Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Di

In the Case of:
Homelife Nursing, Inc., DATE: March 26, 1996
Petitioner,

Docket No. C-94-382
Decision No. CR417

-v-

Health Care Financing
Administration.

DECISION

Homelife Nursing, Inc. (Petitioner), a provider of home
health agency services, requested a hearing to challenge
the determination by the Health Care Financing
Administration (HCFA) that its office located in
Riverside, California (Riverside Office), be certified
for Medicare purposes as a subunit of the parent office
located in Lake Forest, California (Lake Forest Office),
instead of as a branch of the Lake Forest Office.! The
case was assigned to me for hearing and decision.

HCFA filed a motion to dismiss the appeal on the grounds
that neither the governing statute nor its implementing
regulations confer jurisdiction on an administrative law
judge to hear Petitioner's appeal. The parties filed
briefs on this issue, and, on February 1, 1995, I issued
a ruling denying HCFA's motion to dismiss Petitioner's
hearing request. I concluded that HCFA's determination
to certify Petitioner's Riverside Office as a subunit of
the Lake Forest Office rather than as a branch of the
Lake Forest Office is a reviewable initial determination,
within the meaning of 42 C.F.R. § 498.3(b) (1) .?

' The difference between a subunit and a branch
are set forth in Part IA of the Analysis.

? I incorporate the rationale of this ruling in
this decision.
2

I held a hearing in San Francisco, California, on June 6,
1995 through June 8, 1995. Subsequent to the hearing,
Petitioner offered four additional exhibits (P. Ex. 34 -
37) into evidence. HCFA offered an additional exhibit
(HCFA Ex. 14) into evidence. HCFA objected to P. Ex. 36,
and Petitioner withdrew this exhibit. In letters dated
July 31, 1995 and August 11, 1995, I notified the parties
that I admitted P. Ex. 34, P. Ex. 35, P. Ex. 37, and HCFA
Ex. 14 into evidence. In addition, the parties submitted
posthearing briefs, response briefs, and reply briefs.

I have considered the evidence, the applicable law, and
the parties' arguments. I conclude that HCFA's
determination to certify Petitioner's Riverside Office as
a subunit of the Lake Forest Office, rather than a branch
of the Lake Forest Office, is supported by the facts in
evidence and the applicable law.

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCL)

1. At all times relevant to this case, Petitioner was a
home health agency whose parent office was located in
Lake Forest, California. HCFA's Proposed Findings of
Fact and Conclusions of Law at 1; Petitioner's
Posthearing Response Brief at 1.

2. In October of 1991, Petitioner submitted an
application packet to the San Bernardino District Office
of Licensing and Certification of the California
Department of Health Services (DHS). The application
packet included a form in which Petitioner requested that
its Riverside Office be licensed by the State of
California as a branch of the Lake Forest Office. The
completed application packet also included a form in
which Petitioner requested that the Riverside Office be
certified in the Medicare program. P. Ex. 11;
Transcript [Tr.] at 394 - 395.

3. The State of California licenses facilities as either
a parent or branch. The State of California does not
recognize the category of subunit for home health agency
licensing purposes. Tr. at 76.

4. DHS surveyed the Riverside Office and declined to
license it as a branch of the Lake Forest Office.
Instead, on March 24, 1992, DHS licensed the Riverside
Office as a parent office. HCFA Ex. 10; P. Ex. 17; Tr.
at 161.
3

5. In a letter to HCFA's Survey and Certification
Operations Branch dated May 5, 1992, Petitioner requested
that its Riverside Office be designated as a branch of
the Lake Forest Office for purposes of Medicare
certification. P. Ex. 17; Tr. at 649.

6. HCFA contracts with DHS to survey home health
agencies and to make recommendations on Medicare
certification. HCFA makes the final determination on
whether a home health agency is eligible to participate
in the Medicare program, including whether that facility
should be certified as a subunit or branch. 42 C.F.R. §§
488.10, 488.24, and 489.10.

7. %In June of 1992, DHS, acting as an agent for HCFA,
surveyed Petitioner's Riverside Office for Medicare
certification purposes. Tr. at 84.

8. Based on the survey results, DHS determined that it
would recommend to HCFA that it certify for Medicare
purposes the Riverside Office as a subunit of the Lake
Forest Office. Tr. at 100 - 103.

9. By letter dated July 30, 1992, HCFA notified the
Riverside Office that, effective June 24, 1992, HCFA had
accepted the agreement of the Riverside Office to
participate as a home health agency in the Medicare
program. HCFA Ex. 1.

10. HCFA's July 30, 1992 letter assigned the Riverside
Office a provider number (55-7199). The issuance of a
new provider number to the Riverside Office meant that
HCFA designated the Riverside Office as a subunit rather
than a branch. HCFA Ex. 1; Tr. at 655.

11. After being certified by Medicare as a subunit,
Petitioner contacted HCFA by telephone to request
certification as a branch rather than a subunit. Tr. at
302, 315.

12. On September 25, 1992, Petitioner requested in
writing that HCFA certify its Riverside Office as a
branch rather than a subunit. P. Ex. 2.

13. On November 4, 1992, HCFA denied Petitioner's
request to change certification of the Riverside Office
from a subunit to a branch. HCFA Ex. 3.

14. On February 12, 1993, Petitioner again asked HCFA to
redesignate the Riverside Office as a branch. P. Ex. 4.
4

15. On May 5, 1993, HCFA again denied Petitioner's
request to certify the Riverside Office as a branch
instead of as a subunit. HCFA Ex. 5.

16. On January 19, 1994, Petitioner again sought to
persuade HCFA to change the designation of the Riverside
Office to a branch. P. Ex. 8.

17. On May 13, 1994, HCFA responded to this request by
reaffirming its determination to certify the Riverside
Office as a subunit rather than a branch. P. Ex. 9.

18. Regulations governing the certification of home
health agencies define the distinctions between a branch
and a subunit of a parent home health agency. 42 C.F.R.
§ 484.2.

19. A branch office means a location or site from which
a home health agency provides services within a portion
of the total geographic area served by the parent agency.
The branch office is part of the home health agency and
is located sufficiently close to share administration,
supervision, and services in a manner that renders it
unnecessary for the branch independently to meet the
conditions of participation as a home health agency. 42
C.F.R. § 484.2.

20. A subunit means a semi-autonomous organization that
-- (1) serves patients in a geographic area different
from that of the parent agency; and (2) must
independently meet the conditions of participation for
home health agencies because it is too far from the
parent agency to share administration, supervision, and
services on a daily basis. 42 C.F.R. § 484.2.

21. In order for a nonparent office to qualify to be
certified as a branch, the regulatory standard for the
frequency of sharing of administration, supervision, and
services is that the parent and nonparent office must be
capable of sharing these functions on a daily basis. 42
C.F.R. § 484.2.

22. Distance in terms of both mileage and travel time
are appropriate factors to be considered in determining
whether to designate a nonparent office as a branch or a
subunit. 42 C.F.R. § 484.2.

23. Depending on the route, the driving distance between
the Lake Forest Office and the Riverside Office is
between 44.3 miles and 49.6 miles. P. Ex. 37; HCFA Ex.
14.
5

24. Depending on traffic conditions and the time of day
that the trip occurs, the driving time between the Lake
Forest Office and the Riverside Office can take between
40 minutes and two and one-half hours. Tr. at 88, 153,
403, 565; P. Ex. 37; HCFA Ex. 14.

25. The geographic area of the patients served out of
Petitioner's Riverside Office included the communities of
Chino, Fontana, Rialto, San Bernardino, Redlands, Lake
Arrowhead, and Big Bear City. Tr. at 89, 167.

26. Driving time from Lake Forest to locations in Chino
can take between 51 minutes during off-peak travel hours
and as long as one and one-half to two hours in heavy
traffic. P. Ex. 34; Tr. at 93.

27. Driving time from Lake Forest to locations in
Fontana, Rialto, San Bernardino, and Redlands can take
between 65 and 77 minutes during off-peak travel times
and as long as one and one-half to two and one-half hours
in heavy traffic P. Ex. 34; Tr. at 93 - 94.

28. Driving time from Lake Forest to locations in Lake
Arrowhead can take one hour and 48 minutes during off-
peak travel hours and as long as three to three and one-
half hours in heavy traffic or under adverse weather
conditions. P. Ex. 34; Tr. at 95 - 96.

29. Driving time from Lake Forest to locations in Big
Bear City can take two hours and 20 minutes during off-
peak travel hours and as long as four hours, or more, in
traffic or under adverse weather conditions. P. Ex. 34;
Tr. at 96 - 97.

30. Given the distance between the Lake Forest Office
and the Riverside Office and the wide disbursement of
home health care patients residing in the Riverside
geographical service area, it is necessary to have
personnel having the capability on a daily basis to be
responsible for supervising the nurses, home health
aides, and other staff, and overseeing their training,
scheduling, performance, and other necessary functions
for the provision of home health care services, to be
located on-site in the Riverside Office. Such capability
would be seriously eroded if the Riverside Office was
designated as a branch of the Lake Forest Office. FFCL
23 - 29; Tr. at 114 - 121, 195 - 197, 207 - 208.

31. Given the distances between the Lake Forest Office
and the Riverside Office and that at times home health
care patients living in the remote areas of the Riverside
geographical area may require supervisory, emergent, or
6

after hour services, designation of the Riverside Office
as a branch, rather than a subunit, would result in the
possible deterioration of services for such patients,
adversely impacting on their health and safety. FFCL 23
- 30.

32. Petitioner's Riverside Office provided services to
patients located in a geographic area different from that
of the Lake Forest Office. FFCL 23 - 31.

33. The Riverside Office must meet the conditions of
participation for home health agencies independently
because it is too far from the parent agency to share
administration, supervision, and services on a daily
basis. FFCL 23 - 32.

