Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Neil R. Hirsch, M.D., DATE: June 2, 1995
Petitioner,

Docket No. C-95-001
Decision No. CR379

-v-

The Inspector General.

DECISION

By letter dated September 13, 1994, Neil R. Hirsch, M.D.,
the Petitioner herein, was notified by the Inspector
General (I.G.), of the United States Department of Health
& Human Services (HHS), that it had been decided to
exclude Petitioner for a period of five years from
participation in the Medicare, Medicaid, Maternal and
Child Health Services Block Grant, and Block Grants to
States for Social Services programs.'! The I.G.'s
rationale was that exclusion, for at least five years, is
mandated by sections 1128(a)(1) and 1128(c)(3)(B) of the
Social Security Act (Act) becayse Petitioner had been
convicted of a criminal offense related to the delivery
of an item or service under the Medicaid program.

Petitioner filed a timely request for review of the
I.G.'s action. . I set up a briefing schedule for the
parties to address the issues in this case.

Because I have determined that there are no facts of
decisional significance genuinely in dispute, and that
the only matters to be decided are the legal implications
of the undisputed facts, I have decided the case on the

' In this decision, I refer to all programs from
which Petitioner has been excluded, other than Medicare,
as "Medicaid."
2

basis of the parties' written submissions.” I grant the
I.G.'s motion for summary disposition.

2 The I.G. submitted a brief in support of her
motion for summary disposition. Petitioner submitted a
response brief and also, cross~-moved for summary
disposition. Following the submissions of these briefs,
I ordered further briefing from the parties. See Order
for Supplemental Briefing, dated March 20, 1995. The
I.G. submitted a supplemental brief, to which Petitioner
filed a supplemental brief in response.

The I.G. submitted eleven exhibits with her initial
brief. Petitioner submitted three exhibits with his
response brief. With her supplemental brief, the I.G.
submitted two additional exhibits (I.G. Exhibits 12 and
13) and withdrew I.G. Exhibit 11. Petitioner did not
submit any additional exhibits with his supplemental
response brief.

Petitioner objected to the admission of I.G. Exs. 7, 12,
and 13. I.G. Ex. 7 is the original indictment dated July
28, 1989, upon which criminal proceedings against
Petitioner were initiated. This indictment was filed in
the Superior Court of the State of Arizona. Petitioner
has objected to this exhibit on the grounds that it is
irrelevant and prejudicial because 14 counts of the 17-
count indictment were later dismissed. The fact that
this indictment was later amended does not mean that it
cannot be a part of the administrative record before me.
Petitioner has not questioned its authenticity. I
overrule Petitioner's objection to I.G. Ex. 7 and admit
it into evidence.

With respect to I.G. Exs. 12 and 13, Petitioner contends
that their submission as exhibits has caused unfair
surprise. P. Supp. Br. at 3-5. However, the I.G.
submitted these exhibits in accordance with paragraph
5(a) of my March 20, 1995 Order, in which I gave the I.G.
the opportunity to file any additional documentary
evidence as exhibits in support of her supplemental
brief. In paragraph 5(b), I gave Petitioner the same
opportunity to submit additional documentary evidence
with its supplemental response brief. I thus overrule
Petitioner's objections to I.G. Exs. 12 and 13 and admit
them into evidence. In addition to I.G. Exs. 7, 12, and
13, I admit also into evidence I.G. Exs. 1-6 and 8-10. I
admit P. Exs. 1 - 3.
3

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

APPLICABLE LAW

Sections 1128(a)(1) and 1128(c) (3)(B) of the Act make it
mandatory for any individual who has been convicted of a
criminal offense related to the delivery of an item or
service under the Medicare or Medicaid programs to be
excluded from participation in such programs for a period
of at least five years.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Arizona has in place a State plan approved under
Title XIX of the Act. I.G. Exs. 12, 13.

2. Under section 1115 of the Act, a State's
experimental, pilot, or demonstration project which, in
the Secretary's judgment, is likely to promote the
objectives of Title XIX, may receive a waiver from the
Secretary from compliance with any of the requirements of
section 1902 of Title XIX to the extent necessary to
enable the State to carry out its project. Act, section
1115(a).

3. If the Secretary grants a section 1115 waiver, the
costs of the State's project which would not otherwise be
included as expenditures under section 1903, and which

3 I cite the I.G.'s exhibits as "I.G. Ex(s). at
(number)." I cite Petitioner's exhibits as "P. Ex(s). at
(number) ."

The parties' briefs and my findings of fact and
conclusions of law will be cited as follows:

I.G.'s brief I.G. Br. at (page)
Petitioner's response brief P. Br. at (page)

I.G.'s supplemental brief I.G. Supp. Br. at (page)
Petitioner's supplemental P. Supp. Br. at (page)

response brief

My Findings of Fact and FFCL (number)
Conclusions of Law
4

would not otherwise be included as part of the cost of
projects under section 1110, shall be regarded as
expenditures under the State plan or plans approved under
Title XIX. Act, sections 1115(a)(1) and (2).

