Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
David E. Scheiner, D.P.M., ) Date: April 21, 1997
)
Petitioner, )
)
“Vee ) Docket No. C-96-450
) Decision No. CR471
The Inspector General. )
)
DECISION

I sustain the determination of the Inspector General (1.G.) to exclude Petitioner,
David E. Scheiner, D.P.M., from participating in Medicare and other federally-
funded health care programs, including Medicaid, for a period of five years. I
find that the I.G. was authorized to exclude Petitioner pursuant to section
1128(b)(1) of the Social Security Act (Act) and that the duration of the exclusion
is reasonable.

I. Background

On July 19, 1996, the I.G. notified Petitioner that he was being excluded from
participating in Medicare and other programs, including Medicaid, for a period of
five years. The I.G. advised Petitioner that he was being excluded pursuant to
section 1128(b)(1) of the Act, because Petitioner had been convicted in a federal
court of a criminal offense related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct. The I.G. advised
Petitioner that she based the five-year term of the exclusion on the presence of
factors in Petitioner’s case which the I.G. determined to be aggravating.

Petitioner requested a hearing and the case was assigned to me for a hearing and
a decision. The parties agreed that the case could be heard and decided based on
their written submissions, including briefs and exhibits. The I.G. submitted a
brief, four proposed exhibits (1.G. Exs. 1 - 4), and a reply brief. Petitioner
submitted a brief. The I.G. submitted two additional proposed exhibits with her
reply brief, I.G. Ex. 5 and I.G. Ex. 6. Petitioner did not object to my receiving
into evidence the I.G.’s proposed exhibits. I hereby receive into evidence I.G.
Exs. 1 - 6.
2
I. Issues, findings of fact and conclusions of law

The issues in this case are whether: (1) the I.G. is authorized to exclude
Petitioner pursuant to section 1128(b)(1) of the Act; and (2) the five-year
exclusion imposed by the I.G. is reasonable. I make the following findings of
fact and conclusions of law (Findings) to support my decision that the exclusion
is authorized and reasonable. I discuss each of these Findings in detail, below.

1. Petitioner is a doctor of podiatry.

2. Petitioner was indicted in the United States District Court for the
Eastern District of Pennsylvania. The indictment charged Petitioner,
along with other named individuals, with devising a scheme and artifice to
defraud and obtain money by means of knowingly making false and
fraudulent pretenses, representations, and promises. The alleged purpose
of the scheme and artifice was to obtain money from insurance companies
by submitting false and fraudulent medical bills to inflate the value of
personal injury claims.

3. On November 2, 1994, Petitioner pled guilty to Counts 1, 2, and 8 of
the indictment. These three counts each alleged that Petitioner engaged in
a specified act of mail fraud in furtherance of his criminal scheme and
artifice.

4. In agreeing to plead guilty to counts 1, 2, and 8 of the indictment,
Petitioner agreed that these offenses arose from his participation in a
criminal scheme that occurred between 1988 and 1991.

5. In agreeing to plead guilty to counts 1, 2, and 8 of the indictment,
Petitioner agreed that he had received payments of approximately $27,000
for fraudulent medical bills.

6. In agreeing to plead guilty to counts 1, 2, and 8 of the indictment,
Petitioner agreed to pay restitution of $37,000 for unlawful proceeds he
obtained from his fraudulent scheme.

7. Petitioner was sentenced to pay restitution in the amount of $37,385.

8. Petitioner’s participation in an unlawful scheme to defraud insurance
companies lasted about three years.

9. Petitioner’s participation in the unlawful scheme caused losses to
insurance companies of at least $27,000, and these losses were in
connection with Petitioner’s false claims for medical services provided by
Petitioner.
3

10. Petitioner was sentenced to a term of imprisonment of 15 months.

11. Under section 1128(b)(1) of the Act, the I.G. is authorized to exclude
any individual or entity that has been convicted, under federal or State
law, 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.

12. Where the I.G. determines to exclude an individual pursuant to
section 1128(b)(1) of the Act, the term of the exclusion will be for a
period of three years, in the absence of aggravating or mitigating factors
that would support an exclusion of more or less than three years.

13. In a case involving an exclusion under section 1128(b)(1) of the Act,
an exclusion of more than three years may be justified where there exist
aggravating factors that are not offset by mitigating factors.

14. Petitioner was convicted under federal law, in connection with the
delivery of a health care item or service, of criminal offenses relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct.

15. The I.G. is authorized to exclude Petitioner pursuant to section
1128(b)(1) of the Act.

16. The I.G. proved the presence of an aggravating factor, in that the
acts resulting in Petitioner’s conviction, or similar acts, resulted in
financial loss of $1,500 or more to an insurance company.

17. The I.G. proved the presence of a second aggravating factor in that
the acts that resulted in Petitioner’s conviction, or other similar acts, were
committed by Petitioner over a period of one year or more.

18. The I.G. proved the presence of a third aggravating factor in that the
sentence that was imposed on Petitioner for his crimes included a period
of incarceration.

19. Petitioner did not prove the presence of any mitigating factor.

20. The evidence which relates to the aggravating factors proved by the
I.G. establishes Petitioner to be untrustworthy to provide care to
beneficiaries and recipients of federally-funded health care programs.

21. A five-year exclusion of Petitioner is reasonable.
4

22. I do not have authority to hear and decide Petitioner’s argument that
the I.G. abused her discretion in determining to exclude Petitioner.

Il. Discussion
A. The relevant facts (Findings 1 - 10)

Petitioner is a doctor of podiatry. I.G. Ex. 1 at 1. He was indicted on federal
criminal charges in the United States District Court for the Eastern District of
Pennsylvania. I.G. Ex. 1. The indictment charges that Petitioner, along with
other named individuals, devised a scheme and artifice to defraud and obtain
money by means of false and fraudulent pretenses, representations and promises.
Id. at 1 - 2. The object of this scheme and artifice was to obtain money from
insurance companies by submitting id fraudulent medical bills to inflate the
value of personal injury claims. Id The indictment charges Petitioner with
perpetrating this scheme and artifice from in or about 1988 until in or about
1991. Id.

The indictment asserts specifically that Petitioner, along with another named
individual, prepared false and fraudulent medical bills, reports and progress
notes, describing fictitious medical treatments that they had purportedly provided
to personal injury patients. I.G. Ex. 1 at 2'. It asserts [ll Petitioner, along
with the other individual, caused to be mailed to insurance companies, and to
attorneys who represented these patients, the fraudulent bills, reports, and
progress notes, to be used to document these patients’ claims. Id. at 3. The
indictment charges that insurance companies were induced to issue checks to
Petitioner and the other individual, as reimbursement for the fraudulent medical
bills. Id. The indictment charges also that Petitioner, along with other
defendants, utilized the United States mails to further their scheme and artifice.
Id. at 3 - 6.

On April 19, 1994, Petitioner agreed to plead guilty to three counts of the
indictment. I.G. Ex. 3. Each of these counts alleges that Petitioner perpetrated a
specified act of mail fraud in furtherance of his scheme and artifice. I.G. Ex. 1
at 3- 6. In agreeing to plead guilty to these three counts, Petitioner admitted that
the counts arose from his participation in a scheme to defraud insurance
companies by submitting fraudulent and inflated medical bills to insurance
companies. I.G. Ex. 3 at 1 - 3. Petitioner admitted that the scheme transpired
between 1988 and 1991. I.G. Ex. 3 at 1. Petitioner admitted additionally that he
had received approximately $27,000 in payment of the fraudulent bills which he

! The other named individual, Frank A. DeLia, was the petitioner in another
case which I decided. Frank A. Delia , D.O.; DAB CR465 (1997). At Part
TII.C.2. of this decision, I discuss the evidence which distinguishes this case from
DeLia.
5

had submitted or caused to be submitted as part of the scheme. I.G. Ex. 3 at 4.
Petitioner agreed to pay restitution of $37,000 for the unlawful proceeds he had
received from participating in the scheme. I.G. Ex. 3 at 2.

On November 10, 1994, Petitioner pled guilty to Counts 1, 2, and 8 of the
indictment. I.G. Ex. 2. Petitioner was sentenced to a term of imprisonment of
15 months. Id. at 2. He was sentenced to pay restitution of $37,385. Id. at 4.

The facts of this case establish that:

© Petitioner participated in a scheme to defraud insurance companies by
submitting fraudulent bills and treatment records to those companies for
fictitious medical services that Petitioner alleged to have provided. This is
evident from the counts of the indictment to which Petitioner pled guilty,
and is evident also from Petitioner’s agreement to plead guilty. I.G. Exs.
1, 2, 3.

© Petitioner perpetrated his crimes over a period of about three years.

¢ Petitioner’s criminal acts caused substantial damages to insurers.
Petitioner admitted to having defrauded insurers in the amount of $27,000.
1.G. Ex. 3 at 4. However, the evidence establishes that the damages he
caused were actually much greater than $27,000. Petitioner agreed to pay
Testitution in the amount of $37,000, and was sentenced to pay restitution
in the amount of $37,385. I.G. Ex. 2 at 4; I.G. Ex. 3 at 2. Petitioner’s
agreement to plead guilty recites that, for purposes of calculating
Petitioner’s sentencing guideline range, the loss and attempted loss
attributable to Petitioner is between $120,000 and $200,000. I.G. Ex. 3
at 4.

B. The governing law (Findings 11 - 13)

The I.G. excluded Petitioner pursuant to section 1128(b)(1) of the Act. As of
July 19, 1996, the date that the I.G. imposed the exclusion, section 1128(b)(1)
provided that the I.G. had authority to exclude an individual who:

has been convicted, under Federal or State law, 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.
6

The version of section 1128(b)(1) that was in effect as of July 19, 1996 did not
provide for a minimum exclusion where the I.G. elected to impose one, or for a
minimum mandatory exclusion.”

Petitioner asserts that the I.G. has authority to exclude an individual only if that -
individual is convicted of a criminal offense that is related to the delivery of an
item or service under a federally-funded health care program, such as Medicare
or a State Medicaid program. I do not agree with this argument. Under section
1128(a)(1) of the Act, the I.G. is mandated to exclude an individual who is
convicted of a program-related offense of the type described by Petitioner in his
argument. However, the I.G.’s exclusion authority is not limited to exclusions
for convictions of program-related offenses. The other parts of section 1128,
including section 1128(b)(1), authorize the I.G. to impose exclusions for a far
broader range of offenses than the program-related offenses that are described in
section 1128(a)(1).