34. The predecisional deliberations and thought
processes of the State's and HCFA's decisionmakers are
not relevant to my decision in this case.

35. Petitioner's Riverside Office is a subunit, within
the meaning of 42 C.F.R. § 484.2.

ANALYSIS

At the time relevant to this proceeding, Petitioner was a
home health agency whose parent office was located in
Lake Forest, California. In October of 1991, Petitioner
requested that its office in Riverside, California, be
licensed by the State of California to provide home
health services as a branch of the parent in Lake Forest.
Petitioner requested also that its office in Riverside be
certified as a Medicare provider of home health services.
FFCL 1 - 2.

Surveyors from DHS surveyed Petitioner's Riverside Office
to determine whether the Riverside Office met the State
requirements for licensing. P. Ex. 17. The State of
California licenses facilities as either a parent or
branch. It does not recognize the category of subunit
for home health agency licensing purposes. FFCL 3. DHS
declined to license the Riverside Office as a branch of
the Lake Forest Office. Instead, on March 24, 1992, DHS
licensed the Riverside Office as a parent home health
agency. FFCL 4.

In June of 1992, DHS, acting as an agent for HCFA,
surveyed Petitioner's Riverside Office for Medicare
certification purposes. FFCL 7. Based on the survey
results, DHS determined that it would recommend to HCFA
7

to certify the Riverside Office as a subunit of the Lake
Forest parent. FFCL 8.

By letter dated July 30, 1992, HCFA notified the
Riverside Office that, effective June 24, 1992, it had
accepted the agreement of the Riverside Office to
participate as a home health agency in the Medicare
program. FFCL 9. In that letter, HCFA assigned the
Riverside Office a provider number different from the
number already assigned to the Lake Forest Office. The
issuance of a new provider number meant that HCFA
designated the Riverside Office as a subunit rather than
a branch. FFCL 10.

On three separate subsequent occasions, Petitioner
requested in writing that HCFA reconsider its prior
determination and certify its Riverside Office as a
branch rather than a subunit. On all three occasions,
HCFA denied Petitioner's request. FFCL 12 - 17.

Petitioner appealed HCFA's determination, and the case
was assigned to me. The issue before me is whether
Petitioner's Riverside Office qualifies, for Medicare
purposes as a home health provider, to be certified as a
branch of Petitioner's Lake Forest Office rather than as
a subunit of the Lake Forest Office. In resolving this
issue, the relevant time frame will be the period from
the date of State licensure on March 24, 1992 through the
date of notice of Medicare certification on July 30,
1992. Tr. at 52 - 60.

Petitioner contends that its Riverside Office qualified
for certification as a branch of the parent in Lake
Forest. I disagree.

I. HCFA's determination that Petitioner's Riverside
Office should be certified as a subunit of the Lake
Forest parent, rather than a branch, is supported by
the facts and the applicable law.

A. The implementing requlations define the terms
branch and subunit.

Part A of the Medicare statute, at Title XVIII of the
Social Security Act (Act), provides reimbursement for
specified health care services to the elderly and
disabled, including home health services. Part A
services are furnished by "providers of services," and a
home health agency, or other eligible entity, may
participate in the Medicare program by entering into a
provider agreement with the Secretary of the United
8

States Department of Health and Human Services (the
Secretary). 42 U.S.C. §§ 1395x(u), 1395cc.

The Act defines a "home health agency" as a public agency
or private organization, or a subdivision of such an
agency or organization which, inter alia, "is primarily
engaged in providing skilled nursing services and other
therapeutic services." 42 U.S.C. § 1395x(0) (1). A home
health agency must meet the conditions of participation
specified in 42 U.S.C. § 1395bbb(a) and such other
requirements as the Secretary may find necessary in the
interest of the health and safety of individuals who are
furnished services by the home health agency. See 42
U.S.C. § 1395x(0) (6).

The regulations implementing the requirements of sections
1395x(o) and 1395bbb(a) are set out at 42 C.F.R. Part
484. These implementing regulations define the
distinctions between a branch and a subunit of a parent
home health agency.

The regulations state that a "branch office" means:

a location or site from which a home health agency
provides services within a portion of the total
geographic area served by the parent agency. The
branch office is part of the home health agency and
is located sufficiently close to share
administration, supervision, and services ina
manner that renders it unnecessary for the branch
independently to meet the condition of participation
as a home health agency.

42 C.F.R. § 484.2. This same section states that a
"subunit" means:

a semi-autonomous organization that -- (1) Serves
patients in a geographic area different from that of
the parent agency; and (2) Must independently meet
the conditions of participation for [home health
agencies] because it is too far from the parent
agency to share administration, supervision, and
services on a daily basis.

The resolution of the dispute over whether the Riverside
Office should be designated as a branch or a subunit
turns on the regulatory definition of these terms. In
interpreting the regulations, it is instructive to
consider the purpose for the distinction between branch
and subunit.
9

The regulations at 42 C.F.R. Part 484 implement the
requirements of the Act and "also sets forth the
additional requirements considered necessary to ensure
the health and safety of patients." 42 C.F.R. § 484.1.
Thus, the purpose for the regulatory distinction between
branch and subunit home health agencies is to ensure the
health and safety of patients served by the entities.’

The regulations permit parent home health agencies to
have branch offices, which are not required to separately
meet the conditions of participation for home health
agencies, where such branch offices are sufficiently
close to the parent so that they share administration,
supervision, and services with the parent. On the other
hand, the regulations provide that where a home health
agency is functioning as a semi-autonomous organization
which (1) serves patients in a geographic area different
from that of the parent agency, and (2) is too far from
the parent agency to share administration, supervision,
and services on a daily basis, that office must
independently meet the Medicare conditions of
participation for home health agencies and be certified
to provide Medicare services as a subunit rather than as
a branch. This requirement for independent certification
is the manner in which HCFA ensures that Medicare
beneficiaries will receive adequately supervised and
timely services without having to rely on a distant
parent which is incapable of sharing administration,
supervision, and services.

The regulations contemplate that, in making the
determination as to whether a nonparent office qualifies
to be certified as a branch or a subunit of a parent
office, the factfinder's overriding consideration is
ensuring the health and safety of the patients served by
the nonparent office seeking certification.

> At the outset of the in-person hearing,
Petitioner indicated that its primary reason for seeking
a branch designation for the Riverside Office was
financial. However, Petitioner agreed that I need not
inquire into such motivation as my focus is whether such
designation would impose an adverse impact on patient
care and contravene the regulatory definitions for
providers of home health care services. Tr. at 20 - 21.
10

B. The Riverside Office was too far from the Lake
Forest parent to share administration,
supervision, and services on a daily basis.

1. The regulations provide a standard for
frequency of sharing.

Petitioner argues that there is no requirement that there
be evidence of daily sharing of administration,
supervision, and services with the parent office in order
for an office to qualify to be designated as a branch.

In support of this argument, Petitioner points out that
the regulatory definition of a branch requires that the
branch be "sufficiently close to share administration,
supervision, and services," but that the definition does
not refer to the frequency of sharing. Petitioner's
Posthearing Brief at 16 - 17. HCFA disagrees, stating
that it "would make no logical sense" to say that
branches do not have to furnish adequate supervision and
services "each and every day of their operation." HCFA's
Posthearing Response Brief at 4.

It is true that the term "daily" does not specifically
appear in the regulatory definition of a branch. The
term "daily" does, however, appear in the regulatory
definition of a subunit. Reading the regulatory
definitions of branch and subunit together, I conclude
that nonparent offices, whether they be branches or
subunits, must provide adequate administration,
supervision, and services on a daily basis. In the case
of a subunit, the regulations are intended to ensure that
adequate administration, supervision, and services will
be provided daily independently of the parent. In the
case of a branch, the regulations are intended to ensure
that adequate administration, supervision, and services
will be provided daily on a shared basis with the parent.

I conclude that, in order for a nonparent office to
qualify to be certified as a branch, the regulatory
standard for the frequency of sharing of administration,
supervision, and services is that the parent and branch
must be capable of sharing these functions daily so that
there would not be a deterioration of the provision of
such functions on a daily basis. If it is not possible
for this daily sharing to occur so that such functions
could not be provided on any given day by the parent
office, then it is necessary that the office be certified
independently as a subunit. Since the branch is not
required to independently meet the conditions of
participation as a home health agency, it is incumbent
for the protection of the health and safety of home
health care patients that the parent be capable of
11

sharing such services with the branch on a daily basis.
If the parent office is not capable of sharing such
functions on a daily basis, then HCFA would have to
ensure that the nonparent office independently meets the
conditions of participation. In such circumstances, the
nonparent office would properly be certified as a subunit
rather than a branch.

2. Mileage and time are appropriate factors to
consider on a case-by-case basis.

Petitioner argues also that mileage and time are not
appropriate factors to consider in determining whether a
nonparent office should be designated a branch or a
subunit. In support of this assertion, Petitioner cites
a 1989 memorandum from the Director of the Office of
Survey and Certification, at HCFA, to an Associate
Regional Administrator, which states:

Because circumstances vary widely between regions
and between States within regions, it is not
appropriate to set a criterion such as mileage or
time for purposes of determining whether or not the
parent [home health agency] is operating a branch or
subunit. Further, there is no authority within the
statute or regulations to make aggregate
determinations based on an operational standard or
regional definition.

