Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Gary E. Wolfe, D.O., DATE: September 22, 1995
Petitioner,

Docket No. C-95-015
Decision No. CR395

-vwo-

The Inspector General.

DECISION

I conclude that the 15-year exclusion the Inspector
General (I.G.) of the United States Department of Health
and Human Services (DHHS) imposed and directed against
Gary E. Wolfe, D.O., Petitioner, from participating in
Medicare and other federally financed health care
programs is reasonable.

I. edura

By letter dated October 19, 1994, the I.G. notified
Petitioner that, as a result of his conviction of a
criminal offense related to Medicare and other health
care programs, he was being excluded for 15 years from
participating as a provider in the Medicare, Medicaid,
Maternal and Child Health Services Block Grant and Block
Grants to States for Social Services programs.'

The I.G. advised Petitioner that the exclusion of
individuals convicted of offenses such as his is mandated
by section 1128(a)(1) of the Social Security Act (Act) .?
The I.G. further advised Petitioner that for exclusions

' Unless otherwise indicated, hereafter I refer
to all programs from which Petitioner has been excluded,
other than Medicare, as "Medicaid."

2? Those parts of the Act discussed herein are
codified in 42 U.S.C. § 1320a-7.
2

imposed pursuant to section 1128(a) of the Act, a five-
year minimum period of exclusion is required by section
1128(c) (3)(B), and that Petitioner's 15-year period of
exclusion took into consideration six specific
aggravating factors.

Petitioner filed a request for review of the I.G.'s
action, and the case was assigned initially to
Administrative Law Judge Steven T. Kessel. Judge Kessel
determined without objection that the administrative law
judge's decision would be based upon written submissions,
there being no need for an in-person hearing.’ The case
was reassigned to me on April 14, 1995.

3 The I.G. filed a Motion for Disposition on the
Documentary Record with a supporting brief (I.G. Br.),
and a statement enumerating the material facts and
conclusions of law the I.G. considered to be uncontested.
The I.G.'s submissions were accompanied by I.G. Exhibits
(I.G. Exs.) 1 through 18.

Petitioner filed Petitioner's Answer and Petitioner's
Statement with Brief in support (P. Br.), accompanied by
Petitioner's Exhibits (P. Exs.) 1 through 20.

The I.G. filed a Reply brief (I.G. R. Br.), accompanied
by I.G. Exs. 19 and 20.

Petitioner filed a Response (P. R. Br.).

Petitioner did not object to any of the I.G.'s exhibits.
Therefore, I admit I.G. Exs. 1 through 20 into evidence.

The I.G. objected to P. Exs. 1 through 9, 12, 14, and 15,
asserting that Petitioner submitted them for the purpose
of collaterally attacking his convictions. The I.G.
objected also to P. Ex. 16 as incomplete. I.G. R. Br. at
7. In his Response, Petitioner explained that he was
merely providing a full explanation of the circumstances
surrounding his convictions and was not collaterally
attacking them. Petitioner explained further that he
provided P. Ex. 16 to emphasize the counts of which he
was convicted, as distinguished from the counts that were
dismissed. P. R. Br. at 6 - 7. I admit into evidence P.
Exs. 10, 11, 13, and 17 - 20. I am not admitting P. Ex.
16 into evidence because it is included within I.G. Ex. 1
and is duplicative. Recognizing that Petitioner may not
collaterally attack his conviction, to allow Petitioner
to fully explain his convictions, I admit P. Exs. 1
through 9, 12, 14, and 15 into evidence over the I.G.'s
objections.
3

Upon careful consideration of the record before me, I
find that there exist no facts of decisional significance
genuinely in dispute and that the only matters to be
decided are the legal implications of the undisputed
material facts.

II. Issue

The only issue is whether the 15-year exclusion which the
I.G. imposed and directed against Petitioner is
reasonable.

IItI. indings of Fact and Con io! of La

1. At all relevant times, Petitioner was a physician
practicing medicine in Pennsylvania. P. Br. at 5 - 6.

2. On May 24, 1993, Petitioner entered guilty pleas to
eight felony offenses charged by Indictment, in Case No.
CR 92-318 in the U.S. District Court for the Middle
District of Pennsylvania, specifically pleading guilty to
Counts 1, 2, 15, 16, 23, 25, 27, and 29 of the
Indictment. I.G. Exs. 1 - 4.

3. Two of the counts to which Petitioner entered his
guilty pleas, Counts 1 and 15, charged Petitioner with
knowingly submitting false Medicare claims to a
department or agency of the United States (in violation
of 18 U.S.C. § 287). These two counts relate direc tly. to
the delive: serv x4 . The other six
counts to which Petitioner entered guilty pleas charged
Petitioner with mail fraud offenses, and relate to claims
submitted to Pennsylvania Blue Shield (in violation of 18
U.S.C. § 1341). I.G. Exs. 1 - 4.

4. The Secretary of DHHS (Secretary) has delegated to
the I.G. the authority to exclude individuals from
participation in Medicare and to direct their exclusion
from participation in Medicaid. 53 Fed. Reg. 12,993
(1988).

5. The I.G. is required to exclude Petitioner from
participation in Medicare and to direct his exclusion
from participation in Medicaid. Act, sections
1128(a) (1), 1128(c) (3) (B).

6. The minimum period of exclusion pursuant to section
1128(a)(1) is five years. Act, section 1128(c) (3) (B).
4

7. Neither the I.G. nor an administrative law judge has
the authority to reduce the five-year minimum exclusion
period mandated by sections 1128(a)(1) and 1128(c) (3) (B)
of the Act.

8. The I.G. proved five aggravating factors which can
support an exclusion longer than five years. 42 C.F.R. §
1001.102(b)(1), (2), (4), (5), (6)-

9. The I.G. did not prove by a preponderance of the
evidence that Petitioner's offense had a significant
adverse physical, mental, or financial impact on program
beneficiaries or other individuals. 42 C.F.R. §
1001.102(b) (3).

10. Petitioner did not prove that there exist any
mitigating factors. 42 C.F.R. § 1001.102(c)(1) - (3).

11. The evidence relevant to the aggravating factors
proves Petitioner to be untrustworthy to the extent that
a 15-year exclusion is reasonably necessary to protect
the integrity of federally financed health care programs
and to protect program beneficiaries and recipients.
I.G. Exs. 1 - 18.

12. The 15-year exclusion imposed and directed against
Petitioner by the I.G. is reasonable. Findings 1 - 11.

Iv. Discussion

A. An exclusion of at least five years is
mandatory.

Section 1128(a)(1) of the Act mandates the exclusion of
individuals who are convicted under federal or State law
of a criminal offense related to the delivery of an item
or service under Medicare or Medicaid.

Once it is shown that a program-related criminal
conviction has occurred, exclusion for at least five
years is mandatory under sections 1128(a) (1) and
1128(c)(3)(B). Petitioner admits that he was convicted
of a criminal offense related to the delivery of an item
or service under the Medicare program. Petitioner admits
also that the I.G. was required to exclude him for at
least five years. P. Br. at 27. Thus, the only issue is
5

whether the 15-year exclusion the I.G. imposed and
directed against Petitioner is reasonable.

B. The 15-vyea: i i i e
against Petitioner is necessary to safequard
Medicare and Medicaid, and program beneficiaries

ipie tt ; :
media ose: ct.

1. The Governing Law

Section 1128 of the Act is a remedial statute. Congress
intended that the Act, including section 1128(a) (1), be
applied to protect the integrity of federally funded
health care programs, and the welfare of program
beneficiaries and recipients, from individuals and
entities who have been shown to be untrustworthy.
Exclusions imposed pursuant to section 1128 (including
exclusions of more than five years imposed under section
1128(a)(1)) have been found reasonable only insofar as
they are consistent with the Act's remedial purpose.

Robert Matesic, R.Ph., d/b/a Northway Pharmacy, DAB 1327,
at 7 - 8 (1992); Rosaly Saba Khalil, M.D., DAB CR353, at

9 (1995); Dr. Abdul Abassi, DAB CR390, at 3 (1995).

Prior to the promulgation of regulations governing
exclusions imposed pursuant to section 1128, the criteria
used to evaluate the trustworthiness of excluded parties,
and the reasonableness of exclusions, were derived from
the Act itself. These criteria encompassed any evidence
relevant to an excluded party's trustworthiness to
provide care. Matesic, DAB 1327, at 7 - 8; Abassi, DAB
CR390, at 3.

Regulations published originally in January 1992 (42
C.F.R. Part 1001) establish the criteria by which the
length of exclusions imposed pursuant to section 1128 are
now to be evaluated. These regulations provide that, in
cases involving exclusions imposed pursuant to section
1128(a) of the Act, the reasonableness of the length of
any exclusion imposed for a period of more than five
years will be decided based on the presence of, and the
weight assigned to, certain aggravating and mitigating
factors which the regulations identify. 42 C.F.R. §
1001.102(b) (1) = (6), (c)(1) - (3); Abassi, DAB CR390,
at 3 - 4.

Under the regulations, in any case in which the
reasonableness of an exclusion is at issue, an
administrative law judge is obligated to decide, using
the factors contained in the regulations, whether an
exclusion of a particular length is reasonably necessary
6

to protect the integrity of federally financed health
care programs and the welfare of the programs’
beneficiaries and recipients. Abassi, DAB CR390, at 4;
Khalil, DAB CR353, at 10.

One consequence of the regulations is to limit the
factors which an administrative law judge can consider as
relevant to an excluded party's trustworthiness to
provide care. For example, an administrative law judge
may no longer consider evidence relating to a party's
remorse for the party's crimes, nor may an administrative
law judge consider evidence relating to a party's
rehabilitation, as evidence of that party's
trustworthiness. Evidence of remorse or rehabilitation
does not fall within the mitigating factors contained in
the regulations. Abassi, DAB CR390, at 4; See Matesic,
DAB 1327, at 7 - 8.

An exclusion imposed pursuant to section 1128(a)(1) of
the Act must not be punitive. Such exclusion must
comport with the remedial purpose of the Act. Moreover,
the presence of aggravating factors in a case is not
itself a basis to exclude a party for a particular length
of time. In a case involving an exclusion imposed
pursuant to section 1128(a)(1), the presence of
aggravating factors not offset by the presence of a
mitigating factor does not automatically justify an
exclusion of more than five years. The regulations
contain no formula for assigning weight to aggravating
and mitigating factors once the presence of any of these
factors is established. It is the task of the
administrative law judge (following the regulations and
cognizant of the Act's remedial purpose) to explore in
detail and assign appropriate weight to, the aggravating
or mitigating factors present in a case. Abassi, DAB
CR390, at 4.

2. et er's Cri ens

Based on his guilty pleas (Finding 2), Petitioner was
convicted of program-related offenses with regard to two
patients. Specifically, while Petitioner was a treating
physician, he provided services to HB‘ on or about
December 29, 1987, and to AE on or about October 25,

4 To protect the privacy of Petitioner's
patients, I refer to them by their initials only.
7

1988, and billed Medicare for services which were not
performed. I.G. Ex. 3 at 15.

