DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:

Tohono O'odham Nation, 30, 1989

DATE:

Appellant,
-ve- Docket No. C-84
Indian Health Service, DECISION CR 30

Appellee.

DECISION OF ADMINISTRATIVE LAW JUDGE

Appellant Tohono O'odham Nation requested a hearing,
protesting Appellee Indian Health Service's decision to
rescind a component of a contract which had been entered
into between Appellant and Appellee. Appellee moved to
dismiss Appellant's hearing request, on the ground that
it was moot. I reserved judgment on the motion and
conducted a hearing. Based on the facts, the law, and
applicable regulations, I conclude that the case is not
moot, and I deny Appellee's motion. I conclude further
that Appellee did not properly terminate the contract
component in compliance with applicable law and
regulations, and I am deciding this case in favor of
Appellant.

BACKGROUND

On August 12, 1988, Appellee notified Appellant that it
had decided to rescind the psychological services
component of a contract between the parties to provide
behavioral health services to Appellant's tribal members.
Appellee told Appellant that the decision to rescind the
contract component was based on Appellee's conclusion
that Appellant's performance constituted an "immediate
threat to the safety of the intended beneficiaries ..
and to other members of the Indian community served by
2

that component of the contract." J. Ex. 6/1.! Appellee
cited as authority for the rescission General Provision
Clause No. 16(c)(2) of the contract, 25 U.S.C. 450m, and
42 C.F.R. 36.233(c)(2). Id.

Appellant timely requested a hearing, and the case was
assigned to me for a hearing and decision. On February
3, 1989, Appellee filed a motion to dismiss the case on
the ground that it was moot, and Appellant filed
opposition to the motion on February 17, 1989. I
conducted a hearing in the case in Sells, Arizona, on
March 15, 1989, in Tucson, Arizona, on March 16-17, 1989,
and in Washington, D.C., on April 3, 1989. Appellant and
Appellee filed post hearing briefs on May 15 and May 19,
1989, respectively.’ The parties filed reply briefs on
June 7, 1989, and I closed the record of this case on
that date.

ISSUES

The issues presented in this case are whether:

1. Appellant's request for hearing should be
dismissed because the case is moot; and

2. Appellee properly rescinded the psychological

services component of the behavioral health services
contract between Appellee and Appellant.

1

The parties' exhibits and memoranda, and the transcript of the

hearing, will be cited as follows:

Joint Exhibit J. Ex. (number) / (page)
Appellant's Exhibit At. Ex. (number) / (page)
Appellee's Exhibit Ae. Ex. (number) / (page)
Transcript Tr. (month/day) at (page)

Memorandum in Support of Appellee's Ae.'s Memorandum Supporting

Motion to Dismiss for Mootness
Appellant's Opposition to Motion
to Dismiss
Appellant's Post-Hearing Brief

Dismissal at (page)

Dismissal at (page)
At.'s Brief at (page)

At.'s Memorandum Opposing

Appellee's Post Hearing Brief
Appellant's Reply Brief

Appellee's Reply to Appellant's

Post-Hearing Brief

2

Ae.'s Brief at (page)
At.'s Reply Brief at (page)

Ae.'s Reply Brief at (page)

Pursuant to my directive, Appellee's post-

hearing brief was embargoed from Appellant until
Appellant filed its post-hearing brief.
PPLICABLE W. TIONS
A. Statutes.

1. The Indian Self-Determination and Education
Assistance Act, 25 U.S.C. 450a-m.

2. The Administrative Procedure Act, 5 U.S.C. 551
et seq.

B. tion
1. 42 C.F.R. Part 36--Indian Health.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. On December 31, 1987, Appellee and Appellant entered
into a contract, pursuant to 25 U.S.C. 450g(a), to
provide behavioral health services to Appellant's
members. J. Ex. 1A.

2. The term of the contract ran from January 1, 1988, to
September 30, 1988. J. Ex. 1A.

3. The contract includes as a component the delivery of
psychological services by the Tohono O'odham
Psychological Services Branch (TOPS). J. Ex. 1A/12-13.

4. TOPS was formed in 1969, and Appellant and Appellee
contracted beginning in 1975 to have psychological
services rendered by TOPS. J. Ex. 1A/12; Tr. 3/15 at
236.

3 The contract states that, in meeting contract

requirements, Appellant shall perform work and services
in accordance with a technical proposal dated August 9,
1987. J. Ex. 1A/3. After completion of testimony, the
parties offered, and I received into evidence, a document
titled "Revised Scope of Work and Budget for
Psychological Services and the Alcoholism Program," dated
August 21, 1987, which they represent as the technical
proposal referenced in the contract. J. Ex. 90. This
document does not describe contract obligations different
from those stated in the contract and recited in these
Findings of Fact and Conclusions of Law.

* The transcript of testimony taken on March 15,
1989, incorrectly states on the cover page that it
contains testimony taken on March 14, 1989. The
transcript of testimony taken on March 16, 1989,

(continued...)
4

5. The contract requires TOPS to conduct psychological
service clinics at Appellee's and tribal and school
facilities on Appellant's reservation. J. Ex. 1A/5, 12.

6. TOPS is also required to provide psychological
consults to Appellee's, and contractor's, facilities
where Appellant's members are treated as inpatients. J.
Ex. 1A/5.

7. The contract specifies that psychological services,
including psychological assessment and psychotherapy for
individuals, families, and children, will be rendered by
four Mental Health Technicians (MHTs). J. Ex. 1A/12.

8. MHTs are required by the contract to conduct intake
interviews, assist with the formulation of diagnoses, and
provide ongoing psychotherapy under the supervision of a
Behavioral Health Clinical Supervisor (clinical
supervisor) and a psychiatrist employed by Appellee.

J. EX. 1A/12, 13.

9. MHTs are required to schedule and conduct
psychological service clinics at least twice weekly and
to provide individual counseling of at least 16 scheduled
hours per MHT, per week. J. Ex. 1A/13.

10. With respect to Appellee's Sells Hospital, the
contract requires MHTs to qualify for paraprofessional
staff privileges, to attend morning rounds and discharge
planning meetings, and to be available for inpatient
consultations during week days. J. Ex. 1A/13.

11. The contract does not require all MHTs to have
paraprofessional staff privileges at Appellee's Sells
Hospital. See J. Ex. 1A/12-13.

12. The contract does not make paraprofessional staff
privileges a prerequisite for MHTs to perform their
duties under the contract, except for those duties
described in Finding 10, supra. See J. Ex. 1A/12-13;
Tr. 3/15 266-267.

13. The contract requires MHTs to be present at specific
locations at scheduled hours to provide emergency
referrals and treatment recommendations for Appellant's

4(...continued)
incorrectly states on the cover page that it contains
testimony taken on March 15, 1989. Citations to the
transcripts of these dates will be to the correct date,
and not to the cover page date.
5

tribal members who need and seek such services. See J.
Ex. 1A/12-13; 3/16 at 536-541.

14. The contract gives TOPS discretion to establish
locations and schedules for MHTs' clinical services,
within the minimum total hours of service required by the
contract. J. Ex. 1A/12-13.

15. The contract does not require TOPS to maintain
emergency services beyond the minimum total hours of
service required by the contract. See J. Ex. 1A/12-13.

16. The contract does not state the minimum training and
experience required to qualify individuals to perform the
duties of MHTs. See J. Ex. 1A/12-13.

17. Individuals performing the duties of MHTs are
required by the contract to possess sufficient training
and experience to enable them to perform the duties
specified by the contract and described in Findings 5-11.
J. Ex. 1A/12-13.

18. The contract does not state the minimum training and
experience required to qualify an individual to perform
the job of clinical supervisor. See J. Ex. 1A/12-13.

19. A person performing the job of clinical supervisor
is required by the contract to possess sufficient
training and experience to enable him or her to perform
the supervisory duties specified by the contract. J. Ex.
1A/12-13.

20. The contract requires that client assessment and
psychotherapy treatment plans be in accordance with
Appellee's program standards and that, at minimum, 75
percent of treatment plans be completed. J. Ex. 1A/13.

21. The contract does not identify the program standards
with which psychotherapy and treatment plans must comply.
See J. Ex. 1A/13.

22. The contract does not require that all contract
performance must be in accord with the requirements of
the Indian Health Manual Part 3 - Professional Services,
Chapter 14 - Mental Health Programs. See J. Ex. 1A/13;
J. Ex. 15.

23. The contract requires that MHTs maintain client
records and that at least 75 percent of these records
include an intake assessment, treatment plan, progress
notes, and a discharge plan. J. Ex. 1A/13.
6

24. %It also requires that MHTs utilize the Patient Care
Information System (PCIS), a computerized record-keeping
system developed by Appellee, to record client services.
J. Ex. 1A/15.

25. The contract does not require TOPS to maintain a
register of chronically mentally ill individuals on
Appellant's reservation. See J. Ex. 1A/12-13.

26. Effective March 1, 1989, the Credentials Committee
of the Executive Committee of the Medical-Dental Staff of
Appellee's Sells Hospital restricted the paraprofessional
privileges of one of TOPS' MHTs. J. Ex. 14/10.

27. As a consequence of the restriction, this MHT was
permitted to evaluate and counsel patients at Appellee's
Sells Service Unit facilities only under the direct
supervision of Appellee's psychiatrist or Sells Service
Unit credentialed TOPS clinical supervisor or
consultants. J. Ex. 14/10.

28. Also, this MHT was required to document her
assessments for the medical charts only with the
co-signature of either Appellee's psychiatrist or the
credentialed TOPS clinical supervisor. J. Ex. 14/10.

29. Two of the remaining three MHTs employed by TOPS
resigned on or about April 1, 1988. Tr. 3/15 at 249-250;
3/16 at 523; 4/3 at 52.