P. Ex. 29 (emphasis added).

I do not agree that the 1989 memorandum supports
Petitioner's contention that mileage and time are not
appropriate factors to be considered. I find that what
is intended by the 1989 memorandum's prohibition against
any "set criterion" such as mileage or time for purposes
of determining whether an office is a branch or subunit
is that it is not appropriate for HCFA to promulgate any
specific mileage or time criteria to be applied in every
case, either regionally or nationally. This conclusion
is consistent with testimony of HCFA's witnesses. Audrey
Blue, a DHS surveyor who surveyed the Riverside Office,
and Captain Donna Dymon, a career commissioned officer of
the United States Public Health Service who works as a
nurse consultant for HCFA and who testified as HCFA's
expert witness, stated that HCFA has not established
specific mileage or time guidelines that apply across-
the-board in determining whether a nonparent office
should be designated a subunit rather than a branch. Tr.
at 83, 215.
12

Rather than setting specific mileage and travel time
requirements for determining whether an office is a
subunit or a branch, the 1989 memorandum instructs that:

[t]he determination of whether [a home health
agency] is operating a ‘branch' or a ‘subunit’ must
be made on an individual, case-by-case basis using
the definitions contained in the Medicare [home
health agency] regulations...

P. Ex. 29. Indeed, the regulatory definitions explicitly
use the terms "sufficiently close" and "too far." They
refer also to the geographic service areas of the parent
and nonparent offices. This language relates to
distance, and I interpret the regulations to mean that
distance in terms of both mileage and time are factors to
be considered in determining whether to designate a
nonparent office as a branch or a subunit. While HCFA
does not set specific mileage or time requirements
defining what is considered "sufficiently close" and "too
far" or defining the size of a geographic service area, I
conclude that the regulations and the 1989 memorandum
contemplate that these are appropriate factors to be
considered under the circumstances of a particular case.
The regulations and the 1989 memorandum provide a
framework for a case-by-case determination as to whether,
based on the geographic locations of the parent and
nonparent office and the patients served by the two
offices, administration, supervision, and services can be
shared on a daily basis.

3. The Riverside Office was located at a
distance too far from the Lake Forest
parent to ensure that patients of the
Riverside Office could be safely and
timely treated from the Lake Forest
parent.

HCFA proved by a preponderance of the evidence that the
Riverside Office is not sufficiently close to the Lake
Forest Office to ensure safe and appropriate treatment of
patients served by the Riverside Office on a shared basis
in such a manner that makes it unnecessary for the
Riverside Office to independently meet the conditions of
participation of a home health agency.

In correspondence from Petitioner to HCFA, Petitioner
stated that the distance between the parent office in
Lake Forest and the Riverside Office was approximately 50
13

miles.‘ P. Ex. 2, P. Ex. 4. Judy Boccia, Petitioner's
Vice President, submitted an affidavit stating that the
distance between the two offices measured 44.3 miles on
her car's odometer. P. Ex. 37. HCFA witness Audrey Blue
submitted an affidavit stating that the distance between
the two offices measured 49.6 miles on her car's
odometer. HCFA Ex. 14. The differing distances as
measured by the witnesses' odometers might be explained
by the fact that Ms. Boccia and Ms. Blue took different
routes. Petitioner's Posthearing Brief at 23. Based on
the foregoing, I find that the evidence establishes that,
depending on the route, the driving distance between the
Lake Forest Office and the Riverside Office is between
44.3 miles and 49.6 miles.

Testimony at the hearing shows also that the driving time
between the two offices varies, depending on traffic
conditions. Traffic between the two offices is heaviest
between the hours of approximately 5:00 a.m. to 9:30 a.m.
and between the hours of approximately 3:00 p.m. to 7:30
p.m. Tr. at 87. In addition, the bulk of rush hour
traffic flows from Riverside to Lake Forest in the
morning and from Lake Forest to Riverside in the evening.
Tr. at 405 - 406, 152 - 153. Accidents can cause
considerable delays. In addition, roads along the route
between the two offices were under construction in 1992
and continue to be now. Tr. at 569 - 570.

During the hearing, Ms. Boccia estimated that it took her
an average of 40 minutes to drive from the Riverside
Office to the Lake Forest Office during the morning rush
hour when the bulk of traffic was flowing in the opposite
direction. Tr. at 403, 565. In support of this
assertion, she submitted an affidavit in which she stated
that she drove from the Lake Forest Office to the
Riverside Office beginning at 9:08 a.m. on August 3,
1995, and that it took her 45 minutes to drive this
distance at that time of day. P. Ex. 37.

Ms. Blue estimated that it could take between two and two
and one-half hours to drive between the two offices in
heavy traffic. At other times when traffic is not heavy,

4 In addition, Petitioner submitted an exhibit
which indicated that the distance between Lake Forest and
Riverside as measured by a map is 42.5 miles. The
caption on this exhibit stated that the distance was from
"Lake Forest to Riverside." The exhibit does not specify
that the distance from Petitioner's office in Lake Forest
to Petitioner's office in Riverside is 42.5 miles. P.
Ex. 35.
14

she estimated that it would take approximately 50 to 55
minutes. Tr. at 88, 153. Ms. Blue submitted an
affidavit in which she stated that she drove from the
Riverside Office to the Lake Forest Office beginning at
9:00 a.m. on June 15, 1995 and that it took her one and
one-half hours to drive that distance at that time of
day. HCFA Ex. 14. The difference in the traveling times
set forth in Ms. Boccia's and Ms. Blue's driving
affidavits could be explained by the fact that the flow
of traffic in the morning hours is heavier from Riverside
to Lake Forest.

Petitioner argues that I should not adopt the time set
forth in Ms. Blue's affidavit because the route taken by
Ms. Blue is not the most direct route. Petitioner's
Posthearing Response Brief at 20. While it appears that
the route taken by Ms. Boccia is 5.3 miles shorter,
Petitioner has not shown that Ms. Boccia's route is the
better alternative in terms of traffic conditions.

It is noteworthy that Ms. Blue started her trip at 9:00
a.m., towards the end of the period the parties stated
traffic is at its heaviest. Therefore, one hour of the
one and one-half hour period that Ms. Blue drove (from
9:30 to 10:30) was not during rush hour. It is
reasonable to infer that had Ms. Blue started her trip at
the beginning of the morning rush hour period, it would
have taken her longer than one and one-half hours to
travel from the Riverside Office to the Lake Forest
Office. In addition, the time would be even greater if
she encountered delays caused by accidents or
construction work. In view of this, I find Ms. Blue's
estimate that it can take between two and two and one-
half hours to travel the distance between the two offices
when traffic is heavy to be credible.

I find that the driving time between the Lake Forest
Office and the Riverside Office can take between 40
minutes and two and one-half hours, depending on traffic
conditions.°

5 Petitioner argues that, if driving time and
distance are indicators to be considered, the driving
time from the parent in Lake Forest to the nonparent in
Riverside is more relevant than the driving time from the
Riverside Office to the Lake Forest Office since the flow
of supervision, administration, and services is from the
parent to the nonparent office. However, sharing of
administration, supervision, and services may occur at
any time of the day in which the home health agency is

(continued...)
15

While the mileage and travel times between the Lake
Forest Office and the Riverside Office are factors to be
considered in determining whether the Riverside Office
qualifies to be certified as a branch, rather than a
subunit, these factors alone are not determinative. In
order to ascertain whether the Riverside Office is
sufficiently close to the Lake Forest Office to ensure
safe and timely treatment of patients on a shared basis
in such a manner that makes it unnecessary to require the
Riverside Office to be independently certified as a
subunit, it is necessary to consider the location of the
patients served by the Riverside Office.

It is undisputed that the geographic area of the patients
served out of Petitioner's Riverside Office included the
communities of Chino, Fontana, Rialto, San Bernardino,
Redlands, Lake Arrowhead, and Big Bear City. FFCL 25.°
Petitioner submitted information regarding "off-peak
weekday travel times" from Lake Forest to the various
locations served by the Riverside Office. This
information was supplied by the California Department of
Transportation based on the Los Angeles Regional
Transportation Study (LARTS) transportation model. P.
Ex. 34. HCFA did not submit any evidence to rebut this

5 (...continued)

open. Thus, personnel from the Lake Forest Office might
be required to travel from Lake Forest to Riverside later
in the day when the traffic flow is at its heaviest.
Also, it is conceivable that Petitioner would have
meetings at the Lake Forest Office that involved the
Riverside Office. In such circumstances, personnel from
the Riverside Office would have to travel to the Lake
Forest Office. In view of the fact that sharing of home
health agency functions may occur at any time of the day
and could flow in either direction, I do not give any
significance to the direction of the flow of shared
functions and services.

° Petitioner points out that the number of
patients in certain parts of the geographic region
varied. Petitioner asserts that it had only a few
patients in the farthest cities, and that home health
staff was retained locally on a contract basis in these
areas. Petitioner's Posthearing Response Brief at 19.
However, this does not negate Petitioner's obligation to
comply with regulatory requirements that adequate
administration, supervision, and services be available to
these patients, and any future patients, located in these
distant areas.
16

evidence, and I rely on it to establish the driving times
from Lake Forest to these locations during periods when
traffic is not at its highest volume.

In addition, Ms. Blue testified concerning travel time
from Lake Forest to the various locations served by the
Riverside Office during periods when traffic is heavy.
Ms. Blue stated that she is familiar with the driving
times between Lake Forest and these locations because she
has driven them under a variety of road and weather
conditions over the past 13 years. HCFA witness Captain
Dymon concurred with Ms. Blue's testimony regarding
travel times. Tr. at 197. Petitioner did not submit
evidence to rebut Ms. Blue's testimony, and I rely on it
to establish the driving times from Lake Forest to these
locations during periods when traffic is heavy. Tr. at
93 - 98.

I find that the evidence establishes that the driving
time from Lake Forest to locations in Chino is
approximately 51 minutes during off-peak travel hours and
that it can take as long as one and one-half hours to two
hours in heavy traffic. Driving time from Lake Forest to
locations in Fontana, Rialto, San Bernardino, and
Redlands takes between 65 and 77 minutes during off-peak
travel hours and it can take as long as one and one-half
to two and one-half hours in heavy traffic. P. Ex. 34;
Tr. at 93 - 94.