4. On October 1, 1992, the State of Arizona implemented
the Arizona Health Care Cost Containment System (AHCCCS),
a demonstration project approved under section 1115 of
the Act. P. Ex. 3; I.G. Br. at 6; P. Br. at 2.

5. AHCCCS received a section 1115 waiver from the
Secretary, which waived compliance with certain Title XIX
requirements. See P. Ex. 1; FFCL 2.

6. The costs of the AHCCCS program which would not
otherwise be included as expenditures under section 1903
of the Act, and which would not be included as part of
the costs of projects under section 1110, shall, to the
extent and for the period prescribed by the Secretary, be
regarded as expenditures under Arizona's Title XIX State
plan. Act, section 1115; FFCL 1-5.

7. AHCCCS contracts with providers for the provision of
hospitalization and medical care coverage to members.
Ariz. Rev. Stat. Ann. § 36-2903(A) (1993 and Supp. 1994).

8. A “prepaid capitated" payment system is one in which
a health care provider is paid based on a fixed rate per
member, notwithstanding the actual number of members who
receive care from the provider and the amount of health
care services provided to any member. Ariz. Rev. Stat.
Ann. § 36-2901(9) (1993 and Supp. 1994).

9. AHCCCS operates on a prepaid capitated basis. Ariz.
Rev. Stat. Ann. § 36-2904(A) (1993 and Supp. 1994).

10. The director of AHCCCS is authorized to apply for
and accept federal funds available under Title XIX of the
Act in support of AHCCCS; such funds may be used only to
support persons who are defined as meeting Title XIx
eligibility requirements. Ariz. Rev. Stat. Ann. § 36-
2903.01(B) (5) (1993).

11. An AHCCCS contractor is required to comply with the
provisions of federal law and regulations governing the
Title XIX program, except for those requirements waived
by the federal government for the State in the State Plan
for Medical Assistance. A contractor is required also to
comply with the provisions of Title 36, Chapter 29 of the
Arizona Revised Statutes (governing AHCCCS), and with all
applicable regulations promulgated by the Arizona
Department of Health Services. I.G. Ex. 8 at 6.
5

12. Another section of the Arizona statutes mandates
that the provisions relating to the operation of AHCCCS
will be suspended if, at any time, federal funding under
Title XIX is denied, not renewed or becomes unavailable.
Ariz. Rev. Stat. Ann. § 36-2919 (1993).

13. The section 1115 waiver enables AHCCCS to receive
Title XIX funds from the State as payments for services
furnished under it.

14. Payments made to AHCCCS pursuant to section
1115(a)(2) are indisputably payments made under Title
XIX, i.e., Medicaid payments. FFCL 9-13.

15. The AHCCCS program is a project approved under
section 1115 of the Act. FFCL 5, 13.

16. The AHCCCS program is considered to be a State
health care program within the meaning of section
1128(h)(1). FFCL 13-15.

17. Petitioner, an ophthalmologist, was one of three
owners and principals of Health Care Providers of
Arizona, Inc. (HCPA). I.G. Ex. 1 at 3-5; I.G. Ex. 10 at
2; P. Ex. 2.

18. HCPA was incorporated on August 6, 1982, to deliver
health care to AHCCCS enrollees. I.G. Ex. 1 at 3-5; I.G.
Ex. 7 at 3.

19. HCPA was a prime contractor with AHCCCS from 1982 to
1984. I.G. Ex. 1 at 3-5; P. Ex. 2.

20. AHCCCS paid HCPA monthly capitation payments for the
delivery of health care to indigent Arizona citizens.
I.G. Ex. 1 at 3-5.

21. The monthly contract payments made to HCPA were
federal funds under Title XIX. FFCL 10, 14-19.

22. Between October 1, 1982 and September 30, 1984,
HCPA's sole source of income was payments by AHCCCS and
interest derived therefrom. I.G. Ex. 7.

23. AHCCCS checks paid to HCPA were deposited into
HCPA's corporate checking account, which was controlled
by HCPA's principals, one of whom was Petitioner. I.G.
Ex. 1 at 4-5.

24. On or about July 28, 1989, a 17~count indictment was
filed in the Superior Court of the State of Arizona
6

(State court) against Petitioner and the two other
principals of HCPA. I.G. Ex. 7.

25. On April 6, 1992, Petitioner pled guilty to two
counts of facilitation of theft, in violation of Ariz.
Rev. Stat. §§ 13-1004 and 13~-1802(A)(2). Pursuant to a
plea agreement, these counts were amended and constitute
amended counts 14 and 16 of the indictment. See I.G. Ex.
1.

26. By signing and dating the statements attached to his
plea agreement, titled "Exhibit II, Factual Basis for
Amended Count 14" and "Exhibit III, Factual Basis for
Amended Count 16," Petitioner has admitted to the facts
set forth in these statements. I.G. Ex. 1 at 4, 5.

27. The factual basis for amended count 14 states that
Petitioner “aided {another principal's] theft of HCPA
monies in violation of A.R.S. 13=-1802(A)(2) by signing
check number 2018 in the amount of $300.00 written on
HCPA's checking account payable to Oximetrix, Inc." I.G.
Ex. 1 at 4.