© Patient HB

Petitioner's treatment notes (P. Ex. 1) indicate
that examination of HB's ears showed the presence of
"dirt/wax." The notation "({i}rrigate both ears" has
been scratched out, and the notation "FB (foreign
body) removed R (right) ear" is included. Regarding
lab work, the blood tests SGOT and SGPT were ordered
and performed, to find out if there was an
inflammation of the liver. P. Br. at 15 ~ 17; P.
Ex. 1.

Medicare was billed for removal of a foreign
body from the ear and for performance of a
hepatitis panel (procedure code 80059), which
procedures were not performed. I.G. Ex. 3 at
15. Procedures less expensive to Medicare,
j.e., ear irrigation and a hepatic panel
(procedure code 80058), were performed, and
Petitioner could have billed for those
procedures. I.G. Ex. 3 at 9 - 15; P. Br. at 15
- 17; P. Ex. 1.

© Patient AE

Petitioner's treatment notes (P. Ex. 2)
indicate that examination of AE's abdomen
revealed fullness in the right upper quadrant.
To Petitioner this indicated possible
inflammation of the liver, because AE's
arthritis medication "has the potential to
cause liver dysfunction." P. Br. at 17 = 18.
The blood tests SGOT and SGPT were ordered and
performed. P. Br. at 17 - 18; P. Ex. 2.

Medicare was billed for performance of a
hepatitis panel (procedure code 80059), which
procedure was not performed. I.G. Ex. 3 at 15.
A procedure less expensive to Medicare, i.e., a
hepatic panel (procedure code 80058) was
performed, and Petitioner could have billed for
that procedure. I.G. Ex. 3 at 9 - 15; P. Br.
at 17 - 18; P. Ex. 2.

Petitioner's convictions also encompassed non-program
related offenses. Specifically, Petitioner was convicted
of mail fraud for billing Pennsylvania Blue Shield for
reimbursement through the U.S. mail for a procedure
consisting of the removal of a foreign body from the ears
8

of HB and three other patients, when that procedure was
not performed. I.G. Ex. 3 at 15 - 16. Also, Petitioner
submitted medical records through the mail to cover up
the fact that he had submitted claims to Pennsylvania
Blue Shield for the removal of foreign bodies from the
ears of these patients when he had not done so. I.G. Ex.
3 at 17.

During the proceeding in which the court accepted
Petitioner's guilty plea, the government asserted certain
facts which Petitioner did not contest. Specifically,
the government asserted that, had Petitioner's case gone
to trial, Petitioner's patients and the employees who
irrigated those patients' ears would have testified that,
in the case of HB (as well as in the cases of three other
patients insured by Pennsylvania Blue Shield, not
Medicare) where Petitioner billed for removal of a
foreign body from an ear, no foreign body was removed.
I.G. Ex. 3 at 13 - 14.

Further, the government asserted that Petitioner's
billing employees would have testified that Petitioner
directed his billing clerk to submit bills in such a way
as to maximize Petitioner's reimbursement. I.G. Ex. 3 at
12. Specifically, the government asserted that
Petitioner directed his billing clerk to bill for a
hepatitis panel (procedure code 80059) whenever the
employee saw "hep" or "SGOT" or "SGPT" on a patient's
chart, instead of billing for the less expensive
procedure codes they should have used (such as procedure
code 80058, a hepatic panel). As a result, the
government asserted that Petitioner was paid
approximately three times more for each claim on a
private insurer and a substantial amount more for each
Medicare claim. I.G. Ex. 3 at 10 - 13. The government
asserted that Petitioner directed his employee to do this
in spite of the fact that Petitioner's office was not
capable of doing a hepatitis panel. I.G. Ex. 3 at 12.

Finally, the government asserted that one of Petitioner's
billing employees would have testified that she advised
him that his billing for hepatitis panels when, in fact,
he had performed SGOT and SGPT tests, was wrong. The
government asserted Petitioner told the employee that was
the way he did it and the way she would do it while she
was working for him. I.G. Ex. 3 at 12 - 13.

As a result of Petitioner's conviction, he was sentenced
to 15 months in prison and ordered to pay restitution of
$34,593 to the DHHS and $55,056 to Pennsylvania Blue
Shield. I.G. Ex. 4.
9

3. Presence of Aggravating Factors

The regulations at 42 C.F.R. § 1001.102 provide that, in
appropriate cases, an exclusion imposed under section
1128(a) (1) may be for a period greater than five years
when certain aggravating factors are present and these
factors are not offset by certain enumerated mitigating
factors. 42 C.F.R. § 1001.102(b) (1) - (6), (c)(1) - (3).

The regulations provide six factors only which may be
considered aggravating and a basis for lengthening an
exclusion beyond five years. 42 C.F.R. § 1001.102(b) (1)
- (6). These aggravating factors are:

1. The acts resulting in the conviction, or
similar acts, resulted in financial loss to
Medicare or a State health care program of
$1500 or more;

2. The acts that resulted in the conviction,
or similar acts, were committed over a period
of one year or more;

3. The acts that resulted in the conviction, or

similar acts, had a significant adverse physical,
mental or financial impact on one or more program
beneficiaries or other individuals;

4. The sentence imposed by the court included
incarceration;

5. The convicted individual or entity has a prior
criminal, civil, or administrative sanction record;

6. The individual or entity has at any time been
overpaid a total of $1500 or more by Medicare or by
a State health care program as a result of improper
billing.

42 C.F.R. § 1001.102(b) (1) - (6).-

In this case, the I.G. has proved the presence of five of
the six aggravating factors asserted in her Notice. I
agree with Petitioner that no significant adverse
physical or mental impact on a program beneficiary or
other individual has been proved. P. Br. at 33 - 34.
There may have been a significant adverse financial
impact on Medicare beneficiaries, by virtue of their 20
percent co-pay portion of Petitioner's inflated billings.
However, absent specific proof regarding financial
impact, I conclude that the third aggravating factor has
not been proved. 42 C.F.R. § 1001.102(b) (3).
10

Regarding the first aggravating factor, the I.G. has
proved that Petitioner's criminal offenses caused a loss
of more than $1500 to Medicare. Specifically,
Petitioner's guilty plea was accompanied by his admission
that he knowingly and wilfully caused false bills to be
submitted, with the result that he received $34,593 in
Medicare reimbursement to which he was not entitled.

I.G. Exs. 3, 4 at 4; P. Br. at 33 - 34.

Regarding the second aggravating factor, the I.G. proved
and the Petitioner admits (P. Br. at 33) that
Petitioner's criminal conduct lasted for over a year's
duration. The actual length of time is in dispute.
Petitioner pled guilty to eight counts of the Indictment,
but the remaining 21 counts were dismissed. Thus, the
indictment language "(f]rom on or about August 1986 to on
or about 1990. .. ." (I.G. Ex. 1 at 4) must be examined
more closely. The amount of restitution that Petitioner
agreed to pay (I.G. Ex. 3 at 6) suggests that
Petitioner's criminal conduct extended beyond the eight
counts to which he pled guilty, but no specific dates are
established except by the eight counts to which he pled
guilty. Thus, the admissions accompanying Petitioner's
guilty plea establish criminal conduct by Petitioner
which extended from December 1987 through April 1990
(I.G. Ex. 3 at 15 - 17), a period of more than two years.

Regarding the fourth aggravating factor, the I.G. has
proved that Petitioner was sentenced to a 15-month term
of incarceration. I.G. Ex. 4 at 2. Petitioner admits
that he spent 13 months in prison. P. Br. at 10, 34.

Regarding the fifth aggravating factor, the I.G. has
proved that Petitioner has both a prior criminal and
administrative sanction record. I.G. Exs. 5 - 18.
Petitioner pled guilty to felony drug distribution
charges in November 1990 (distribution of cocaine). I.G.
Exs. 6, 7. Following his plea, Petitioner was sentenced
to two years probation, fined $17,320, ordered to perform
200 hours of community service, and ordered to
participate in any drug abuse treatment program his
probation officer deemed necessary. I.G. Ex. 7.

Based on this drug distribution conviction, on March 17,
1992, the I.G. imposed and directed a four-year exclusion
against Petitioner under the authority of section
1128(b)(3) of the Act. I.G. Ex. 8.

Also based on Petitioner's guilty plea to the drug
distribution charge, the Pennsylvania State Board of
Osteopathic Medicine (State Board) suspended Petitioner's
medical license in December 1990. I.G. Ex. 15.
11

On May 12, 1993, the State Board suspended Petitioner's
medical license indefinitely. The State Board restricted
Petitioner further by not permitting him to seek
termination of his suspension for five years. I.G. Ex.
18. On July 2, 1993, the State Board ordered Petitioner
to show cause why the State Board should not impose
further sanctions against Petitioner, based on the
criminal offenses underlying Petitioner's 15-year
exclusion here. I.G. Ex. 18.

Regarding the sixth aggravating factor, the I.G. has
proved that Petitioner was overpaid more than $1500.
I.G. Exs. 3, 4 at 4; P. Br. at 33 - 34.

In her reply brief, the I.G. requested that I consider
Petitioner's recent Medicaid fraud convictions as an
aggravating factor in this case. I.G. Exs. 19, 20. The
I.G. suggested also that I consider increasing
Petitioner's exclusion based on these additional program-
related convictions. I.G. R. Br. at 1. These Medicaid
fraud convictions would impact somewhat the first,
second, and sixth aggravating factors. They would not
impact the fourth aggravating factor and, because they do
not constitute a prior criminal record, they would not
impact the fifth aggravating factor. I have decided not
to consider Petitioner's recent Medicaid fraud
convictions here. These convictions constitute an
independent basis upon which the I.G. may exclude
Petitioner.

4. Absence of Mitigating Factors

The regulations provide that, if aggravating factors are
present and justify an exclusion of more than five years,
then mitigating factors may be considered as a basis for
reducing the exclusion to a period of not less than five
years. 42 C.F.R. § 1001.102(c). The regulations provide
that only the following three factors may be considered
as mitigating:

1. The individual or entity was convicted of 3 or
fewer misdemeanor offenses, and the entire

amount of financial loss to Medicare and State
health care programs due to the acts that resulted
in the conviction, and similar acts, is less than
$1500;

2. The record in the criminal proceedings,
including sentencing documents, demonstrates

that the court determined that the individual had
a mental, emotional, or physical condition before
or during the commission of the offense that
12
reduced the individual's culpability; or

3. The individual's or entity's cooperation with
federal or State officials resulted in -

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

(ii) The imposition against anyone of a civil
monetary penalty or assessment under part 1003
of this chapter.

42 C.F.R. § 1001.102(c)(1) - (3).

It is Petitioner's burden to prove that mitigating
factors exist. Abassi, DAB CR390, at 7. Petitioner has
not introduced evidence to prove any of the mitigating
factors allowed by the regulations.

With regard to the first mitigating factor, Petitioner's
conviction was for a felony and the amount of loss to
Medicare was well in excess of $1500. I.G. Exs. 1 - 4.
Regarding the second mitigating factor, while Petitioner
asserts that his drug dependency affected all his actions
during the time in which he committed his criminal
offenses, the record of the criminal proceedings upon
which his 15-year exclusion is based (his program-related
crimes), including his sentencing documents, demonstrates
that the court did not determine that his mental,
emotional, or physical condition before or during the
time that he committed his offenses reduced his
culpability. I.G. Exs. 1 - 4.