Driving time from Lake Forest to locations in Lake
Arrowhead is approximately one hour and 48 minutes during
off-peak travel hours. Ms. Blue testified that, to get
to Lake Arrowhead, it is possible to take the freeway as
far as San Bernardino. The traveler must then take
Highway 18, a two-lane curving road up a mountain.
According to Ms. Blue, the trip is more time-consuming in
the winter months when there is snow on the ground. Ms.
Blue testified that the trip could take as long as three
to three and one-half hours. P. Ex. 34; Tr. at 95 - 96.

With respect to the travel time from Lake Forest to
locations in Big Bear City, the farthest geographical
location served by the Riverside Office, it takes two
hours and 20 minutes to drive this distance during off-
peak travel hours and as long as four hours in traffic.
Ms. Blue testified that travel to Big Bear City requires
the traveler to drive on a curving, two-lane road. She
stated that, under winter weather conditions, the travel
time could be even longer. P. Ex. 34; Tr. at 96 - 97.
17

HCFA offered persuasive evidence showing that there are
compelling reasons for requiring that the Riverside
Office be certified as a semi-autonomous subunit, with
its own responsibility for providing administration,
supervision, and services on a daily basis independent of
the parent in Lake Forest. I find that the evidence
adduced by HCFA establishes that the Riverside Office is
too far from the Lake Forest Office to ensure safe
treatment of the Riverside Office's patients on a shared
basis with the Lake Forest Office.

HCFA's State Operations Manual (Manual) No. 260 provides
guidance with respect to the distinctions between a
branch and subunit of a home health agency. With respect
to administrative functions pertaining to a branch
office, the Manual states that the "administration at the
parent agency is aware of the staffing, patient census
and any issues/matters affecting the operation of any
given branch." HCFA Ex. 12 at 5. In order to accomplish
the administrative functions of the branch, the
administrator of the home health agency "maintains an
ongoing liaison with the branch staff and the group of
professional personnel." HCFA Ex. 12 at 6. The Manual
states that the branch must be "located sufficiently
close to the parent to share administration. The
administrator is apprised of, and resolves issues
affecting patients in branch(es) as well as the service
area(s) covered by the parent." Id. The subunit, on the
other hand, "maintains its own administrative staff"
because it is "located at such a distance from the parent
agency that it is incapable of sharing administration,
supervision, and services on a daily basis." HCFA Ex. 12
at 5 - 6.

Ms. Blue testified regarding HCFA's requirements as to
the appropriate designation of a home health agency as a
branch or subunit. Ms. Blue stated that staff serving a
home health agency includes licensed nurses, home health
aides, physical therapists, occupational therapists, and
social workers. With respect to administrative
functions, Ms. Blue stated that both branches and
subunits must have the ability to assess and evaluate the
care provided to patients by the staff serving a home
health agency. She explained that a subunit must have
its own "staff complement administratively that would
give them the ability to easily make decisions and
provide guidance and supervision to the staff working out
of that office." Tr. at 78 - 80.
18

Ms. Blue opined that, in this case, because of the far
distances of the Riverside Office's patients from the
parent office at Lake Forest, it was not possible for the
Riverside Office to share administrative functions with
the Lake Forest Office. Instead, Ms. Blue expressed the
view that it was imperative that the administrative
functions be available on-site in the Riverside Office in
order to "ensure that patient-related goals and
objectives were met." Tr. at 114 - 115. Based on this,
Ms. Blue opined that the Riverside Office should be
certified as a subunit rather than a branch.

Captain Dymon agreed with Ms. Blue's testimony. She
elaborated on the type of activities included in the term
"administration." According to Captain Dymon,
administrative functions include not only the
responsibility for the daily patient census, but
"assuring that the beneficiaries have their care needs
met by the various professional entities that are serving
in the home." The home health agency's administrative
staff must ensure that services and staff are available
as needed. Tr. at 195 - 196. Captain Dymon opined that,
in view of the distances and travel times involved in
this case, it was necessary that the Riverside Office
have administrative staff on-site to ensure that these
administrative functions are performed adequately. Tr.
at 197.

With respect to supervision, Ms. Blue testified that many
supervisory functions go "hand-in-hand" with
administrative functions. Tr. at 146. According to Ms.
Blue, responsibilities of supervisory personnel include:
evaluating the work performance of non-supervisory
personnel; scheduling the nurses, home health aides, and
staff under contract with the home health agency,
including locating replacements when regularly scheduled
personnel are unavailable; training; and participating in
routine case conferences with staff to ensure
beneficiaries are receiving appropriate care. Tr. at 80,
117 - 121.

Captain Dymon testified that supervision is necessary to
establish "consistency in care and to assure that the
care for the beneficiary is being dedicated in a
professional manner." Tr. at 196. Supervisory
responsibilities identified by Captain Dymon include
reviewing personnel policies; making sure the non-
supervisory personnel are complying with the policies;
managing leave taken by staff; oversight and monitoring
of home health aides; monitoring the clinical record;
monitoring therapy services; making sure that supervisory
visits are conducted according to regulations; and
19

assuring that durable medical equipment is provided and
in working order. Tr. at 207 - 208.

HCFA's Manual provides that, in the case of a subunit,
supervisory personnel (a supervisory physician or
registered nurse) must be available on the premises
during operating hours. HCFA Ex. 12 at 6. In the case
of a branch office, on the other hand, its location must
be such that supervision can be accomplished easily from
the parent office, since HCFA does not require branch
offices to have supervisory personnel on the premises.
HCFA Ex. 12 at 6; Tr. at 117, 338. Thus, where the
patients served by a nonparent office are located at a
geographic distance from the parent such that supervision
will be, or is likely to be, interrupted if it is
performed by the parent, then the nonparent office must
be certified as a subunit with its own supervisory
personnel available on site on a daily basis.

Petitioner repeatedly points out in its posthearing
submissions that California licensure law requires all
home health agency offices, including branches, to have
an on-site nursing supervisor. Petitioner contends that
the fact that federal requirements do not require nursing
supervisors in branch offices is irrelevant because
California law requires all home health agency offices to
have a clinical supervisor. According to Petitioner, the
Riverside Office's patients will be adequately supervised
even if HCFA designates it as a branch because of the
State law requirement to have a supervisor on site.
Petitioner's Posthearing Response Brief at 16 - 17.

Petitioner's argument that California law requires the
presence of a supervisor on-site is not persuasive. It
is incumbent that HCFA certify home health agency
providers according to federal regulatory requirements.
HCFA cannot certify as a branch a home health agency
office which it otherwise was required to certify as a
subunit simply because the office would satisfy some of
the subunit requirements under State law. HCFA has the
responsibility to ensure that entities are operating at
the level which they have been found qualified,
regardless of any changes in State requirements which
might occur. Under Petitioner's scenario, the Riverside
Office could be certified as a branch based on State law
requirements, and then remove its on-site supervisor in
the event that State law requirements change. If that
were the case, the Riverside Office would still be
20

certified as a branch even though it lacked the necessary
supervision.’

Petitioner contends that "[{ijn contrast to institutional
providers, patient care personnel in a home health agency
must be able to operate without a great deal of
supervision when furnishing hands-on patient care in the
home." Petitioner's Posthearing Brief at 15. Petitioner
asserts that this is recognized by the definition of
"supervision" under the conditions of participation for
home health agencies. Citing 42 C.F.R. § 484.2,
Petitioner states that the regulations do not require
supervision of direct patient care at the patient's home
where the individuals furnishing that care meet the
qualifications specified in 42 C.F.R. § 484.4. According
to Petitioner, "the vast majority of home health
personnel" meet those qualifications. Id.* Petitioner
contends that most supervision in the home health setting
“is actually conducted by telephone, in writing, through
review of patient charts, or in the office when team
meetings are conducted." Id. From this, it appears that
Petitioner is arguing that, since supervision occurs in a
location other than the patient's home, then it does not
matter how far patients are from where a supervisor is
physically located. Petitioner's Posthearing Brief at
15, 40 - 41.

7 Although HCFA establishes its regulatory
standards on the basis of nationwide application, it is
obviously cognizant of the various State requirements for
licensing of home health agencies. Here, the Riverside
Office under California licensing procedures was either
to be classified as a parent or branch. Using criteria
similar to the HCFA definitional standards, DHS licensed
the Riverside Office as a parent rather than a branch.
Petitioner's compliance with this designation does not
automatically mean that its Riverside Office could not be
a branch under federal law. Irrespective of the
placement of supervisory personnel in Riverside, the
controlling factor is the Lake Forest Office's ability to
share functions with the Riverside Office on a daily
basis to ensure the health and safety of home health
patients being served from the Riverside Office.

® Ms. Boccia testified that there are separate
supervision requirements for home health aides which
require that supervisory visits be made to patients'
homes. However, she testified also that these
supervisory visits are made by a staff nurse assigned to
the patient, and are not performed by supervisors. Tr.
at 481.
21

This argument is not supported by the testimony of HCFA's
witnesses. Ms. Blue testified that the nature of
supervisory responsibilities contemplate that supervisory
staff be available to go into patients' homes. In order
to evaluate the services provided by staff and contract
personnel, supervisors must be able to see for themselves
the interaction between the workers and the patient. Ms.
Blue stated that, in the event that a patient is not
progressing as anticipated, a supervisor should be able
to go to the site where services are being provided to be
able to assess the situation for themselves. Tr. at 80,
104, 108.°

In addition, Ms. Blue testified that not only do
supervisors evaluate the actions of home health care
workers, but they provide guidance and general expertise
to staff. Tr. at 104. If warranted, supervisors should
“be ready to lend whatever assistance they may need to
the individual in the field," including actually
providing health care to patients where necessary. Tr.
at 105 - 106.