Section 1128(b)(1) plainly provides that an exclusion may be imposed where an
individual is convicted of an offense relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct, that is
committed in connection with the delivery of a health care item or service. There
is no requirement in this section that the offense be directed against a
government-funded program, although conviction of an offense against a
government-funded program would constitute an additional basis for an exclusion
under section 1128()(1).

The purpose of an exclusion imposed under any of the parts of section 1128 of
the Act, including section 1128(b)(1), is remedial, and not punitive. An
exclusion is reasonable insofar as it is intended to protect federally-funded health
care programs and the beneficiaries and recipients of those programs from an
individual who has demonstrated by his or her conduct that he or she is not
trustworthy to provide care under those programs.

The Secretary has published regulations which establish criteria for determining
the length of exclusions imposed pursuant to the version of section 1128(b)(1)
that was in effect as of the date of the imposition of the exclusion against
Petitioner. The criteria identified by these regulations are the factors that the

2 On July 31, 1996, Congress amended section 1128 of the Act. One of the
amendments to section 1128 creates a new section 1128(a)(3) which mandates a
minimum exclusion of at least five years for any felony conviction for an offense
formerly described by section 1128(b)(1), occurring after the date of enactment of
the 1996 amendments. Section 1128(b)(1) is retained, but provides permissive
exclusion authority for misdemeanor convictions only. I am not considering this
case under the 1996 amendments to section 1128, inasmuch as Petitioner was
convicted prior to July 31, 1996, the date of enactment of the 1996 amendments.
7

Secretary has determined are relevant in measuring the trustworthiness of an
excluded individual or entity. The governing regulation for an exclusion imposed
pursuant to section 1128(b)(1) is 42 C.F.R. § 1001.201.

The regulation provides that an exclusion imposed pursuant to section 1128(b)(1)
will be for a period of three years, unless there exist aggravating or mitigating
factors which would support the imposition of an exclusion of more than or less
than three years. 42 C.F.R. § 1001.201(b)(1). The aggravating factors which, if
present in a case involving an exclusion imposed under section 1128(b)(1) of the
Act, may establish a basis for an exclusion of more than three years, are stated at
42 C.F.R. § 1001.201(b)(2). The mitigating factors which, if present in a case
involving an exclusion imposed under section 1128(b)(1) of the Act, may offset
aggravating factors, or which may establish a basis for an exclusion of less than
three years, are stated at 42 C.F.R. § 1001.201(b)(3). The regulation makes it
plain that only evidence which relates to one or more of the defined aggravating
or mitigating factors may be considered as a basis for increasing or shortening an
exclusion. ,

Although 42 C.F.R. § 1001.201 establishes the exclusive criteria for determining
the length of an exclusion imposed under section 1128(b)(1) of the Act, it does
not direct that an exclusion of any particular length be imposed in a case where
aggravating or mitigating factors are established. The administrative law judge
must weigh any evidence which relates to one or more of the defined aggravating
or mitigating factors to decide what the evidence shows as to an excluded
individual’s trustworthiness to provide care.

C. Application of the governing law to the relevant facts (Findings 14 -
22)

1. The I.G.’s authority to exclude Petitioner (Findings 14 - 15)

The I.G. is authorized to exclude Petitioner under section 1128(b)(1) of the Act.
Petitioner was convicted in a federal court of criminal offenses relating to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct committed in connection with the delivery of health care items or
services. The gravamen of the scheme and artifice to which Petitioner pled guilty
was fraud against health insurers arising from fictitious claims by Petitioner for
health services purportedly provided by him.

Petitioner argues that the I.G. has no authority to exclude him, inasmuch as
Petitioner was not convicted of an offense against or involving a federally-funded
health care program. However, as I discuss at part I1.B. of this decision, the
1.G.’s exclusion authority is not limited to exclusions for convictions of program-
Telated offenses. The I.G. is authorized to exclude Petitioner because Petitioner
was convicted of an offense that is described under section 1128(b)(1) of the Act.
8
2. Whether the exclusion is reasonable (Findings 16 - 22)

The five-year exclusion that the I.G. imposed against Petitioner is reasonable.
The evidence relating to the aggravating factors established by the I.G. pursuant
to 42 C.F.R. § 1001.201(b)(2) proves that Petitioner is a highly untrustworthy
individual. Petitioner offered no evidence to establish the présence of any
mitigating factors described in 42 C.F.R. § 1001.201(b)(3). A five-year
exclusion will serve as a reasonable protection for federally-funded health care
programs and the beneficiaries and recipients of those programs in view of the
unrebutted evidence of Petitioner’s lack of trustworthiness.

The I.G. proved the presence of three aggravating factors, consisting of the
following:

© The acts resulting in Petitioner’s conviction, or similar acts, caused
financial loss of $1,500 or more to a government program or to one or
more other entities. 42 C.F.R. § 1001.201(b)(2)(i). Petitioner’s fraud
caused very substantial losses to be incurred by entities other than
government programs. Petitioner admitted to having defrauded health
insurers of $27,000. That amount comprises only a portion of the
financial damages that Petitioner’s fraud caused non-government entities.
He was sentenced to pay restitution of more than $37,000. For sentencing
purposes, the total loss or attempted loss attributed to Petitioner was
estimated at between $120,000 and $200,000.

¢ The acts that resulted in Petitioner’s conviction, or other similar acts,
were committed by Petitioner over a period of one year or more. 42
C.F.R. § 1001.201(b)(2)(ii). Petitioner admitted to having perpetrated his
crimes over a period of about three years, beginning in 1988 and ending
in 1991.

© The sentence that was imposed on Petitioner for his crimes included a
period of incarceration. 42 C.F.R. § 1001.201(b)(2)(iv). Petitioner was
sentenced to 15 months’ imprisonment.

The evidence which relates to the aggravating factors established by the I.G.
proves Petitioner to be a highly untrustworthy individual. Petitioner’s lack of
trustworthiness is established by his approximately three-year involvement in a
massive scheme to defraud insurers. Petitioner’s protracted involvement in that
scheme demonstrates that he is capable of engaging in well-organized and
complex fraud. His fraud was persistent and deliberate, not random or
impulsive. The extent to which Petitioner persisted in defrauding insurers is
established by the large losses he caused insurers to incur.
9

As I find above, Petitioner has not offered any evidence to prove the presence of
a mitigating factor. There is no evidence in this case to offset the evidence
relating to the aggravating factors proved by the I.G., and, hence, there is
nothing which would suggest that Petitioner is trustworthy to provide care.

Petitioner argues that, in this case, the exclusion is unnecessary, because it
unreasonably burdens Petitioner and does not protect the public welfare.
Petitioner’s Brief at 6 - 7. Essentially, Petitioner asserts that the stigma attached
to his conviction, his incarceration, along with a State-imposed 60-month
suspension of Petitioner’s license to practice podiatry, is sufficient protection and
that additional protection is not warranted. Additionally, Petitioner asserts that he
is remorseful for his crimes.

None of these assertions relate to any of the mitigating factors described by 42
C.F.R. § 1001.201(6)(3) and, therefore, even if true, they are not relevant.
Furthermore, I am not persuaded that these contentions, even if relevant and
probative, overcome the evidence of untrustworthiness established by the
evidence relating to aggravation. On balance, this evidence of aggravation proves
a five-year exclusion to be reasonable, even if I consider Petitioner’s assertions
about the imposition against him of other. sanctions and his remorse.

Petitioner asserts additionally that the I.G. delayed unreasonably in determining to
impose an exclusion against him. Petitioner argues that the I.G. delayed
imposing an exclusion by about 18 months from the date that Petitioner pled
guilty. Petitioner’s Brief at 5 - 6. Petitioner asserts that the I.G. has a duty to
impose an exclusion promptly upon learning about conduct that might be a basis
for an exclusion and that she failed to exercise that duty here.

This argument is, essentially, an argument that the I.G. ought to be estopped
from excluding Petitioner because she delayed in malaing an exclusion
determination in Petitioner’s case. The timing of a determination by the I.G. to
exclude an individual is an act of discretion. I have no authority to decide
whether the I.G. exercised her discretion reasonably. 42 C.F.R. § 1005.4(c)(4).

Moreover, it is not apparent from the record of this case that the I.G. delayed her
determination to impose an exclusion of Petitioner. There is no evidence which
establishes the date when the I.G. first learned of Petitioner’s conviction.

It is not unreasonable for an excluded individual to question the length of an
exclusion on the ground that, because of the late date of the imposition of the
exclusion, the exclusion establishes a date when the individual may apply for
Teinstatement that is so far off in the future that the exclusion is effectively
punitive, and not remedial. The evidence here is that Petitioner perpetrated his =
last criminal act in 1991. He pled guilty in November 1994. The exclusion was
imposed in July 1996, for a term of five years, meaning that Petitioner will not

be eligible to apply for reinstatement until early August 2001. Thus, Petitioner
10

will not be eligible for reinstatement until about 10 years after the date that he
perpetrated his last criminal act.

I have considered whether the five-year exclusion is unreasonable, given that
Petitioner will not be eligible for reinstatement until about 10 years after he last
committed a crime. I conclude that, although the relatively remote date of
Petitioner’s crimes mutes substantially the force of the evidence of aggravation,
the level of untrustworthiness manifested by Petitioner in committing those crimes
is so great that the exclusion is reasonable.? The crimes that Petitioner engaged
in manifested a great deal of calculation and determination. The evidence
establishes Petitioner to be an individual who is capable of executing a complex
and protracted criminal scheme. There is no credible evidence in the record of
this case to prove that Petitioner does not now remain capable of criminal
behavior, or to prove that Petitioner will not be capable of engaging in such
behavior prior to the date when he will be eligible for reinstatement.

As I note above, I recently heard and decided the case of an exclusion of
Petitioner’s co-perpetrator. Frank A. DeLia,D.O., DAB CR465 (1997). In that
case, I found that the exclusion of five years was unreasonable and I modified it
to a term of three years. Id. at 8 - 10. Each case must stand or fall on its own
merits. I do not find that my rationale in DeLia directs a particular outcome in
another case. However, the excluded individual in DeLia was Petitioner’s co-
perpetrator. For that reason, I believe it appropriate to explain why I am
sustaining the five-year exclusion in this case, as opposed to my decision to
modify the exclusion to a term of three years in DeLia.

In DeLia, I found that, as in this case, the excluded individual perpetrated his last
crime in 1991. I observed that the evidence as to aggravation was, in some
respects, diluted by that fact. DAB CR465 at 9. I did not conclude, however,
that the five-year exclusion was necessarily unreasonable because of the remote
date of the excluded individual’s last crime. I based my decision as to
reasonableness primarily on the fact that, in JM there was strong evidence of
mitigation.