Finally, while Petitioner asserted that he cooperated
with government officials in drug investigations, there
is no evidence that Petitioner's cooperation with
government officials resulted in the conviction,
exclusion, or imposition of a civil money penalty against
anyone with regard to the criminal proceedings upon which
his 15-year exclusion is based (his program-related
crimes).

5. enes the E usi

Petitioner's arguments are eloquent and demonstrate an
understanding of the law. Nevertheless, upon careful
consideration of the evidence as a whole, I am convinced
that Petitioner's 15-year exclusion is reasonable. The
five aggravating factors proved by the I.G. convince me
that Petitioner is a manifestly untrustworthy individual
and that the 15 year period of exclusion imposed against
13

Petitioner is necessary to protect Medicare and Medicaid
and the programs' beneficiaries and recipients. Below, I
discuss these factors in terms of the weight I have
assigned to each factor and the reasonableness of
Petitioner's exclusion.

a. Weight of Aggravating Factors

i. Petitioner's prior conviction and
administrative sanction record

Petitioner argues that the criminal offenses which led to
his felony drug distribution conviction occurred during
the same time period as the criminal offenses which led
to his program-related convictions. In an attempt to
mitigate the severity of his offenses, Petitioner
distinguishes between the repeat offenses of an
individual who has been held accountable and thereafter
commits additional crimes, and his own convictions.

It is true that Petitioner's criminal convictions all
stem from criminal offenses committed prior to his first
sentencing. Petitioner's felony drug dealing occurred
"from on or about December 1985 to on or about January
1990" (I.G. Ex. 5). He was sentenced in March 1991 (1.G.
Ex. 7), and he was notified of his exclusion in March
1992 (I.G. Ex. 8). So far as we know, the only offenses
Petitioner has committed since his first sentencing
involve his continuing drug use in 1992.5 Petitioner's
program-related crimes occurred in December 1987 (Count
I, I.G. Ex. 1) and October 1988 (Count XV, I.G. Ex. 1),
prior to his first sentencing.®

I agree with Petitioner that his prior record is not as
egregious as if he had committed his program-related
crimes after having once been brought to justice.
Nevertheless, Petitioner's prior record is, in my
opinion, the most weighty aggravating factor in his case.
42 C.F.R. § 1001.102(b) (5).

5 During probation, Petitioner's urine specimens
were positive for cocaine (I.G. Exs. 9 - 13).

6 As indicated, I do not evaluate the impact of
Petitioner's recent Medicaid fraud convictions (I.G. Ex.
20) on his period of exclusion. I note, however, that
the criminal offenses of which he was convicted took
place "on or about February 26, 1988 through August 31,
1990" (I.G. Ex. 19), again, prior to his first
sentencing.
14

I do not agree with Petitioner's characterization of his
felony drug dealing and his program-related crimes as "a
single set of facts." P. Br. at 2. Even though these
crimes occurred during roughly the same time period, they
reflect entirely different criminal activity and give
rise to additional reasons for concern regarding
Petitioner's trustworthiness to participate in the
programs.

Furthermore, in suspending Petitioner's license to
practice for at least five years, beginning May 1993
(I.G. Ex. 17 at 15), the State Board included in its
Conclusions of Law the following:

2. Respondent is unable to practice
osteopathic medicine and surgery with
reasonable skill and safety to patient by
reason of drunkenness and excessive use of
drugs in violation of Section 15(a)(5) of the
Act. (Findings of Fact Nos. 6-28).

I.G. Ex. 17 at 10.

Petitioner admits "active addiction" to both alcohol and
cocaine (P. Br. at 4) during the period of his criminal
activity (from the late 1980s into 1990). Furthermore,
his drug dealing conviction for distribution of cocaine
goes beyond addiction. Petitioner's drug dealing
conviction demonstrates clearly his disregard for the
law, his disregard for the health and safety of others,
as well as of himself, and his poor judgment.

Petitioner's cocaine distribution conviction and the
attendant circumstances, including Petitioner's positive
urine specimens for cocaine after sentencing (I.G. Exs. 9
- 13), and including the State Board's conclusion that
Petitioner is unable to practice medicine and surgery
with reasonable skill and safety to his patients, is
entitled to great weight. Thus, Petitioner's prior
conviction and sanction record demonstrates that a very
lengthy exclusion is necessary for the I.G. to be able to
determine whether Petitioner is again trustworthy to
provide program services.

ii. Financial loss to Medicare

The next most weighty aggravating factor in Petitioner's
case is the $34,593 financial loss to the Medicare
program (42 C.F.R. § 1001.102(b)(1)), which is admitted
by Petitioner. I categorize this together with the
aggravating factor of overpayment to Petitioner in the
same amount (42 C.F.R. § 1001.102(b)(6)). The large
15

financial loss to Medicare, and the illegal gain to
Petitioner, again demonstrate the seriousness of
Petitioner's offenses and support a very lengthy period
of exclusion.

Petitioner pled guilty to defrauding Medicare by billing
for services that he did not perform. Petitioner's
admission of guilt in open court in the presence of his
attorney (I.G. Ex. 3) is more persuasive than his
detailed explanation of his reasons for choosing the code
for removal of a foreign body from the ear and the code
for performance of a hepatitis panel (P. Br. at 20 - 22)
in place of using codes for less expensive services he
may have performed. Petitioner's explanation that he
decided to plead guilty because his prior conviction
prevented him from being regarded as credible, and
because he could not afford to defend himself, is not
persuasive.

Petitioner distinguishes his wrongdoing from that of
providers who submit fraudulent claims without providing
any treatment, explaining: "[w]hat I did do, was engage
in aggressive billing practices. . .." P. Br. at 6.
While Petitioner may wish to characterize his criminal
conduct as "aggressive billing practices," he
nevertheless committed fraud or theft. As stated by an
appellate panel of the Departmental Appeals Board in the
case of Timothy L. Stern, M.D., DAB 1396, at 17 (1993):

[p]resenting an "inflated" claim can be
potentially just as damaging to the Medicare
program as presenting a claim where no
reimbursable service was provided at all. Both
instances equally involve program deception and
both instances place program funds at risk.

iii. Other aggravating factors

The remaining aggravating factors, i.e., Petitioner's
crimes being committed over longer than a one-year period
(42 C.F.R. § 1001.102(b)(2)), and Petitioner's sentence
including incarceration (42 C.F.R. § 1001.102(b)(4)), are
additional indicators of the extent of Petitioner's
16

untrustworthiness and support a lengthy period of
exclusion.

b. ons iste wit! usio

In determining the reasonableness of a period of
exclusion, I consider the period of exclusion imposed by
the I.G. in other cases and whether that period of
exclusion was upheld by administrative law judges and
appellate panels of the DAB. However, each case must be
decided on the totality of its own circumstances, and
there are so many variables in each case that comparison
is difficult.

Petitioner asserts that in comparison to other
exclusions, his is unreasonable. Petitioner argues that
the term of his exclusion should be consistent with the
exclusions "imposed on other practitioners who have been
involved in like violations." P. R. Br. at 8; see also
P. Br. at 35 - 36.

For example, Petitioner distinguishes his case from that
of the petitioner in Khalil, DAB CR353. P. Br. at 35.
Dr. Khalil's program-related convictions involved:

fraudulent claims [which] resulted ina
financial loss of almost $2 million. Khalil,
DAB CR353 at 11 - 12.

(Dr. Khalil] was almost never present at the
clinics and, but for one or two instances,
never personally examined or treated Medicaid
recipients. Khalil, DAB CR353 at 15.

(Dr. Khalil] knew that the physician assistants
were seeing patients on her behalf without
supervision, and that they were generating
reimbursement claims for services which she had
not provided and which were not medically
necessary. Khalil, DAB CR353, at 16.

While I agree with Petitioner that his program-related
crimes are less egregious than those of Dr. Khalil,
Petitioner's cocaine distribution conviction and the
attendant circumstances nevertheless add a dimension to
Petitioner's case that is not present in Dr. Khalil's
case. Based on the totality of the aggravating factors
17

in Petitioner's case, I am persuaded that a 15-year
exclusion is warranted and reasonable.’

Recently, an administrative law judge modified a 15-year
exclusion from Medicare and Medicaid down to eight years.
Two aggravating factors and no mitigating factors were
proved:

First, the I.G. proved that [Abassi] engaged in
crimes resulting in financial loss to the New
York Medicaid program in excess of $1500.00.

42 C.F.R. § 1001.102(b)(1). . . .[{Abassi]
committed fraud against the New York Medicaid
program in the amount of $75,000...

Second, (Abassi] was sentenced to
incarceration. 42 C.F.R. § 1002.102(b) (4).

.» . + [Abassi] was sentenced to a term of one
year in prison...

Abassi, DAB CR390, at 6.

In Abassi, the judge noted that the record was
practically silent as to the nature of Petitioner's
involvement in the crimes for which he was convicted.
However, the aggravating factors present in Petitioner's
case add a dimension not present in Dr. Abassi's case,
including, but not limited to, Petitioner's cocaine
distribution conviction and the circumstances attendant
to that conviction.

Petitioner has demonstrated by his conduct that he cannot
be trusted to handle program funds or to treat patients.
Even if Petitioner does not consider himself as culpable
as some others who have been excluded for 15 years, this
does not mean that the 15-year exclusion imposed against
him is unreasonable. The aggravating factors proved in
Petitioner's case suggest that Petitioner is a manifestly
untrustworthy individual and that a very lengthy period
of exclusion is necessary to protect the integrity of
federally financed health care programs and the welfare

7 A 15-year exclusion also was upheld recently in
the case of Shahid M. Siddiqui, M.D., DAB CR377 (1995).
Dr. Siddiqui was excluded from Medicare and Medicaid for
15 years, based on the presence in his case of four
aggravating factors and no mitigating factors. The
aggravating factors were those specified at 42 C.F.R. §§
1001.102(b) (1), 1001.102(b) (2), 1001.102(b) (4), and
1001.102(b) (5).
18

of the programs' beneficiaries and recipients. See
Abassi, DAB CR390, at 9.

Vv. Conclusion

The I.G.'s determination to exclude Petitioner for 15
years from participation in Medicare, and to direct that
he be excluded from participation in Medicaid, comports
with the remedial purposes of the Act and, thus, is
reasonable.

/s/

Jill S. Clifton
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
In the Case of:
Bali S. Reddy, DATE: September 20, 1995
Petitioner,

Docket No. C-95-029
Decision No. CR394

“vr

The Inspector General.

wee SS SS SLES

DECISION

On October 19, 1994, the Inspector General (I.G.)
notified Petitioner, Bali S. Reddy, that he was being
excluded from participating in the Medicare,. Medicaid,
Maternal and Child Health Services Block Grant and Block
Grants to States for Social Services programs for three
years.! The I.G. told Petitioner that he was being
excluded under section 1128(b)(1) of the Social Security
Act (Act) based on his conviction of a criminal offense
relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

Petitioner requested a hearing, and the case was assigned
to Administrative Law Judge Joseph K. Riotto for a
hearing and decision. Judge Riotto held a telephone
prehearing conference in this case on March 2, 1995.
During the conference, both parties agreed that the case
could be decided by written submissions and that an in-
person evidentiary hearing was not necessary. The
parties agreed further that the only issue in the case is
whether the three-year exclusion the I.G. imposed against
Petitioner is reasonable. March 9, 1995 Order and
Schedule for Filing Briefs and Documentary Evidence. . The
parties submitted proposed exhibits and briefs.