Moreover, Captain Dymon testified that, with respect to
at least one of the services furnished by staff out of
the Riverside Office, that of nutritional guidance,
HCFA's regulations require the presence of a supervisor
on the premises to supervise the individual furnishing
that service. Captain Dymon explained that 42 C.F.R. §
484.4 does not specify any qualifications for the
category of personnel responsible for performing
nutritional guidance, and therefore the home health
agency is required to furnish direct supervision on the

° The conditions of participation for a home
health agency providing care through the use of home
health aides specifically mandates that such aides be
"closely supervised to ensure their competence in
providing care." 42 C.F.R. § 484.36. Moreover, such
conditions require that the home health aides receive
supervisory visits, at least once every 60 days, froma
registered nurse in the home of their patient when the
aide is furnishing care to such patient. Id. at §
436.(d)(1). When other types of care are furnished to a
patient by someone other than a registered nurse, such as
skilled nursing or physical, speech or occupational
therapy, more frequent supervisory visits (at least every
two weeks), are required by a registered nurse or skilled
therapist. Id. at § 436.(d)(2). A home health agency
must provide a supervisory structure which ensures that
its personnel will receive this level of supervision.
22

premises for those individuals providing nutritional
guidance. Tr. at 198 - 200."

Captain Dymon stated that nutritional guidance can be
provided by various categories of personnel, including a
professional nurse, a dietitian, or a nutritionist. Tr.
at 202. Captain Dymon explained that nutritional
guidance involves "designing a diet that may be a
therapeutic diet used in conjunction with a particular
diagnosis, in order to treat the person from a
nutritional standpoint." Tr. at 200. As an example,
Captain Dymon stated that an end-stage renal disease diet
would have certain restrictions, and that this service
would be needed to provide guidance on food preparation,
to monitor consumption, and to monitor the patient's
response to the diet. Tr. at 201. According to Captain
Dymon, supervision of nutritional guidance entails
assessing the patient's needs and assessing who best on
the staff can serve those needs. Also required is the
supervisory capacity to assess whether the nutritional
interventions are actually meeting the needs of the
patients. If the interventions are not effective, the
supervisor must be available to communicate the findings
to the patient's physician and possibly request an
alteration of the patient's plan of care. Tr. at 203 -
204.

Captain Dymon testified also that inadequate supervision
of nutritional guidance could have a detrimental effect
on the health and safety of patients. As an example,
Captain Dymon stated that a renal dialysis patient could

Petitioner does not dispute that personnel
responsible for providing nutritional guidance do not
meet the qualifications specified in 42 C.F.R. § 484.4.
However, Petitioner contends that "dietary/nutritional
guidance visits are not separately billable to Medicare
as are the visits by each category of personnel listed in
§ 484.4." Petitioner's Posthearing Brief at 15. Dietary
and nutritional services are billable as administrative
costs by a home health agency where dieticians or
nutritionists are used to provide overall training or
consultative advice to the staff of the home health
agency and incidentally provide dietetic or nutritional
services to beneficiaries in their homes. 42 C.F.R. §
409.46(d). However, visits by such personnel to a home
health agency patient's home are not separately billable
under Medicare. Id. It is conceivable that a home
health care agency could provide nutritional or dietetic
advice as part of another covered service.
23

have excessive fluids in the body if the diet is not
correct. Tr. at 204.

In addition, Ms. Blue and Captain Dymon testified that
there may at times be a need for supervisory personnel to
go to a patient's home in order to respond to an
emergency when other staff are unavailable. Ms. Blue and
Captain Dymon distinguished between emergencies which
require hospital emergency treatment and emergencies
arising in connection with the provision of a home health
service which requires immediate in-home treatment by a
home health agency staff member. Ms. Blue and Captain
Dymon explained that, with respect to home health
patients, there may be situations which require the
immediate intervention of a skilled caregiver in the
home. In these instances, it would not be appropriate or
cost effective to make a patient go to a hospital
emergency room for a service which is supposed to be
provided in the home. An example of this type of
immediate need requiring in-home treatment is where a
catheter may have become dislodged in a patient with a
stage 4 decubitus ulcer. In this instance, the patient
would need to have the catheter replaced quickly in order
to prevent further progression of the decubitus ulcer.
Tr. at 81, 106, 116, 197 - 198, 237, 243 - 244.

Robert Gleason, Petitioner's President, testified that
one of the services furnished to patients out of the
Riverside Office involved the use of "high tech" infusion
therapy. According to Mr. Gleason, this therapy involves
the infusion of a solution, such as intravenous food,
intravenous antibiotics, or intravenous pain medication,
into a patient's veins. He stated that these are
considered high tech procedures because they are infused
intravenously. In addition, he stated that these
procedures require careful monitoring and that they
require somebody to be on call in the Riverside Office on
a 24-hour basis, with the ability to get staff toa
patient within an hour or two in the event that a problem
develops.'"' Tr. at 697, 700 - 701.

"Petitioner contends that the home health agency
conditions of participation do not require a home health
agency to cover its telephone during nonbusiness hours or
to furnish services during nonbusiness hours to meet
unexpected patient needs. Petitioner stated that, at its
own initiative, it has established a 24-hour on-call
service, but that this service is provided above and
beyond any regulatory requirement. I agree that the
conditions of participation do not specify the hours of

(continued...)
24

Mr. Gleason gave several examples of problems with this
type of therapy which might require immediate attention.
A nurse would need to restart the therapy in the event
that the intravenous line which delivers the infusion
becomes clogged or the needle which delivers the infusion
becomes dislodged. In addition, a nurse would need to go
to the patient's home to fix a broken intravenous pump.

A nurse would also be sent to a patient's home if a
patient reported any signs of infection. Tr. at 698 -
700.

In the event of a sudden need requiring a prompt,
unscheduled visit, it would be necessary for supervisory
personnel to delegate staff to attend to the patient's
need. It could also become necessary for the supervisor
to personally step in and respond with a visit to the
patient's home if other staff are not available at the
time the need arose. Tr. at 81, 244.

Moreover, even if a home health agency supervisor never
needed to actually go to the homes of patients, it still
must be practical for non-supervisory personnel to travel
to the office where the supervisor is located for
training, routine case conferences, and evaluations. Mr.
Gleason testified that the supervisor and home health
care personnel regularly meet to discuss patients' care.
These conferences occur either weekly or every two weeks.
Tr. at 691. Thus, the location of supervision is
important in order to accomplish these supervisory
activities. If such supervision was to be offered in the
Lake Forest Office rather than the Riverside Office, then
the travelling time and distance would significantly

i (...continued)
operation for a home health agency. However, it is
evident from the array of medical services provided ina
patient's home that some of these services would be
provided outside the normal office hours of the agency.
In fact, it is conceivable that some seriously ill
patients might require 24-hour skilled nursing or home
health aide services. In such instances, supervisory
personnel might need to respond to problems occurring
after business hours. Consequently, Petitioner should
have the capacity to respond to unexpected patient needs
both during and after business hours. Moreover, even if
I found that Petitioner was not required to respond to
unexpected patient needs during nonbusiness hours,
Petitioner would still be required to have the capacity
to meet unexpected needs at least during business hours.
25

impact on the availability and timeliness of the
supervision provided.

Ms. Blue and Captain Dymon both expressed the view that,
given the distances and travel times in this case, the
Lake Forest Office was not able to adequately share
supervision with the Riverside Office. Both Ms. Blue and
Captain Dymon opined that the certification of the
Riverside Office as a subunit was necessary to protect
the health and safety of Riverside's patients. Tr. at
116, 208.

Petitioner contends that HCFA's emphasis on supervision
for unexpected patient needs is misplaced because it
always had on-call staff working near its patients. Ms.
Boccia testified that it was not necessary for the Lake
Forest Office to respond to direct patient care needs or
emergencies of Riverside patients because from "the time
we saw patients in that area, we always had on-call staff
that lived in that area." Tr. at 517.

Petitioner's argument is unavailing because even local,
on-call staff need to be supervised. They need to be
scheduled, trained, and supervised by supervisory staff.
In addition, in the event that the on-call staff is
unavailable, it still would be necessary for supervisory
staff to be available to meet the unanticipated need.
Tr. at 467 - 468.

Moreover, Ms. Boccia's testimony that she hired staff
locally to be available to meet patient needs supports
HCFA's position that the Lake Forest Office and the
Riverside Office cannot share services on a daily basis.
Ms. Boccia testified that she hired separate on-call
nurses for the Lake Forest Office and for the Riverside
Office. She identified specific geographic territories
in which the on-call nurses had to live in order to be
able to provide timely services to patients living in
those territories.” Tr. at 586 - 589.

2 Ms. Boccia testified that she hired on-call
nurses in Big Bear City and Lake Arrowhead which were
separate from the on-call nurses hired to serve the
vicinity closer to the Riverside Office. Petitioner
points out that "HCFA does not object to the Riverside
office serving Big Bear, even though Big Bear is farther
from Riverside than Riverside is from Lake Forest."
Petitioner's Reply Brief at 4. While it is true that
patients in Big Bear City and Lake Arrowhead are
geographically distant from the Riverside Office, this

(continued...)
26

In view of the foregoing, I find that based on the
distances between the Riverside Office and its patients
from the parent in Lake Forest, the high tech types of
services being provided to patients by Petitioner, as
well as the need to promptly respond to unexpected needs
of home health patients, the weight of the evidence
establishes that the Lake Forest Office was not able to
share administration, supervision, and services with the
Riverside Office on a daily basis, within the meaning of
42 C.F.R. § 484.2.

Petitioner argues that the Lake Forest Office was the
centralized focus of Petitioner's operation. According
to Petitioner, many functions originated out of the
parent office and were shared with the Riverside Office.
Petitioner contends that even though the Riverside Office
independently met the conditions of participation for a
home health agency, this is not prohibitive of branch
status.