30. TOPS' clinical supervisor resigned in early March,
1988. J. Ex. 2/1; Tr. 3/16 at 460.

31. As of April, 1988, TOPS employed one credentialed
MHT, one MHT whose credentials were restricted, and no
clinical supervisor. Tr. 4/3 at 52; see Findings 17-19,
Supra.

32. This loss of personnel diminished TOPS' capability
to perform contracted services. Tr. 4/3 at 53-55.

33. TOPS experienced difficulty assigning MHTs to
counsel emotionally disturbed patients who had been
discharged from psychiatric hospitalization. Tr. 4/3 at
69.

34. Some individuals who had regularly been treated by
MHTs who resigned were not assigned a replacement
therapist. Tr. 4/3 at 69.
7

35. School counselors and teachers had difficulty
getting assistance from TOPS when they sought to refer
individuals for treatment. Tr. 4/3 at 70.

36. Physicians at Appellee's Sells Service Unit
facilities experienced difficulty in getting patients’
psychological status assessed by MHTs within a reasonable
period of time. Tr. 3/17 at 73.

37. On April 18, 1988, Appellee requested Appellant to
present a plan to resolve the deficiencies caused by loss
of personnel. J. Ex. 2.

38. In May, 1988, Appellant presented Appellee with a
proposal to resolve the deficiencies. See J. Ex. 17;
Tr. 3/15 at 251.

39. This proposal was not accepted by Appellee. See J.
Ex. 17; Tr. 3/15 at 251.

40. Additional discussions and document exchanges
occurred between Appellant and Appellee which failed to
produce a mutually acceptable plan to resolve the
deficiencies created by the loss of personnel. J. Ex.
26; Tr. 3/15 at 251-256.

41. Representatives of Appellant and Appellee met in
June, 1988, and Appellant offered a plan which, among
other things, proposed to replace the resigned clinical
supervisor with a person supplied by a subcontractor,
Palo Verde Hospital. J. Ex. 26; Tr. 3/17 at 96-97; 3/15
at 256.

42. Although this proposal was not formally accepted by
Appellee, in writing, Appellee accepted the concept of
replacing resigned personnel with qualified subcontract
personnel. J. Ex. 26; Tr. 3/17 at 97.

43. By letter dated June 23, 1988, Appellee advised
Appellant that if corrective action was not accomplished
by July 15, 1988, Appellee intended to immediately
reassume the psychological services component of its
contract with Appellant. J. Ex. 3.

44. Appellant decided to hire an individual to replace
the resigned clinical supervisor and to subcontract with
Palo Verde Hospital to obtain personnel to replace the
resigned MHTs. J. Ex. 27.

45. Appellant notified Appellee of its intentions on
July 6, 1988. J. Ex. 27.
8

46. The individual hired by Appellant to serve as its
clinical supervisor had no prior experience in
supervising the performance by mental health clinicians
of clinical responsibilities. Tr. 3/15 at 130-131.

47. This employee had extensive administrative
experience managing alcoholism treatment and other Indian
health care programs. Tr. 3/15 at 113-114.

48. The clinical supervisor was fluent in Appellant's
tribal language. Tr. 3/15 at 114.

49. Appellant's new clinical supervisor commenced his
employment with Appellant on July 25, 1988. Tr. 3/15 at
112.

50. Appellant entered into a contract with Palo Verde
Mental Health Services, d/b/a Palo Verde Hospital (the
subcontract), on July 15, 1988. J. Ex. 64/29-34.

51. The subcontractor agreed to supply Appellant with
the services of a clinician to perform the duties of
client assessment, individual counseling and
psychotherapy with written assessments, treatment plans,
and progress notes as needed by Appellant. J. Ex. 64/30.

52. The subcontractor agreed that the clinician would be
a master's degree social worker or have a master's degree
in another behavioral health area. J. Ex. 64/30.

53. The subcontractor agreed that in the clinician's
absence, a substitute clinician satisfactory to
Appellant, would be designated. J. Ex. 64/30.

54. The subcontractor agreed that the clinician would
perform 32 hours per week of direct clinical service.
J. Ex. 64/31.

55. The person assigned to work for TOPS pursuant to the
subcontract had a master's degree in education with a
practicum in mental health counseling. Tr. 3/15 at 156.

56. This person had worked since December, 1981, as a
mental health counselor. Tr. 3/15 at 156.

57. This individual's duties for the two and one-half
years prior to his assignment under the subcontract,
consisted of crisis intervention. Tr. 3/15 at 157.

58. His entire responsibility during this period
consisted of performing emergency psychiatric
evaluations. Tr. 3/15 at 157.
9

59. This individual had the training and experience to
perform all of the duties assigned to MHTs under the
contract. J. Ex. 64/30-31; Tr. 3/15 at 152-157; Tr. 4/3
at 128; 129-130.

60. The clinician provided by subcontract began
rendering clinical services for TOPS in July, 1988.
Tr. 3/15 at 153-154; 3/16 at 570.

61. During the two weeks that the clinician was on
vacation, from late July until early August, the
subcontractor supplied another clinician to perform his
duties. Tr. 3/15 at 155.

62. Both the contract clinician and his replacement
actively performed evaluations and made referrals in
clinical settings for TOPS. Tr. 3/15 at 168-171.

63. On July 27, 1988, Appellant notified Appellee that
it had met the conditions of its plan to correct contract
deficiencies. J. Ex. 4.

64. On July 27, 1988, Appellee wrote to Appellant
concerning the status of the TOPS program. J. Ex. 8.

65. Appellee demanded that Appellant devise a work plan
to provide and manage psychological services. J. Ex.
8/4.

66. Appellee set a deadline of August 8, 1988, for
Appellant to submit its work plan to Appellee, and told
Appellant that an inspection team would inspect TOPS'
operations at noon on August 5, 1988. J. Ex. 8/5.

67. Appellee's team conducted its inspection of TOPS on
August 5, 1988. J. Ex. 6; J. EX. 42; Tr. 3/17 at
104-105.

68. The inspection team was composed of four
individuals: Dr. George McCoy, Dr. Patricia Nye, and
Maria Stetter, all employees of Appellee; and Dr. Marvin
Kahn, a consultant to Appellant, J. Ex. 6/1.

69. The inspection team conducted its review on the
afternoon of August 5, 1988. J. Ex. 42/15; Tr. 3/17 at
104.

70. Members of the inspection team spoke with
Appellant's representatives and clinicians. J. Ex.
42/15; Tr. 3/17 at 127-128.
10

71. Members of the inspection team did not interview
clinicians furnished through Appellant's subcontract with
Palo Verde Hospital. Tr. 3/17 at 168.

72. Members of the inspection team reviewed about 50
randomly selected patient records. Tr. 3/17 at 129.

73. Dr. McCoy was not familiar with the contractor's
obligations under the psychological services component.
Tr. 3/17 at 132, 135, 142, 146, 148.

74. Dr. McCoy based many of his judgments regarding
Appellant's performance of the contract component on his
conclusions that Appellant had obligations which were not
in fact required by the contract. Tr. 3/17 at 133, 135,
142, 146, 148.

75. Dr. McCoy was the only member of the team who
recommended in writing that Appellee rescind the contract
component. J. Ex. 42/7-11.

76. The inspection team did not produce a report with
recommendations. See J. Ex. 42.

77. (Individual members of the inspection team submitted
separate reports. J. Ex. 42

78. On August 12, 1988, Appellee rescinded the
psychological services component of its contract with
Appellant and assumed operation and control of the
psychological services program. J. Ex. 6.

79. Appellee did not offer a hearing to Appellant prior
to rescinding the contract component. J. Ex. 6.

80. Appellee concluded that Appellant's performance
under the psychological services component of the
contract constituted an immediate threat to the safety of
members of the Indian community served by that component.
J. Ex. 6.

81. On August 5, 1988, August 12, 1988, and all dates
between August 5 and 12, 1988, the TOPS program had
sufficient trained and experienced personnel to perform
the duties assigned to MHTs under the contract. Tr. 3/15
at 265-266; 275-277; Tr. 4/3 at 195.

82. On August 5, 1988, August 12, 1988, and all dates
between August 5 and 12, 1988, the TOPS program had a
clinical supervisor who was qualified to perform all of
the administrative supervisory requirements of the
contract. Tr. 3/15 at 113-114.
11

83. TOPS' relationship with its subcontractor enabled it
to obtain clinical supervision of the MHTs; this, in
conjunction with the clinical supervision provided by
Appellee's psychiatrist pursuant to the contract, would
satisfy the clinical supervision requirements of the
contract. Tr. 3/15 at 134-135; 261, 263; Tr. 3/16 at
571-572.

84. On August 5, 1988, when Appellee's review team
inspected TOPS, TOPS' new clinical supervisor did not
present a schedule which allocated personnel in a manner
which met all contract personnel requirements. Tr. 3/15
at 118-119.

85. Appellant's clinical supervisor prepared a schedule
allocating personnel but forgot to bring it to the
meeting with Appellee's review team. Tr. 3/15 at 118.

86. Appellant has not established that on August 5,
1988, August 12, 1988, or any date between August 5 and
12, 1988, it tendered a copy of the schedule to Appellee.
See Tr. 4/3 at 195; 201-202.

87. The Indian Self-Determination and Education
Assistance Act, 25 U.S.C. 450a-m, provides at 25 U.S.C.
450m, that the Secretary may immediately rescind a
contract entered pursuant to the Act without first
holding a hearing, if he or she finds that there is an
immediate threat to safety.

88. Regulations adopted pursuant to the Act provide
that, where Appellee's Director or his or her delegate
determines that a contractor's performance poses an
immediate threat to the safety of any person, the
Director or delegate may immediately rescind a contract
without first holding a hearing. 42 CFR 36.233 (c) (2).

89. Failure by the contractor to perform the contract
will not necessarily justify peremptory rescission of the
contract. See 25 U.S.C. 450a, g, m; 42 C.F.R.

36.233(c) (2).