! Unless the context indicates otherwise, in this
decision I use the term "Medicaid" to represent all
programs other than Medicare from which Petitioner was
excluded.
2

Due to Judge Riotto's ill health, the case was reassigned
to me on September 7, 1995. On September 14, 1995, I
held a telephone prehearing conference. During the
conference, the parties confirmed that Petitioner was not
contesting the I.G.'s authority to exclude him under
section 1128(b)(1). Therefore, the only issue in this
case is whether the three-year exclusion imposed by the
I.G. is reasonable.

The I.G. submitted seven exhibits (I.G. Ex.(s) 1 - 7).
Petitioner did not object to the admission into evidence
of I.G. Exs. 1- 7. However, I am admitting into
evidence only I.G. Exs. 2 - 7. I am not admitting I.G.
EX. 1 into evidence. I.G. Ex. 1 is a copy of the I.G.'s
October 19, 1994 notice letter to Petitioner, which is
already of record in this case.” Petitioner submitted
two unmarked exhibits. The I.G. has not objected to
Petitioner's exhibits. I have marked these two exhibits
as Petitioner's exhibits (P. Ex.(s)) 1 and 2 and I have
admitted them into evidence.

I have considered the evidence, applicable law and
regulations, and the parties' arguments. I conclude that
the I.G. had authority to exclude Petitioner pursuant to
section 1128(b)(1) of the Act. I conclude also that
there exist no mitigating factors in this case which
justify reducing the exclusion below the minimum three-
year period imposed by the I.G. Therefore, I sustain the
three-year exclusion which the I.G. imposed against
Petitioner.

I. e indin« 03 Ss.

Only one issue has been raised in this case. That issue
is whether the three-year exclusion imposed against
Petitioner by the I.G. is reasonable. Below I make
specific findings of fact and conclusions of law in
addressing and deciding this issue. In setting forth my
findings and conclusions, I cite to relevant portions of
my decision, at which I discuss my findings and
conclusions in detail.

1. Regulations mandate that at least a three-year
exclusion be imposed pursuant to section 1128(b)(1) of

2? paragraph 8(f) of the March 9, 1995 Order and
Schedule for Filing Briefs and Documentary Evidence
directed specifically that the parties should not file
such record documents as exhibits in this case.
3

the Act in a case where there exist no mitigating
factors. Pages 3 - 4.

2. Petitioner did not prove that mitigating factors
exist in this case. Pages 6 - 7.

3. I do not have the authority to declare a regulation
to be ultra vires the Act or the Administrative Procedure
Act, nor do I have the authority to declare a regulation,
or the application of a regulation to a particular
individual, to be unconstitutional. Pages 4 - 6.

A. verni aw

The I.G. imposed Petitioner's exclusion pursuant to
section 1128(b)(1) of the Act. This section permits the
exclusion from Medicare and Medicaid of individuals who
have been convicted, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a program operated by or financed in whole or
in part by any federal, State, or local government
agency, of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or
other financial misconduct. Social Security Act, section
1128(b) (1).

Section 1128 of the Act is a remedial statute. Congress
intended that it be applied to protect the integrity of
federally funded health care programs, and the welfare of
program beneficiaries and recipients, from individuals
and entities who have been shown to be untrustworthy.
Exclusions imposed pursuant to section 1128 have been
found reasonable only insofar as they are consistent with

the Act's remedial purpose. Robert Matesic, R.Ph., d/b/a
Northway Pharmacy, DAB 1327, at 7 - 8 (1992); Rosaly Saba

, DAB CR353, at 9 (1995); Dr. Abdu] Abassi,
DAB CR390, at 3 (1995).

Prior to 1993, there were no regulations governing the
administrative adjudication of exclusions imposed
pursuant to section 1128. Before then, administrative
law judges and appellate panels of the Departmental
Appeals Board had held that the criteria by which they
evaluated the trustworthiness of excluded parties, and
the reasonableness of exclusions, derived from the Act
itself. These criteria encompassed any evidence relevant
to an excluded party's trustworthiness to provide care.
Matesic, DAB 1327, at 7 - 8.
4

In January 1993, regulations at 42 C.F.R. Part 1001
became binding on administrative law judges and appellate
panels of the Departmental Appeals Board. 42 C.F.R. Part
1001; 42 C.F.R. § 1001.1(b). Among other things, the
regulations at 42 C.F.R. Part 1001 direct the I.G. to
exclude an individual who has been convicted of a
criminal offense relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct committed in connection with the delivery of a
health care item or service. 42 C.F.R. § 1001.201(a).
The regulations direct further that, in the absence of
certain enumerated aggravating or mitigating factors, the
length of the individual's exclusion is to be three
years. 42 C.F.R. § 1001.201(b).

As a consequence of the regulations, in any case in which
the reasonableness of an exclusion is at issue, I am
obligated to decide whether an exclusion of a particular
length is reasonably necessary to protect the integrity
of federally financed health care programs and the
welfare of the programs' beneficiaries and recipients by
using only the aggravating and mitigating factors
contained in the regulations. Abassi, DAB CR390, at 4;
Khalil, DAB CR353, at 10. The regulations limit the
factors which I may consider as relevant to an excluded
party's trustworthiness to provide care. I may no
longer, for example, consider evidence relating to a
party's rehabilitation, as evidence of that party's
trustworthiness. See Matesi¢c, DAB 1327, at 7 - 8. Such
evidence does not fall within any of the aggravating or
mitigating factors contained in the regulations. Abassi,
DAB CR390, at 4.

B. The reasonableness of Petitioner's exclusion

Petitioner is not contesting whether or not the I.G. had
a basis upon which to exclude him.’ Petitioner is
contesting only the reasonableness of his three-year
exclusion. In support of his contention, Petitioner
makes a number of arguments in which he asserts that the
regulations at 42 C.F.R. Part 1001 are either ultra vires

3 Petitioner admits that he was convicted of one
count of an attempt to offer or pay a kickback or bribe
in connection with the furnishing of goods and services
for which payment may be made by health care insurance or
by a health care corporation. Petitioner's brief (P.
Br.) at 2 - 3.
5

or unconstitutional. Petitioner asserts also that
mitigating factors exist in his case.‘

Specifically, Petitioner argues that the regulations
governing his case, as set forth at 42 C.F.R. Part 1001,
are invalid for the following reasons: 1) the
regulations are ultra vires the Act; 2) they subject him
to double jeopardy in violation of his Fifth Amendment
rights under the United States Constitution; and 3) they
violate his due process rights under the Fifth Amendment.
Additionally, Petitioner challenges the regulation at 42
C.F.R. § 1001.1(b), which assertedly binds administrative
law judges, the Departmental Appeals Board, and federal
courts, on the following grounds: 1) the regulation was
issued without following procedures prescribed by the
Administrative Procedure Act; 2) it does not follow the
proper delegation of authority to or from the Secretary
of the Department of Health and Human Services
(Secretary); and 3) it was published in violation of
President Clinton's moratorium on newly published
regulations. P. Br. at 3 - 14.

Many of the arguments Petitioner has raised were
considered by administrative law judges prior to 1993.
At that time, administrative law judges determined that
the Part 1001 regulations did not apply to administrative
hearings. Bertha K. Krickenbarger, R.Ph., DAB CR250
(1993); Tajammu] H. Bhatti, M.D,, DAB CR245 (1992);

FS a; , DAB CR205 (1992); Steven Herlich, DAB
CR197 (1992); Stephen J, Willig, M.D., DAB CR192 (1992);
oysi , DAB CR189 (1992); Charles J.

A DAB CR187 (1992). In those decisions,
the administrative law judges concluded that the
Secretary did not intend that the Part 1001 regulations
apply to govern administrative adjudications of I.G.
exclusion determinations. One reason for the conclusion
cited in these decisions was the concern that these
regulations, if they were found to govern administrative
adjudications, might be found to be either ultra vires
the Act or unconstitutional. It was concluded that the
Secretary did not intend the Part 1001 regulations to be
applied in a way that might result in an ultimate
decision that the regulations were ultra vires the Act or
unconstitutional.

However, the regulations published on January 22, 1993,
make clear that these regulations govern administrative
hearings as to exclusions imposed under section 1128 of

4 The I.G. has not alleged that aggravating
factors exist in this case.
6

the Act. Jose Ramon Castro, M.D., DAB CR259 (1993); 42
C.F.R. § 1001.1(b). As a delegate of the Secretary, I
have no independent authority to rule on the validity or
constitutionality of regulations issued by the Secretary.
Moreover, the regulation at 42 C.F.R. § 1005.4(c) (1)
specifically precludes me from ruling on the validity of
the regulations Petitioner challenges. Thus, I am
without authority to consider Petitioner's arguments as
to whether the regulations are lawful or constitutional.

Petitioner asserts also that mitigating factors exist in
this case. Petitioner asserts specifically that: 1) his
conviction was not program-related; 2) he has divested
all ownership in the laboratory which was implicated
along with Petitioner in the criminal charges which
resulted in Petitioner's conviction; and 3) he has
cooperated with the Michigan State Attorney General's
Office (State) in the prosecution of a number of kickback
schemes. P. Br. at 2.

Under the regulations defining the mitigating factors I
am allowed to consider, it is irrelevant whether
Petitioner's conviction was program-related or whether
Petitioner has divested his ownership in the laboratory
that was implicated along with Petitioner in the criminal
charges that resulted in Petitioner's conviction.

The regulations list only four factors which I may
consider as mitigating and a basis for reducing
Petitioner's three-year exclusion. These factors are
whether: 1) an individual was convicted of three or
fewer misdemeanors with a loss to the victims of the
crime aggregating less than $1500; 2) the sentencing
court determined that the convicted individual had a
mental, emotional, or physical condition before or during
the commission of the offense that reduced the
individual's culpability; 3) the convicted individual's
cooperation with federal or State officials resulted in
others being convicted, excluded, or subjected to a civil
money penalty; or 4) no alternative sources of the types
of items or services provided by the convicted individual
are available. 42 C.F.R. § 1001.201(b) (3) (i) - (iv).
Only Petitioner's third assertion, that he has cooperated
with State officials in the prosecution of kickback
schemes, might, if proved, constitute a mitigating factor
under the regulations. 42 C.F.R. § 1001.201(b) (3) (iii).

Petitioner has the burden of proving a mitigating factor
under 42 C.F.R. § 1001.201(b)(3) (iii). His burden here
consists of proving: 1) that he cooperated with State
officials; and 2) that his cooperation resulted in the
conviction, exclusion, or imposition of a civil money
7

penalty against another individual or individuals.
Abassi, DAB CR390, at 7.