28. Petitioner signed check number 2018 to pay for an
electric surgical knife, "knowing that the equipment was
to be used for . . . non-AHCCCS cosmetic surgery
patients. Cosmetic procedures are not covered by
AHCCCS." I.G. Ex. 1 at 4.

29. The factual basis for amended count 16 states that
Petitioner "aided in Berton Siegel's theft of HCPA monies
by signing check #3748 in the amount of $10,000 written
on Health Care Providers of Arizona checking account to
Touche Ross Minneapolis." I.G. Ex. 1 at 5.

30. Check number 3748 was used to pay the balance on an
actuarial study which was to provide information for a
private health care organization owned by Berton Siegel
and Petitioner. Petitioner signed the check knowing that
the actuarial study was not used for HCPA's purposes.
I.G. Ex. 1 at 5.

31. By signing checks on HCPA's checking account for the
purchase of equipment for non-AHCCCS patients and for
services from a non-AHCCCS organization, Petitioner
misappropriated AHCCCS funds that had been entrusted to
HCPA to pay for health care to indigent Arizona citizens
who were enrolled in the AHCCCS program. FFCL 23-30.

32. Petitioner was a joint owner of Eyelites
International, Inc. (Eyelites), an optical company.
I.G. Ex. 1 at 3.
33. Via two subcontracts executed on or about August 9,
1983 and August 11, 1983, Eyelites became a HCPA
subcontractor to provide eyeglasses to HCPA's AHCCCS
members. I.G. Ex. 1 at 3; I.G. Ex. 7 at 13.

34. Neither Petitioner nor the other principal of
Eyelites signed the subcontract; instead, two employees
of the principals who had no association with Eyelites
were directed to sign the Eyelites' subcontracts. I.G.
Ex. 1 at 3.

35. AHCCCS regulations required HCPA's principals to
disclose to AHCCCS any subcontracts in which a HCPA
principal had a financial interest. I.G. Ex. 1 at 3.

36. On April 6, 1992, Petitioner pled guilty to one
count of fraudulent schemes and practices, wilful
concealment, in violation of Ariz. Rev. Stat. § 13-2311.
Pursuant to a plea agreement, this count was amended and
now constitutes amended count 10 of the indictment. See
I.G. Ex. 1.

37. By signing and dating the statement attached to his
plea agreement, titled "Exhibit I, Factual Basis for
Amended Count 10," Petitioner has admitted to the facts
set forth in this statement. I.G. Ex. 1 at 3.

38. The factual basis for amended count 10 states that
Petitioner "knowingly concealed the related party status
of Eyelite, International, Inc. pursuant to a scheme or
artifice to defraud which enabled [Petitioner] to have
HCPA pay $60,000.00 to Eyelites between November 14, 1983
and February 8, 1984 . . . while [Petitioner's] financial
interest in Eyelites, International, Inc. remained
concealed from AHCCCS." I.G. Ex. 1 at 3.

39. Petitioner knowingly concealed from AHCCCS that
Petitioner, a HCPA principal, had a financial interest in
Eyelites' subcontract. FFCL 32-38.

40. Under its subcontract, HCPA paid $60,000 to Eyelites
between November 14, 1983 and February 8, 1984, for
approximately 63 pairs of eyeglasses for HCPA's AHCCCS
patients, with an average cost of approximately $952.38
per pair of glasses. I.G. Ex. 1 at 3.

41. Petitioner used Title XIX funds paid to HCPA by
AHCCCS to pay Eyelites under the fraudulently obtained
subcontract. Petitioner misappropriated Title XIX funds
by directing such monies to Eyelites, a HCPA related
party. I.G. Ex. 1 at 4. FFCL 32-40.
8

42. Petitioner caused AHCCCS funds to be used for
private, non-Medicaid purposes. FFCL 25-41.

43. Based on Petitioner's guilty plea, the State court
convicted Petitioner of two counts of facilitation of
theft and one count of fraudulent schemes and practices
and wilful concealment. I.G. Exs. 2, 3.

44, In accordance with the terms of Petitioner's plea
agreement, the State court judge granted Petitioner's
motion to dismiss counts 1-9, 11-13, 15, and 17 of the
indictment. I.G. Ex. 3 at 4.

45. The State court placed Petitioner on three years
probation, commencing July 31, 1992, and ordered him to
pay restitution in the amount of $40,000. In addition,
the court ordered Petitioner to pay $50,000 as
reimbursement, a fine of $14,000, and other assessments
and fees. I.G. Ex. 3.

46. As part of his plea agreement, Petitioner stipulated
that he was "on notice that as a result of his plea he is
subject to exclusion from Medicare and other State health
care programs as a health care provider for a minimum
period of at least five years." I.G. Ex. 1 at 6.

47. Under section 1128(i)(3) of the Act, "an individual
or entity is considered to have been ‘convicted' of a
criminal offense -- (3) when a plea of guilty or nolo
contendere by the individual or entity has been accepted
by a Federal, State or local court. ..." .