In DeLia, as opposed to this case, the evidence of mitigation offset the evidence
of aggravation. The excluded individual cooperated with prosecuting authorities
and his cooperation led to the conviction of other individuals. That is a
mitigating factor which is not present in this case. See 42 C.F.R. §
1001.201(b)(3)(iii). I found that not only did a mitigating factor exist, but that
the extent and quality of cooperation given by the excluded individual
demonstrated efforts by that individual to become trustworthy, which offset the

3 Had the evidence established that Petitioner engaged in crimes more
recently than in 1991, I would have been inclined to sustain an exclusion of more
than five years in this case.
11

evidence of aggravating factors proved by the I.G. DAB CR465 at 9 - 10. The
excluded individual cooperated with prosecuting authorities over an extended
period of time and, in doing so, jeopardized his own safety.

IV. Conclusion
I conclude that the I.G. was authorized to exclude Petitioner, pursuant to section

1128(b)(1) of the Act. I find the five-year exclusion to be reasonable and I
sustain it.

/s/

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Jagdish Mangla, M.D., DATE: April 15, 1997
Petitioner,

Docket No. C-96-440
Decision No. CR470

-v -

The Inspector General.

DECISION

I sustain the determination of the Inspector General
(I.G.) to exclude Petitioner, Jagdish Mangla, M.D., from
participating in Medicare and State health care programs,
including Medicaid, until Petitioner obtains a valid
license to practice medicine or to provide health care in
the State of California. I base my decision on evidence
which proves that a State licensing authority revoked
Petitioner's medical license for reasons bearing on
Petitioner's professional competence and professional
performance within the meaning of section 1128(b) (4) (A)
of the Social Security Act (Act). Petitioner has not
offered any evidence which would support a finding that
the I.G. does not have the authority to exclude
Petitioner or that the length of the exclusion should be
modified.

BACKGROUND

On July 24, 1996, the I.G. notified Petitioner that he
was being excluded from participation in Medicare and
State health care programs, including Medicaid, until
Petitioner obtained a valid license to practice medicine
or provide health care in the State of California. The
I.G. advised Petitioner that she was excluding him
pursuant to section 1128(b) (4) of the Act because his
license to practice medicine or provide health care was
revoked by the State of California.

Petitioner requested a hearing and the case was assigned
to Administrative Law Judge Edward Steinman for a hearing
and a decision. On February 12, 1997, the Chief of the
Civil Remedies Division reassigned this case to me.
2

The parties agreed that this case could be heard and
decided based on written submissions, including briefs
and documentary evidence, and without the need for an in-
person hearing.

The I.G submitted a brief, with one proposed exhibit
(I.G. Ex. 1). Petitioner submitted a brief, with ten
proposed unnumbered exhibits. The I.G. declined the
opportunity to file a reply brief. For the purposes of
maintaining a uniform record in this case, I have
numbered Petitioner's exhibits (P. Ex. 1 - 10). There
having been no objections to any of the offered exhibits,
I hereby receive into evidence I.G. Ex. 1 and P. Ex. 1 -
10.

APPLICABLE LAW

Section 1128(b)(4)(A) of the Act, 42 U.S.C. § 1320a-
7(b) (4) (A), authorizes the Secretary of the United States
Department of Health and Human Services (or her delegate,
the I.G.) to exclude from participation in the Medicare
program any individual "whose license to provide health
care has been revoked or suspended by any State licensing
authority, or who otherwise lost such a license or the
right to apply for or renew such a license, for reasons
bearing on the individual's . . . professional
competence, professional performance, or financial
integrity."

The Secretary has published regulations which establish
criteria for determining the length of any exclusion that
is imposed pursuant to section 1128(b) (4) of the Act. An
exclusion imposed pursuant to section 1128(b) (4)
ordinarily shall be for the same duration as the period
during which an individual's license is lost as a result
of a State disciplinary proceeding. 42 C.F.R. §
1001.501(b) (1). An exclusion may be for a longer
duration than a period that is coterminous with a loss of
a State license to provide health care if there exist
aggravating factors that are not offset by any mitigating
factors. 42 C.F.R. § 1001.501(b) (2), (3). An exclusion
may be for a shorter duration than a period that is
coterminous with the loss of a State license to provide
health care, if prior to the date of the notice of
exclusion, the licensing authority of a State (other than
the one in which the individual's license had been
revoked, suspended, surrendered, or otherwise lost),
being fully apprised of all of the circumstances
surrounding the prior action by the licensing board of
the first State, grants the individual a license or takes
no significant adverse action as to a currently held
license. 42 C.F.R. § 1001.501(c) (1). In addition,
subsection (2) of 42 C.F.R. § 1001.501(c) provides that
the I.G. will consider a request for early reinstatement
3

if an excluded provider fully and accurately discloses
the circumstances surrounding the license revocation to
another State and that State either grants the provider a
new license or takes no adverse action against an
existing license.

PETITIONER'S POSITION

Petitioner contends that the New York State proceedings
which resulted in the initial revocation of his license
to practice medicine were biased against him and were
conducted by his enemies.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner was licensed to practice medicine in the
States of California and New York. I.G. Ex. 1, at 3 and
10.

2. On March 3, 1993, the State of New York Board for
Professional Medical Conduct suspended Petitioner's
license to practice medicine in that State because it
determined that he suffered from a psychiatric condition,
bipolar disorder. I.G. Ex. 1, at 8 - 15.

3. On June 8, 1995, the California Medical Board, citing
the March 3, 1993, order of the New York State Board of
Professional Medical Conduct, entered an order revoking
Petitioner's physician and surgeon certificate, effective
July 8, 1995, based on a finding of unprofessional
conduct. I.G. Ex. 1, at 4- 5.

4. The June 8, 1995 action of the California Medical
Board was based on sections 2234 and 2305 of the
California Business and Professional Code, which provide
that the revocation, suspension, or other discipline by
another State of a license or certificate to practice
medicine issued by that State shall constitute
unprofessional conduct in California. I.G. Ex. 1, at 3.

5. By letter dated July 24, 1996, the I.G. notified
Petitioner that, pursuant to section 1128(b)(4) of the
Act, the Department of Health and Human Services was
excluding him from participation in the Medicare program
and directing his exclusion from State health care
programs based on the revocation of his California
physician and surgeon certificate for reasons bearing on
his professional competence, professional performance, or
financial integrity.

6. Section 1128(b)(4)(A) of the Act authorizes the I.G.

to exclude an individual whose license to provide health

care in a State has been revoked or suspended as a result
of formal disciplinary proceedings by the State's
4

licensing authority for reasons bearing on the
individual's professional competence, professional
performance, or financial integrity.

7. Where an exclusion is imposed pursuant to section
1128(b) (4) of the Act, and there exist no aggravating
factors or exceptional circumstances, the length of the
exclusion will be coterminous with the State license
revocation on which the exclusion was based. 42 C.F.R. §
1001.501(b).

8. The I.G. was authorized to exclude Petitioner
pursuant to section 1128(b) (4) (A) of the Act.

9. The I.G. neither alleged nor proved the presence of
aggravating factors.

10. Petitioner did not prove the presence of any
exceptions which would justify reducing the exclusion
which the I.G. imposed to one which was less than
coterminous with Petitioner's loss of his license to
practice medicine in California.

11. The exclusion imposed by the I.G. against Petitioner
was reasonable.

DISCUSSION

The undisputed facts establish that Petitioner's license
to practice medicine in the State of California was
revoked by the State of California, effective July 8,
1995, due to unprofessional conduct. The California
Medical Board's action was based on the suspension of
Petitioner's license to practice medicine in the State of
New York. The suspension of Petitioner's New York
license was based upon a determination by the New York
Board that Petitioner suffered from a psychiatric
condition which impaired his occupational functioning.
The action of the California Medical Board was authorized
by California law that provides that the revocation,
suspension, or other discipline by another State of a
license or certificate to practice medicine issued by
that State shall constitute unprofessional conduct in
California. California Business and Professional Code
section 2305.

The exclusion in Petitioner's case is based on section
1128(b) (4) of the Act which authorizes the exclusion from
participation in the Medicare program of any individual
whose license to.provide health care has been revoked or
suspended by any State licensing authority, or who
otherwise lost such a license or the right to apply for
or renew such a license, for reasons bearing on the
individual's professional competence, professional
5

performance, or financial integrity. The Act further
authorizes the Secretary to direct that an individual be
excluded under section 1128(b)(4) of the Act from
participation in the State health care programs defined
by section 1128(h) of the Act.

The imposition of Petitioner's exclusion coterminous with
the license revocation in California is consistent with
the criteria set forth in the regulations at 42 C.F.R. §
1001.501. Petitioner has not alleged or demonstrated
that, prior to the notice of exclusion, he obtained a
license to practice medicine in another State after the
licensing authority of that State had been fully apprised
of all of the circumstances surrounding the prior action
by the California Medical Board. The I. G. has not
alleged any aggravating factors in Petitioner's case.
Furthermore, the record does not show that the exceptions
in 42 C.F.R. § 1001.501(c) for shortening the length of
the exclusion are applicable to this case.

Petitioner's contends that the action of the New York
licensing authority was unfair. His allegations on this
issue, however, are wholly unsupported by any evidence.
Moreover, it has been held that in proceedings under
section 1128(b) (4) collateral attacks on the actions of
the State licensing authorities are not permitted.
Foderick, , DAB 1125 (1990). Even if I could
review the actions of the New York Medical Board, the
record establishes that Petitioner was afforded the
opportunity, either personally or through counsel, to
present his case to those authorities. There was ample
basis on the record in that proceeding for concluding
that Petitioner suffered from a serious psychiatric
disturbance which impaired his occupational functioning.

CONCLUSION
I conclude that the I.G. was authorized to exclude
Petitioner pursuant to section 1128(b)(4)(A) of the Act.

I conclude also that the term of exclusion imposed by the
I.G. was lawful.

/s/

Joseph K. Riotto
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:

Capitol Hill Community DATE: March 24, 1997
Rehabilitation and

Specialty Care Center,
Petitioner,

Docket No. C-96-014
Decision No. CR469

-v-

Health Care Financing
Administration.