There is some evidence of record that Petitioner may have
cooperated with State officials. P. Ex. 1; I.G. Ex. 6 at
7. However, there is no evidence of record that
Petitioner's cooperation with State officials resulted in
the conviction, exclusion, or imposition of a civil money
penalty against any other individual or individuals. See
Abassi, DAB CR390, at 8.

I conclude that Petitioner did not prove the presence of
a mitigating factor within the meaning of 42 C.F.R. §
1001.201(b) (3) (iii). Assuming that Petitioner proved
that he has cooperated with State officials, Petitioner
has not proved that his cooperation with State officials
resulted in others being convicted, excluded, or
subjected to a civil money penalty.

III. Conclusion

I conclude that the I.G. was authorized to exclude
Petitioner for three years. In the absence of mitigating
factors, the regulations governing this case mandate that
the I.G. exclude Petitioner for three years. Thus, I
sustain Petitioner's three-year exclusion.

/s/

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Franklin Park Nursing Home, DATE: September 13, 1995
Petitioner,

Docket No. C-94-301
Decision No. CR393

-v-

Health Care Financing
Administration.

DECISION

I am issuing my ruling dismissing Petitioner's hearing
request for cause under 42 C.F.R. § 498.70(b) and, in the
alternative, my decision to resolve the case in full by
entering summary judgment in favor of the Health Care
Financing Administration (HCFA).

I. Background

This case came before me pursuant to the filing of
Petitioner's hearing request (Hearing Request) dated
February 18, 1994. The Hearing Request referred to the
January 27, 1994 determination by HCFA that Petitioner's
participation as a skilled nursing facility in the
Medicare program and as a nursing facility in the
Medicaid program should terminate effective April 7,
1994. HCFA stated in its notice letter that its
determination was based on the results of a "complaint
survey" conducted by the New York State Health Department
on January 7, 1994. Notice Letter at 1. According to
Petitioner, its licensees “disagree that the residents
were in ‘imminent danger' at the time the New York State
Department of Health ordered the evacuation of the
Nursing Home's residents." Hearing Request at 1.

After a preliminary prehearing conference, I stayed
proceedings in the case at Petitioner's request, based
upon Petitioner's representations concerning its pending
negotiations with the New York State Department of Health
2

and other proceedings relevant to this case. See letter
to counsel dated May 31, 1994. During a conference call
on June 6, 1995, the parties' counsel updated me on the
status of this case. June 14, 1995 Order and Summary of
Prehearing Conference. At that time, HCFA argued also
that all issues in the case have become moot. HCFA
stated that: the State of New York had suspended
Petitioner's certificate to operate a nursing home even
before HCFA had sent the notice of termination dated
January 27, 1994; Petitioner had voluntarily terminated
doing business; and Petitioner had surrendered its State
license. Jd. at 3.

Petitioner, by counsel, acknowledged that it has been
closed since January of 1994, and Petitioner did not
disagree with HCFA's allegations and its assertion that
the case is moot. Id. at 3. However, Petitioner refused
to withdraw its hearing request, indicating that it would
withdraw its hearing request only if HCFA issues a
written waiver of remedies, in order to relieve
Petitioner's former operators from any personal liability
they may have. Id. at 3 - 4. Petitioner held fast to
its refusal to withdraw and its demand for a written
release from HCFA even after I had made clear that
personal liability has never been and cannot become an
issue in this case. Id.. Therefore, I invited HCFA to
file a motion to dismiss the action or any other motion
appropriate to its assertions of mootness. Id. at 4.

In accordance with my scheduling order, HCFA timely filed
its brief (HCFA Br.) and supporting evidence for the
dismissal of Petitioner's Hearing Request.’ Petitioner
had until August 14, 1995, to file a response under my
order. Petitioner has not filed any response or sought
an extension of time.

By order dated September 1, 1995, I considered Petitioner
to have waived its opportunity to respond and closed the
record for the reasons stated therein. With respect to
any new facts contained in HCFA's brief and exhibits, I
consider them to be uncontested by Petitioner. I note,
in addition, that Petitioner had been placed on notice at
the outset of this case that failure to follow orders
might have serious adverse consequences. See April 6,
1994 Order to Show Cause Why Hearing Request Should Not
Be Dismissed, and May 18, 1994 Order and Notice of Second
Prehearing Conference.

1 HCFA submitted two exhibits with its brief. I
hereby admit into evidence HCFA's Exhibits 1 and 2. They
shall be referenced herein as HCFA Ex. 1 and 2.
3

Having reviewed the contents of the record before me, I
agree with HCFA that there exists no real issue of fact
or law in controversy. Moreover, Petitioner does not
have any legitimate expectation of relief in this forum.
Accordingly, I rely on 42 C.F.R. § 498.70(b) and dismiss
the action because, for the reasons set forth below in
part II of this Decision, Petitioner is not a "proper
party or does not otherwise have a right to a hearing."
42 C.F.R. § 498.70(b). In the alternative, if I were to
assume that Petitioner's filing of a hearing request
entitled it to an adjudication on the merits, I would
also decide the case in HCFA's favor by entering summary
judgment against Petitioner. I set forth in part III,
below, my findings and conclusions for entering summary
judgment against Petitioner and in favor of HCFA.

I rule that Petitioner's Hearing Request must be
dismissed, based on the following findings of fact and
conclusions of law (FFCL):

1. Prior to January 7, 1994, Petitioner was
participating as a skilled nursing facility in
the Medicare program and as a nursing facility
in the Medicaid program. See Notice Letter;
Hearing Request; HCFA Br. at 4.

2. On January 7, 1994, the New York State
Department of Health conducted a survey of
Petitioner. See Notice Letter; Hearing
Request.

3. On January 7, 1994, the New York State
Department of Health ordered Petitioner to
complete the removal and transfer of all
residents within 96 hours, and it prohibited
Petitioner from admitting additional patients
until it receives written permission from the
New York State Department of Health to return
nursing home residents to Petitioner's
premises. HCFA Ex. 1 at 4 ~ 5.

4. There was no event that took place after
January 11, 1994 (i.e., 96 hours after the New
York State Department of Health issued its :
January 7, 1994 order) that could have resulted
in Petitioner's submission of any legitimate
claim for reimbursement of services. HCFA Br.
at 12; FFCL 3.
4

5. On January 27, 1994, HCFA notified
Petitioner of its initial determination that,
effective April 7, 1994, Petitioner's provider
agreement would be terminated, based on the
results of the survey conducted on January 7,
1994 by the New York State Department of
Health. Notice Letter.

6. Since January 1994, Petitioner has been
closed for business. June 14, 1995 Order and
Summary of Prehearing Conference at 3; FFCL 3.

7. A provider may, on its own, terminate its
provider agreement with HCFA. 42 C.F.R. § 489.52.

8. A provider's cessation of business is
deemed to be a termination by the provider,
effective with the date on which it stopped
providing services to the community. 42 C.F.R.
§ 489.52 (b) (3).

9. The reasons for a provider's cessation of
business are irrelevant under 42 C.F.R. §
489.52(b) (3).

Inc., DAB CR370, at 10 (1995).

10. On or about January 11, 1994, Petitioner,
on its own, terminated its right to participate
in the Medicare program. FFCL 3, 6 - 9.

11. HCFA would not have terminated
Petitioner's right to participate in the
Medicare program until April 7, 1994, the date
specified in HCFA's notice letter. Notice
Letter at 2.

12. On February 18, 1994, Petitioner requested
a hearing before an administrative law judge.
Hearing Request.

13. Any provider dissatisfied with an initial
determination by HCFA to terminate its provider
agreement is entitled to a hearing before an
administrative law judge. 42 C.F.R. §498.5(b).

14. On January 27, 1994, when HCFA issued its
determination, Petitioner was not a provider
within the meaning of the law. 42 C.F.R. §
498.2; FFCL 10.

15. On February 18, 1994, when Petitioner
filed its Hearing Request, Petitioner was not a
5

provider within the meaning of the law. 42
C.F.R. § 498.2; FFCL 10.

16. On February 18, 1994, Petitioner did not
have any hearing rights. 42 C.F.R. § 498.5(b);
FFCL 13 - 15.

17. All hearing requests must identify the
specific issues and the findings of fact and
conclusions of law with which the individual or
entity disagrees. 42 C.F.R. § 498.40(b) (1).

18. In its Hearing Request, Petitioner stated
that it disagreed that "the residents were in
‘imminent danger' at the time the New York
State Department of Health ordered the
evacuation of the Nursing Home's residents."
Hearing Request at 1.

19. HCFA's notice letter dated January 27,
1994 did not make any finding that Petitioner's
residents were in “imminent danger." Notice
Letter at 2.

20. HCFA's notice letter dated January 27,
1994 stated that the issue of “immediate and
serious threat" to patients had been rendered
moot by Petitioner's discharge of all patients,
even though HCFA had earlier considered this
issue as a possible basis for terminating
Petitioner's provider agreement. Notice Letter
at 2.

21. Even assuming that Petitioner was a
provider on February 18, 1994, Petitioner's
Hearing Request did not raise any genuine
dispute for hearing. 42 C.F.R. § 498.40(b) (1);
FFCL 17 - 20.

22. A hearing request must be dismissed for
cause when the party requesting the hearing is
not a proper party or does not otherwise have a
right to a hearing. 42 C.F.R. § 498.70(b).

Accordingly, I dismiss Petitioner's Hearing Request under
42 C.F.R. § 498.70(b).
III. Findings and Decision to enter Summary Judgment

: Petiti 1 inf f HCFA
In the alternative, if I were to assume that Petitioner's
filing of a Hearing Request entitled it to an
adjudication on the merits, I would enter summary
judgment against Petitioner and in favor of HCFA.
Because there exist no facts of decisional significance
genuinely in dispute, the only matters to be decided are
the legal implications of the undisputed material facts.
I conclude that Petitioner has not had the right to
participate in the Medicare program as a provider during
any period that may have been placed into controversy by
Petitioner's attempt to challenge HCFA's January 27, 1994
determination to end Petitioner's provider agreement on
April 7, 1994.

Under this alternative analysis, I hereby incorporate all
of the FFCL 1 - 22 in the preceding part of this
Decision. In addition, I issue also the following FFCL:

23. As a matter of law, HCFA's issuance of a
notice of termination dated January 27, 1994
could not have had the effect of altering or
negating Petitioner's own prior termination of
its provider agreement on or about January 11,
1994. 42 C.F.R. § 489.52(b) (3); FFCL 3, 6 -
10, 14.

24. For any entity to participate either as a
skilled nursing facility in the Medicare
program or as a nursing facility in the
Medicaid program, it must comply with all State
and local licensing requirements. Sections
1819(d) (2) (A) and 1919(d) (2) (A) of the Social
Security Act.

25. By order dated January 7, 1994, the New
York State Department of Health suspended
Petitioner's operating certificate. HCFA Br.
at 9; HCFA Ex. 1.

26. During October of 1994, Petitioner
consented to the State's revocation of its
operating certificate, and Petitioner
surrendered said certificate to the New York
State Department of Health. HCFA Ex. 2 at 3.