48. Petitioner's guilty plea, “and the actions taken by
the State court indicating acceptance of his plea,
constitute a "conviction" of Petitioner within the
meaning of section 1128(i)(3) of the Act. FFCL 36; 43-
47,

49. Petitioner was convicted of a criminal offense
related to the delivery of an item or service under the
Medicaid program, within the meaning of section
1128(a)(1) of the Act. FFCL 36-48.

50. Under section 1128(a)(1) of the Act, a conviction
within the meaning of section 1128(i) mandates exclusion.
The administrative law judge is not authorized to look
behind the conviction to determine its validity.

51. The Secretary of HHS has delegated to the I.G. the
authority to determine, impose, and direct exclusions
pursuant to section 1128 of the Act. 48 Fed. Reg. 21,662
(1983).
9

52. An exclusion imposed and directed pursuant to
section 1128(a)(1) of the Act must be for a period of at
least five years. Act, sections 1128(a) (1),
1128(c)(3)(B); 42 C.F.R. § 1001.102(a).

53. Section 1128 of the Act is intended to protect the
integrity of federally-funded health care programs and
the welfare of program beneficiaries and recipients from
individuals and entities who have been shown to be
untrustworthy. See S. Rep. No. 109, 100th Cong., 1st
Sess. 1 (1987), reprinted in 1987 U.S.C.C.A.N. 682.

54. Neither the I.G. nor an administrative law judge is
authorized to reduce the five-year minimum mandatory
period of exclusion.

55. The I.G. properly excluded Petitioner from
participation in the Medicare and Medicaid programs for
five years, as required by sections 1128(a)(1) and
1128(c)(3)(B) of the Act. FFCL 1-54.

PETITIONER'S ARGUMENT

Petitioner contends that because the AHCCCS program is a
demonstration project approved under section 1115 of the
Act, it is not a plan approved under Title XIX.
Petitioner contends further that AHCCCS is not a State
health care program within the meaning of section 1128(h)
of the Act because it does not fulfill all Title xIx
requirements. P. Br. at 8-13. Additionally, Petitioner
argues that his offenses did not relate to the delivery
of an item or service under Title XVIII or a State health
care program. P. Br. at 12-21. He asserts that there is
no nexus between his offenses and the delivery of an
identifiable item or service. Moreover, Petitioner
contends that the victim of his offenses was HCPA, not
AHCCCS. P. Br. at 14-21. Furthermore, Petitioner
alleges that the exclusion imposed against him by the
I.G. has a punitive aspect. Petitioner contends that,
based on the foregoing, he should not be subjected to a
mandatory exclusion. P. Br. at 31-33.

BACKGROUND

Under section 1115 of the Act, a State's experimental,
pilot, or demonstration project which, in the Secretary's
judgment, is likely to promote the objectives of Title
XIX, may receive a waiver from the Secretary from
compliance with any requirements of section 1902 of Title
XIX to the extent necessary to enable the State to carry
10

out its project. If the Secretary grants a section 1115
waiver, the costs of the State's project, which would not
otherwise be included as expenditures under section 1903,
shall be regarded as expenditures under the State plan or
plans approved under Title XIX. Act, sections 1115(a) (1)
and (2).

The legislative history of section 1115 states in part:

The public assistance titles of the Social
Security Act contain a number of requirements
on the States for the approval of a State plan.
These plan requirements, however, often stand
in the way of experimental projects designed to
test out new ideas and ways of dealing with the
problems of public welfare recipients. One
such requirement, for example, is that the plan
be in effect throughout the State. A
demonstration project usually cannot be
statewide in operation. For this reason, under
the bill the Secretary would be authorized to
waive plan requirements to the extent he
believes this action is necessary to carry out
a demonstration or experimental project, if
such project furthers the general objectives of
the program. This would mean that the regular
Federal participation would be available for
such projects whether they involve assistance,
service, or administrative expenditures.

S. Rep. No. 1589, 87th Cong., 2nd Sess. (1962), reprinted
in 1962 U.S. Code Cong. & Admin. News 1943.

Congress thus intended that a’project which received a
section 1115 waiver would still be able to receive
federal funds under a public assistance title. Thus, the
effect of section 1115 is to enable a State to carry out
a demonstration project and receive Title XIX federal
funds.

Section 1115(a)(1) provides that the Secretary may waive
compliance with section 1902 requirements "to the extent
. + . necessary." The section 1115 waiver, therefore,
gives states the flexibility to deviate from the
requirements of section 1902 of the Act, which contains
various State plan requirements for reimbursement under

* The statutory language of section 1115(a) (1)
and (2) refers to other titles and sections of the Act;
however, for purposes of relevancy to this decision, I
refer only to Title XIX and sections 1902 and 1903.
11

the Medicaid program. The section 1115 waiver provides
Title XIX funding for costs which would otherwise be
considered non-matchable expenditures under section 1903
of the Act. These are costs which would normally not
receive federal funds; however, since they have been
approved under the section 1115 waiver, they are regarded
as Title XIX expenditures.

DISCUSSION
I. A i roved und Cc 1 of the Act is
regard S_a State he are an_ approve tle
within the i of sectiol the Act.