DECISION
BACKGROUND

Pending before me is the issue of what relief, if any,
Petitioner is entitled to receive as a result of the
allegedly unreasonable manner in which the Health Care
Financing Administration (HCFA) determined the amount of
the civil money penalty (CMP) to be paid by Petitioner.
HCFA imposed the CMP after having found Petitioner out of
compliance with various Medicare and Medicaid
participation requirements. By notice dated September
20, 1995, HCFA issued its determination that Petitioner
should pay a total of $80,400 for 41 days of
noncompliance, calculated at the rate of $4000 per day
for the first 19 days and $200 per day for the subsequent
22 days.

I was informed during the initial prehearing conference
that Petitioner was disputing the portion of the CMP
calculated at the rate of $4000 per day. Letter by
Direction of ALJ to Parties dated Dec. 8, 1995. As
Petitioner also reconfirmed during a subsequent
prehearing conference, Petitioner did not dispute the
existence of the deficiencies found by HCFA. Order of
Sept. 24, 1996, at 1. Instead, Petitioner explained that
it was challenging the manner in which HCFA had imposed
the CMP because, in Petitioner's view, HCFA had failed to
2

consider certain relevant information concerning
Petitioner's financial condition. Jd.

From December 1995 until September 1996, I stayed the
proceedings before me at the parties' request. During
the stay, counsel for HCFA filed written status reports
which informed me that the parties had not reached any
settlement agreements, but that HCFA was considering
Petitioner's request for HCFA to waive collection of the
CMP imposed against Petitioner. Status Reports dated
Feb. 16, 1996 and Mar. 29, 1996. HCFA informed me also
that it had committed to make a decision on Petitioner's
waiver request based on those financial documents
Petitioner had submitted and would submit pursuant to
HCFA's request. Id. However, I returned the case to
active status after counsel for HCFA reported that
Petitioner did not provide the additional financial data
requested by HCFA by the date agreed to by Petitioner.
Status Report dated July 12, 1996.

I established a briefing schedule pursuant to the
parties' agreement to identify the pertinent legal issues
in writing and file appropriate motions for a resolution
of those issues. Order dated September 24, 1996. With
supporting briefs and exhibits', HCFA has requested that
I grant summary disposition in favor of HCFA on the issue
of whether HCFA had properly considered Petitioner's
financial condition, as required by 42 C.F.R. §
488.438(f) (2), in calculating the amount of the CMP
assessed against Petitioner. Petitioner has filed a
brief in support of its request that I vacate the CMP
determination issued by HCFA and return the matter to
HCFA for further consideration of Petitioner's financial
condition. P. Br. at 7.”

— HCFA's brief in chief ("Brief of the Health
Care Financing Administration in Support of its Motion
for Summary Disposition" will be abbreviated as "HCFA
Br.," and HCFA's reply brief will be abbreviated as
"HCFA Reply." The 13 exhibits submitted by HCFA will be
denoted as "HCFA Ex. 1 through 5" and "HCFA Ex. 7 through
14." (HCFA Ex. 6 is a blank page and HCFA Ex. 14
corrects a typographical error contained in paragraph 10
of HCFA Ex. 12.) I receive into evidence HCFA Ex. 1
through 5 and 7 through 14.

? I use "P. Br." to denote the document titled
"Brief of Capitol Hill Community Rehabilitation and
Specialty Care Center in Opposition to Motion for Summary
Disposition." Petitioner has filed no exhibits in
support of its position.
3

In this decision, I grant HCFA's motion for summary
disposition and deny Petitioner's request for remand.

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCLS)

I summarize below my findings and conclusions, annotated
with the section of the decision where I have analyzed
the relevant facts and law:

1. In any CMP case, a petitioner is entitled to a
hearing on the merits in this forum on only two issues:
whether a basis exists for HCFA's imposition of a CMP,
and (if so) whether the amount of CMP imposed by HCFA is
reasonable. Discussion, I.

2. Petitioner has challenged only the procedures used by
HCFA to investigate Petitioner's financial condition for
the purpose of determining a CMP amount. Background;
Discussion, I and II.

3. HCFA has the discretion to use whatever process it
deems appropriate to evaluate a provider's financial
condition prior to issuing a notice imposing a CMP.
Discussion, II.

4. I have no authority to dictate the process HCFA must
follow prior to reaching its determination. Discussion,
II.

5. Petitioner has not articulated any legal theory to
support a possible reduction of the $4000 per day CMP
amount based on Petitioner's financial condition.
Discussion, II.

6. Petitioner has not made any argument or showing that,
if the case were to proceed to an evidentiary hearing,
Petitioner has evidence which may prove the
unreasonableness of the $4000 per day CMP amount set by
HCFA. Discussion, II.

7. Petitioner's complaint against HCFA's procedures does
not constitute a justiciable controversy entitling it to
an evidentiary hearing. Discussion, II.

8. HCFA is entitled to summary disposition in its favor.
Discussion, II; FFCLs 1 - 7.
4

9. While the proceedings in this case were stayed by
agreement of the parties, Petitioner submitted a request
for HCFA to waive the collection of the CMP, and HCFA had
agreed to process the waiver request with use of
financial information Petitioner had provided and would
provide by an agreed-to date. Discussion, III.

10. Petitioner did not provide the additional financial
information requested by HCFA for deciding Petitioner's
waiver request. Discussion, III.

11. The merits of Petitioner's waiver request are beyond
the scope of these proceedings. Discussion, III.

12. The parties' dealings with one another pursuant to
the waiver request filed by Petitioner are relevant to
the issue of whether this case should be remanded to HCFA
for consideration of Petitioner's financial condition
based on documents and information requested directly
from Petitioner. Discussion, III.

13. Independent of the reasons for granting summary
disposition in favor of HCFA, I find that no useful
purpose can be served by granting Petitioner's request
that this case be remanded to HCFA for further
consideration of Petitioner's financial condition.
Discussion, III.

14. It is appropriate to deny Petitioner's request for
remand. Discussion, III; FFCLs 9 - 13.

DISCUSSION
I. The issue in this case and the parties’ arguments

As I had explained in a ruling in Baltic Country Manor,
HCFA, C-96-281, there are only two main issues on
which a petitioner may request a hearing in a CMP case:
whether there existed a basis for HCFA's imposition of a
CMP, and, assuming that a basis exists, whether the CMP

amount imposed by HCFA is reasonable. Ruling on CMP
Issue (Dec. 11, 1996). Here, as discussed above,
Petitioner has expressly waived any challenge to the
basis alleged by HCFA in imposing the CMP. Accordingly,
the findings of noncompliance contained in the survey
reports and HCFA notice letters of record (e.g., HCFA Ex.
2, 4, 5, 7) are accepted as true.

The record evidence establishes that there are two rates
of CMP imposed by HCFA. HCFA Ex. 7. For the period from
July 21 until August 8, 1996, HCFA imposed the CMP amount
5

of $4000 per day’ pursuant to its determination that
Petitioner's noncompliance constituted immediate jeopardy
to residents during these 19 days. For the period from
August 9 until August 29, 1996, HCFA imposed the CMP
amount of $200 per day‘ pursuant to HCFA's determination
that Petitioner was still not in compliance with program
requirements but had eliminated the immediate jeopardy to
its residents. Id.

As Petitioner has made clear during the prehearing
conferences and in its brief to me, its objection is to
HCFA's having decided to impose a CMP at the rate of
$4000 per day without having first solicited information
from Petitioner concerning its financial condition.
Letter by Direction of ALJ dated Dec. 8, 1995; P. Br. at
1 - 3. Both parties agree that HCFA was under an
affirmative duty pursuant to 42 C.F.R. § 488.438(f) (2) to
consider Petitioner's financial condition in setting the
amount of a CMP. HCFA did not deny that it had decided
to impose the $4000 per day amount without having
solicited relevant financial information from Petitioner.

HCFA relied upon various affidavits (e.g., HCFA Ex. 3, 8,
9, 10) to explain that it had used an indirect method of
inquiry to evaluate Petitioner's financial condition.
Instead of soliciting information from Petitioner, HCFA
had contacted Petitioner's Medicare fiscal intermediary,
the State surveying agency, and the Medicaid agency in
order to find out whether these entities knew of any
financial problems experienced by Petitioner. HCFA Br.
at 7. HCFA argued that its pre-determination method of
inquiry was valid in this case because, as demonstrated
by the affidavits it submitted, the State surveying
agency, Medicare intermediary, and Medicaid agency may be
reasonably expected to have information or clues bearing
on program providers' fiscal soundness. HCFA Br. at 14 -

3 HCFA is authorized to impose a CMP within the
range of $3050 to $10,000 per day for deficiencies which
constitute immediate jeopardy. 42 C.F.R. §

488.438(a) (1).

4 HCFA is authorized to impose a CMP within the
range of $50 to $3000 per day where the deficiencies do
not constitute immediate jeopardy but either caused
actual harm or have the potential for causing more than
minimal harm. 42 C.F.R. § 488.438(a) (2).
6

Petitioner argued in response that the process used by
HCFA in deciding the CMP amount was flawed. Petitioner
observed that HCFA's process was not designed to obtain
information about a facility's financial condition, but
"to determine if third parties know anything that might
indicate that the facility is in financial difficulty."
P. Br. at 3. Petitioner complained that HCFA had chosen
such a course when it could have simply asked some direct
questions of Petitioner. Jg. Petitioner argued also
that the process used by HCFA has forced Petitioner to
take an appeal, when HCFA was required by law to consider
Petitioner's financial condition before HCFA decides on a
CMP amount. P. Br. at 5.

II. Reasons for granting of HCFA's motion for summary
disposition

Even though Petitioner's criticisms of HCFA's process
appear to have logical merit, I am granting HCFA's motion
for summary disposition. I do so because HCFA has the
discretion to use whatever process it deems appropriate
to evaluate a provider's financial condition prior to
issuing a notice imposing a CMP. I have no authority to
dictate the process HCFA must follow prior to reaching
its determination. Petitioner has not articulated any
legal theory to support a possible reduction of the $4000
per day CMP amount based on Petitioner's financial
condition. In addition, Petitioner has not made any
argument or showing that, if the case were to proceed to
an evidentiary hearing, Petitioner has evidence which may
prove the unreasonableness of the $4000 per day CMP
amount set by HCFA. I discuss below each of these main
reasons for granting summary disposition in favor of
HCFA.