27. As a matter of law, Petitioner has been
ineligible to participate as a Medicare or
Medicaid provider since January 7, 1994. FFCL
24 - 26.
Accordingly, summary judgment is hereby entered against

7

28. Whatever the merits of Petitioner's
disagreement in February of 1994 with the
"imminent danger" found by the New York State
Department of Health (Hearing Request),
Petitioner was not and could not have remained
a program provider on or after April 7, 1994,
when HCFA would have terminated Petitioner's
provider agreement based on the results of the
January 7, 1994 survey. FFCL 6 = 11, 14, 18,
23 - 27.

29. Whatever the merits of any fact alleged in
HCFA's January 27, 1994 notice letter,
Petitioner was not and could not have remained
a program provider on or after April 7, 1994,
when HCFA would have terminated Petitioner's
provider agreement based on the results of the
January 7, 1994 survey. FFCL 5 - 11, 14, 23 -
27.

30. The record does not contain any evidence
or allegation that Petitioner has been harmed
by HCFA's decision to terminate Petitioner's
provider agreement effective April 7, 1994.
FFCL 4, 6, 10, 11, 27.

31. The record does not contain any evidence
which might entitle Petitioner to relief in
this action.

Petitioner and in favor of HCFA.

Iv.

Conclusion

I grant HCFA's motion and dismiss Petitioner's Hearing

Request.

favor of HCFA and against Petitioner.

/s/
Mimi Hwang Leahy
Administrative Law Judge

In the alternative, I enter summary judgment in


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Michael Blake Runyon, D.P.M., DATE: September 8, 1995
Petitioner,

Docket No. C-95-067
Decision No. CR392

-we

The Inspector General.

DECISION

By letter dated December 15, 1994, Michael Blake Runyon,
D.P.M., the Petitioner herein, was notified by the Inspector
General (I.G.), of the U.S. Department of Health & Human
Services (HHS), that it had been decided to exclude him 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
the Medi-Cal progran.!

1 The I.G.'s December 15, 1994 letter notifying
Petitioner of his exclusion states that Petitioner's criminal
offense is related to the delivery of an item or service
“under the Medi-Cal program," (California's Medicaid program,
a State health care program). However, in her brief, the
I.G. informed me that she had inadvertently sent an incorrect
notice to Petitioner. I.G. Memorandum at 1 - 2, n.2. The
notice should have stated that Petitioner was convicted of a
criminal offense related to the Medicare program. The I.G.
asserts that the reference to Medi-Cal -- instead of Medicare
-- is of no legal consequence because section 1128(a) (1) of
the Act requires the Secretary to exclude "({a])ny individual
or entity that has been convicted of a criminal offense
related to the delivery of an item or service under Title
XVIII [Medicare] or under any State health care program
2

Petitioner filed a timely 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 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.

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 Medicare or Medicaid to be excluded from
participation in such programs for a period of at least five
years.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Eindings of Fact and Conclusions of Law by Agreement of the

1. As a result of an investigation conducted by the
California Department of Justice Bureau of Medi-Cal Fraud and
the Office of the I.G., Petitioner was charged with one
felony count of conspiracy to defraud the Medi-Cal and
Medicare programs, in violation of: section 182(a)(1) and

{including Medicaid]." Id. Petitioner has not contested the
adequacy of the notice or argued that the I.G.'s inadvertent
mistake supports a contention that there is no basis for his
exclusion. Thus, the I.G.'s notice is not an issue in this
case. P. Response at 4.

2 In this section, I have adopted I.G. Proposed
Findings 1, 2, and 7. Petitioner did not contest these
specific findings of fact and conclusions of law. P.
Response at 2. I have independently reviewed the record and
determined that the findings have a basis in the record.
Thus, I have adopted these findings of fact and conclusions
of law, with only minor editorial changes. Additionally, I
have supplied the citations to the record that support the
findings.
3

(4) of the California Penal Code (Conspiracy); section
14107.2(a) and (b) of the California Welfare and Institutions
Code (False Claims); section 650 of the California Business
and Professions Code (CBPC) (Unlawful Remuneration); section
4390 of the CBPC (Prescription Forgery); and four felony
counts of forgery of a prescription for a TENS
(Transcutaneous Electrical Nerve Stimulators) device, a
dangerous drug, as defined in section 4211(b) of the CBPC, in
violation of section 4390(a) of the CBPC. I.G. Exs. 2 - 5,
14.

2. Pursuant to a plea bargain, Petitioner pleaded no
contest to, and was convicted of, one count of receiving
unlawful remuneration on or about December 30, 1989, for
sending medical business to Sunmac, a medical supply company,
in violation of section 650 of the CBPC. Petitioner was
sentenced to three years' probation on condition that he
disgorge his kickbacks in the amount of $3863; pay a fine of
$8500 for the cost of the investigation; and pay restitution
of $1000 through the California Department of Justice. I.G.
Exs. 17, 18.

3. The Secretary of HHS has delegated to the I.G. the duty
(pursuant to 42 U.S.C. § 1320a-7(a)) of excluding persons and
entities convicted of program-related crimes from
participating in Medicare and of directing their exclusion
from State health care programs. 48 Fed. Reg. 21,662 (1983);
42 C.F.R. § 1001.101 et seq.

indi Fact i we

4. During the period relevant to this case, Petitioner was
a podiatrist, practicing in California.

5, Under Medicare and Medicaid regulations, a physician
must sign a prescription for a patient to rent a TENS unit.

3 The I.G. submitted 18 exhibits with the I.G.'s
motion and memorandum for summary disposition. I cite these
exhibits as "I.G. Ex(s). (number) at (page)." The I.G.
submitted also one exhibit, I.G. Ex. 19, with her reply
brief. Petitioner submitted exhibits A - E with his
response. Since Petitioner's exhibits were not labelled
correctly, I have relabelled them and they are now
Petitioner's exhibits 1-5. I cite these exhibits as "P.
Ex(s). (number) at (page)." The pages in Petitioner's
response brief are not numbered. I have numbered these
pages. Page 1 begins with the "Introduction" and the last
page is 12. Neither party has objected to the other party's
exhibits. In the absence of objection, I admit both parties'
exhibits into evidence.
4

The physician must also complete and sign a Certificate of
Medical Necessity (CMN) for rental of the TENS device. If a
patient wishes to purchase a TENS unit, the physician must
then sign a separate written prescription after conducting a
follow-up examination to determine whether the TENS unit
benefitted the patient. I.G. Ex. 3; P. Response at 2 - 3;
I.G. Memorandum at 7 - 9; I.G. Reply at 4 - 6.

6. The authorizing prescription and CMN must be submitted”

to the Medicare or Medicaid fiscal intermediary, along with a
claim form, for a TENS rental, TENS purchase, and subsequent

TENS order for supplies. I.G. Ex. 3.

7. The complaint filed against Petitioner alleged a
fraudulent scheme between Petitioner and Sunmac whereby
Petitioner agreed to prescribe Sunmac's TENS units, for
certain of his podiatric patients, knowing that these TENS
units were not medically necessary. Petitioner then
allegedly received unlawful remuneration from Sunmac for
referring his podiatric patients to Sunmac for the TENS
units. I.G. Ex. 2 at 1; I.G. Exs. 3, 14, 18.

8. Allegedly, Sunmac submitted claims to Medicare and
Medicaid for the TENS units, which Petitioner had prescribed.
Sunmac's forms to Medicare contained falsely completed
authorizing documents and Sunmac was then paid by Medicare
for the claims it submitted based upon the false
prescriptions and CMN forms. I.G. Exs. 14, 17, 18.

9. Petitioner's plea of no contest was accepted by the Los
Angeles County Municipal Court, Van Nuys Branch. The court
found him guilty as a matter of law. I.G. Ex. 17.

10. Petitioner's plea of no contest, and the court's
acceptance of that plea, constitute a conviction within the
meaning of sections 1128(a)(1) and 1128(i)(3) of the Act.

11. The offense of which Petitioner was convicted --
receiving remuneration in exchange for patient referrals --
is related to the delivery of items or services under
Medicare, within the meaning of section 1128(a)(1) of the
Act.

12. The I.G. properly excluded Petitioner, pursuant to
section 1128(a)(1) of the Act, for a period of five years, as
required by the minimum mandatory exclusion provision of
section 1128(c) (3) (B) of the Act.

13. I do not have the authority to reduce the five-year
minimum exclusion mandated by section 1128(c)(3)(B) of the
Act. 42 C.F.R. § 1001.102.
5

14. Petitioner is not entitled to an in-person hearing,
because no disputed issue of material fact exists in this
case.

PETITIONER'S ARGUMENT

Petitioner argues the following: (1) that his criminal
conviction was not related to the delivery of items or
services under Medicare or Medicaid; (2) that he did nothing
improper in prescribing medical equipment -- rather, he acted
in good faith to help his patients; and (3) that a criminal
conviction for receiving kickbacks does not justify mandatory
exclusion under section 1128(a)(1) -- instead, section
1128(b) (permissive exclusion) must be regarded as
controlling.

DISCUSSION
I. he 1.G. was required to exclude Petitioner
pursuant to section 1128(a) (1) of the Act.

The law relied upon by the I.G. to exclude Petitioner,
section 1128(a)(1) of the Act, requires initially that
Petitioner have been convicted of a criminal offense. As
previously noted, Petitioner, a podiatrist, was charged with
a number of criminal offenses, all related to his receiving
unlawful remuneration from a supplier of medical equipment.
Petitioner entered a no contest plea to the unlawful
remuneration charge. The judge accepted Petitioner's plea
and sentenced him. The Act defines the term "convicted of a
criminal offense" to include those circumstances in which a
plea of nolo contendere (no contest) by an individual has
been accepted by a federal, State, or local court. Act,
section 1128(i)(3). Therefore, I conclude that Petitioner
was convicted of a criminal offense within the meaning of
sections 1128(a)(1) and 1128(i) of the Act.

Next, the Act requires that the criminal activity must have
been related to the delivery of an item or service under

Medicare or Medicaid. A person may be guilty of a program-
related offense even if he or she did not physically deliver

any items or services. Napoleon S. Maminta, M.D., DAB 1135
(1990); Charles W. Wheeler and Joan K. Todd, DAB 1123 (1990);

Jack W. Greene, DAB CR19 (1989), aff'd DAB 1078 (1989), aff'd
ub nom., Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn.
1990). An offense is program-related if there is a common-
sense connection between the offense and the Medicare or
Medicaid programs. Berton Siegel, D.O., DAB 1467 (1994). I
find that connection here. Petitioner admits that "he pled
no contest to . . . receiving unlawful remuneration for
sending business to Sunmac ... ." P. Response at 3. See
I.G. Ex. 17. The receipt of unlawful remuneration for
sending business to the entity paying such remuneration
constitutes a kickback. The kickback paid by Sunmac to
Petitioner involved medical equipment (TENS units) for which
Sunmac billed Medicare. Thus, Petitioner's receipt of the
kickback was directly related to the program that paid for
the equipment which was the subject of the kickback.
Niranjana B. Parikh, M.D., DAB 1334 (1992).