On October 1, 1982, the State of Arizona implemented
AHCCCS, a demonstration project approved under section
1115 of the Social Security Act. Pursuant to the Arizona
statute, AHCCCS contracts to provide hospital and medical
care coverage to its members, who are indigent Arizona
citizens. Ariz. Rev. Stat. Ann. § 36-2903(A) (1993 and
Supp. 1994). HCPA, a company in which Petitioner was one
of three owners and principals, was incorporated on
August 6, 1982, to deliver health care to AHCCCS
enrollees. HCPA was a prime contractor with) AHCCCS from
1982 to 1984. In accordance with its contract, AHCCCS
made monthly payments to HCPA to cover the cost of
providing services to indigent Arizona patients. The
payment AHCCCS made to HCPA was made on a prepaid
capitated basis (Ariz. Rev. Stat. Ann. §36-2904(A)

(1993 and Supp. 1994)), in which the amount of the
payment, in any given month, was based on the number of
patients enrolled with HCPA during that month.’ P. Br.
at 17-18.

The I.G. does not dispute Petitioner's assertion that
AHCCCS was approved under section 1115, and that it was
not required to comply with certain Title xIx
requirements. Petitioner argues, however, that AHCCCS
cannot be a State health care program within the meaning
of section 1128(h)(1) of the Act because it does not
fulfill all Title XIX requirements. P. Br. at 8-13.
Petitioner's argument, however, does not have any merit.

Based on the evidence in the record, I conclude that
Arizona has in existence a State plan approved under

5 This payment plan varies from the more common
fee-for-service arrangement.
12

Title XIx.° I.G. Exs. 12 and 13. The AHCCCS program
thus operates under this State plan.’ Pursuant to
section 1115 of the Act, AHCCCS' costs which would not
otherwise be included as section 1903 expenditures ". ..
shall . . . be regarded as expenditures under the State
plan .. . approved under such title." Thus, under
AHCCCS, expenditures which would normally not be
allowable under section 1903 are regarded as expenditures
under Arizona's Title XIX plan. The section 1115 waiver
enables AHCCCS to receive Title xIX federal funds from
the State as payments for services furnished under it.

It is indisputable, therefore, that payments made to
AHCCCS pursuant to section 1115(a) (2) are Title XIX,
i.e., Medicaid payments. This means that the monthly
payments which HCPA received under the AHCCCS program are
Medicaid payments.

The director of AHCCCS is authorized to apply for and
accept federal financing through Title XIX of the Act.
Ariz. Rev. Stat. Ann. § 36-2903.01(B)(5) (1993). Such
funds may be used only to support persons who are defined
as meeting Title XIX eligibility requirements. Ariz.
Rev. Stat. Ann. § 36-2903.01(B)(5) (1993). Accordingly,
a contractor with AHCCCS is required to comply with the
provisions of federal law and regulations governing the
Title XIX program, except for those requirements that
have been specifically waived for the State in the State
Plan for Medical Assistance. I.G. Ex. 8 at 6. Arizona
State law mandates also that provisions relating to
AHCCCS operations will be suspended if Title XIX funding
is at any time denied, not renewed, or made unavailable.
Ariz. Rev. Stat. Ann. § 36-2919 (1993).

Based on the foregoing, I find that although the AHCCCS
program is a project approved under section 1115 of the
Act, it is considered to be a State health care program
within the meaning of section 1128(h)(1). Payments made
under the section 1115 waiver are still Medicaid
payments. The fact that payments received by HCPA from
AHCCCS were made pursuant to a waiver of certain Title
XIX requirements does not change that the source of funds

6 The Arizona Department of Health Services was
the State agency designated to administer or supervise
the administration of the Medicaid program under Title
XIX of the Act. I.G. Ex. 12 at 10, 14.

7 The fact that the I.G. may not have submitted
the plans in their entirety does not detract from the
fact that a State plan approved under Title XIX is, in
fact, in existence in Arizona.
13

is the Medicaid program. Although the Secretary may have
waived compliance with certain Title XIX requirements,
payments to the program are made from Title XIX funds.'

I find, therefore, that the funds which Petitioner
misappropriated from the AHCCCS program (as discussed
below) were Medicaid funds paid to AHCCCS pursuant to
Arizona's State plan and its section 1115 waiver.

II. etiti was "convicted" a iminal offense
within the meaning of section 1128(a)(1) of the Act.

An individual or entity must be excluded from
participation in the Medicare and Medicaid programs
pursuant to section 1128(a)(1) where two elements are
present: (1) the individual or entity has been
"convicted" of a criminal offense, within the meaning of
section 1128(i); and (2) the conviction is related to the
delivery of an item or service under the Medicare or
Medicaid programs.

