20110 through on or about September 20, 2012, Petitioner
made over 30 separate purchases from the unlicensed drug distributor. 1.G. Ex. 5 at 6.
to patients.” I.G. Ex. 4 at 3. The dispensation or sale of a prescription drug is an evident
health care item or service. His criminal offense related to fraud because his plea
agreement specifies that he received prescription drugs in interstate commerce “with the
intent to defraud or mislead.” I.G. Ex. 4 at 2. He also purchased the counterfeit Botox
(Turkish) using Aestheticare’s checking account and passed the non-approved FDA drug
to his patients as the real product. Petitioner’s conduct breached his fiduciary
responsibility to his patients and he committed financial misconduct that resulted in
$32,000 in illegal proceeds. I.G. Ex. 4 at 8.

Petitioner argues that he was not convicted of a felony within the meaning of section
1128(a)(3) because he was not convicted of health care fraud. Petitioner’s argument is
unavailing because the Departmental Appeals Board (DAB) has held that “[s]ection
1128(a)(3) does not require that the felony conviction be for an offense specified as
“health care fraud” under federal or state law.” Charice Curtis, DAB No. 2430 at 4
(2011). Petitioner also argues that an 1128(a)(3) exclusion can only be supported if a
public or private insurance or benefits program would have been charged for the medical
benefit rendered. Nothing in this section requires that a public or private insurance or
benefits program would have been charged for the medical benefit rendered in order for
an individual to be subject to its reach. It plainly applies to any individual who is
convicted of a felony described in that section. Lastly, Petitioner makes constitutional
arguments but I do not have authority to rule on the constitutional arguments.

The LG. is required to exclude Petitioner for a minimum of five years. Act
§ 1128(c)(3)(B). Here, the I.G. opted to exclude Petitioner for a period of five years and
the length of the exclusion is reasonable as a matter of law.

/s/
Steven T. Kessel
Administrative Law Judge


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

Fiaz M. Afzal, M.D.,
(O.I. File No.: H-14-41654-9),

Petitioner,
Vv.
The Inspector General.

Docket No. C-14-2013
Decision No. CR3911

Date: May 28, 2015

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Fiaz
Afzal, M.D., from participating in Medicare and other federally funded health care
programs for a minimum of five years.

I. Background

Petitioner requested a hearing to challenge the I.G.’s determination to exclude him. The
1G. filed a brief and five exhibits, identified as I.G. Ex. 1 — 1.G. Ex. 5, in support of his
determination to exclude. Petitioner filed two briefs, one on April 6, 2015, and the other
on April 21, 2015. Petitioner filed three documents that he intended to be considered as
exhibits. I identify those documents as P. Ex. 1, P. Ex. 2, and P. Ex. 3. I receive the
parties’ exhibits into the record. Neither party offered testimony.
IL. Issues, Findings of Fact and Conclusions of Law
A. Issues

The issues are whether: the I.G. is authorized to exclude Petitioner; and the five-year
minimum exclusion imposed by the LG. is mandatory.

B. Findings of Fact and Conclusions of Law

The L.G. asserts that section 1128(a)(1) of the Social Security Act (Act) mandates
Petitioner’s exclusion. This section requires the exclusion of any individual who is
convicted of a criminal offense related to the delivery of an item or service under
Medicare or a State Medicaid program.

On October 24, 2013 Petitioner pled guilty in a Louisiana State Court to multiple counts
of Medicaid fraud. I.G. Ex. 2. He admitted to billing the Louisiana Medicaid program for
numerous tests, immunizations, and injections that he never administered. I.G. Exs. 3, 4,
5. These facts are on their face sufficient to prove that Petitioner was convicted of a
crime within the meaning of section 1128(a)(1) of the Act. The offenses of which he was
convicted were not only related to a State Medicaid program, they consisted of ostensible
Medicaid items or services and the Louisiana State Medicaid program was the target of
Petitioner’s fraud.

Petitioner raises a number of arguments in opposition to the I.G.’s exclusion
determination. First, he contends that he was convicted of only 18 counts of Medicaid
fraud rather than the 35 counts alleged by the I.G. It is unnecessary that I resolve this fact
issue because conviction of even one count of Medicaid fraud would be sufficient to
implicate the requirements of section 1128(a)(1).

Second, Petitioner makes various due process and constitutional arguments. Some of
these seem to be directed at what happened in a State disciplinary proceeding that is, at
best, collateral to the criminal case against Petitioner. In any event, Petitioner’s
arguments — even if they might be meritorious in some other forum — are irrelevant here.
The requirement that Petitioner be excluded derives from his conviction in State court.
Petitioner does not deny that he was convicted of Medicaid fraud, and he has not
contended that his conviction has been reversed or vacated.

Petitioner asserts also that the I.G. has used a wrong middle initial (“M”) to identify him.
Accepting that as true, it changes nothing because Petitioner does not deny that he is the
Fiaz Afzal who was convicted of Medicaid fraud.
Finally, Petitioner seems to assert that the crimes of which he was convicted are minimal
and that the IG. should review them on the merits. Evidently, Petitioner contends that
the remedy of exclusion is unreasonable given what he seems to believe is the trivial
nature of his crimes. However, the Act imposes no requirement on the LG. that he
review program-related offenses for seriousness as a precondition for excluding an
individual pursuant to section 1128(a)(1). The exclusion requirement of this section is
mandatory and does not hinge on the relative seriousness of program-related crimes.

The Act mandates that individuals who are convicted of crimes described by section
1128(a)(1) be excluded for a minimum period of five years. Act § 1128(c)(3)(B). That is
what the I.G. opted to impose in this case. Consequently, the length of Petitioner’s
exclusion is reasonable as a matter of law, and it is not reviewable.

/s/
Steven T. Kessel
Administrative Law Judge