90. Peremptory rescission is justified where the
contractor's performance of the contract creates a
substantial likelihood of imminent harm to individuals.
25 U.S.C. 450m

91. In hearings on peremptory rescissions, the
contractor has the burden of proving a prima facie case
that the contract was improperly rescinded. See 5 U.S.C.
556; 25 U.S.C. 450m; 42 C.F.R. 36.233(c) (2); (ad) (1).
12

92. Once the contractor meets this burden, the burden
shifts to the agency to prove that the peremptory
rescission was in accordance with statutory criteria.
See 25 U.S.C. 450a, g, m.

93. Appellee has not established that as of August 12,
1988, August 12, 1988, or any date between August 5 and
August 12, 1988, an immediate threat existed to the
safety of any person by virtue of Appellant's performance
of, or failure to perform, the contract. See Findings
81-85, supra.

94. Appellee improperly rescinded the psychological
services component of the contract.

95. On October 11, 1988, Appellee notified Appellant
that it declined to renew the psychological services
component of the contract. At. Ex. 13.

96. The issue of the propriety of the declination is not
an issue in this case.

97. The September 30, 1988 expiration of the contract
and the October 11, 1988 declination have not completely
and irrevocably eradicated the effects of the rescission.

98. To the extent that Appellant has suffered pecuniary
loss by virtue of Appellee's improper rescission of the
psychological services component of the contract, a
finding of improper rescission in this case may provide
Appellant a basis to seek additional relief in another
forun.

99. The expressed reasons for the declination include
many of the grounds for rescission offered by Appellee.
At. Ex. 13; At. Ex. 21.

100. A finding of improper rescission in this case may
provide Appellant with grounds to challenge the
declination,

101. This case is not moot.

ANALYSIS
A. This case is not moot.
Appellee moved to dismiss this case, arguing that even if
Appellee improperly rescinded the psychological services
component of its contract with Appellant, there is no

likelihood that such action would recur and that
developments subsequent to the rescission completely and
13

irrevocably eradicated the effects of the rescission. I
deny Appellee's motion because the effects of the
rescission and reassumption of the psychological services
component of the contract between Appellant and Appellee
have not been completely and irrevocably eradicated by
subsequent events.

The standard employed by federal courts to determine
whether a case has become moot is set forth in County of
Los Angeles v. Davis, 440 U.S. 625, (1979). The Supreme
Court stated in Davis that a case becomes moot when the
issues presented are no longer "live," or where the
parties lack a legally cognizable interest in the outcome
of the case. 440 U.S. at 631. The court identified two
elements which must be present in order for a case to be
moot: (1) there is no reasonable expectation that the
alleged violation will recur; and (2) interim relief or
events have completely and irrevocably, eradicated the
effects of the alleged violation. Id.°

The Supreme Court also concluded in Davis that there is a
heavy burden on a party advocating dismissal on the basis
of mootness to establish that a case is moot. 440 U.S.
625. Implicit in this statement is the conclusion that
courts (and by extension, administrative agencies) should
not terminate the adjudicative process on mootness
grounds except in those cases where it is clear that a
decision will provide no meaningful remedy.

Appellant argues that this case cannot be moot, because
Appellant has a reasonable expectation that the alleged
violation (wrongful rescission of the contract component)
will recur. Appellant asserts that this is a fair
conclusion based on the history of prolonged federal
domination of Indian service programs. At.'s Memorandum

5 Appellant questions whether I have the autnority
to decide if this case is moot. At.'s Memorandum
Opposing Dismissal at 8-9. The regulations governing
this proceeding are silent on the issue. See 42 C.F.R.
36.233(d). Neither party offers federal case law or
administrative precedent which directly addresses whether
I have the authority to rule on questions of mootness. I
conclude that the authority for me to rule on mootness
issues is implicit in the authority to hear and decide
cases conferred by the regulations. It is apparent from
Davis that the mootness doctrine is an efficiency-
promoting mechanism which enables courts to dispose of
cases, consistent with due process requirements, in which
no meaningful remedy may be granted to litigants.
Identical efficiency imperatives apply to quasi-judicial
proceedings such as the present case.
14

Opposing Dismissal at 18; see 25 U.S.C. 450a(b).
Appellee strongly contests this assertion. Ae.'s Reply
Brief at 5.

Regardless of the history of federal-Indian relations, I
find nothing in the record of this case which supports
Appellant's contention that wrongful rescission of this
or similar contract components is likely to recur. The
record of this case shows that the rescission was a
singular occurrence, based on unique facts.

Central to Appellee's motion is its argument that a
finding by me that the psychological services component
was improperly rescinded will be meaningless, because it
will have no effect on past or future contractual
relations between the parties. Appellee notes that the
contract has expired and that it has declined to renew
the psychological services component. Ae.'s Memorandum
Supporting Dismissal at 6. Appellee argues that I cannot
order the parties to resume the expired contract, and, as
the issue of the propriety of the declination is not
before me, I cannot order that the contract be renewed.
Therefore, according to Appellee, there is no meaningful
relief that I can order and the case is moot.

Appellee's assertion that I cannot order that the
contract be resumed or renewed is correct, but it begs
the question of whether this case is moot. It appears
that Appellee's decision to decline to renew the
psychological services component was, at least in part,
grounded on its reasons to rescind the component. A
conclusion by me that the component was improperly
rescinded may provide Appellant with support in another
proceeding for its assertion that the subsequent
declination was improper.

Appellant argues that, to the extent that the component
was improperly rescinded, Appellant has been financially
damaged, and, for that reason, the case is not moot. It
asserts that I should order that the rescission be set
aside and direct Appellee to pay Appellant all costs
properly incurred by it in operating the component in the

6 Appellant asserts that the declination is based

on "the same set of circumstances" by which Appellee
seeks to justify rescinding the psychological services
component and that, if it prevails in its challenge of
the rescission, "the declination cannot stand." At.'s
Reply Brief at 32. It is unnecessary for me to make a
finding on this claim in order to resolve the mootness
issue.
15

period following the rescission. At.'s Memorandum
Opposing Dismissal at 11-12. Appellee contends that
there is no issue as to damages, because it has offered
to reimburse Appellant for all properly incurred program
operation costs through the end of the contract period.
Ae.'s Reply Brief at 19.

There is no provision in the law or in relevant
regulations which authorizes me to award damages in this
case. See 25 U.S.C. 450m; 42 C.F.R. 36.233(d). I am not
prepared to conclude that I have such authority in the
absence of legal authority which states that I do. There
was no evidence offered or received at the hearing of
this case concerning damages, if any, sustained by
Appellant. Therefore, I make no finding in this case
that Appellant is entitled to damages.

However, it is conceivable that Appellant has sustained
damages as a result of Appellee's actions and that
Appellant may have a right to prove those damages in
another forum. A decision as to the propriety of the
rescission may be a necessary prerequisite to seeking
damages. My findings may constitute a meaningful remedy
in the sense that they give Appellant a basis upon which
to seek additional relief.

Therefore, my decision in this case may provide a basis
for tangible benefits to Appellant, even if I am without
authority to reinstate the contract component, to address
the propriety of the declination, or to award damages.
For this reason, the case is not moot.

B. i ided_the psychological
services component of the contract.

1. Burden of proof.

This case consists of a quasi-judicial administrative
appeal of Appellee's decision to rescind a contract
component entered pursuant to the provisions of The
Indian Self Determination and Education Assistance Act,

7 Appellee's assertion that it has agreed to pay
reasonable program operating costs to Appellant for the
period between the date of rescission and the end of the
contract period does not resolve the issue of damages.
The parties have not agreed as to these costs and,
furthermore, their positions as to appropriate
reimbursement may in some respects be affected by my
findings in this case.
16

25 U.S.C. 450a-m (the Act).® A threshold issue in this
case is which party has the burden of proof. I conclude
that Appellant bears the burden to make a prima facie
showing of improper termination; once that burden is met,
the burden shifts to Appellee to establish that the
rescission is justified, based on the law and
regulations.

Neither the Act nor regulations governing rescissions
contain an explicit statement as to allocation of burdens
of proof in hearings on rescissions. See 25 U.S.C. 450m;
42 C.F.R. 36.233(c) (2); (d)(1). The Administrative
Procedure Act, states that in administrative
adjudications, where not otherwise provided by statute,
the "proponent of a rule or order has the burden of
proof." 5 U.S.C. 556(d).

Appellant is the proponent of an order. Appellee
terminated a component of a contract between Appellant
and Appellee, and Appellant asks that I declare that
action to be improper. Therefore, under section 556(d)
of the Administrative Procedure Act, Appellant bears the
burden of establishing a prima facie case that Appellee
unreasonably rescinded the component.

The additional necessary elements of proof in this case
can be inferred from the language of 25 U.S.C. 450a-m.
As I note in subpart 2 of this Analysis, infra, Congress
directed that federal services to Indian tribes be
contracted for and made it plain that these contracts
could be terminated only in narrowly defined
circumstances. This amounts to a rebuttable presumption
that contracts made pursuant to the Act, once entered,
are valid.’ Therefore, Appellant makes a prima facie

8 Appellant filed its hearing request pursuant to
42 C.F.R. 36.233(c)(2) and (d), which provides that
hearings on rescissions be conducted by The Indian Health
Service Contract Appeals Board. In November, 1988,
Congress amended the Act to provide at section 450m that,
in cases of rescission, the contracting party must be
provided with a hearing "on the record." In January,
1989, the Contract Appeals Board decided that this case
should be assigned to an administrative law judge for a
hearing and decision.

Appellant cites legislative history to the Act to
support its contention that the burden of persuasion in
rescission cases falls on Appellee. At.'s Brief at 8-16.
Although this history supports my analysis, I do not rely
on it because I do not find that there exist ambiguities
17

case for improper rescission when it establishes: (1)
that a contract was entered between Appellant and
Appellee; and (2) that Appellee rescinded a component of
that contract prior to its expiration date.