With regard to the first element, as stated earlier,
Petitioner pled guilty to one count of fraudulent schemes
and practices, wilful concealment and two counts of
facilitation of theft. Based on Petitioner's guilty
plea, the State court convicted him of these offenses.
The court placed Petitioner on three years' probation,
commencing July 31, 1992, and ordered him to pay
restitution in the amount of $40,000. I.G. Ex. 3 at 3.
In addition, the court ordered Petitioner to pay $50,000
as reimbursement, a fine of $14,000, and other
assessments and fees. I.G. Ex. 3 at 4. Under section
1128(i)(3), “an individual or entity is considered to
have been ‘convicted' of a critiinal offense -- (3) when a
plea of guilty or nolo contendere by the individual or
entity has been accepted by a Federal, State or local
court ... ." Thus, Petitioner's guilty plea, and the
court's acceptance of that plea, constitute a
"conviction" of Petitioner within the meaning of section
1128(i)(3) of the Act.

8 In fact, Petitioner's disavowal of AHCCCS as a
State health care program within the meaning of Section
1128(h)(1) is rather disingenuous in light of the
statement in one of its exhibits that "AHCCCS was then,
and remains today, the only statewide prepaid Medicaid
system in the country." P. Ex. 3 at 5.
14

III. Petitioner's criminal conviction is related to the
delivery of an item or service under the Medicaid
program, within the meaning of section 1128(a)(1) of the
Act.

As for the second element under section 1128(a)(1), I
find that the criminal offense of which Petitioner was
convicted is "program-related."

A. Petitioner's conviction of fraudulent schemes
and practices, wilful concealment is related to the
delivery of an item or service under the Medicaid
program.

On April 6, 1992, Petitioner pled guilty to one count of
fraudulent schemes and practices, wilful concealment, in
violation of Ariz. Rev. Stat. § 13-2311, and two counts
of facilitation of theft, in violation of Ariz. Rev.
Stat. §§ 13-1004 and 13-1802(A)(2). These counts were
amended counts 10, 14, and 16, respectively, of the
original indictment. Petitioner signed and dated factual
statements which underlie the basis for these counts,
thereby admitting to the facts set forth in these
statements.

Based on the factual basis for amended count 10 signed by
Petitioner, his conviction for fraudulent schemes and
practices, wilful concealment arose from Petitioner's
principal interest in Eyelites International, Inc.
(Eyelites). I.G. Ex. 1 at 3. Petitioner was a co-owner
of Eyelites, and through this privately-held corparation,
he subcontracted with HCPA to provide eyeglasses to
HCPA's AHCCCS members. AHCCCS”*regulations required HCPA
principals to disclose to AHCécS any HCPA related party
subcontracts in which a HCPA principal had a financial
interest. I.G. Ex. 1 at 3. Petitioner knowingly
concealed his related party status in Eyelites, and his
financial interest in the subcontract was not immediately
discovered, because neither Petitioner nor the other
principals of Eyelites signed the subcontract. I.G. Ex.
1 at 3. Two employees of the principals, who had no
association with Eyelites, were directed to sign the
Eyelites' subcontracts. Under the subcontract, HCPA paid
$60,000 to Eyelites between November 14, 1983 and
February 8, 1984 for approximately 63 pairs of eyeglasses
for HCPA's AHCCCS patients, with an average cost of
approximately $952.38 per pair of glasses. Id.

Petitioner argues that his failure to disclose an
ownership interest in Eyelites does not relate to the
delivery of an item or service under the Medicaid program
since it does not relate to any request for payments from
15

AHCCCS. Petitioner contends that it was an unintentional
oversight. P. Br. at 15.

A criminal offense will be found to be program-related
when there exists a "common sense connection" between the
criminal offense and the delivery of items or services
under the Medicare or Medicaid programs. Richard F.
Jaskiewi R.N., DAB CR315 (1994), Berton Siegel, D.O.,
DAB 1467 (1994). In addition, 42 C.F.R. § 1001.101(a)
provides also that an offense will be program-related if
it concerns "the performance of management or
administrative services relating to the delivery of items
or services under any such program." 42 C.F.R. §
1001.101(a) (1994). Here, Petitioner, through HCPA's
subcontract with Eyelites, was submitting claims for
eyewear services for HCPA's AHCCCS patients. Petitioner,
therefore, used Title XIX funds, paid to HCPA by AHCCCS,
to pay Eyelites (and himself) under the fraudulently
obtained subcontract. Petitioner's misappropriation of
federal funds to his own privately held corporation is
the common sense connection between Petitioner's failure
to disclose and the unlawful use of federal funds.

B. Petitioner's convictions of facilitation of
theft are d_ to t eli an item o

service under the Medicaid program.

Petitioner was convicted of two counts of facilitation of
theft. Both offenses concerned the use of Medicaid funds
for private purposes.

AHCCCS checks paid to HCPA were deposited into HCPA's
corporate checking account, which was controlled by
HCPA's principals, one of which was Petitioner.
Petitioner signed a $300 check on HCPA's checking account
for the purchase of electrical surgical knife equipment,
knowing that the equipment was to be used for non-AHCCCS
cosmetic surgery patients. I.G. Ex. 1 at 4. The wilful
nature of this offense was further illustrated by the
fact that AHCCCS does not cover cosmetic procedures.
Petitioner also signed a $10,000 check on HCPA's checking
account to Touche Ross, Inc. to pay the balance of an
actuarial study commissioned for a private health care
services organization of which Petitioner is a co-owner.
Petitioner signed the $10,000 check despite knowing that
the actuarial study was used for his health care
organization and not for HCPA.