Neither the regulations nor statutes specify the
procedures HCFA must follow in determining a facility's
financial condition. As explained in the preamble to the
regulations, no factors were specified in the regulations
for determining a facility's financial conditions because
such factors are considered unique for each facility. 59
Fed. Reg. 56,204 (Nov. 10, 1994). Additionally, as
discussed in my ruling in Country , the only
two issues which may be presented to an administrative
law judge for adjudication are HCFA's basis for imposing
a CMP and the reasonableness of the CMP amount.
Therefore, as a matter of law, I cannot compel HCFA to
use a process which solicits financial information

5 To the extent HCFA has asserted any other
basis for seeking summary disposition, I have rejected
them.
7

directly from providers prior to HCFA's formulating a
determination on the amount of CMP to be assessed. Nor
can I enjoin HCFA from gathering information about a
facility's financial condition by indirect means or from
third parties. I must uphold HCFA's authority to
exercise its discretion in the manner it sees fit (which
I do here by granting HCFA's motion for summary
disposition), irrespective of whether Petitioner or I
think HCFA has acted prudently. There is no right to a
hearing on the issue of whether the process used by HCFA
in ascertaining a provider's financial condition was
reasonable or unreasonable. 42 C.F.R. § 498.3.

If Petitioner believed that financial information not
gathered by HCFA has resulted in HCFA's imposing an
unreasonably high amount of CMP, Petitioner had the
opportunity to make such arguments to me and disclose the
existence of its supporting evidence pursuant to my
scheduling order. In using Rule 56 of the Federal Rules
of Evidence for guidance in evaluating HCFA's motion for
summary disposition, I note the following relevant
provisions:

When a motion for summary judgment is
made and supported as provided in this
rule, an adverse party may not rest upon
the mere allegations or denials of his
pleading, but his response, by affidavits
or as otherwise provided in this rule,
must set forth specific facts showing
that there is a genuine issue for trial.
If he does not so respond, summary
judgment, if appropriate, shall be
entered against him.

Rule 56(e), Fed. R. Civ. P.

I note in addition that a provider's financial condition
is only one of several factors HCFA is required to
consider in determining the amount of a CMP to be
imposed. 42 C.F.R. §§ 488.404; 488.438(f). In this
case, HCFA showed by affidavit that it followed the
regulatory requirements by having considered also
Petitioner's compliance history and the seriousness of
Petitioner's noncompliance in determining the $4000 per
day rate. HCFA Ex. 3. In evaluating Petitioner's
compliance history (42 C.F.R. § 488.438(f)(1)], HCFA's
agent concluded that, since Petitioner was opened and
certified in 1993, "this was the second time in three
years that it was found to be in serious noncompliance
with Medicare requirements." HCFA Ex. 3, at 3 - 4. In
evaluating the seriousness of Petitioner's deficiencies
8

(42 C.F.R. § 488.404(b)], HCFA's agent stated also that
he and his colleagues compared Petitioner's deficiencies
to those in other facilities where immediate jeopardy to
residents had been found. Even though HCFA ultimately
determined that Petitioner's deficiencies were serious
enough to constitute immediate jeopardy to residents for
the first 19 days (HCFA Ex. 5, 7), HCFA did not impose a
penalty near the $10,000 per day maximum potential rate
because its agents found several mitigating factors when
Petitioner's deficiencies were compared to those of other
facilities also having noncompliance at the immediate
jeopardy level. HCFA Ex. 3, at 4 - 5. Therefore,
whether or not the $4000 per day amount is reasonable
cannot be decided solely on the basis of Petitioner's
financial condition. Petitioner has offered nothing to
refute HCFA's evidence that additional factors were
material to HCFA's determination of the CMP amount, that
Petitioner had a poor compliance history, and that
severity of Petitioner's noncompliance was at immediate
jeopardy level.°

Here, even assuming that HCFA had not made its
determination based on any other factor specified by
regulation, HCFA has filed a motion for summary
disposition with affidavits showing that it made
inquiries concerning Petitioner's financial condition
with entities reasonably expected to have such
information and that no information came to HCFA's
attention to indicate that imposing a CMP of $4000 per
day would be inappropriate to Petitioner's financial
condition. HCFA Br. at 13 - 14 and affidavits cited
therein. In opposition to HCFA's motion for summary
disposition, Petitioner has not even alleged to me that
the $4000 per day amount is unreasonably high given
Petitioner's financial condition. Petitioner has not
introduced any evidence to show that Petitioner's
financial status was materially worse than that perceived
by HCFA and would, therefore, make a CMP in the amount of
$4000 per day appear unreasonable.’ Nor has Petitioner

6 The regulation codified at 42 C.F.R. §
498.61(b) states, "In civil money penalty cases, HCFA's
conclusions as to a [skilled nursing facility]'s or
{nursing facility]'s level of noncompliance must be
upheld unless clearly erroneous."

7 after having submitted financial information to
HCFA in order to request that HCFA waive collection of
the CMP (HCFA Ex. 11), Petitioner argued that HCFA's
Exhibits 11, 12, and 13 show that the financial
information submitted to HCFA would "tend to support a
9

set forth any reason for its failure to identify or
include such evidence at this time.

Petitioner has not even articulated any legal theory
related to its financial condition in support of a
possible reduction of the CMP amount. HCFA contended in
seeking summary disposition that, as a matter of law, an
otherwise appropriate CMP amount cannot be lowered unless
imposing that amount would put the affected facility out
of business. HCFA Br. at 9 - 10 (relying on the agency
comment that "it is not our intention to put facilities
out of business[,]" published at 59 Fed. Reg. 56,116,
56,204 (Nov. 10, 1994). Accordingly, HCFA has requested
summary disposition based on its theory and evidence that
Petitioner's payment of the CMP amount would not put it
out of business. HCFA Br. at 9 - 10, 22.

Petitioner's response brief does not include any
disagreement with HCFA's theory that "putting a facility
out of business" is the only legally valid measuring
stick for deciding whether an otherwise appropriate CMP
amount should be lowered. Nor has Petitioner alleged or
attempted to demonstrate that paying the CMP amount would
put it out of business. In the absence of any
disagreement from Petitioner on the foregoing legal and
factual matters asserted by HCFA, it is immaterial
whether Petitioner is experiencing financial
difficulties.

contention that it is in financial difficulty." P. Br.
at 6. However, Petitioner has not made the contention
that Petitioner is in financial difficulty. Petitioner
argued instead that HCFA's refusal to consider
Petitioner's information adequate "cast[s] doubt upon
HCFA's stated policy to seek and consider additional
information when it has reason to believe a facility is
experiencing financial difficulties[,]" and that "HCFA
now, at least, has sufficient reasons to go back to Blue
Cross of Maryland, one of its primary sources for its
initial conclusion, and to inquire as to whether it now
has information ... to believe that [Petitioner] is
experiencing financial difficulty." P. Br. at 6.
Moreover, even if I were to assume that the documents
from Petitioner referenced in HCFA's Exhibits 11, 12, and
13 show that Petitioner is experiencing financial
difficulties, there has been no effort by Petitioner to
assert whether its financial difficulties are serious in
light of its known assets, or to correlate the extent of
its financial problems with any possible theory that
$4000 per day should be considered an unreasonable amount
of CMP.
10

Petitioner has made known since the prehearing
conferences in this case that it is seeking redress for
its complaint that HCFA had set the CMP amount at $4000
per day without having soliciting financial information
directly from Petitioner. As discussed below, the
redress Petitioner seeks for its complaint is a remand of
the case to HCFA for further considerations. Petitioner
is, in essence, seeking only to change the procedures
used by HCFA. Petitioner's complaint against HCFA's
procedures does not constitute a justiciable controversy
entitling it to an evidentiary hearing.

Accordingly, I grant HCFA's motion for summary
disposition.

III. Denial of Petitioner's request that the financial
condition issue be remanded to HCFA for further
consideration

The regulation codified at 42 C.F.R. § 498.56(d) permits
the remand of a case to HCFA for further proceedings when
new issues impinging on the rights of an affected party
arise following the filing of a hearing request. In this
case, Petitioner has a right to contest the
reasonableness of the amount of a CMP imposed against it.
The methods used by HCFA in arriving at what HCFA
considered to be a reasonable CMP amount were not known
to Petitioner until HCFA filed its motion for summary
disposition. Since Petitioner was never given notice
that HCFA was considering imposing a CMP in the amount of
$4000 per day, Petitioner had no opportunity to transmit
relevant financial information to HCFA before HCFA
decided to impose a CMP in said amount. Accordingly, I
have construed Petitioner's request that I "vacate the
CMP imposed by HCFA and ... return it [i.e., the question
of Petitioner's financial condition] to HCFA for further
consideration" (P. Br. at 7) as a request for remand
under 42 C.F.R. § 498.56(d).

I have considered Petitioner's remand request
independently of those reasons which led me to grant
summary disposition in favor of HCFA.

I am denying Petitioner's request for remand because,
after the first prehearing conference was held, HCFA gave
Petitioner the opportunity to submit financial
information for HCFA's consideration. While the
proceedings before me were stayed at the parties'
request, HCFA was willing to and did in fact consider the
financial information submitted by Petitioner. HCFA Ex.
12, 14. These actions were undertaken by HCFA in
response to Petitioner's request for HCFA to waive
11

collection of the CMP from Petitioner.* HCFA Ex. 11;
Status Report dated February 16, 1996. However, despite
Petitioner's apparent agreement to do so, Petitioner then
failed or refused to provide HCFA with the follow-up
information HCFA deemed necessary. HCFA Ex. 12 - 14;
Status Report dated July 12, 1996.

I have reviewed HCFA's reasons for requ@™@ng additional
information from Petitioner. There is nothing inherently
unreasonable in HCFA's requests for additional documents.
In its brief to me, Petitioner has given no explanation
for its failure or refusal to provide the information
HCFA requested. Nor has Petitioner indicated that it
would be more willing to provide such information to HCFA
should I grant its remand request. Petitioner has
demonstrated no practical need for a remand.

The merits of Petitioner's request for waiver are not
within the scope of the proceedings before me. See,
Ruling on CMP Issues (Dec. 10, 1996) in Baltic Country

I in its brief, Petitioner has objected to HCFA's
use of certain documents because Petitioner believes that
"discussions of a settlement nature should not be
included as evidence in a case." P. Br. at 3.

Petitioner did not specify the exhibits to which it was
objecting. However, as HCFA correctly noted, the
documents referenced by HCFA were financial documents
which Petitioner submitted in support of its request for
a “hardship waiver" -- not as part of its offer to
compromise the CMP amount. HCFA Reply at 7; HCFA Ex. 11,
at 1 (Petitioner stated, "Since you indicated that your
client did not look favorably upon the foregoing offer
[of paying $200 per day for 41 days), we would like to
pursue a waiver of the penalty upon grounds of financial
hardship. Enclosed herein are financial statements of
the nursing home ....").