Petitioner gave examples of shared activities between the
two offices, including policy-setting, billing, payroll,
accounting, support for recruiting and hiring, and upper
management leadership in terms of decision-making.
Petitioner asserts that shared activity between the two
offices was facilitated by the multiple visits to the
Riverside Office by high level staff from Lake Forest.
Petitioner's Posthearing Brief at 27 - 35. Mr. Gleason
testified that it was always Petitioner's intent for the
parent in Lake Forest "to maintain central corporate
administrative and clinical policy control" over the
operations in the Riverside Office. Tr. at 725 - 726.

In reaching my decision in this case, I recognize that
there are some shared activities between the parent at
Lake Forest and the Riverside Office. The regulations do
not define a subunit as an office which is completely
autonomous from the parent. On the contrary, it
describes a subunit as being semi-autonomous. I read
this to mean that the regulations envision that the
parent will retain some responsibilities to set overall
company management policies and procedures and to enforce
quality of care controls in its nonparent offices. Tr.

2 (...continued)
does not provide justification for certifying the
Riverside Office as a branch rather than a subunit. On
the contrary, the distances between the Riverside Office
and these outlying northern areas supports HCFA's
position that services to these areas cannot be shared
with the parent in Lake Forest.
27

at 191. Thus, the fact that the Lake Forest Office may
have had overall responsibility for setting policy and
may have shared some activities does not prevent me from
reaching the conclusion that the Riverside Office should
be certified as a subunit rather than a branch.

Moreover, the mere fact that high level officials in Lake
Forest traveled to the Riverside Office during the period
the office was being set up for purposes such as
obtaining space, marketing, and recruiting staff does not
establish that the requisite administration, supervision,
and services can be shared on a daily basis after the
Riverside Office became fully operational. Tr. at 423.

c. The Riverside Office served patients in a
geographic area different from that of the Lake
Forest Office.

HCFA asserts that the Riverside Office should be
certified as a subunit because it served patients "in a
geographic area different from that of the parent
agency," in accordance with the definition of a subunit
set forth at 42 C.F.R. § 484.2. Petitioner argues that
the Riverside Office should be certified as a branch
because it is a "location or site from which a home
health agency provides services within a portion of the
total geographic area served by the parent" in accordance
with the definition of a branch set forth at 42 C.F.R. §
484.2.

During the hearing, Ms. Boccia referred to the geographic
area served by the Riverside Office and stated that
before the Riverside Office was licensed by the State of
California, Petitioner provided services to the patients
who resided in this geographic area out of its Lake
Forest Office. She noted specifically that the Lake
Forest Office served patients as far away as Big Bear
city at that time. Ms. Boccia stated that once the
Riverside Office was licensed, these patients were
admitted to the Riverside Office. Tr. at 422, 501 - 502.
Based on this, Petitioner argues that the Riverside
Office met the regulatory criteria for a branch because
it "served patients who were within the geographic area
also served by Lake Forest." Petitioner's Posthearing
Brief at 21.

Petitioner attempts to establish that the geographic area
of its Lake Forest Office extended as far away as Big
Bear City by relying on Ms. Boccia's testimony that this
area was served by the Lake Forest Office prior to the
licensure of the Riverside Office. I do not agree that
Petitioner's actions prior to undergoing the scrutiny of
the State licensing process establishes that Lake
28

Forest's geographic service area extended as far as Big
Bear City.

Although the Lake Forest Office may have been providing
services to the entire geographic area now covered by the
Riverside Office, Petitioner has not adduced any evidence
to show that the Lake Forest Office did so with the
approval of the appropriate State licensing authority.
Indeed, once the State agency in San Bernardino surveyed
the Riverside Office, it refused to license the Riverside
Office as a branch of the parent in Lake Forest.

Instead, the State licensed the Riverside Office as a
parent home health agency. In addition, the State
recommended HCFA to certify the Riverside Office as a
Medicare provider as a subunit, rather than as a branch,
of the Lake Forest Office, and HCFA adopted this
recommendation. This shows that, once the Riverside
Office submitted to the survey process, both the State
and HCFA concluded that the Riverside Office had to meet
Medicare certification requirements independently of the
Lake Forest Office in order to be certified to provide
services to patients located in the geographic area
served by the Riverside Office. I infer from this that
the State and HCFA concluded that the Lake Forest Office
could not be relied on to adequately provide services to
this geographic area.

In the absence of persuasive evidence documenting that
the Lake Forest Office had the ability to administer,
supervise, and serve patients residing in the geographic
area covered by the Riverside Office, Ms. Boccia's
testimony that the Lake Forest Office once served
patients in this geographic area is not sufficient for me
to conclude that the Lake Forest Office's geographic
service area encompasses the geographic area served by
the Riverside Office. Accordingly, Ms. Boccia's
testimony does not establish that the Riverside Office
provides services within a part of the total geographic
area served by the Lake Forest Office.

Petitioner argues that an understanding of the operation
of home health services and supervision supports the
conclusion that the distances from the Lake Forest Office
to the locations of the Riverside Office's patients’
homes has little relevance in this case. Petitioner
states that, since home health agencies furnish services
in patients' homes, patient care personnel operate with a
great deal less supervision than personnel in an
institutional setting. Petitioner asserts that the
nature of home health services is to provide supervision
"from office to office," thereby implying that the
distance between the Lake Forest Office and the Riverside
29

Office is more relevant than the distance between the
Lake Forest Office and locations of patients in
determining whether the Riverside Office should be
designated as a branch or a subunit. Petitioner's
Posthearing Brief at 15, 26 - 27.

Petitioner asserts also that a showing that the Riverside
Office serves patients which are not in the geographic
area served by the Lake Forest Office does not disqualify
the Riverside Office from being designated a branch.
Petitioner argues that the reason to open a branch office
is to have increased efficiency and to provide the
opportunity to expand the geographical range of services.
Petitioner reasons that if the Riverside Office was
serving the same patient population as the Lake Forest
Office, there would be no reason to open a branch office.
Petitioner argues that the regulation requires only that
a branch provide services within a "portion" of the total
geographic area served by the parent. Petitioner takes
the position that, as long as the service areas of the
Riverside Office and Lake Forest Office "overlap," then
they are not different and they would meet the
requirement that a branch provide services within a
portion of the total geographic area served by the
parent. Petitioner's Posthearing Response Brief at 19;
Tr. at 19 - 20.

Petitioner asserts that, in this case, the record shows
that the Lake Forest Office and the Riverside Office are
in the same geographical area. Petitioner's Proposed
Findings of Fact and Conclusions of Law at 4. Petitioner
cites Mr. Gleason's testimony that the Riverside area and
the Lake Forest area are "immediately adjacent and kind
of all the same area" and that "the towns just go through
Orange County and continue on when you cross the
Riverside County border." Tr. at 663. Petitioner also
points out that Ms. Boccia testified that there are
employees of Petitioner who furnish services to patients
of both the Riverside Office and the Lake Forest Office.
Tr. at 406. Based on this, Petitioner contends that the
service area of the Riverside Office overlaps with the
service area of the Lake Forest Office, and therefore the
Riverside Office provides services within a portion of
the total geographic area served by the Lake Forest
Office.

I do not agree with Petitioner's interpretation of the
regulations. Petitioner appears to be arguing that there
are no limits to how far a branch office may expand its
service area as long as the branch has some service area
in common with the parent. Under Petitioner's reading of
the regulations, a branch could be permitted to serve
30

patients all over the State of California as long as some
of its patients were drawn from the same geographic area
served by the parent. Moreover, the operative phrase in
the definition of branch is that it is a site from which
a home health agency provides services "within a portion
of the total geographic area served by the parent
agency." 42 C.F.R. § 484.2. If, as here, the nonparent
office is located arguably within the geographical area
of the parent but provides services to patients outside
that geographical area, then the nonparent cannot be a
branch and must be classified as a subunit. This is
consistent with the subunit definition that applies to
nonparent offices that service patients in a geographic
area different from the parent.

I find that Petitioner's interpretation is contrary to
the intent of the regulations. The issue before me is
not whether the Lake Forest Office and the Riverside
Office have some service area in common, but rather
whether the geographic service area of the Riverside
Office is contained within the total geographic service
area of the Lake Forest Office. This is consistent with
the testimony of HCFA's witnesses. Captain Dymon
testified that a branch is "an extension of the parent
serving the identical services as the parent area within
the geographic description of the parent." Tr. at 193.
On the other hand, a subunit serves patients in a
geographic area different from that of the parent. Ms.
Blue testified that "different from the parent" would be
the areas that would be further beyond the area of what
might be a branch; an area that might cause a problem for
a patient to readily access the system or for the agency
staff to reach the patient in a timely fashion to provide
care. Further, Ms. Blue stated, "(hjowever, if, indeed,
patients reside outside of the general area that the
parent serves, it's geographically different. Then,
indeed, that office would need to be a subunit." Tr. at
82 - 83.

In this case, even if I were to accept that the distances
and travel time between the Riverside Office and the Lake
Forest Office put the two offices in the same geographic
area and that some of the patients of the Riverside
Office were drawn from the same geographic area as some
of the patients of the Lake Forest Office, I would still
find that the Riverside Office served other patients who
were located outside of the total geographic area served
by the Lake Forest Office. I find that the evidence
establishes that the Lake Forest Office cannot be relied
on to provide safe and timely administration,
supervision, and services to patients located as far away
as Big Bear City and Lake Arrowhead. Based on this, I
31

find that the Riverside Office served patients ina
geographic area different from that of Lake Forest,
within the meaning of the regulatory definition of a
subunit.