Petitioner argues that these checks do not relate to the
delivery of items or services under the Medicaid program,
since AHCCCS payments are not paid on a fee for service
basis, but on a capitated basis, regardless of whether
16

any items or services are rendered. P. Br at 13-15.
Petitioner argues also that his criminal offenses are not
program-related since AHCCCS was not harmed by his
misconduct. According to Petitioner, HCPA, and not
AHCCCS, was the victim of his crimes since the federal
funds at issue were directly paid in trust to HCPA.

Petitioner's arguments, however, are without any merit.
By signing checks on HCPA's checking account for the
purchase of equipment for non-AHCCCS patients and for
services for a non-AHCCCS organization, Petitioner

caused AHCCCS funds to be used for private, non-Medicaid
purposes. Thus, Petitioner misappropriated AHCCCS funds
that had been entrusted to HCPA to pay for health care to
indigent Arizona citizens enrolled in the AHCCCS program.
Under its contract with AHCCCS, HCPA's primary purpose
was to provide health care services to AHCCCS enrollees
regardless of how payment was rendered. Petitioner's
misconduct directly diminished the ability of programs
funded by Title XIX to provide health care services to
its recipients by reducing the funds available to pay for
these services. Thus, AHCCCS, and not HCPA, was the
victim of Petitioner's crimes.

Petitioner's financial misconduct, and his depletion of
funds necessary for the delivery of health care to AHCCCS
enrollees, sufficiently establishes that Petitioner's
convictions for facilitation of theft are related to the
delivery of an item or service under the Medicaid
program. Berton Siegel, D.O., DAB 1467 (1994).
Furthermore, a criminal offense is considered to he
“program-related" where either the Medicare or Medicaid
program is the victim of the crime. Napoleon S. Maminta,
M.D., DAB 1135 (1990).

Iv. Petitioner's mandatory five-year exclusion is
remedial, and not punitive, in nature.

Petitioner argues that the five-year exclusion imposed
upon him has a punitive effect in that he would be unable
to "submit( ] true and correct bills in the future for
services that his patients need and require."
Petitioner's Request for Hearing at 3. Petitioner
contends that any remedial effect of the exclusion is
sufficiently accomplished by the fact that Petitioner is
no longer in Arizona and will not be a prime contractor
under AHCCCS. In addition, Petitioner argues that the
five-year exclusion which has been imposed against him is
unduly harsh since the I.G. has not proven the existence
of aggravating circumstances.
17

I find that Petitioner's arguments are without merit.
Section 1128 is a civil statute, and, in a prior decision
of an appellate panel of the Departmental Appeals Board,
the panel stated that exclusions are not punitive
actions. The panel stated that exclusions are
administrative remedies designed to protect federally-
funded health care programs:

(Tjhe purpose of the exclusion here is to
protect federally funded health programs, not
to punish Petitioner. Both the State .. . and
the federal government have an interest in
protecting such programs from untrustworthy
individuals.

Paul R. Scollo, D.P.M., DAB 1498 (1994), quoting Larry
White, R.Ph., DAB 1346, at 3 (1992).

Congress intended section 1128 to be remedial in
application. The legislative history behind section 1128
supports that the purpose of the exclusion law is to
protect the integrity of federally financed health care
programs and the welfare of the programs' beneficiaries
and recipients. The exclusion law is intended to protect
program funds and beneficiaries and recipients from
providers who have demonstrated by their conduct that
they pose a threat to the integrity of such funds, or to
the well-being and safety of beneficiaries and
recipients. See S. Rep. No. 109, 100th Cong., 1st Sess.
1 (1987), reprinted in 1987 U.S.C.C.A.N. 682. Thus,
Petitioner's argument that his exclusion is punitive in
nature is without any merit.

Furthermore, an exclusion impésed and directed pursuant
to section 1128 (a) (1) of the Act must be for a period of
at least five years.” This means that in the case of a
mandatory exclusion, the I.G. is not required to prove
the existence of aggravating factors.

CONCLUSION

I find that the AHCCCS program is considered to be a
“State plan," within the meaning of section 1128(h) of
the Act. Accordingly, Petitioner's convictions are
related to the delivery of an item or service under the

9 By the very terms of his plea agreement,
Petitioner was placed on notice that, as a result of his
plea, he was subject to exclusion from Medicare and
Medicaid for at least five years. I.G. Ex. 1 at 6.
18

Medicaid program. Petitioner's offenses involved the
misappropriation of federal funds, and his crimes
directly diminished the Medicaid program's ability to
provide health care services to its recipients, by
reducing the funds available to pay for these services.

Accordingly, Petitioner's exclusion from the Medicare and
Medicaid programs, for at least five years, is mandated
by sections 1128(a)(1) and 1128(c)(3)(B) of the Act.
Neither the I.G. nor an administrative law judge is
authorized to reduce the five-year minimum mandatory
period of exclusion. Jack W. Greene, DAB CR19, aff'd,

DAB 1078 (1989), aff'd sub nom., Greene v. Sullivan, 731
F. Supp. 835, 838 (E.D. Tenn. 1990).