Once Appellant establishes its prima facie case, then,
consistent with Congressional intent, the burden shifts
to Appellee to establish that as of the moment of
rescission there no longer exists a valid contract.
Appellee meets that burden by proving, by a preponderance
of the evidence, that its rescission of the component is
consistent with statutory and regulatory criteria for
rescission. This evidence may be rebutted by Appellant.

There is no dispute between the parties that a contract
was entered and that Appellee rescinded a component prior
to the contract expiration date. Appellant's prima facie
case is, therefore, established. The issue in dispute is
whether Appellee properly rescinded the component.
Appellee bears the burden of showing, by a preponderance
of the evidence, that the rescission was justified.

2. tatut a sis contractin
and rescinding contracts.

The starting point for determining whether Appellee
properly rescinded the component is to identify the legal
standards for contracting and rescinding contracts
established by the Act and implementing regulations
contained in 42 C.F.R. Part 36. The Act establishes a
federal policy to assure maximum Indian participation in
the direction of federal services to Indian communities
in order to be more responsive to the needs and desires
of those communities. 25 U.S.C. 450a(a). It declares a
commitment to an orderly transition from federal
domination of Indian services to effective and meaningful
participation by the Indian people in the planning,
conduct, and administration of those services. 25 U.S.C.
450a(b) .°

in the Act relating to this issue which need clarifying
by reading legislative history.

10 In a separate enactment, Congress found that:

(T)he prolonged Federal domination of Indian
service programs has served to retard rather than
enhance the progress of Indian people and their
communities by depriving Indians of the full
opportunity to develop leadership skills crucial to
the realization of self-government, and has denied
18

The Act implements these objectives, in part, by
directing the Secretary of Health and Human Services (the
Secretary) to enter into contracts with Indian tribes, at
the tribes' request, to perform functions previously
reserved by law to the Secretary. 25 U.S.C. 450g. The
contract between Appellant and Appellee, including the
component at issue, was entered pursuant to this section
of the Act.

The Act prohibits agencies from lightly taking back that
which they have contracted out. The Act and implementing
regulations permit the Secretary or his or her delegate
(including Appellee's Director or the Director's
delegate) to rescind a contract or contract component
only under narrowly defined circumstances. 25 U.S.C.
450m. Congress' directive to the Secretary to contract
services, coupled with the restrictive rescission
language of section 450m, establishes that mere
unsatisfactory performance by a contractor will not
justify rescission.

The Secretary, the Director, or the Director's delegate
may, after providing a contracting tribe with a notice
and hearing, rescind a contract or component if he or she
concludes that the contractor's performance involves the
violation of the rights or endangerment of the health,
safety, or welfare of any persons, or gross negligence or
mismanagement in the handling or use of contract monies,
and the contractor has failed to take prescribed
corrective action. 25 U.S.C. 450m; 42 C.F.R. 36.233(a).
However, where the Secretary, the Director, or the
Director's delegate determines that a contractor's
performance poses an immediate threat to the safety of
any person, then he or she may rescind the contract
without first giving notice and holding a hearing.

25 U.S.C. 450m; 42 C.F.R. 36.233(c) (2).

Neither the Act nor regulations define the expressions
“immediate threat to safety" or "endangerment of the
health, safety, or welfare." It is evident from the
plain meaning of these expressions, as well as from their
context, that Congress intended that peremptory
rescission without a prior hearing would not be justified
except in the case where the contractor's performance of
the contract creates a substantial likelihood of imminent
harm to individuals. This distinguishes "immediate

to the Indian people an effective voice in the
planning and implementation of programs for the
benefit of Indians which are responsive to the true
needs of Indian communities. . . . 25 U.S.C. 450.
19

threat" from "endangerment," where rescission can be
effected only upon notice, a hearing, and a demonstrated
failure by the contractor to take corrective action.
Only some measurable risk of harm need be present to
justify rescission after a hearing and a demonstrated
failure by the contractor to correct deficiencies.

There are neither judicial nor administrative decisions
applying section 450m, so this is a case of first
impression. However, decisions applying similar
rescission provisions in other statutes support this
interpretation of the Act.

Analogous language exists in Social Security Act
provisions providing for decertification of Medicare and
Medicaid provider facilities. 42 U.S.C. 1395cc(f);
1396i(c). These sections provide for immediate
decertification in cases where facilities are not
operated in compliance with statutory requirements and
where operations “immediately jeopardize" the health and
safety of patients, 42 U.S.C. 1395cc(f) (1) (A)? and
decertification after a hearing and appeals process in
circumstances where noncompliance without immediate
jeopardy is present, 42 U.S.C. 1396i(c)(2). Courts have
held that peremptory decertification is unlawful absent
the presence of some immediate jeopardy to patients'
health and safety. Wayside Farms v. United States
Department of Health, 663 F. Supp. 945 (N.D. Ohio 1987);
Lexington Management Co. v. Department of Social
Services, 656 F.Supp. 36 (W.D. Mo. 1986).

The Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. 136, permits the Environmental Protection Agency
to immediately suspend the registration of a pesticide if
its Administrator "determines that action is necessary to
prevent an imminent hazard during the time required for
cancellation or change in classification proceedings . .
. ." 7 U.S.C. 136(c)((1). (Emphasis added.) This
language has been interpreted to require a "substantial
likelihood" that continued use of a pesticide during the
administrative review process will cause serious harm.
Environmental Defense Fund v. Environmental Protection
Agency, 548 F. 2d 998, 1001 (D.C. Cir. 1976), cert.
Genied sub _ nom. Velsicol Chemical Corp. v. Environmental
Protection Agency, 431 U.S. 925 (1977).

The rescission at issue in this case was effected by
Appellee pursuant to the peremptory rescission provisions
of 25 U.S.C. 450m and 42 C.F.R. 36.233(c)(2). Appellee
asserts that Appellant's operation of the psychological
services component constituted an immediate threat to the
safety of individuals. In order to sustain the
20

rescission, Appellee must establish that, by virtue of
Appellant's performance of the contract, there existed at
the time of rescission a substantial likelihood of
imminent harm to individuals served by the psychological
services component.

Appellee suggests that, because of the nature of the
contract component at issue (provision of mental health
services), evidence of nonperformance by Appellant
justifies peremptory rescission. Ae.'s Brief at 19. I
disagree. Certainly, nonperformance by Appellant of
mental health services contracted under the component
could create an "immediate threat" situation. However,
neither the Act nor regulations support a conclusion that
nonperformance of the psychological services component
creates a per_se basis for peremptory rescission. I
conclude that whether rescission is justified depends on
proof of the effects of failure by the contractor to
perform the contract. That in turn requires examination
of evidence establishing: the contractor's duties;
whether the contractor performed those duties; and the
actual or potential consequences of the performance or
non-performance of contract duties.

Appellee also argues that its interpretation of the
rescission provisions of the Act and regulations must be
afforded substantial deference, citing Chevron, U.S.A.
Inc. v. Natural Resource Defense Council, 467 U.S.843
(1984). Ae.'s Brief at 24. Appellee further asserts
that the rescission decision constitutes an agency
decision which must be accorded deference, and which
should not be overturned absent a clear error of
judgment. Ae.'s Brief at 27-28. These arguments are
merged by Appellee to support the proposition that its
decision to rescind the component is presumptively
correct. Id.

I do not accept this analysis. Agency interpretations of
statutes embodied in regulations are accorded substantial
deference by the courts. Chevron, U.S.A., Inc., supra-
But that is not what is at issue in this case. This case
addresses the lawfulness of a management decision. The
Chevron case does not address the question of whether
such management decisions will be accorded the kind of
deference given by the courts to policies implemented as
regulations. Furthermore, the decision to rescind the

"The regulations contained in 42 C.F.R. Part 36

constitute the kind of statutory interpretations at issue
in the Chevron case. Their legitimacy is not at issue
here.
21

component is not the kind of final agency determination
to which a presumption of correctness attaches. Both 25
U.S.C. 450m and 42 C.F.R. 36.233(d) provide that the
"final" decision in this case will be the final agency
decision based on the hearing afforded Appellant, and not
the management decision to rescind the contract
component. Therefore, Appellee's rescission action is
not presumptively correct.

3. Appellant's contractual obligations.

Not only must the peremptory rescission comport with the
legal criteria established by the Act, but it must be
based on Appellant's performance of the contract
component. A rescission cannot lawfully be based on a
contractor's failure to perform functions it is not
contractually obligated to perform. It is, therefore,
necessary to determine the obligations incurred by
Appellant under the psychological services component.

Unfortunately, the contract (and in particular, the
psychological services component) is not a document which
is easy to understand. There are several aspects to the
document which make it ambiguous.

Other documents incorporated by reference in the contract
either do not appear to exist, or are not accurately
identified by the contract. For example, the contract
incorporates by reference a "technical proposal"
ostensibly dated August 9, 1987. See J Ex. 1A/3. The
parties tendered an exhibit, J. Ex. 90, which they
represent as the "technical proposal." However, this
document is dated August 21, 1987. Another problem
arises from the contract's incorporation of "standards"
which are not described or identified. For example, the
contract provides that client assessment and
psychotherapy treatment plans "will be in accordance with
-.. [Appellee's) program standards," but never identifies
the standards. See J. Ex. 1A/13. An additional problem
is created by the contract's failure to define many key
terms like "psychotherapy." Although some of the
contractor's duties are simply declared, much of the
contract language pertaining to the component is written
in terms of a narrative background statement. Other TOPS
functions are stated as "goals," rather than as
obligations.

2 vague contract language may in some respects

account for the fact that there was considerable
confusion among the witnesses as to what the contract
required. For example, Appellee's witness, Dr. George
22

I am not suggesting that much of the language pertaining
to TOPS is meaningless. The problem lies in giving
meaning to opaque language. In particular, I do not
accept Appellant's assertion that the narrative language
of the component is mere "statement of fact" which can be
dismissed as not defining the contractor's duties. At.'s
Reply Brief at 17-19. This language, despite its format,
describes the contractor's duties.