The efforts made by the parties pursuant to Petitioner's
waiver request were reported to me in the various Status
Reports filed by HCFA between February and July of 1996.
When Petitioner received copies of those Status Reports,
Petitioner did not inform me that the documents submitted
to HCFA were for compromising the CMP amount by
agreement, as opposed to supporting the request for
waiver. Moreover, I have not used HCFA's exhibits
referencing those financial documents provided by
Petitioner for the purpose of ascertaining Petitioner's
liability for the CMP amount of $4000 per day. Instead,
I have used such exhibits to evaluate the feasibility of
adopting the remand procedure requested by Petitioner.
12

Manor. However, the parties' dealings with one another
pursuant to Petitioner's request for waiver are relevant
to whether a remand of this case to HCFA is necessary,
appropriate, or of potential benefit to either party.
Given the evidence of record concerning Petitioner's
request for waiver, I conclude that remanding this case
to HCFA for further consideration of Petitioner's
financial condition would be nonproductive and therefore
inappropriate.

CONCLUSION
For the reasons stated above, the amount of the CMP
imposed by HCFA is upheld pursuant to my granting of

HCFA's motion for summary disposition and my denial of
Petitioner's request for remand.

/s/

Mimi Hwang Leahy

Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Date: March 3, 1997
GranCare Home Health

Service & Hospice,

Docket No. C-96-406
- ve. = Decision No. CR464

)
)
)
)
)
)
Petitioner, )
)
)
)
Health Care Financing Administration)

)

)

DECISION

I sustain the determinations of the Health Care Financing
Administration (HCFA) to certify Petitioner, GranCare Home Health
Service & Hospice, to participate in Medicare, as a home health agency
and hospice, effective November 28, 1995.

I. Background

On February 7, 1996, HCFA sent notices to Petitioner advising it that
HCFA had determined to certify Petitioner to participate in Medicare,
both as a hospice and as a home health agency, effective November 28,
1995. HCFA Ex. 3; HCFA Ex. 4.+ Petitioner requested reconsideration of
these determinations. HCFA Ex. 5; HCFA Ex. 6. By letters of May 24 and
28, 1996, HCFA denied Petitioner's requests.’

‘HCFA submitted six proposed exhibits (HCFA Ex. 1 - 6). Petitioner
submitted nine proposed exhibits (P. Ex. 1 - 4, 4a, 5 - 8). Neither party
objected to my receiving into evidence any of these proposed exhibits. I
receive into evidence HCFA Ex. 1 - 6 and P. Ex. 1 - 4, da, 5 - 8.

?Neither HCFA nor Petitioner offered into evidence HCFA's notice of
denial of Petitioner's requests for reconsideration. However, that document
was provided by HCFA as part of the documentation of Petitioner's hearing
request and is, therefore, part of the record of this case.
Petitioner requested a hearing and the case was assigned to me. I held
a prehearing conference at which HCFA advised me that it intended to
move for disposition of the case, based on undisputed facts and the
law. I established a schedule for the parties to submit proposed
exhibits, briefs, and reply briefs. The parties complied with this
schedule. I base my decision in this case on the undisputed facts, the
law, and the parties' arguments.

II. Issue, findings of fact and conclusions of law

The issue in this case is whether HCFA properly certified Petitioner
to participate in Medicare, as a home health agency and as a hospice,
effective November 28, 1995. This issue involves the question of
whether I may direct HCFA to certify a provider to participate in
Medicare on a date earlier than the date of completion of an on-site
survey of that provider which has been conducted to determine whether
the provider complies with Medicare participation requirements. In
deciding that HCFA properly determined to certify Petitioner to
participate in Medicare, as a home health agency and as a hospice,
effective November 28, 1995, I make the following findings of fact and
conclusions of law (Findings). I discuss these Findings below.

1. On December 24, 1994, Petitioner applied to HCFA for certification
to participate in the Medicare program as a home health agency.

2. On February 21, 1995, Petitioner applied to HCFA for certification
to participate in the Medicare program as a hospice.

3. On April 6, 1995, the California Department of Health Services
(California State survey agency) surveyed Petitioner to determine
whether Petitioner complied with applicable State licensing
requirements. Based on this survey, the California State survey agency
concluded that Petitioner complied with all applicable State licensing
requirements.

4. On November 28, 1995, the California State survey agency, acting on
behalf of HCFA, surveyed Petitioner to determine whether Petitioner
complied with Medicare participation requirements which govern home
health agencies and hospices. Based on these surveys, the

California State survey agency concluded that Petitioner complied with
all applicable Medicare participation requirements which govern home
health agencies and hospices.

5. HCFA determined to certify Petitioner to participate in Medicare,
effective November 28, 1995.

6. In order to be certified to participate in Medicare, a provider
must apply to HCFA to participate, and then must be surveyed, in order
to determine whether it complies with applicable Medicare
participation requirements.
7. The first date on which a provider may participate in Medicare is
the date of completion of an initial survey of that provider which
finds that the provider complies with all applicable Medicare
participation requirements.

8. November 28, 1995, is the date when surveys were completed of
Petitioner which established that Petitioner complied with all
Medicare participation requirements which apply to home health
agencies and hospices.

9. November 28, 1995, is the first date on which Petitioner qualified
to be certified to participate in Medicare.

10. I am without authority to direct HCFA to certify Petitioner to
participate in Medicare on the date when Petitioner met State license
requirements, even assuming that State license requirements impose on
Petitioner the same obligations and duties as do Medicare
participation requirements.

11. I am without authority to decide that HCFA is estopped from
certifying Petitioner to participate in Medicare, as a home health
agency and a hospice, effective November 28, 1995.

12. I am without authority to decide that Petitioner is entitled, as
the beneficiary of a contract between HCFA and the California State
survey agency, to be certified to participate in Medicare at any date
prior to November 28, 1995.

III. Discussion
A. The relevant facts (Findings 1 - 5)

The following facts are not in dispute. On December 24, 1994
Petitioner applied to participate in the Medicare program as a home
health agency. P. Ex. 1 at 2; Petitioner's Brief (P. Br.) at 3. On
February 21, 1995, Petitioner applied to participate in the Medicare
program as a hospice. P. Ex. 1 at 1; P. Br. at 3.

Petitioner applied also to the State of California for a license to
operate as a home health agency and as a hospice. On April 6, 1995

the California State survey agency conducted a survey of Petitioner in
order to determine whether Petitioner complied with applicable State
licensing requirements. It determined that, as of the date of the
survey, Petitioner was complying with State licensing requirements.

P. Ex. 2.

Although Petitioner applied to participate in Medicare in December
1994 and February 1995, HCFA did not have Petitioner surveyed for
compliance with Medicare participation requirements until November 28
1995. On that date, the California State survey agency conducted
surveys on behalf of HCFA to determine whether Petitioner complied
with Medicare requirements which govern home health agencies and
hospices. P. Ex. 7 at 1 - 4. The California State survey agency
concluded, on the basis of the November 28, 1995 surveys, that
Petitioner complied with all Medicare participation requirements
governing home health agencies and hospices. Id. On February 7, 1996
HCFA determined to accept the California State survey agency's
conclusions, and certified Petitioner to participate in Medicare, as a
home health agency and a hospice, effective November 28, 1995, the
date that the California State survey agency conducted and completed
its Medicare certification surveys of Petitioner. P. Ex. 8.

B. Governing law (Findings 6 - 7)

A provider may participate in Medicare if it enters into participation
agreement with the Secretary of the United States Department of Health
and Human Services (Secretary). Social Security Act (Act), section
1866(a) (1). However, the Secretary is not required to enter into a
participation agreement with a provider if the Secretary determines
that the provider is not complying substantially with Medicare
participation requirements. Act, section 1866(b) (2).

The Secretary has published regulations which establish a process by
which HCFA, acting on behalf of the Secretary, determines whether an
applicant for participation in Medicare is complying with Medicare
participation requirements. An entity must apply to HCFA to be
certified to participate in Medicare. 42 C.F.R. § 489.10(a). In order
to be certified, an applicant for participation first must be surveyed
in order to determine whether that applicant meets all Medicare
participation requirements. 42 C.F.R. §§ 488.10, 489.10(d). HCFA has
delegated to State survey agencies the authority to conduct surveys on
behalf of HCFA. Id. HCFA will accept an applicant's participation
agreement and certify that applicant to participate in Medicare on the
date that a survey of that applicant is completed, assuming that the
applicant meets all participation requirements on that date. 42 C.F.R.
S 489.13(a).

The regulations plainly state that the earliest date that an applicant
may participate in Medicare is the date of completion of the initial
certification survey, assuming that the applicant satisfies all
Medicare participation requirements as of that date. 42 C.F.R. §
489.13(a). An applicant for participation may not be certified to
participate in Medicare at a date that is earlier than the date the
initial survey is completed, even assuming that the applicant might
have been able to satisfy HCFA that it met participation requirements
at an earlier date, had the survey been conducted on that earlier
date. See Id.

C. Application of the law to the undisputed facts
(Findings 8 - 12)

It is evident from application of the law to the undisputed facts that
HCFA certified Petitioner to participate in Medicare, as a home health
agency and as a hospice, on the earliest date on which Petitioner
qualified to participate. That date was November 28, 1995, the date
when the California State survey agency, acting on HCFA's behalf
completed initial surveys of Petitioner and concluded that Petitioner
complied with all Medicare participation requirements, both as a home
health agency and as a hospice. There is no provision in the
regulations which would enable Petitioner to be certified at any date
earlier than November 28, 1995. Consequently, I conclude that HCFA
properly certified Petitioner to participate in Medicare, effective
November 28, 1995.

Petitioner's arguments that it ought to have been certified to
participate at an earlier date all devolve from the fact that many
months transpired from the dates when Petitioner first applied to HCFA
to participate as a home health agency and as a hospice, and the date
of the initial surveys of Petitioner. Eleven months transpired from
the date that Petitioner first applied to participate in HCFA as a
home health agency and the initial certification survey that was
conducted of Petitioner by the California State survey agency; about
nine months transpired from the date that Petitioner first applied to
HCFA to participate as a hospice and the initial certification survey.