II. Petitioner's arguments attacking the decisionmaking
process are unavailing.

Petitioner argues also that HCFA's determination to
designate the Riverside Office as a subunit should not
stand because the underlying decisionmaking process was
defective. According to Petitioner, HCFA never engaged
in openminded factfinding related to the issue of whether
the Riverside Office should be certified as a subunit or
a branch.

Petitioner asserts that, at all times, it wanted the
Riverside Office to be a branch of the parent at Lake
Forest and that it consistently communicated this desire
to HCFA. Petitioner's Posthearing Response Brief at 6 -
7. Petitioner points out that it indicated on the State
licensure application that it wanted its Riverside Office
to be a branch of the parent in Lake Forest. In
addition, Petitioner points out that it expressed its
desire to have its Riverside Office designated as a
branch for purposes of Medicare certification in a letter
written to HCFA before the Medicare survey.

Ms. Blue testified that, when she visited the Riverside
Office for the Medicare survey in June of 1992, she was
informed by Petitioner's staff that they considered the
Riverside Office to be a subunit, and she entered that
information on HCFA Form 1572, Home Health Agency Survey
and Deficiencies Report. Tr. at 99 ~ 100; HCFA Ex. 8.

On the other hand, Ms. Boccia speculated that the reason
the question, "Is this home health agency a subunit?" was
answered "yes" on HCFA Form 1572 was that State licensing
officials had refused to license the Riverside Office as
a branch. Ms. Boccia suggested that the response to this
question was not intended to convey that Petitioner
viewed the Riverside Office to be a subunit, but instead
was intended to convey that Petitioner recognized that,
for State licensure purposes, the Riverside Office was
characterized as a subunit. Tr. at 398, 513." Ms.

3 ~his testimony is somewhat confusing since the
California DHS does not certify home health agencies as
subunits, only parents and branches. However, Ms. Boccia
clarified her testimony by stating that, at the time of

(continued...)
32

Boccia further testified that she told Ms. Blue during
the survey that the Riverside Office would like to be
given the same provider number as the Lake Forest Office.
Tr. at 400.

Petitioner takes the position that, notwithstanding the
fact that it repeatedly expressed its desire for the
Riverside Office to be certified as a branch, HCFA did
not give adequate consideration to this request.
Petitioner contends that HCFA relied on the State
licensure determination to refuse to license the
Riverside Office as a branch, and, as a result, HCFA did
not conduct an adequate survey addressing this issue.
Petitioner argues that there never would have been a
Medicare survey of the Riverside Office unless it had
been predetermined that the office should be certified as
a subunit for Medicare purposes.

According to Petitioner, the decisionmaking process was
deficient because no part of the Medicare survey which
was conducted related to reaching findings on the issue
of branch status. Petitioner states that, contrary to
HCFA's own policy as set forth in its Manual, HCFA never
visited the parent to pursue the question of Lake
Forest's capability of sharing administration,
supervision, and services with the Riverside Office.
Petitioner argues that, in the absence of a factfinding
survey to determine the facts relating to the regulatory
criteria, the correspondence between the parties on this
issue amounts to nothing more than post hoc
rationalization of HCFA's prior decision. Petitioner's
Posthearing Brief at 8 - 14; Petitioner's Posthearing
Reply Brief at 25 - 26.

Petitioner's arguments attacking the underlying
decisionmaking process are without merit. As I stated in
my June 2, 1995 ruling, this hearing is, by law, de novo.
Act, section 205(b). Accordingly, in evaluating whether
the Riverside Office should be certified as a branch, I
must make an independent assessment of the regulatory
factors which define branches and subunits and apply them
to the facts of this case.

The underlying decisionmaking process is not at issue
before me. The predecisional deliberations and thought
processes of the State's and HCFA's decisionmakers are

8B (...continued)
the Medicare certification survey, Petitioner believed
that the Riverside Office was operating as a subunit.
Tr. at 511 - 513.
33

not relevant to my decision in this case because it has
nothing to do with the issue of whether the Riverside
Office meets the regulatory definition of a branch. I
must decide this case on its merits, not in terms of
whether HCFA properly followed its own internal
procedures in making its determination to certify the
Riverside Office as a subunit. In accordance with my
June 2, 1995 ruling, Petitioner's criticisms of
procedures followed by the State and HCFA relating to the
survey process are not relevant to the issue at hand.

Moreover, even if Petitioner's arguments were relevant,
there is nothing in HCFA's regulations or Manual which
prohibits HCFA from conducting a direct survey of a
nonparent office for the purpose of determining whether
the nonparent office qualifies to be certified as a
branch or a subunit.'* However, assuming arguendo that
HCFA disregarded its own guidelines by failing to make
adequate findings with respect to the issue of whether
the Riverside Office qualified to be designated as a
branch, this deficiency in the survey process is cured by
this hearing. Petitioner has had ample opportunity in
this forum to come forward with factual information to
support its contention that the Riverside Office met the

‘4 The guidelines in the Manual cited by Petitioner
state:

when conducting a survey of a [home health agency]
with branch offices, ascertain from [home health
agency] records whether the branch offices are
provided adequate supervision by the parent agency
and whether they are, in fact, sufficiently close to
the parent agency to be considered branch offices
rather than subunits. If this judgment cannot be
made without direct observation, visit the branch
office to make this determination. When reviewing
records and conducting visits to patients' homes,
select some records and schedule some home visits to
patients who are served by a branch office. You may
also conduct a standard survey of the [home health
agency] at a branch office.

P. Ex. 15 at 4. I do not read these guidelines to mean
that HCFA is required to survey the parent to determine
branch or subunit status. Instead, the guidelines
endorse conducting a standard survey of the nonparent
office. While the guidelines suggest that visiting the
nonparent office might not be necessary if sufficient
information can be obtained from the parent, they do not
require that in all cases parents must be surveyed first.
34

regulatory definition of a branch. I find that the
preponderance of the evidence adduced by the parties at
this hearing supports HCFA's determination to certify the
Riverside Office as a subunit rather than as a branch.

CONCLUSION

I conclude that HCFA's determination to certify
Petitioner's Riverside Office as a subunit of the parent
in Lake Forest was in accordance with the applicable law
at 42 C.F.R. § 484.2. Therefore, I sustain HCFA's
determination.

/s/

Edward D. Steinman
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Erol Ucer, M.D., DATE: March 25, 1996
Petitioner,

Docket No. C-95-151
Decision No. CR416

-v-

The Inspector General.

DECISION

In a letter dated May 15, 1995, the Inspector General
(I.G.) notified Petitioner that she had made a
determination to exclude him for a period of three years
from participation in Medicare, Medicaid, Maternal and
Child Health Services Block Grant and Block Grants to
States for Social Services programs.' Petitioner was
informed that his exclusion was being imposed pursuant to
section 1128(b)(1) of the Social Security Act (Act), due
to the fact that Petitioner had been convicted of a
criminal offense related to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct. The I.G. further informed Petitioner that
his exclusion had national effect, and that she was
required by law to notify the appropriate State agency of
Petitioner's exclusion. The appropriate State agency was
required by law to exclude Petitioner for a minimum of
three years as well.

By letter dated June 29, 1995, Petitioner requested a
hearing to contest his exclusion. The case was docketed
and assigned to me. I conducted a prehearing conference
in this case on August 7, 1995, during which time
Petitioner conceded that he had in fact been convicted of
a criminal offense related to fraud in connection with
the delivery of a health care item or service. I
informed Petitioner of the regulation at 42 C.F.R. §

1 Unless the context indicates otherwise, I will
use Medicare and Medicaid to designate these programs.
2

1001.201, which provides for a three-year benchmark
exclusion in cases where an individual has been convicted
of a criminal offense related to fraud in connection with
the delivery of a health care item or service. I
informed Petitioner that, since he was not disputing that
he was convicted or that his conviction was related to
fraud in connection with the delivery of a health care
item or service, the only remaining issue in this case
was whether the three-year exclusion directed and imposed
against Petitioner by the I.G. was reasonable.

Counsel for the I.G. requested leave to file a motion for
summary disposition. Because there did not appear to be
any material facts in dispute in this case, I granted the
I.G.'s request.

The parties have filed briefs and exhibits. I have
reviewed the parties' submissions and conclude that the
I.G. is entitled to judgment as a matter of law.

APPLICA LAW

Section 1128(b)(1) of the Act provides that the Secretary
(or the Secretary's lawful delegate, the I.G.) may
exclude individuals and entities from participation in
Medicare and Medicaid under the following circumstances:

(1) CONVICTION RELATING TO FRAUD. -- 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 .. .

The implementing regulation, codified at 42 C.F.R. §
1001.201, sets forth the criteria for determining the
length of exclusion imposed pursuant to section
1128(b)(1) of the Act. Such an exclusion will be for
three years, unless the aggravating or mitigating factors
specified by the regulation are present and warrant
adjusting the three-year benchmark exclusion period. 42
C.F.R. § 1001.201(b). The contents of the regulation are
binding upon administrative law judges. Joel Fass, DAB
CR349, at 4 - 5 (1994).

The only issues appealable to an administrative law judge
are whether a basis for the imposition of the exclusion
exists and whether the length of the exclusion is
3

reasonable. 42 C.F.R. § 1001.2007(a)(1). When the
exclusion is based on a conviction, the basis of the
conviction is not subject to review, and may not be
collaterally attacked during the appeal of an exclusion.
42 C.F.R. § 1001.2007(d).

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FINDINGS)
A. Background facts concerning Petitioner's conviction

1. On June 15, 1992, Petitioner was formally charged
with 54 counts alleging that he made or presented or
caused to be made or presented, false claims against the
Medicaid program, in violation of Mich. Comp. Laws Ann. §
400.607(1) (West 1991) and with 44 counts alleging that
he made or presented or caused to be made or presented,
false claims against Blue Cross, Blue Shield of Michigan,
in violation of Mich. Comp. Laws Ann. § 752.1003(1) (West
1991). I.G. Ex. 37.