The contract requires Appellant to maintain a staff of
paraprofessional MHTs to assist medical employees of
Appellee in diagnosing and treating mental illness.
Findings 5-10. Although the specific duties of the MHTs
are not clearly defined, it is reasonable to conclude
from the terms of the contract that these individuals are
required to: identify mental illness in patients; make
some educated conclusions as to the nature of that
illness; make treatment recommendations; provide
counseling and followup care; and refer seriously
disturbed individuals to more highly trained specialists.
Id. The contract provides that TOPS will employ four
MHTs who will each provide at least 16 scheduled hours of
individual counseling per week. Findings 7, 9. The
contract does not specify where clinics and counseling
sessions must be held but presumes that TOPS will
regularly schedule them at accessible locations on
Appellant's reservation. Finding 13.

The contract states no minimum education or experience
requirements for MHTs. I do not conclude from this that
the contract allows any individual to serve as an MHT; it
is reasonable to infer from the contract that each MHT
must have enough training and experience to be able to
perform contract duties. I conclude, however, that there
is no formula for determining what education and
experience qualifies. Findings 16, 17.

The contract requires that MHTs qualify for
paraprofessional staff privileges to assist the medical
staff at Appellee's Sells, Arizona hospital. Finding 10.
The contract does not require that all MHTs have such
privileges, nor does it state that privileges are a
prerequisite for performance of MHT duties other than the
specified duties performed at the hospital. Findings

McCoy, whose opinion was clearly instrumental to
Appellee's decision to rescind the component, erroneously
asserted that the contract required TOPS to maintain off-
hours emergency services and a register of chronically
mentally ill patients. Tr. 3/17 at 142; 173.
23

11, 12. The contract fails to identify the training or
experience necessary to qualify an MHT for privileges,
and it does not state what a "privileged" MHT is
permitted to do in the hospital.

The contract provides that the MHTs are to be jointly
supervised in performing their clinical duties by a
clinical supervisor and a psychiatrist employed by
Appellee. Finding 8. As with the MHTs, the contract
does not specify the minimum education or experience
requirements for the clinical supervisor. I conclude
that the contract requires that this person have enough
training and experience to be able to perform the duties
specified by the contract. Findings 18, 19.

4. Appellant's performance of the contract
component.

TOPS began experiencing difficulties meeting its
contractual obligations in March, 1988. These
difficulties were the direct result of the sudden
resignations of two of TOPS' four MHTs, and its clinical
supervisor. Findings 29, 30. The consequence of these
resignations was that TOPS was unable to provide the
staff and services that it had agreed to provide and
which clinicians, other government entities, and tribal
members expected TOPS to provide. Findings 32-36.

During the months following the staff resignations,
Appellant attempted to reconstitute its TOPS program.
Findings 38-59. Meetings were held between Appellant and
Appellee concerning Appellant's proposals to replace the
resigned staff, and memoranda were exchanged, without
producing an agreement between the parties. Findings
38-42. In June, 1988, Appellee gave Appellant a

% Appellant's performance of the contract
component in the months prior to the August 12, 1988
rescission is not relevant to the issue of whether
peremptory rescission was justified in August, except to
provide some background and context to this case.

4 Bach party attempted to assign blame to the
other for these employees' resignations, and TOPS'
consequent difficulties in performing the contract.
Evidence as to blame is of questionable relevance to the
issue of whether conditions existed which justified
peremptory rescission. In any event, the evidence
offered by the parties fails to establish that either of
them should be assigned blame for the employees'
resignations.
24

July 15, 1988 deadline to undertake corrective action, or
face immediate rescission of the component. Finding 43.

The solution finally arrived at by Appellant had two
features. First, Appellant hired an individual to
replace the resigned clinical supervisor. Finding 44.
Second, Appellant entered a subcontract with a local
psychiatric hospital to obtain personnel to replace the
resigned MHTs. Id. In late July, Appellant notified
Appellee that the deficiencies in the TOPS program were
corrected; on August 5, 1988, Appellee sent an inspection
team to examine the status of the program. Findings 63,
64-67.

5. e Augqus: 88 ection.

The inspection team consisted of three of Appellee's
employees and a consultant employed by Appellant.
Finding 68. The team spent an afternoon on Appellee's
reservation; members of the team spoke with some
clinicians at local facilities, interviewed TOPS' new
clinical director, and examined some randomly selected
treatment records. Findings 66, 69.

The inspection team had no organized approach to
examining the TOPS program. One member, Dr. McCoy, was
unfamiliar with the terms of the contract. Finding 73.
No attempt was made to systematically interview entities
or individuals serviced by TOPS. The team failed to
contact the subcontractor and did not determine whether
the subcontracted services fulfilled contract
obligations. Finding 71. The team did not produce a
report; rather, individual members reported their
findings in separate memoranda. Findings 76, 77.

Shortly after this visit, Appellee's local management
decided to rescind the contract. On August 12, 1988,
Appellee advised Appellant that it was rescinding the
contract pursuant to the peremptory rescission provisions
of 25 U.S.C. 450m and 42 C.F.R. 36.233(c)(2). J. Ex. 6.
Appellee effected its rescission on that date. Finding
78.
25

6. ‘ 2 he tract

2. i) individual.

The determinative question in this case is whether
Appellee has proven that, on August 5, 1988, August 12,
1988, or any date between August 5 and 12, 1988,
Appellant's performance of the contract created an
immediate threat to any individual." I conclude that
Appellee has not established that by virtue of
Appellant's contract performance there existed a
substantial likelihood of imminent harm to any person.
Appellee has not met its burden of proving that there
existed a condition which justified a peremptory
rescission pursuant to 25 U.S.C. 450m and 42 C.F.R.
36.233(c) (2).

Appellee's principal contention is that failure by TOPS
to provide contracted services would jeopardize the
health and safety of Appellant's tribal members and that
there was no coherent plan in place to deliver these
services on August 5, 1988 and thereafter. Ae.'s Brief
at 21-23.

Failure by TOPS to deliver certain contracted services
could create a situation justifying peremptory
rescission. TOPS functioned as an integral part of a
mental health safety net, and it provided some critical
services. As is noted supra, TOPS agreed to provide MHTs
at scheduled locations and times to assist clinicians in
making diagnoses, treatment, and to provide referrals of
individuals in need of specialized care. These services
included assisting with the care of potentially, and in
some circumstances, actually dangerous or harmful
individuals. Tr. 3/16 at 556. Furthermore, the record
establishes that clinicians and tribal members relied on
TOPS to perform these services. Tr. 3/17 at 73,'¢

5 Although the inspection occurred on August 5,

Appellee did not rescind the contract until August 12.
Had Appellee established that a condition existed on
August 5, August 12, or any date in between which
justified peremptory rescission, then Appellee would have
sustained its burden in this case.

© The parties offered considerable evidence as to
whether TOPS' personnel problems increased the risk of
suicide on Appellant's reservation. See, for example,
Tr. 3/16 at 334-341; 372-375; Tr. 4/3 at 55-75. Much of
this evidence related to the period between April and the
end of July, 1988, and it is irrelevant to the question
of whether an immediate threat existed to the safety of
26

It is arguable that, during the period between April and
late July, 1988, the loss of staff by TOPS made it
impossible for TOPS to perform these vital services,
thereby jugtifying peremptory rescission of the contract
component. However, what is relevant to the rescission
issue is the circumstances pertaining as of the date of
the rescission. The record establishes that by late July
TOPS was in the process of effecting improvements. By
August 5, TOPS replaced all of its resigned personnel in
a manner which enabled it to meet its critical contract
obligations. Findings 81-83.

The services rendered by the MHTs are the heart of the
TOPS program. TOPS' July 1988 subcontract with Palo
Verde Hospital provided TOPS with clinical services to
sufficiently augment those provided by the two MHTs still
employed by TOPS to meet the service requirements of the
contract. Finding 81. In late July, TOPS hired a
clinical supervisor who was qualified to carry on the
administrative duties allocated to the supervisor.
Finding 82. TOPS also agreed with its subcontractor to
obtain clinical supervision to support that being
provided by Appellee's psychiatrist. Finding 83.

I conclude that Appellant had restored many contract
services by early August. The clinician provided by
subcontract began rendering clinical services for TOPS in
July. Finding 60. During the two weeks that this
individual was on vacation in late July and early August,
the contractor supplied another clinician to perform his
duties. Finding 61. Both the contract clinician and his
replacement actively performed evaluations and made
referrals in clinical settings. Finding 62. Although
Appellant's new clinical supervisor obviously had not
become completely at ease with his responsibilities in
the two weeks between the date of his hire and Appellee's
inspection, he was actively working towards that end.

Tr. 3/16 at 117.

any person on August 5. Moreover, the evidence was
inconclusive, even for the period between April and July.
Appellee's witness, Dr. Nye, testified that the suicide
rate on Appellant's reservation decreased in 1988. Tr.
4/3 at 120.

v7 Indeed, much of Appellee's evidence concerning
the dangers created by Appellant's performance of the
contract pertained to this time period. See Tr. 4/3 at
55-85.
27

Therefore, by August 5, 1988, TOPS acquired the personnel
and the expertise to meet critical contract requirements
and communicated these developments to Appellee. Finding
63. Yet, when Appellee inspected the TOPS program on
August 5, it did not make the inquiries necessary to
determine whether these developments had rectified the
problems caused by resignation of staff. As I have noted
upra, Appellee's team made no effort to interview or
meet with Appellant's subcontractor. Finding 71. It did
not systematically survey local clinicians or facilities
to determine whether the added personnel were providing
contracted services.