Petitioner essentially concedes that the regulations do not, on their
face, permit it to have been certified prior to the date of completion
of the initial certification surveys of Petitioner by the California
State survey agency. Petitioner argues that the delays were contrary
to HCFA's policies concerning the timeliness of initial certification
surveys and were unfair to Petitioner. Petitioner argues that, in
light of the asserted unreasonable delays between the dates of
Petitioner's applications and the date of the initial surveys, I
should direct HCFA to certify Petitioner at an earlier date than
November 28, 1995. The date advocated by Petitioner is April 6, 1995
the date on which Petitioner was found to qualify for a State license
by the California State survey agency.

Petitioner makes three arguments to support its assertion that it
should be certified to participate effective April 6, 1995. First,
Petitioner argues that the license survey which was completed by the
California State survey agency on April 6, 1995, constituted a survey
by the same agency as performed the initial certification surveys of
Petitioner on November 28, 1995. Petitioner asserts, furthermore, that
the criteria used by the California State survey agency to determine
whether Petitioner qualified for a State license are identical to
those used by HCFA to assess compliance with Medicare participation
requirements. From this, Petitioner argues that I ought to accept the
finding by the California State survey agency that Petitioner met
State license requirements as the functional equivalent of findings
that Petitioner met Medicare participation requirements, and order
HCFA to certify Petitioner to participate, as a home health agency and
as a hospice, effective April 6, 1995.

Second, Petitioner asserts that the delays in conducting Medicare
certification surveys of Petitioner contravene HCFA's policies
concerning the timeliness of such surveys. Petitioner argues that it
was harmed by these delays. From this, Petitioner asserts that HCFA is
estopped from certifying Petitioner to participate effective November
28, 1995, and must be directed to certify Petitioner to participate
effective April 5, 1995.

Third, Petitioner argues that the agreement between HCFA and the
California State survey agency, pursuant to which the California State
survey agency conducts Medicare participation surveys, is intended to
benefit applicants for participation in Medicare. Petitioner argues
that one requirement of this agreement is that surveys be conducted in
a timely manner. Petitioner asserts that, in this case, the California
State survey agency failed to comply with this requirement, to
Petitioner's loss. Petitioner argues that, as a third-party
beneficiary of the agreement between HCFA and the California State
survey agency, it should be granted relief in the form of an earlier
date of certification to participate in Medicare.

I am without authority to grant the relief which Petitioner requests.
In evaluating Petitioner's arguments, I must apply to the evidence the
letter of the regulations which govern initial certification. These
regulations give me no authority to direct HCFA to accept the results
of a State license survey as a substitute for initial certification
surveys, even if the license survey was performed by the same agency
as performed the later certification surveys, and even assuming that
the criteria for licensure are identical with the criteria which
govern participation in Medicare. I have no authority to find that
HCFA is estopped from certifying Petitioner, effective November 28,
1995, on the grounds that the delays in surveying Petitioner harmed
Petitioner, contravene HCFA's policies, and are unreasonable. Finally
I have no authority to direct that HCFA certify Petitioner prior to
November 28, 1995, on the ground that Petitioner, as the third-party
beneficiary of a contract between HCFA and the California State survey
agency, had a right to be surveyed timely and was damaged by the
alleged failure of the California State survey agency to fulfill its
obligations under the agreement.

That is not to say that I am unsympathetic to Petitioner. A great deal
of time transpired between Petitioner's initial applications for
participation and the certification surveys. Delays of eleven and nine
months occurred between the dates when Petitioner applied to
participate in Medicare as a home health agency and as a hospice and
completion of the initial surveys of Petitioner by the California
State survey agency. It is at least possible that Petitioner would
have been able to demonstrate that it complied with applicable
participation requirements months prior to November 28, 1995, had the
California State survey agency conducted participation surveys of
Petitioner in a more timely manner. Petitioner may well have been
damaged financially by the delayed surveys.

1. Petitioner's argument that the results of the State
license survey must be accepted by HCFA as proof of
compliance with Medicare participation requirements
(Finding 10)

Petitioner argues that there is nothing in the regulations which
prohibits HCFA from using the results of a State license survey of
Petitioner to determine whether Petitioner meets Medicare
participation requirements. Petitioner observes that the regulations
which govern certification do not specifically define what an on-site
survey for certification purposes constitutes, nor do they contain any
language precluding HCFA from using the results of a license survey as
a basis for determining whether a provider qualifies to participate in
Medicare.

Petitioner's characterization of what the regulations contain may be
true, but it begs the question of whether HCFA may be directed to use
the results of a State license survey to determine whether a provider
qualifies to participate in Medicare. The regulations give HCFA
authority to decide what it will accept from a State survey agency as
a basis for certifying an applicant to participate in Medicare.

42 C.F.R. $§ 488.10; 488.11(c); 488.12; 488.18. It is apparent

from the record of this case that HCFA has chosen not to

consider the State license survey as being equivalent to the

provider certification surveys that were conducted subsequently. The
regulations do not require HCFA to accept any substitute for a
provider certification survey. I have no authority to direct that HCFA
do so. Thus, it is not relevant that the agency which performed the
State license survey is the same agency as that which performed the
Medicare certification surveys, nor is it relevant that the criteria
for attaining a license in California to operate as a home health
agency and as a hospice arguably may be the same as those which govern
participation in Medicare of home health agencies and hospices.’

In its reply to Petitioner's brief, HCFA asserts that the issues in
this case do not include the issue of whether California State license
requirements and Medicare participation requirements are the same.
From this, HCFA seems to be asserting that I should preclude
Petitioner even from arguing that it should be certified based on the
results of the California State license survey. Petitioner responded
to this assertion by moving to expand the issues in the case.

I deny Petitioner's motion as moot. Deciding the issue of whether
State license and Medicare participation requirements are identical
would have no affect on the outcome of this case, inasmuch as the
regulations which govern participation of providers do not compel HCFA
to accept the results of a State license survey as proof of compliance
with participation requirements. However, I would have permitted
Petitioner to argue and offer evidence that is relevant to its
assertion that State license requirements and Medicare participation

31 make no finding as to whether the criteria are the same, because it
is not necessary that I do so.
requirements are identical, had I concluded that the regulations did
provide HCFA's acceptance of the results of a State license survey as
a substitute for the results of a Medicare certification survey.

2. Petitioner's estoppel argument (Finding 11)

I do not have authority to direct HCFA to certify Petitioner to
participate in Medicare on a date prior to November 28, 1995, on the
grounds that the delay in surveying Petitioner was unfair to
Petitioner, or that the delay is contrary to HCFA's policy that
applicants for participation be surveyed promptly. My authority thus
is limited to deciding whether HCFA certified Petitioner to
participate in accordance with applicable regulations governing
participation. The regulations which govern certification neither
state nor suggest that HCFA may be estopped from certifying a provider
to participate on the date when an initial survey of that provider is
completed, even where the survey has been delayed through no fault of
the provider. See 42 C.F.R. § 489.13(a).

Petitioner notes that I have held in other cases that HCFA may not be
estopped from certifying a provider pursuant to 42 C.F.R. § 489.13

but it attempts to distinguish the facts of those cases from the facts
of the present case. I have held that, where an applicant for
participation in Medicare fails at the initial survey to demonstrate
that it meets all participation requirements, HCFA may not be estopped
from certifying the applicant to participate as of the date that

it establishes that it has corrected outstanding deficiencies, on the
ground that HCFA or a State survey agency delayed unreasonably in
conducting a resurvey of the applicant. SRA Inc., D/B/A St. Mary
Parish Dialysis Center, DAB CR341 (1994); The Rivers HealthCare
Resources, Inc., DAB CR446 (1996).

Petitioner argues that, in every other case where I have declined to
find that HCFA is estopped, the provider bore some responsibility for
the delays in its certification, because it was found to be deficient
in complying with participation requirements at the initial survey.
Petitioner asserts that it bears no responsibility for the delay in
certification, because there is no evidence that it was deficient at
any time prior to November 28, 1995.

I agree with Petitioner that this case differs from those cases in
which I have held that HCFA may not be estopped, in that, here, there
is no evidence that Petitioner bears responsibility for the lapse of
time between the date it applied to be certified and the effective
date of its certification. However, I am, nevertheless, without
authority to find that HCFA is estopped from certifying Petitioner to
participate in Medicare, effective November 28, 1995. The regulations
which govern certification do not authorize me to supersede their
explicit requirements based on principles of equity, including
estoppel.
I would not find that Petitioner established the factual predicate for
its equitable argument (that HCFA failed to comply with a policy which
required that Petitioner be surveyed within three weeks of the dates
of its applications for participation) even if I were to conclude that
I had the authority to grant the equitable relief that Petitioner
seeks. It is not clear that the California State survey agency
contravened HCFA's policy concerning the timing of participation
surveys.

Petitioner proved that HCFA's general policy concerning the timing of
certification surveys is to require that an initial certification
survey be performed of an applicant for participation within three
weeks of the date when the applicant submits an application for
participation which recites that the applicant is operational. An
excerpt from the State Operations Manual, a document which HCFA
provides to State survey agencies as policy guidance, states:

When the provider notifies . . . [the State survey agency] of
full operation, document the file with the date of notification
and conduct the survey within 3 weeks of that date.

P. Ex. 4. This excerpt is corroborated by the affidavit of
Petitioner's counsel. P. Ex. 4a. Petitioner's counsel recites being
present at a "special training session," which he asserts that HCFA
held for administrative law judges, on January 14, 1997. He recites
that, at that session, Ms. Mavis Connolly, a representative of HCFA,
advised the participants that the State survey agency conducts an
initial survey within three weeks of its receipt of an application by
a provider which indicates that the provider is operational. Id.*

However, in February 1995, HCFA felt it necessary to advise State
survey agencies that, due to budget constraints, it might be necessary
for them to waive the requirement that a survey of an applicant for
participation be conducted within three weeks of the date of the
application for certification "if the State budget does not permit all
initial surveys to be done." P. Ex. 6 at 2. It is unclear from the
evidence in this case whether the California State survey agency
delayed surveying Petitioner consistent with HCFA's 1995 exception to
the overall policy concerning the timing of initial surveys.

4as Petitioner's counsel recites in his affidavit, I was present at this
meeting (I would not characterize it as a "special training session"), along
with other administrative law judges, members of the Departmental Appeals
Board, representatives of the Departmental Appeals Board Appellate Division
and Civil Remedies Division staffs, and representatives of the public. I make
no findings as to what was said at that meeting, based on my memory of what
occurred. My findings are based solely on the unrebutted statement of
Petitioner's counsel.
10

3. Petitioner's argument that, as the beneficiary of a
contract between HCFA and the California State survey
agency, it should be certified to participate in Medicare
earlier than November 28, 1995 (Finding 12)

I am without authority to direct HCFA to certify Petitioner to
participate in Medicare prior to November 28, 1995, as relief for an
alleged breach of what Petitioner characterizes to be a third-party
beneficiary contract between HCFA and the California State survey
agency. My authority, again, is limited to deciding whether HCFA's
certification of Petitioner complied with the requirements of
applicable regulations. I make no finding as to whether any agreement
between HCFA and the California State survey agency is a third-party
beneficiary agreement which operates to Petitioner's benefit, inasmuch
as I have no authority to direct any relief based on an asserted
breach of that agreement.