Applying a mandatory exclusion under these circumstances also
comports with the intent of Congress to strengthen the
mandatory exclusion provision by amendment of the exclusion

laws in 1987. See ica: atie
Protection Act of 1987, Pub. L. No. 100-93, § 4(a)-(c), 101

Stat. 688, 689 (1987) (codified at 42 U.S.C. § 1396);
Maminta, DAB 1135 at 10. In Maminta, an appellate panel of
the DAB examined the legislative history of the mandatory
exclusion provision and found that Congress intended
mandatory exclusions to be instituted whenever the programs
were victimized by a criminal offense whether or not the
offense involved actual delivery of medical care by a
convicted individual or entity. Jd. at 12.

With regard to this case, Petitioner's criminal conviction
for accepting kickbacks for referring patients for the rental
or purchase of medical equipment that was not medically
necessary is sufficiently related to the delivery of an item
or service under Medicare or Medicaid to justify application
of the mandatory exclusion provisions of section 1128(a) (1).
It is no defense that the kickbacks may have been paid for
medically justifiable transactions or that Petitioner acted
in good faith in prescribing the equipment. Zenaida

Macapaga 1, R.N., DAB CR179 (1992). It is not necessary that
I examine Petitioner's motivations, since proof of criminal
intent is not required to bring a conviction within the ambit
of section 1128(a) (1). Healt! ba _ Ma:
Convalescent Hospital, DAB 1173 (1990). Further, with regard
to the five-year minimum mandatory exclusion, an
administrative law judge cannot look beyond the fact of
conviction, or consider evidence intended to mitigate the
length of the minimum mandatory exclusion. Asadollah

Amrollahifar, Ph.D., DAB CR238 (1992).

I reject also Petitioner's argument that he should be
sanctioned under section 1128(b)(7) of the Act, which
provides for the exclusion of individuals who have committed
an act described in sections 1128A or 1128B. P. Response at
8 - 9. It is undeniable that there is some subject matter
overlap between the mandatory exclusion for criminal
convictions authorized by section 1128(a) (1) and the
permissive exclusion for fraud or kickbacks authorized by
7

section 1128(b)(7). Parikh, DAB 1334 at 4. However, once a
person has been convicted of a program-related criminal
offense, exclusion is mandatory under section 1128(a) (1).

Id. at 4 (citing Leon Brown, M.D., DAB CR83 (1990), aff'd DAB
1208 (1990)). Therefore, it has consistently been held that
the Secretary is under no obligation to proceed under section
1128(b) of the Act. Thus, once the I.G. determined that
Petitioner's conviction was within the meaning of section
1128(a) (1), the I.G. was under no obligation to consider
whether section 1128(b) (7) was applicable.

II. Petitioner is not entitled to an in-person hearing.

Since there are no disputed issues of material fact in this
case, I find that an in-person hearing is not justified. As
the I.G. has correctly noted, the only issues in this case
are: (1) whether Petitioner was convicted of a criminal
offense under federal or State law; and (2) whether
Petitioner's criminal offense was related to the delivery of
an item or service under Medicare or Medicaid. I.G.
Memorandum at 16. As for the first issue, Petitioner
admitted that he was convicted of a criminal offense in that
he admitted pleading to a charge of "receiving unlawful
remuneration." P. Response at 1, 6. The second issue,
whether Petitioner's conviction was program-related, is a
question of law. I have found Petitioner's conviction to be
program related. Thus, I find that Petitioner's case can be
decided without an in-person hearing.

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

1078 (1989), aff'd sub nom., Greene v. Sullivan, 731 F. Supp.
835 (E.D. Tenn. 1990).

The five-year exclusion is, therefore, sustained.

/s/
Joseph K. Riotto

Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Dr. Abdul Abassi, DATE: August 31, 1995
Petitioner,

Docket No. C+93=122
Decision No. CR390

-v-

The Inspector General.

DECISION

In this Decision, I conclude that the 15-year exclusion
that the Inspector General (I.G.) imposed against
Petitioner from participating in Medicare and other
federally financed health care programs is excessive. I
modify the exclusion to a term of eight years.

I. Bae und

On July 13, 1993, the I.G. notified Petitioner that he
was being excluded from participating, for a period of 15
years, in the following programs: Medicare, Medicaid,
Maternal and Child Health Services Block Grant, and Block
Grants to States for Social Services. The I.G. told
Petitioner that he was being excluded because he had been
convicted of a criminal offense related to the delivery
of an item or service under Medicaid.

Petitioner requested a hearing. The case was assigned
originally to Administrative Law Judge Charles Stratton.
At the request of Petitioner, Judge Stratton stayed the
case. The case was reassigned to me after Judge
Stratton's death. In early 1995, Petitioner requested
that the stay be removed and that a hearing be held. I
scheduled an in-person hearing. On May 24, 1995, I held
an in-person hearing in New York City.

I base my Decision in this case on the law, the evidence
which I received at the hearing, and on the arguments
which the parties made in their posthearing briefs.
II. Issue

Petitioner admits that he was convicted of a criminal
offense related to the delivery of an item or service
under the New York Medicaid program. ALJ Ex. 1 at 4.!
Petitioner admits also that the I.G. was required to
exclude Petitioner, pursuant to section 1128(a)(1) of the
Social Security Act (Act), for at least five years. See
Id. Therefore, the only issue in this case is whether
the 15-year exclusion imposed by the I.G. is reasonable.

In deciding to modify the exclusion to a term of eight
years, I make the following findings of fact and
conclusions of law. After each finding or conclusion, I
state the page or pages of this Decision at which I
discuss the finding or conclusion in detail.

1. The Act requires the Secretary, or her lawful
delegate, the I.G., to exclude for at least five years
any individual or entity who is convicted of an offense
described in section 1128(a)(1) of the Act. Pages 3 - 4.

2. Regulations provide that an exclusion of more
than five years may be imposed in any case where there
exist factors which the regulations define as
aggravating, and that are not offset by factors which the
regulations define as mitigating. Pages 3 - 4.

3. The I.G. proved that there exist two aggravating
factors. Pages 4 - 6.

4. Petitioner did not prove that there exist any
mitigating factors. Pages 6 - 8.

5. The evidence which is relevant to the
aggravating factors does not prove that Petitioner is so
untrustworthy as to require a 15-year exclusion.

Pages 8 - 10.

6. The degree of untrustworthiness established in
this case proves that an exclusion of eight years is
reasonably necessary to protect the integrity of
federally financed health care programs. Pages 8 - 10.

| I refer to the exhibits and transcript as
follows: Petitioner's Exhibit - P. Ex. (number at page) ;
I.G.'s Exhibit - I.G. Ex. (number at page);
Administrative Law Judge Exhibit - ALJ Ex. (number at
page); Transcript - Tr. (page).
III. Discussion

A. Governing law

The I.G. imposed Petitioner's exclusion pursuant to
section 1128(a)(1) of the Act. This section mandates the
exclusion of any individual or entity who has been
convicted of a criminal offense related to the delivery
of an item or service under Medicare or under any State
health care program, including the New York Medicaid
program. Exclusions imposed under section 1128(a) (1)
must be for a minimum of five years. Act, section
1128(c) (3) (B).

The purpose of the exclusion law is remedial. Congress
intended that the Act, including section 1128(a)(1), be
applied to protect the integrity of federally funded
health care programs and the welfare of program
beneficiaries and recipients, from individuals and
entities who have been shown to be untrustworthy.
Exclusions imposed pursuant to section 1128 (including
exclusions of more than five years imposed under section
1128(a)(1)) have been found reasonable only insofar as
they are consistent with the Act's remedial purpose.
Robert Matesic, R.Ph., d/b/a Northway Pharmacy, DAB 1327,
at 7 - 8 (1992); Rosaly Saba Khalil, M.D., DAB CR353, at
9 (1995).

Prior to 1993, there were no regulations governing the
administrative adjudication of exclusions imposed
pursuant to section 1128. In cases decided prior to
1993, appellate panels and administrative law judges of
the DAB held that the criteria used to evaluate the
trustworthiness of excluded parties, and the
reasonableness of exclusions, were derived from the Act
itself. These criteria encompassed any evidence relevant
to an excluded party's trustworthiness to provide care.
Matesic, DAB 1327, at 7 - 8.

However, in January 1993, regulations published
originally in January 1992, became binding on
administrative adjudicators. 42 C.F.R. Part 1001; 42
C.F.R. § 1001.1(b). The regulations established criteria
by which the length of exclusions imposed pursuant to
section 1128 are to be evaluated. These regulations
provide that, in cases involving exclusions imposed
pursuant to section 1128(a) of the Act, the
reasonableness of the length of any exclusion imposed for
a period of more than five years will be decided based on
the presence of, and the weight assigned to, certain
aggravating and mitigating factors which the regulations
4

identify. 42 C.F.R. § 1001.102(b)(1) = (6), (c)(1) -
(3).

In any case in which the reasonableness of an exclusion
is at issue, I am obligated to decide, using the factors
contained in the regulations, whether an exclusion of a
particular length is reasonably necessary to protect the
integrity of federally financed health care programs and
the welfare of the programs' beneficiaries and
recipients. Khalil, DAB CR353, at 10. One consequence
of the regulations is to limit the factors which I may
consider as relevant to an excluded party's
trustworthiness to provide care. I may no longer, for
example, consider evidence relating to a party's remorse
for his or her crimes, nor may I consider evidence
relating to a party's rehabilitation, as evidence of that
party's trustworthiness. See Matesic, DAB 1327, at 7 -
8. Such evidence does not fall within any of the
aggravating or mitigating factors contained in the
regulations.

An exclusion must not be punitive. It must comport with
the Act's remedial purpose. The presence of aggravating
factors in a case is not in and of itself a basis to
exclude a party for a particular length of time. Ina
case involving an exclusion imposed pursuant to section
1128(a)(1), the presence of an aggravating factor or
factors not offset by the presence of a mitigating factor
or factors, does not automatically justify an exclusion
of more than five years. The regulations contain no
formula for assigning weight to aggravating and
mitigating factors once the presence of any of these
factors is established. It is apparent both from the
regulations themselves, and from the Act's remedial
purpose that, I must explore in detail, and assign
appropriate weight to, those factors which are
aggravating or mitigating.

B. =) 2 i ci

Petitioner

Petitioner is a physician. ALJ Ex. 1 at 1; Tr. at 32 -
33.7 On August 7, 1991, Petitioner was indicted in the

Supreme Court of the State of New York, Bronx County, on
felony charges related to the New York Medicaid program.

2? At the hearing, I admitted the following
exhibits into evidence: ALJ Ex. 1; I.G. Exs. 1 through
15, inclusive; P. Exs. 1 through 12, inclusive. None of
the exhibits offered by either party was rejected.
I.G. Ex. 1; ALJ Ex. 1 at 1. On June 19, 1992, after a
jury trial, Petitioner was convicted on 18 counts. I.G.
Ex. 2 at 1; I.G. Ex. 3; ALJ Ex. 1 at 2.

Petitioner was convicted of one count of grand larceny in
the third degree, and 17 counts of offering a false
instrument for filing in the first degree. I.G. Ex. 3 at
1. The gravamen of these offenses is that Petitioner
submitted or caused to be submitted false Medicaid claims
to a fiscal agent for the New York Medicaid program.