There were two questions which Appellee's inspection team
members had to address in order to make a reasoned
determination as to whether peremptory rescission of the
contract component was justified. First, they had to
determine to what extent, if at all, contract services
had been restored by Appellant's subcontract with Palo
Verde Hospital. Second, they needed to learn whether,
assuming some contract services had not been restored,
the continuing absence of services created an immediate
threat to the safety of any person. Appellee's team
members failed to address the first question, and, thus,
were unable to reasonably address the second.

The failure of the inspection team to systematically
address the question of whether Appellant's subcontractor
effectively replaced lost personnel is apparent from its
members' testimony. Not only did these individuals reach
their conclusions without interviewing the subcontractor,
but the information they relied on largely consisted of
anecdotes concerning the period prior to Appellant's
execution of a subcontract with Palo Verde Hospital. For
example, Dr. Nye, one of the team members, testified
concerning problems with emotionally disturbed patients
which occurred on Appellant's reservation between April
and July 1988. Tr. 3/4 at 55-84. She testified,
additionally, that these problems were at least
potentially exacerbated by the loss of TOPS staff. Id.
Dr. Nye also testified that Appellant's obtaining
subcontract personnel in July failed to rectify the
problems she perceived. Tr. 3/4 at 138-139. But it is
clear from Dr. Nye's testimony that this judgment was
made without complete investigation of the actual
services rendered by subcontract personnel.

Appellee argues that the failure of TOPS' new clinical
supervisor to produce a coherent schedule of services on
August 5 renders TOPS' personnel replacement efforts
meaningless. It asserts that even if Appellant had
contracted for adequate replacement personnel, there was
28

no evidence as of August 5 or 12 that critical services
were actually being performed. Appellee argues, in
effect, that Appellant's efforts amounted to, at best, a
potential for services, rather than the supply of actual
services. See Ae.'s Reply Brief at 14.

I disagree with these assertions. Appellant's clinical
supervisor had prepared a schedule of services, although
he did not produce it at the August 5 inspection.
Finding 85. Moreover, the issue is not whether Appellant
had a schedule of services, but whether Appellee has
shown that Appellant was failing to perform its contract,
in a manner that created an immediate threat to safety.
Given Appellant's efforts to rectify personnel losses
and, further, given Appellee's failure to systematically
examine these actions, I conclude that Appellee has not
established that on August 5, August 12, or any date
between August 5 and 12, a condition existed which
justified peremptory rescission.

I am not concluding that on August 5, August 12, or any
date between Appellant fully complied with all of its
obligations under the psychological services component.
As I have noted supra, the issue before me is whether
Appellant's performance of the contract component created
circumstances justifying rescission, not whether it was
performing all contracted duties.

Furthermore, although I disagree with the opinions
expressed by Appellee's witnesses, I do not question
these witnesses' sincerity. As I noted during the
hearing, I was impressed with the forthrightness of all
of the witnesses.

My conclusion, that Appellee failed to meet its burden of
proving that a condition existed which justified
peremptory rescission, takes into consideration that
Appellant had no contractual obligation to correct some
of the "deficiencies" asserted by Appellee or its
employees. The only member of Appellee's investigation
team who concluded in writing that the component should
be rescinded was Dr. McCoy. Finding 75. His conclusion
was instrumental to Appellee's decision to rescind the
component. However, his conclusion was in large measure
based on his finding that TOPS did not provide emergency

© the schedule was merely a weekly calendar

showing which MHT would be at a given location at a given
time to deliver services. See J. Ex. 64 at 97. It could
easily be prepared by any person familiar with TOPS'
personnel and their work hours.
29

services outside of regular business hours. J. Ex.
42/10. TOPS had no obligation to provide such services.
Finding 15. Dr. McCoy also asserted in his testimony
that TOPS was deficient in failing to maintain a register
of chronically mentally ill individuals. Tr. 3/17 at
142. TOPS had no contractual obligation to maintain such
a register. Finding 25. Dr. McCoy also claimed that
TOPS was obligated to perform all contracted services in
conformity with standards contained in the Indian Health
Manual Part 3 - Professional Services, Chapter 14 -
Mental Health Programs. Tr. 3/17 at 142, 175. In fact,
this was not required by the contract. Finding 22.

Other deficiencies alleged by Appellee are either not
established by credible evidence or are insubstantial.
For example, Appellee produced witnesses who testified
that TOPS failed to maintain records in keeping with
contract requirements. However, this evidence is, at
best, anecdotal. No systematic review was made by
Appellee of TOPS' records to determine whether contract
requirements were being complied with. The investigation
team merely looked at random examples on August 5.
Finding 72. The contract did not even require that all
records be maintained in accordance with established
procedures. Finding 23.

An example of an insubstantial deficiency is the
suspension of hospital staff privileges of one TOPS' MHT
in March, 1988. Appellee argues that this meant that
“only one out of the required four credentialed MHTs were
available to perform services." Ae.'s Brief at 18.

I disagree with both the contention and Appellee's
apparent implication that the suspension of the MHT's
privileges critically weakened TOPS' capacity to render
services. Many of the MHTs' duties were performed
outside of a hospital setting where the possession or
nonpossession of privileges was irrelevant. Furthermore,
with the addition of qualified clinical staff in July,
TOPS had the personnel to cover those circumstances where
privileges might be required. Finding 81.

Another example of an insubstantial contract deficiency
is the question of the credentials of TOPS' new clinical
supervisor. At least one member of Appellee's inspection
team concluded that the supervisor's lack of clinical
supervisory experience in the mental health field raised
serious concerns. J. Ex. 42/14. I agree that
unavailability of a qualified person to provide clinical
supervision to the MHTs might have posed serious risks to
patients. But the record establishes that there was no
lack of qualified supervision. The contract provided for
30

joint supervision by the clinical supervisor and
Appellee's psychiatrist. Finding 8. Furthermore,
Appellant's subcontractor was able to provide a qualified
supervisor and did so on short notice. Finding 83.
Therefore, the fact that the clinical supervisor hired by
Appellant may not have been able to perform all of the
clinical supervisory duties required by the contract did
not create a situation of immediate threat to the safety
of any individual.”

CONCLUSION

Based on my findings in this case, I conclude that on
August 12, 1988, Appellee improperly rescinded the
psychological services component of its behavioral health
services contract with Appellant. Therefore, I enter my
decision in favor of Appellant.

/s/

Steven T. Kessel
Administrative Law Judge

1% the individual supplied by the subcontractor to
provide clinical services was more qualified to render
these services than were the MHTs he replaced. See
Findings 56-58.


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board

Civil Remedies Division

In the Case of:
JUN 8, 1989

Joan K. Todd, DATE:
Petitioner,
7 Ve Docket No. C-63

DECISION CR 29
The Inspector General. CIS

DECISION AND ORDER

Joan K. Todd, the Petitioner, requested a hearing to
contest the Inspector General's (I.G.'s) determination to
exclude her from participation in Medicare and to direct
that she be excluded from participation in State health
care programs (e.g., Medicaid), for a period of five
years.1/ This Decision and Order resolves this case on
the basis of written briefs and a stipulated record.2/ I
find no merit in the numerous arguments raised by the
Petitioner and I hereby deny the Petitioner's motion to

1/ For the sake of brevity, I hereafter refer only to
Medicaid as constituting "State health care programs"
under section 1128 of the Social Security Act.

2/ Ina preliminary ruling, I granted the Petitioner's
request to consolidate her hearing, docketed as No. C-63,
with the hearing for Petitioner Charles W. Wheeler,
Docket No. C-61. The Petitioner is the mother of
Petitioner Wheeler, and the circumstances underlying
their convictions, and the I.G.'s action to exclude them
were essentially identical. The I.G. had no objection to
the consolidation. See December 9, 1988 Prehearing Order
and Notice of Hearing Schedule.

As I indicated in my December 9, 1988 Ruling, a separate
Decision and Order is being rendered simultaneously in
Petitioner Wheeler's case.
dismiss. I conclude that the I.G. was required under
federal law to exclude the Petitioner from Medicare, and
to direct her exclusion from Medicaid, for five years.

APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.

This case is governed by section 1128 of the Social
Security Act (Act), codified at 42 U.S.C. 1320a-7 (West
U.S.C.A. Supp., 1988). Section 1128(a) of the Act,
headed "Mandatory Exclusion," provides for the exclusion
from Medicare, and a directive to the State to exclude
from State health care programs, any individual who is
"convicted of a criminal offense related to the delivery
of an item or service" under the Medicare or Medicaid
programs. Section 1128(c)(3)(B) provides that the period
of such exclusion shall be for a minimum of five years.3/

The term "convicted" is defined in section 1128(i) to
include "when a judgment of conviction has been entered
against the physician or individual by a Federal, State,
or local court," or when a plea of guilty or nolo
contendere has been "accepted by a Federal, State, or
local court." (Emphasis added.)

While section 1128(a) of the Act provides for a minimum
five-year mandatory exclusion for (1) convictions of
program-related crimes and (2) convictions relating to
patient abuse, section 1128(b) of the Act provides for
the permissive exclusion of "individuals and other
entities" for twelve types of other convictions,
infractions, or undesirable behavior, such as convictions
relating to fraud, license revocation, or failure to
supply payment information. The Act does not prescribe a
minimum period of exclusion in the case of a permissive
exclusion,

II. The Federal Regulations.

The governing federal regulations (Regulations) are found
in 42 C.F.R. Parts 498, 1001, and 1002 (1987). Part 498
governs the procedural aspects of this exclusion and
Parts 1001 and 1002 govern the substantive aspects.

In accordance with section 498.5(i), a practitioner,

3/ This version of section 1128 of the Act was enacted
in August 1987. Before August 1987, the Act did not
prescribe a minimum period of exclusion.
provider, or supplier who has been excluded from program
coverage is “entitled to a hearing before an ALJ
(Administrative Law Judge)." Pursuant to section
1001.128, an individual who has been excluded from
participation has a right to request a hearing before an
ALJ on the issues of whether: (1) he or she was, in fact,
convicted; (2) the conviction was related to the delivery
of an item or service under Medicare or Medicaid; and (3)
the length of the exclusion is reasonable.