2. The 44 counts of fraud against Blue Cross, Blue
Shield of Michigan alleged that Petitioner made or
presented or caused to be made or presented to a health
care corporation or health care insurer, claims for
payment of health care benefits, knowing the claims to be
false. I.G. Ex. 3.

3. Petitioner was convicted on 11 of the 44 counts of
submitting fraudulent or false claims to Blue Cross, Blue
Shield of Michigan, in violation of Mich. Comp. Laws Ann.
§ 752.1003(1). I.G. Exs. 3, 4.

4. Petitioner was convicted of eleven felony counts. .
I.G. Ex. 4 at 2-3; Mich. Comp. Laws Ann. § 752.1003(1) -
(5) (West 1991).

5. Petitioner was sentenced to 90 days of incarceration
and ordered to pay $700 in restitution. I.G. Ex. 4.

? The I.G. submitted five exhibits in conjunction
with her motion for summary disposition. I have marked and
refer to these exhibits as "I.G. Exs. 1 - 5," respectively.
I admit I.G. Exs. 1 - 5 into evidence. Petitioner
submitted a one page letter (brief) on his own behalf and
=Aree pages of exhibits. I have marked and refer to these
-shibits as "P. Exs. 1 - 3," respectively. I admit P. Exs.

- 3 into evidence.
4

B. The circumstances underlying Petitioner's conviction

mandate that he should be excluded for a three-year
period.

6. Petitioner was convicted of a criminal offense,
within the meaning of section 1128(i) of the Act. Act,
section 1128(i)(1) and (2). Findings 1 - 5.

7. Petitioner's conviction for 11 counts of submitting
fraudulent or false claims to Blue Cross, Blue Shield of
Michigan is a conviction relating to fraud, within the
meaning of section 1128(b)(1) of the Act. Act, section
1128 (b) (1).

8. An exclusion imposed pursuant to section 1128(b) (1)
of the Act will be for a period of three years unless
certain specific aggravating or mitigating factors are
present. 42 C.F.R. § 1001.201.

9. It is an aggravating factor and a basis for
increasing an exclusion beyond the three-year benchmark
period if the acts that resulted in Petitioner's
conviction, or similar acts, resulted in financial loss
of $1500 or more to a government program or to one or
more other entities, or had a significant financial
impact on program beneficiaries or other individuals. 42
C.F.R. § 1001.201(b) (2) (i).

10. The aggravating factor at 42 C.F.R.
§ 1001.201(b) (2)(i) is not present in this case.

11. It is an aggravating factor and a basis for
increasing an exclusion beyond the three-year benchmark
period if the acts that resulted in Petitioner's
conviction, or similar acts, were committed over a period
of one year or more. 42 C.F.R. § 1001.201(b) (2) (ii).

12. The aggravating factor contained at
42 C.F.R. § 1001.201(b) (2) (ii) is not present in this
case.

13. It is an aggravating factor and a basis for
increasing an exclusion beyond the three-year benchmark
period if the acts that resulted in Petitioner's
conviction, or similar acts, had a significant adverse
physical or mental impact on one or more program
beneficiaries or other individuals.

42 C.F.R. § 1001.201(b) (2) (iii).

14. The aggravating factor at 42 C.F.R.
§ 1001.201(b) (2) (iii) is not present in this case.
5

15. It is an aggravating factor and a basis for
increasing an exclusion beyond the three-year benchmark
period if the sentence imposed by the court included
incarceration. 42 C.F.R. § 1001.201(b) (2) (iv).

16. The aggravating factor at 42 C.F.R. §
1001.201(b) (2) (iv) is present in this case. I.G. Ex. 4;
Finding 5.

17. The I.G. has not presented any evidence or argument
that would support increasing Petitioner's exclusion
based on the presence of the aggravating factor at 42
C.F.R. § 1001.201(b) (2) (iv).

18. It is an aggravating factor and a basis for
increasing an exclusion beyond the three-year benchmark
period if Petitioner has a prior criminal, civil, or
administrative sanction record. 42 C.F.R. §
1001.201(b) (2) (v).

19. The aggravating factor contained at 42 C.F.R. §
1001.201(b) (2) (v) is not present in this case.

20. It is a mitigating factor if Petitioner was
convicted of three or fewer misdemeanor offenses, and the
entire amount of financial loss to a government program
or to other individuals or entities due to the acts that
resulted in the conviction and similar acts is less than
$1500. 42 C.F.R. § 1001.201(b) (3) (i).

21. The mitigating factor contained at 42 C.F.R. §
1001.201(b) (3) (i) is not present in this case.

22. It is a mitigating factor if the record in the
criminal proceedings demonstrates that the court
determined that the individual had a mental, emotional,
or physical condition, before or during the commission of
the offense, that reduced the individual's culpability.
42 C.F.R. § 1001.201(b) (3) (ii).

23. The mitigating factor contained at 42 C.F.R. §
1001.201(b) (3) (ii) is not present in this case.

24. It is a mitigating factor if Petitioner cooperated
with federal or State officials and that cooperation
resulted in others being excluded from Medicare or any of
the State health care programs or resulted in the
imposition of a civil monetary penalty against others.

42 C.F.R. § 1001.201(b) (3) (iii).
6

25. The mitigating factor contained at 42 C.F.R. §
1001.201(b) (3) (iii) is not present in this case.

26. It is a mitigating factor if alternative sources of
the type of health care items or services furnished by
Petitioner are not available. 42 C.F.R. §

1001.201(b) (3) (iv).

27. The mitigating factor contained at 42 C.F.R. §
1001.201(b) (3) (iv) is not present in this case.

28. The I.G. properly excluded Petitioner for three
years in accordance with 42 C.F.R. § 1001.201. Findings
1 - 27.

29. There exists no genuine issue of material fact.
Findings 1 - 28.

30. As a matter of law, the I.G. is entitled to summary
disposition in her favor. Findings 1 - 29.

DISCUSSTON

There is no dispute in this case that Petitioner was
convicted of a criminal offense, within the meaning of
section 1128(i) of the Act. Petitioner states that he
was charged with 98 counts of billing fraud and was
acquitted of 87 of the counts. Still, the record in this
case reflects, and Petitioner does not dispute, that he
was convicted of 11 counts of filing false health care
Claims. I.G. Exs. 3 - 5. Petitioner argues that he
should not have been excluded by the I.G. because he has
committed no offense which has caused harm to either the
Medicare or Medicaid programs.

However, section 1128(b)(1) of the Act, under which
Petitioner was excluded, authorizes the I.G. to exclude
any individual or entity who has been convicted, in
connection with the delivery of a health care item or
service, of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or
other financial misconduct. Thus, the authority to
exclude under this section of the Act does not depend on
whether Petitioner had harmed the Medicare or Medicaid
programs.

The facts of this case leave no doubt but that Petitioner
was convicted of a criminal offense in connection with
the delivery of a health care item or service relating to
fraud. Specifically, Petitioner was convicted, after a
jury trial, of 11 counts of submitting false health care
7

claims for reimbursement to Blue Cross, Blue Shield of
Michigan when Petitioner knew that the claims were false.
I.G. Exs. 1, 4, 5. It is well established that where an
individual is convicted of an offense involving the
submission of fraudulent or false health care claims for
reimbursement, that offense is committed in connection
with the delivery of health care items or services.
William D. Miles, M.D., DAB CR354 (1995); Joel Fass, DAB
CR349 (1994); Michael M. Bouer, R.Ph., DAB CR345 (1994).
Petitioner does not dispute this in his submission.

Moreover, Petitioner's conviction meets the second test
required by section 1128(b)(1) of the Act because it is a
conviction relating to fraud. I.G. Exs. 4, 5. The
State statute under which Petitioner was convicted is
very specific, and it makes clear that Petitioner's
conviction involved not only filing false claims, but
involved Petitioner knowing that the claims were false.
I.G. Exs. 4, 5. The conviction itself specifies that
Petitioner was convicted of fraud. I.G. Ex. 4.
Petitioner's conviction is thus, on its face, related to
fraud in connection with the delivery of a health care
item or service. It falls squarely within the purview of
section 1128(b)(1) of the Act.

Petitioner argues also that a three-year exclusion is
unduly harsh and that the financial damage from his false
billing activities totalled only $650. I am bound in
this case by regulations which allow me to consider only
certain mitigating and aggravating factors. Absent such
factors, a three-year exclusion is reasonable under the
relevant regulations. 42 C.F.R. § 1001.201(b).

The record in this case does not disclose the extent of
financial damage resulting from Petitioner's criminal or
any related activities. However, even if I were to
accept as true Petitioner's statement that the extent of
the financial damage was only $650, this amount would be
a mitigating factor only if Petitioner had been convicted
of no more than three misdemeanors. 42 C.F.R. §
1001.201(b) (3). The record in this case reveals that
Petitioner was convicted of 11 felony counts. I.G. Exs.
1 - 5. The mitigating factor at 42 C.F.R. §
1001.201(b) (3) therefore is not applicable to this case.

In addition, the I.G.'s decision to impose a three-year
exclusion in this case is reasonable because the I.G.
could have argued for a greater period of exclusion based
upon the fact that Petitioner's sentence included
incarceration. 42 C.F.R. § 1001.201(b)(2) (iv). Instead,
the I.G. showed restraint and imposed only the three-year
benchmark exclusion period.
8
CONCLUSION

For the foregoing reasons, I conclude as a matter of law
that the I.G. properly excluded Petitioner for a period
of three years pursuant to section 1128(b) (1) of the Act
and 42 C.F.R. § 1001.201.

/s/

Mimi Hwang Leahy
Administrative Law Judge