For the same reason, I make no finding that the California State
survey agency failed to comply with its obligations under any contract
it had with HCFA.

Iv. Conclusion

I conclude that HCFA properly certified Petitioner to participate in
Medicare, as a home health agency and as a hospice, effective November
28, 1995. Therefore, I sustain HCFA's determinations.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Muhammad A. Malick, DATE: February 24, 1997
Petitioner,

Docket No. C-97-014
Decision No. CR463

-vo

The Inspector General.

DECISION

By letter dated August 16, 1996, Muhammad A. Malick, the
Petitioner herein, was notified by the Inspector General (I.G.),
U.S. Department of Health and Human Services (HHS), that it had
been decided to exclude him for a period of five years from
participation in the Medicare, Medicaid, Maternal and Child
Health Services Block Grant and Block Grants to States for Social
Services programs.'! The I.G. explained that the five-year
exclusion was mandatory under sections 1128(a)(1) and
1128(c) (3) (B) of the Social Security Act (Act) because Petitioner
had been convicted of a criminal offense related to the delivery
of an item or service under Medicaid.

Petitioner filed a timely request for review of the I.G.'s action
and the I.G. moved for summary disposition.

Because I conclude that there are no material and relevant
factual issues in dispute, and the only matter to be decided is
the legal significance of the undisputed facts, I have decided
the case on the basis of the parties' written submissions in lieu
of an in-person hearing. I grant the I.G.'s motion for summary
disposition.

Thus, I affirm the I.G.'s determination to exclude Petitioner
from participation in the Medicare and Medicaid programs for a
period of five years.

1 In this decision, I use the term "Medicaid" to refer to
these State health care programs.
2
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.

PETITIONER'S ARGUMENT

Petitioner contends, first, that his exclusion is not warranted
because he was not a provider of items or services under
Medicaid. He argues also that the I.G. unreasonably prolonged
his exclusion by waiting so long to act against him. Petitioner
argues that the effective date of his exclusion should start from
the date of his conviction, which was more than two years ago.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. During the period relevant herein, Petitioner operated a
business which administered sonogram and blood tests.

2. On July 19, 1993, Petitioner was indicted in New Jersey
Superior Court on one count of conspiracy (3rd degree), one count
of misconduct by corporate officials and complicity (3rd degree),
one count of Medicaid fraud and complicity (high misdemeanor),
and one count of commercial bribery and complicity (3rd degree).
I.G. Ex. 2.

3. The indictment alleged that Petitioner and an acquaintance
formed a corporation called Muasif Services, Inc., and its
purpose was to administer sonogram and blood tests. I.G. Ex. 2.3

4. In setting forth the conspiracy allegations, the indictment
charged that, between April 1, 1988 and February 28, 1989, a
physician who was also a Medicaid provider directed his patients
at various times to submit to tests administered by Petitioner,
without regard to the medical necessity of the tests.

2 The I.G. submitted a brief and five exhibits (I.G. Exs.
1-5). I refer to the I.G.'s brief as "I.G. Brief." Petitioner has
not objected to the I.G.'s exhibits. In the absence of objection,
I admit the I.G.'s exhibits into evidence. I refer to Petitioner's
brief in this case as "P. Brief." Petitioner did not submit any
exhibits.

3 I note for the record that Petitioner, in his brief,
spells the name of his corporation as both "Masif Services, Inc."
(P. Brief at 1) and "Muasif Services, Inc." (P. Brief at 2, 3, 4).
I will use "Muasif Services, Inc.", which is also the spelling used
in the Indictment.
3

5. The indictment alleged further that, as part of the
conspiracy, Petitioner paid the aforementioned physician's office
and overhead expenses in exchange for the referral of patients
for blood and sonogram testing.

6. The indictment alleged that Petitioner offered a kickback to
this physician in connection with the furnishing of services
under Medicaid, in that Petitioner paid for that physician's
office and overhead expenses, in exchange for the referral of
patients, including Medicaid recipients, to him for the
administration of sonogram and blood tests.

7. On June 24, 1994, a judgment of conviction was entered in New
Jersey Superior Court finding Petitioner guilty of conspiracy,
misconduct by corporate officials and complicity, and Medicaid
fraud and complicity. I.G. Ex. 1.

8. On June 24, 1994, Petitioner was sentenced to the custody of
the Commissioner of the Department of Corrections for three
years, and was assessed a $50 penalty. I.G. Ex. 1; I.G. Ex. 3 at
22-23.

9. The judgment of conviction entered against Petitioner
constitutes a conviction within the meaning of sections
1128(a)(1) and 1128(i)(1) of the Act.

10. Petitioner's offering of kickbacks in exchange for patient
referrals, including Medicaid recipients, is related to the
delivery of items or services under Medicaid, within the meaning
of section 1128(a)(1) of the Act.

11. Once a person has been convicted of a program-related
criminal offense, exclusion is mandatory under 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.

DISCUSSION

The first statutory requirement for the imposition of a mandatory
exclusion pursuant to section 1128(a)(1) of the Act is that the
individual or entity in question be convicted of a criminal
offense under federal or state law. In the case at hand,
Petitioner does not contest that he was convicted of a criminal
offense. A judgement of conviction was entered in Petitioner's
case and he was sentenced by the State court, Petitioner was
thus convicted within the meaning of section 1128(i)(1) of the
Act. This satisfies the first criterion of section 1128(a) (1) of
the Act.
4

Next, section 1128(a)(1) requires that the crime at issue be
related to the delivery of an item or service under Medicaid or
Medicare. I find that in this case there is a common-sense
connection between the criminal offense and the Medicaid program.
Clarence H. Olson, DAB CR46 (1989). I conclude that the delivery
of items or services under Medicaid played an essential and
integral role in Petitioner's criminal conduct and conviction.
The evidence relating to the State court proceeding shows that
Petitioner was found guilty of the crimes of conspiracy,
misconduct by corporate officials, and Medicaid fraud. These
crimes arose as part of a scheme by Petitioner to have
Petitioner's corporation perform medically unnecessary tests on
patients, including Medicaid recipients. In return, the
physician involved received kickbacks, in the form of payment of
his rent and overhead expenses, from Petitioner's corporation.
Thus, the criminal offenses for which Petitioner was convicted
arose directly out of the delivery of services under Medicaid.

Petitioner's argument that the exclusion mandated by section
1128(a)(1) is inapplicable to him because he is not a health care
practitioner or provider is without merit. Petitioner's
assertion is contrary to congressional intent. Specifically, in
1980, when Congress was drafting section 1128, it declared that
it intended to exclude not only "physicians and other
practitioners convicted of program-related crimes," but also
other persons, "such as administrators of health care
institutions," who were similarly convicted. 1980 U.S.C.C.A.N.
5526, 5572. This policy is reflected also in the regulations
which implement mandatory exclusion under section 1128(a) (1).
The regulations provide, inter alia, that the requirement of a
relationship between a criminal conviction and the delivery of
items or service under the Medicare and Medicaid programs can be
satisfied by criminality in". . . the performance of management
or administrative services . . ." 42 C.F.R. ยง 1001.101(a).
Thus, I find that Petitioner, as co-owner of a business which
administered sonogram and blood tests, falls within the class of
persons the law was intended to deter and is not immune to
exclusion.

In Ifeoma Afeonyi, DAB CR262 (1993), the petitioner was an owner
of a clinic who received kickbacks for directing Medicaid-funded
laboratory work. It was held that the criminal conviction was
based upon acts which arose directly out of the delivery of
services under Medicaid and that it was proper to exclude the
petitioner from the programs based upon her criminal conviction
even though she was not a health-care practitioner but, rather,
occupied the role of an owner or manager.

As to Petitioner's contention that the I.G. did not act within a
reasonable time to effect his exclusion, I, as an administrative
law judge, have no authority to alter the effective date of
exclusion designated by the I.G. as a remedy for the latter's
alleged tardiness. The appellate panel in Shanti Jain, M.D., DAB
CR237 (1992), aff'd, DAB 1398 (1993), held that "[a]n
5

administrative law judge has no authority to alter the effective
date of exclusion designated by the I.G. where the I.G. acted
within the discretion afforded by statute and regulation in
setting the effective date." Jain, DAB 1398, at 7. Thus, I am
without authority to alter the commencement date of Petitioner's
exclusion.

Although one may understand Petitioner's irritation at being
excluded from federal health care programs over two years after
he was convicted by the State court and imprisoned, the
regulations specify no time limit for the I.G. in cases involving
exclusions under section 1128(a)(1) of the Act. Fred R. Spierer,
DAB CR359 (1995).

Finally, Petitioner contends also that his "exclusion is
permissive, not mandatory," and that "[t]he minimum period of
exclusive [sic] is 3 years". Petitioner's generalized position
that the I.G. should have proceeded under the permissive
exclusion provisions of section 1128(b) of the Act is without
merit. Where a criminal conviction satisfies the statutory
criteria of section 1128(a) (1), then section 1128(a)(1) is
controlling and the I.G. must impose the mandatory exclusion
which the statute provides.

The basis for Petitioner's exclusion rests upon his conviction of
a program-related offense. It is well established that, under
section 1128(a)(1), the Secretary is required to exclude from
participation any individual who is convicted of an offense
related to the delivery of an item or service under the Medicare
or Medicaid programs. See e.g., Francis Shaenboen, DAB 1249
(1991); DeWayne Franzen, DB 1165 (1990); Jack W. Greene, DAB 1078
(1989), aff'd sub nom, Greene v. Sullivan, 731 F.Supp. 835 (E.D.
Tenn 1990).

CONCLUSION

Sections 1128(a) (1) and 1128(c)(3)(B) of the Act mandate that
Petitioner herein be excluded from the Medicare and Medicaid
programs for a period of at least five years because he has been
convicted of a criminal offense related to the delivery of a
health care item or service under the Medicaid program. The
five-year exclusion is therefore sustained.

/s/

Joseph K. Riotto
Administrative Law Judge