Section 1001.123(a) requires the I.G. to send written
notice of his determination to exclude an individual or
entity when he has "conclusive information" that the
individual or entity has been convicted of a crime
related to the delivery of an item or service under
Medicare or Medicaid.

BACKGROUND

By letter dated October 6, 1988, the I.G. notified the
Petitioner that, as a result of her conviction of a
criminal offense related to the delivery of an item or
service under Medicaid, she would be excluded from
participation in Medicare and Medicaid for a mandatory
five year period, commencing 20 days from the date of the
Notice.4/ The I.G.'s basis for the exclusion here was
the Petitioner's guilty plea and her conviction in the
Circuit Court of Fayette County, West Virginia, of a
criminal offense related to the delivery of an item or
service under Medicaid.5/

On October 18, 1988, the Petitioner and Petitioner
Wheeler timely filed a joint request for hearing on the
I.G.'s determination. I held a prehearing telephone
conference call on December 7, 1988, at which T
determined that the issues raised by the Petitioner's
hearing request were primarily legal issues, which could

4/ Section 1001.123 of the Regulations provides that the
period of exclusion is to begin 15 days from the date on
the notice; however, the I.G. allowed 5 days for mailing
in this case.

5/ Petitioner Charles W. Wheeler received a letter dated
September 30, 1988 from the I.G., notifying him of his
mandatory five-year exclusion from Medicare and Medicaid
because of his guilty plea and conviction in the Circuit
Courts of Fayette and Mercer Counties, West Virginia of
criminal offenses related to the delivery of an item or
service under Medicaid.
be further developed by the parties in written briefing.
As reflected in the December 9, 1988 Prehearing Order and
Notice of Hearing Schedule, I stated that, if it was
determined later that an evidentiary hearing was needed,
I would contact the parties to schedule such a
proceeding.

EVIDENCE

The material facts in this case are stipulated to and
evidenced by State court documents pertaining to the
guilty pleas of the Petitioner and her son: the
indictments against the Petitioner Wheeler in Fayette
County and Mercer County (I.G. Exs. 1 and 3,
respectively); the indictment against Petitioner in
Fayette County (I.G. Ex. 2); the transcript of the
Petitioner's plea, along with Petitioner Wheeler's plea,
in Fayette County (P.Ex. A~1); and the signed plea
agreement of both Petitioners for the charges in both
counties. (P. Ex. A-2).6/ 7/ See also, Tape, containing
the parties' stipulation to the authenticity of all
exhibits.

The Petitioner acknowledges that she pleaded guilty in
State court to a misdemeanor of "falsifying accounts by
falsely certifying Medicaid cost reports" under State
law, under "an Alford plea arrangement," which the

6/ The citations to the record in this Decision and
Order are noted as follows:

Petitioner's Brief P. Br. (page)
Petitioner's Exhibit P. Ex. (number) / (page)
I.G.'s Brief I.G. Br. (page)

I.G.'s Exhibit I.G. Ex. (number) / (page)
Petitioner's Reply Brief P. Rep. Br. (page)

Tape of March 10, 1989 Tape

oral argument (by
telephone conference)

2/ The record does not contain the transcript of the
Petitioner Wheeler's plea or sentencing in the Mercer
County case.
Petitioner's counsel described as "equivalent to a nolo

contendere plea." P. Br.1. 8/
ISSUES 9/10/

1. Whether the Petitioner is subject to the minimum
mandatory five-year exclusion provision of section
1128(c) (3) (B) of the Act.

2. Whether the Petitioner was "convicted" of a criminal
offense within the meaning of sections 1128(a)(1) and (i)
of the Act.

3. Whether the Petitioner was convicted of a criminal
offense "related to the delivery of an item or service"
under the Medicaid program within the meaning of section
1128(a)(1) of the Act.

4. Whether the I.G. failed to comply with the federal
Administrative Procedure Act, by (1) not publishing
regulations to implement the distinction between the
mandatory and permissive exclusion authorities, and
(2) relying upon unpublished guidelines/directives in
implementing the Act.

8/ The record indicates that the Petitioner actually
Pleaded guilty to the lesser offense of "attempting to
commit the offense of falsifying accounts... ." P.Ex.
A-2.

9/ The Petitioner's brief was highly repetitive, and
contained numerous variations of the same issues outlined
here. Some arguments raised by the Petitioner are not
directly addressed in this Decision and Order because I
found them to be either cumulative or irrelevant under
the Act and Regulations.

10/ The issues and facts raised in this case are nearly
identical to those raised by the Petitioner in the case
of Arthur B. Stone, D.P.M., Petitioner, v. The Inspector
General, Docket No. C-52, decided by me on May 5, 1989.
Counsel for the Petitioner in this case was also the
Petitioner's counsel in Stone.
5. Whether the I.G. was prohibited by provisions of
federal law (regarding program operating
responsibilities) from excluding the Petitioner.

6. Whether there is a need for an evidentiary hearing in
this case.

FINDINGS OF FACT AND CONCLUSIONS OF LAW 11/

Having considered the entire record, the arguments and
submissions of the parties, and being fully advised
herein, I make the following Findings of Fact and
Conclusions of Law:

1. The Petitioner is a resident of the State of West
Virginia, and was an officer of incorporated nursing
homes in the State. I.G.Ex. 2.

2. On March 2, 1987, a bill of indictment was returned
in Fayette County, West Virginia against the Petitioner,
charging her with two counts of "falsifying accounts" in
submission of Medicaid cost reports to the State
Department of Welfare.12/ I.G.Ex. 2.

3. On December 15, 1987, the Petitioner entered into a
Plea Agreement whereby she agreed to plead guilty in
Fayette County, West Virginia to one count of “attempting
to commit the offense of falsifying documents," a
misdemeanor. P.EXx. A-2.

4. On February 16, 1988, the Fayette County Circuit
Court accepted the Petitioner's plea. P.EXx. A-1.

5. The Petitioner informed the Fayette County Circuit
Court that her guilty plea was taken pursuant to Kennedy
v. Frazier, 357 S.E.2a 43 (W.Va. 1987) and North Carolina
vs Alford, 400 U.S. 25 (1970). P.Ex. A-1/5.

6. At the time the Petitioner entered her guilty plea,
she was advised that the guilty plea would result ina
judgment of guilt. P.Ex. A=1/25.

11/ Any other part of this Decision and Order which is
obviously a finding of fact or conclusion of law is
incorporated herein,

12/ The West Virginia State Department of Welfare is now
the State Department of Human Services.
7. The offense to which the Petitioner pleaded guilty in
Fayette County, West Virginia, is a criminal offense
related to the delivery of an item or service under the
Medicaid program within the meaning of section 1128(a) (1)
of the Act.

8. The Petitioner's guilty plea was entered knowingly
and voluntarily. P.Ex.A-1/16, 20.

9. The Petitioner was convicted of a criminal offense
within the meaning of sections 1128(a)(1) and 1128(i) of
the Act.

10. The Petitioner was convicted of a criminal offense
“related to the delivery of an item or service" under
Medicaid, within the meaning of section 1128(a) (1) of the
Act.

11. In accordance with section 1128 of the Act, the
Petitioner was properly excluded from participation in
Medicare and Medicaid for a period of five years.

12. The I.G. did not violate the federal Administrative

Procedure Act, 5 U.S.C. 551 et seg., by not promulgating
regulations to distinguish the exclusion authorities in

section 1128(a)(1) and 1128(b)(1) of the Act.

13. The I.G. did not rely upon an “unpublished
guidance/directive" in classifying the Petitioner as
subject to the mandatory exclusion authority of section
1128(a)(1) of the Act.

14. The material and relevant facts in this case are not
contested.

15. The classification of the Petitioner's conviction of
a criminal offense as subject to the authority of section
1128(a)(1) is a legal issue.

16. There is no need for an evidentiary hearing in this
case.

17. The I.G. is not prohibited by federal law or
regulations from participation in the exclusion process.

18. The I.G. is entitled to summary disposition in this
proceeding.
DISCUSSION

Section 1128(a)(1) of the Act clearly requires the I.G.
to exclude individuals and entities from the Medicare
program, and to direct their exclusion from the Medicaid
program, for a minimum period of five years, when such
individuals and entities have been "convicted" of a
criminal offense "related to the delivery of an item or
service" under the Medicare or Medicaid programs within
the meaning of section 1128(a)(1) of the Act.

For the reasons expressed in my Decision and Order in the
case of Charles W. Wheeler, Petitioner, v. The Inspector
General, Docket No. C-61, decided June 8, 1989, I hereby
adopt the reasoning set forth therein as being equally
applicable to this Petitioner.

CONCLUSION

Based on the law and undisputed material facts in the
record of this case, I conclude that the I.G. properly
excluded the Petitioner from the Medicare program, and
directed her exclusion from State health care programs,
for the minimum mandatory period of five years.

IT IS SO ORDERED.

/s/

Charles E. Stratton
Administrative Law Judge


DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board
Civil Remedies Division

In the Case of:
MAY 19, 1989

John Vanderhorst, DATE:
Petitioner,
- veo Docket No. C-93

The Inspector General. DECISION CR 27

DECISION

This case is before me on Petitioner’s request for a
hearing challenging his exclusion from participation as a
provider in the Medicare and Medicaid programs. I am
dismissing the request because it was not timely filed and
I do not have good cause to allow a late filing.

By letter dated July 29, 1985, the Inspector General
("I.G.") notified Petitioner that he was being suspended
from participation in these programs for twenty years,
pursuant to Section 1128(a) of the Social Security Act,

42 U.S.C. 1320a-7(a).1/ The reason provided for
Petitioner’s exclusion was his conviction in federal court
of an offense related to his participation in the Medicare
program. Petitioner requested a hearing by submitting a
Petition for Modification of Ineligibility Determination,
postmarked February 1, 1989, protesting the length of his
exclusion.