I.G. Ex. 1 at 2.

During a six-month period, from November 1987 to May
1988, Petitioner engaged in fraud against the New York
Medicaid program totalling $75,000. The exhibits
relating to Petitioner's indictment and conviction do not
describe his crimes in detail. See I.G. Exs. 1 - 4, It
is not clear from these exhibits precisely how Petitioner
defrauded the New York Medicaid program. The exhibits
prove that Petitioner engaged in fraud beginning on or
about November 1, 1987 and continuing to about May 1,
1988. I.G. Ex. 1 at 1 = 20. That fraud consisted of
submitting, or causing to be submitted, false Medicaid
reimbursement claims for radiological services. Id.
Petitioner was sentenced to pay restitution in the amount
of $75,000. I.G. Ex. 2; I.G. Ex. 4 at 31.

Petitioner essentially denies committing crimes,
notwithstanding the proof of his indictment and
conviction. According to Petitioner, he was an innocent
bystander to a scheme to defraud the New York Medicaid
program that was perpetrated by others. I find
Petitioner's explanation of his conduct to be self-
serving and not credible.’

Petitioner testified that, beginning in March 1987, he
rented an office which he sublet to two physicians. Tr.
at 40 - 41. He testified that he closed the office in
June 1987, in response to complaints from neighborhood

3 I did not receive Petitioner's testimony as
evidence relating to the issue of whether he committed
program-related crimes. Petitioner conceded that he was
convicted of program-related crimes. Moreover, the
evidence establishing his indictment and conviction of
criminal offenses related to the delivery of items or
services under the New York Medicaid program is
irrefutable proof of his conviction of an offense within
the meaning of section 1128(a)(1) of the Act. I received
Petitioner's testimony as evidence about the possible
presence of aggravating and mitigating factors.
6

residents about the patients who were visiting the
office. Tr. at 43.

Petitioner acknowledged that the physicians who rented
the office from him used that office to generate false
Medicaid reimbursement claims for sonograms. Tr. at 42 -
43. However, he denied that he was aware of this fraud
during the time that he sublet the office to the
physicians. Tr. at 44 - 45. Petitioner asserted that he
first became aware that these physicians may have engaged
in fraud in 1991, after being contacted by investigators.
Id. Petitioner acknowledged also receiving a kickback
from an individual, Mabbo Babassi, which, evidently, was
in some respects related to a scheme to defraud Medicare.
Tr. at 56, 66 - 67. However, the record of this case is
unclear as to how this payment relates to the crimes of
which Petitioner was convicted. Petitioner denied that
he ever received reimbursement checks from the New York
Medicaid program. Tr. at 56.

c. The presence of a avatin cto:

The July 13, 1993 notice of exclusion which the I.G. sent
to Petitioner told him that he was being excluded for a
period of 15 years, based on the alleged presence of
three aggravating factors. According to the I.G., the
alleged aggravating factors consisted of the following:

QO Petitioner's crimes caused financial damage to
the New York Medicaid program of more than $200,000.

© Petitioner was sentenced to imprisonment for one
year.

Oo Petitioner committed his criminal acts over a
two-year period, from 1986 - 1988.

The evidence in this case establishes the presence of two
aggravating factors. First, the I.G. proved that
Petitioner engaged in crimes resulting in financial loss
to the New York Medicaid program in excess of $1500. 42
C.F.R. § 1001.102(b)(1). As I find above, Petitioner
committed fraud against the New York Medicaid program in
the amount of $75,000 (not the more than $200,000 alleged
by the I.G.).

Second, Petitioner was sentenced to incarceration. 42
C.F.R. § 1001.102(b) (4). The evidence establishes that
Petitioner was sentenced to a term of one year in prison,
as was alleged by the I.G. I.G. Ex. 4 at 30 - 32.
7

The I.G. did not prove the presence of a third
aggravating factor, the alleged commission of crimes by
Petitioner during a period of more than one year. See 42
C.F.R. § 1001.102(b) (2). As I find above, Petitioner
committed his crimes over a period of six months.‘

D. The absence of mitigating factors

Petitioner asserts that the two aggravating factors
proved by the I.G. are offset by a mitigating factor. He
contends that, subsequent to his conviction, he
cooperated with prosecuting authorities, resulting in the
conviction of other individuals. See 42 C.F.R. §
1001.102(c) (3) (i).

Petitioner did not prove that his cooperation with
prosecuting authorities resulted in the conviction of
other individuals. Therefore, I do not find that
Petitioner proved the presence of the mitigating factor
described in 42 C.F.R. § 1001.102(c) (3) (i).

Petitioner has the burden of proving the presence of a
mitigating factor. His burden here consisted of proving
that: (1) he cooperated with prosecuting authorities;
and (2) that his cooperation resulted in the conviction
of another individual or individuals.

Petitioner proved the first element of his burden. The
evidence establishes that, subsequent to his conviction,
Petitioner cooperated with prosecuting authorities by
supplying them with information concerning the possible
criminal activities of other individuals. I.G. Ex. 13;
I.G. Ex. 15 at 2; P. Ex. 1; Tr. at 48 - 55.

However, the evidence does not prove that Petitioner's
cooperation has so far resulted in the conviction of
others. The prosecuting authorities whom Petitioner has
communicated with have not stated or suggested that
Petitioner's cooperation has led to or contributed to the
conviction of other individuals. See I.G. Ex. 13; I.G.
Ex. 15 at 2; P. Ex. 1. Petitioner did not offer any
meaningful evidence to prove that any individual was
convicted as a result of Petitioner's cooperation.
Petitioner testified that one person pled guilty to
criminal charges after Petitioner had supplied
information about that person to prosecuting authorities.
Tr. at 51 - 53. Petitioner averred that he was willing

4 The I.G. did not assert, either at the hearing
or in her posthearing brief, that she had proven the
presence of this third alleged aggravating factor.
8

to testify against that individual had he not pled
guilty. Id. However, Petitioner did not offer any
evidence to show that his cooperation affected that
individual's decision to plead guilty.

The I.G. and Petitioner dispute the meaning of the term
"resulted in" as set forth at 42 C.F.R. §
1001.102(c)(3)(i). It is not necessary for me to decide
the meaning of that term in order for me to conclude that
Petitioner did not prove that his cooperation resulted in
the conviction of another person. Even the broadest
definition of the term "resulted in" would require
evidence of some causal relationship between the
individual's cooperation and the conviction of another
individual in order to prove the presence of a mitigating
factor. Here, there is no evidence of any causal
relationship between Petitioner's cooperation with
prosecuting authorities and the conviction of another
individual.

At the hearing, I received evidence from Petitioner
concerning his conduct after his conviction. This
evidence established that Petitioner has pursued his
medical studies and that he presently has a fellowship in
cardiology at Columbia University. Tr. at 45. The
evidence includes also Petitioner's testimony that he has
paid $30,000 of the $75,000 restitution that he was
ordered to pay. Tr. at 48. It includes also a letter
from Richard S. Harrow, the prosecutor in the criminal
case against Petitioner. I.G. Ex. 13; P. Ex. 1. In that
letter, Mr. Harrow opines that Petitioner is sincerely
remorseful and that Petitioner should be given a second
chance to pursue his medical career. Id.

This evidence would have been relevant to the issue of
Petitioner's trustworthiness to provide care under the
criteria for evaluating trustworthiness established by
the Matesic decision. However, it does not relate to any
of the mitigating factors listed in 42 C.F.R. §
1001.102(c). Therefore, I cannot consider this evidence
to be relevant, either to the issue of whether mitigating
factors were established by Petitioner, or to the broader
issue of Petitioner's trustworthiness to provide care to
Medicare beneficiaries and Medicaid recipients.

E. valu n_o: le of exclusion

The presence of two aggravating factors in this case, not
offset by a mitigating factor, means that an exclusion of
more than five years may be reasonable. However, as I
hold at Part III.A. of this Decision, the presence of
these factors does not mean that an exclusion of any
9

particular length in excess of five years is reasonable.
I conclude that an exclusion of eight years is reasonable
in this case. My conclusion is a measure of the
Petitioner's lack of trustworthiness, as established by
the aggravating factors proved by the I.G. and the lack
of any mitigating factor.

The evidence pertaining to the two aggravating factors
established by the I.G. proves that Petitioner committed
crimes which had a serious financial impact on the New
York Medicaid program. Petitioner engaged in a series of
fraudulent acts over a six-month period that defrauded
Medicaid of $75,000. The persistence with which
Petitioner engaged in his misconduct, as evidenced by the
18 separate criminal counts of which he was convicted,
coupled with the damages he caused, suggests a high
degree of untrustworthiness. This evidence proves the
need for an exclusion of more than five years to protect
the integrity of federally financed health care programs.

However, the evidence in this case does not prove that
Petitioner's conduct was so egregious as to justify a
level of untrustworthiness meriting a 15-year exclusion.
An exclusion of 15 years is so lengthy that, depending
upon the age and particular circumstances of the
individual, it may effectively permanently preclude that
individual from participating as a provider in federally
funded health care programs. Exclusions of 15 years or
more should be imposed only on the most untrustworthy
individuals. Such exclusions are justified in cases
where an individual demonstrates by his or her conduct
that he or she is so untrustworthy that it is possible
that he or she may never again become a trustworthy
provider of items or services under federally funded
programs.

There are cases in which a provider's conduct, as is
demonstrated by the aggravating factors proved by the
I.G., is so egregious as to justify an exclusion of 15
years. In Khalil, I sustained a 15-year exclusion. In
that case, the petitioner had been a willing and active
participant in a massive fraud scheme against the New
York Medicaid program. I found that her conduct caused
Medicaid to be defrauded of more than $1,900,000. Khalil
at 11. She was overpaid more than $135,000 as a direct
consequence of her fraud. Id. at 12. Her crimes were so
serious that she was sentenced to 41 months of
incarceration. Id.

The evidence in this case does not establish that
Petitioner manifests the level of culpability, or lack of
trustworthiness, that I found the petitioner manifested
10

in Khalil. Petitioner's crimes, while serious, are of a
lesser magnitude than those that were established to have
been committed by the petitioner in Khalil.

The total damages caused by Petitioner in this case to
the New York Medicaid program are substantially less than
were caused by the Petitioner in Khalil. Perhaps more
significant, the record in this case is practically
silent as to the nature of Petitioner's involvement in
the crimes of which he was convicted. By contrast, the
record in Khalil was replete with evidence that proved
that the petitioner in that case was an active and eager
participant in a scheme to defraud the New York Medicaid
program. The length of the sentence imposed on the
Petitioner in this case -~- one year's imprisonment -- is
additional evidence that Petitioner's crimes are of a
lesser degree than those committed by the petitioner in
Khalil, who was sentenced to 41 months in prison.

Iv. Conclusion

I conclude that the I.G. was authorized to exclude
Petitioner for more than five years. The exclusion of 15
years that the I.G. imposed is excessive, because it is
not supported by the evidence relating to the aggravating
factors proved by the I.G. An eight-year exclusion is
reasonable. Therefore, I sustain an exclusion of
Petitioner for a period of eight years.

/s/

Steven T. Kessel
Administrative Law Judge