On April 21, 1989, the I.G. moved to dismiss the
Petitioner’s hearing request, arguing that it was not
timely filed, and that Petitioner had not shown good cause
for the untimely filing. On or about April 25, 1989,
Petitioner submitted to the I.G. a motion to dismiss his
hearing request without prejudice. This motion to dismiss
without prejudice was not received by me until May 9,

1/ The term "exclusion" is currently used to describe the
same action as the term "suspension" did in 1985.
1989. On May 2, 1989, the I.G. filed his response to
Petitioner’s Motion to Dismiss, objecting to the dismissal
being without prejudice and asserting that the case should
be dismissed with prejudice.

ISSUES
1. Whether Petitioner’s hearing request was timely
filed.
2. Whether Petitioner had "good cause" for not timely

filing his request for hearing.

3. Whether dismissal of Petitioner’s hearing request
should be with or without prejudice.

LICABL WS AND IONS

1. Section 1128 of the Social Security Act: As of
the date of Petitioner’s suspension, Section 1128(a) of
the Social Security Act, 42 U.S.C. 1320a-7(a), required
the Secretary of Health and Human Services (the Secretary)
to suspend from participation in the Medicare and Medicaid
programs any physician or other individual who had been
convicted of a criminal offense related to that person’s
participation in the delivery of medical care or services
under titles XVIII (Medicare), XIX (Medicaid), or XX
(block grants to states) of the Act. The law did not
prescribe a minimum suspension. The law was revised in
August 1987 to require a minimum exclusion from
participation in the Medicare and State health care
programs (including Medicaid) of five years for any
individual or entity "convicted of a criminal offense
related to the delivery of an item or service under title
XVIII or under any State health care program," Pub. L.
100-93 (August 18, 1987), 42 U.S.C. 1320(a)(1) and
(c) (3) (B) .2/

Both the law in effect as of the date of Petitioner’s
exclusion and the current law provide that an excluded
individual is entitled to an administrative hearing as to
the exclusion. The law in effect as of Petitioner’s

2/ Many of the preexisting statute’s provisions were
retained without significant change as part of the revised
statute. For purposes of simplicity, this decision will
cite to the revised statute, except where specifically
noted.
exclusion provided at 42 U.S.C. 1320a-7(e) that an
excluded individual is entitled to a hearing "to the same
extent as is provided in section 205(b) of the Social
Security Act." Virtually identical language is contained
in the 1987 revision at 42 U.S.C. 1320a-7(f)(1). Section
205(b) (1) of the Social Security Act, 42 U.S.C. 405(b)(1),
provides that a person entitled to an administrative
hearing by virtue of an adverse decision shall be given
reasonable notice and opportunity to be heard, and
provides further that the hearing decision shall be based
“on evidence adduced at the hearing." The statute
specified that in order to be entitled to a hearing, a
party requesting a hearing must file the request within 60
days from the date the exclusion notice is received.

2. Part 498 of 42 C.F.R.: Regulations adopted by
the Secretary implementing the law similarly require, at
42 C.F.R. 498.40(a) (2), that the party requesting the
hearing must file the request within 60 days from receipt
of the exclusion notice. However, 42 C.F.R. 498.40(c) (2)
provides that "for good cause shown," the administrative
law judge to whom the case is assigned may extend the time
for filing the hearing request.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. On July 29, 1985, Petitioner was incarcerated at
the U.S. Federal Prison Camp, Terre Haute, Indiana.

2. On July 29, 1985, the I.G. sent written notice
to Petitioner, pursuant to 42 U.S.C. 1320a-7(c) and
42 C.F.R. 1001.123, advising him that he would be
suspended from participating in the Medicare and Medicaid
programs. I.G. Ex. 1.3/

3. The notice was received by Petitioner at the
Federal Prison Camp in Terre Haute, Indiana.

4. Petitioner’s request for hearing, styled
"Petition for Modification of Ineligibility
Determination," was postmarked February 1, 1989.

3/ Exhibits and the prehearing conference order will be
cited as follows:

I.G.’s Exhibit I.G. Ex.
Prehearing Order P.H.O.
5. Petitioner had been released from incarceration
for approximately 18 months when he filed his request for
hearing.

6. Petitioner’s hearing request was not filed
within 60 days from Petitioner’s receipt of the notice of
suspension and Petitioner has not shown good cause for an
extension of the filing deadline.

7. Petitioner is not entitled to a hearing, and his
untimely request should be dismissed with prejudice.

ANALYSIS
A. Petitioner’s Entitlement to a Hearing.

As previously noted, both the Petitioner and the I.G. have
moved that Petitioner’ s hearing request be dismissed, and
ordinarily I would simply dismiss the case without
discussion. However, since the Petitioner has requested
that the dismissal be without prejudice to him and the
I.G. has objected, insisting upon a dismissal with
prejudice, I must consider the threshold issue of whether
Petitioner is entitled to a hearing.

The undisputed facts of this case establish that
Petitioner did not file his hearing request within the 60
day limitations period established by statute and
regulation. The Secretary is therefore under no
obligation to grant Petitioner a hearing. However, the
Secretary has established circumstances where a petitioner
may be granted a hearing, even though he is not entitled
to one. The question is whether "good cause" exists in
order to justify a discretionary grant of a hearing.

The regulations do not define "good cause." The
regulations governing Social Security disability hearings,
which are also conducted pursuant to 42 U.S.C. 405(b), do
set forth examples of what would constitute "good cause"
for missing the filing deadline in Social Security
disability cases. These examples are enumerated at 20
C.F.R. 404.911(b)(1)-(9). All of these examples describe
circumstances where the party requesting the hearing
endeavors in good faith to request a hearing, but
nonetheless fails to meet the statutory and regulatory
deadline. These examples are not inclusive of all of the
circumstances which would qualify for a "good cause"
exception.
The I.G. contends that Petitioner’s hearing request, filed
more than three years after he received the notice of
suspension, was not timely filed. The I.G. argues that,
consequently, Petitioner is not entitled to a hearing and
that I should dismiss the hearing request with prejudice.
Petitioner has merely requested a dismissal of the
proceeding without prejudice. Based upon the exhibits,
Pleadings and the applicable regulations, I conclude that
the Petitioner’s request was not timely filed, that there
was no "good cause" which would justify the lateness of
filing, and that Petitioner’s hearing request should be
dismissed with prejudice.

Petitioner was the owner and chief operating officer of
Vanderhorst Ambulance Service, Inc. In the Information
filed by the United States Attorney for the Northern
District of Ohio, Western Division (I.G. Ex. 3), the U.S.
Attorney charged that Vanderhorst Ambulance Service, Inc.
transported dialysis patients in the Toledo, Ohio area
between January 1, 1980 and December 31, 1982, and that
Petitioner fraudulently claimed that such patients were
"Bed Confined, Moveable by Stretcher Only," when they were
not. The U.S. Attorney further alleged that the false
Medicare claims fraudulently billed by Petitioner were in
the approximate amount of $490,000.00. Under the terms of
the Plea Agreement which Petitioner executed on July 6,
1983 (I.G. Ex. 2), Petitioner agreed "not to engage in the
business of transporting patients for a fee, that is the
Ambulance business, as either an owner or employee for a
period of five years from the date of sentencing. . . ."

Petitioner entered a plea of guilty and was convicted of
five counts of filing false Medicare claims in violation
of 18 U.S.C. 287. As a result of his conviction, he was
incarcerated at the Federal Prison Camp located in Terre
Haute, Indiana, when he was notified of his exclusion.
Petitioner received the I.G.’s notice of suspension
shortly after the mailing date of July 29, 1985. He was
out of prison for one and one half to two years before his
counsel filed his request for hearing, which was
postmarked February 1, 1989.

The regulations provide, at 42 C.F.R. 498.40(a) (2), that a
party must file a hearing request within 60 days from
"receipt of the notice" in order to be entitled to a
hearing. Petitioner did not comply with this regulation
when he filed his hearing request on February 1, 1989,
more than three years after he received the suspension
notice from the I.G. Petitioner has acknowledged that he
-6-

received the notice of suspension shortly after it was
mailed on July 29, 1985 and that he had been out of prison
for over a year and a half before he requested the
hearing, yet he has offered no reason for the delay, much
less "good cause" to justify it. Thus, it is appropriate
to grant a motion to dismiss his request for hearing as
not being timely filed.

B. Whether the Dismissal Should be With or Without
Prejudice.

Petitioner has asked in his motion to dismiss the hearing
request that the dismissal should be without prejudice.
The I.G. concurs that dismissal is appropriate, but
strenuously objects to a dismissal without prejudice,
arguing that Petitioner’s request for hearing is untimely
and further, that there is no good cause for his delay in
making the request. Therefore, the I.G. contends, the
case should be dismissed with prejudice.

The notice of exclusion which Petitioner received in 1985
from the I.G. specified that Petitioner had 60 days within
which to request a hearing. He did not do so. Moreover,
he was out of prison for more than a year and a half
before he made his request for a hearing to review the
exclusion. No request for extension of time for filing
his hearing request was made, nor has Petitioner shown
good cause for his delay. Indeed, there seems little
reason for Petitioner’s delay in initiating the hearing
request process, particularly since he has not been
hindered by his incarceration for quite some time. At
this point, even after Petitioner has already been
excluded nearly four years, Petitioner still has not
decided whether he wants a hearing. Under these
circumstances, it is appropriate to dismiss this case with
prejudice.

CONCLUSION

Based on the law and record of this proceeding I conclude
that Petitioner’s hearing request was not timely filed
within the requirements of 42 C.F.R. 498.40(a) (2), and
that good cause does not exist to excuse the late filing.
The I.G.’s motion to dismiss this proceeding with
prejudice is therefore granted, and the Petitioner’s
motion to dismiss, insofar as he requests dismissal
without prejudice, is denied.

/s/

Steven T. Kessel
Administrative Law Judge