The five-year exclusion is, therefore, sustained.

/s/

Joseph K. Riotto
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Lee G. Balos, DATE: June 2, 1995
Petitioner,

Docket No. C-95-025
Decision No. CR378

-v.-

The Inspector General.

DECISION

By letter dated September 20, 1994, the Inspector General
(I.G.) of the United States Department of Health and
Human Services (DHHS) notified Lee Balos (Petitioner),
that he was being excluded from participation in the
Medicare, Medicaid, Maternal and Child Health Services
Block Grant and Block Grants to States for Social
Services programs for a period of five years.' The I.G.
advised Petitioner that he was being excluded as a result
of his conviction of a criminal offense relating to
neglect or abuse of patients in connection with the
delivery of a health care item or service. The I.G.
advised Petitioner that the ex¢lusion of individuals
convicted of such offenses is mandated by section
1128(a) (2) of the Social Security Act (Act). The I.G.
further advised Petitioner that for exclusions imposed
pursuant to section 1128(a)(2) of the Act, section
1128(c) (3) (B) requires a five-year minimum period of
exclusion.

Petitioner filed a request for review of the I.G.'s
action. This case was initially assigned to Judge Joseph
K. Riotto for hearing and decision, and then it was
reassigned to me. During a prehearing conference held by
Judge Riotto on November 23, 1994, the parties agreed to
proceed by written submissions. Accordingly, Judge

1 In this decision, I refer to all programs from
which Petitioner has been excluded, other than Medicare,
as "Medicaid."
2

Riotto established a schedule for the parties to file
briefs and documentary evidence.

Thereafter, the I.G. filed a brief, including a statement
enumerating the material facts and conclusions of law the
I.G. considered to be uncontested. The I.G.'s brief was
accompanied by seven exhibits which I identify as I.G.
Ex. 1 through 7. Petitioner responded with a brief,
including a response to the I.G.'s proposed findings of
fact and conclusions of law and an additional statement
enumerating material facts and conclusions of law
Petitioner considered to be uncontested. Petitioner's
responsive brief was accompanied by 13 exhibits which I
identify as P. Ex. 1 through 13. The I.G. filed a reply
and Petitioner filed a sur-reply.

Petitioner has not contested the admissibility of the
seven exhibits submitted by the I.G. I admit into
evidence I.G. Ex. 1 through 7. The I.G. has not
contested the admissibility of the 13 exhibits submitted
by Petitioner. I admit into evidence P. Ex. 1 through
13.

I have considered the parties' arguments, supporting
exhibits, and the applicable law. I conclude that there
are no material factual issues in dispute (i.e., the only
matter to be decided is the legal significance of the
undisputed facts). I conclude also that Petitioner is
subject to the minimum mandatory exclusion provisions of
sections 1128(a) (2) and 1128(c)(3)(B) of the Act, and I
affirm the I.G.'s determination to exclude Petitioner
from participation in Medicare and Medicaid for a period
of five years. *

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCLs)

1. During the period relevant to this case, Petitioner
was employed as a certified registered nurse anesthetist
(CRNA) by Waterville Osteopathic Hospital (WOH) in
Waterville, Maine. I.G.'s Proposed FFCLs, paragraph 1;
Petitioner's Response to I.G.'s Proposed FFCLs, paragraph
1.

2. On July 23, 1991, a nurse in a operating room at WOH
reported that Petitioner was acting inappropriately in
the operating room. The nurse observed Petitioner to be
“dopey or high." I.G. Ex. 3, p. 1; Petitioner's Proposed
FFCLs, paragraph 1.

3. Upon learning this, Petitioner's supervisor went into
the operating room and observed that Petitioner had heavy
eyelids and slurred speech. Petitioner's supervisor
3

observed also that Petitioner had filled out incorrect
times on the operating room anesthetic record completed
by him. I.G. Ex. 3, p. 1; P. Ex. 10, p. 1.

4. Petitioner's supervisor suspected that Petitioner was
performing his CRNA duties while under the influence of
drugs, and he requested Petitioner to submit a urine
sample for drug testing. I.G. Ex. 3, pp. 1 = 2.

5. The results of the drug test were positive. P. Ex.
10, p. 2.

6. When confronted with the results of the drug test,
Petitioner admitted that he had a problem with drug
dependency. P. Ex. 10, p. 2.

7. When confronted with the results of the drug test,
Petitioner took affirmative steps to notify hospital
authorities that he had removed ampules of drugs from
WOH's anesthesia department and replaced the drugs with
ampules filled with a sterile saline solution. I.G. Ex.
4, 5.

8. Petitioner informed hospital authorities that the
drug cupboard contained ampules of saline solution in an
effort to ensure that no patient would be harmed. FFCL
7; I.G. Ex. 4, 5.

9. On April 8, 1992, the State of Maine filed a three
count criminal information against Petitioner in the
Superior Court for Kennebec County (the court). i.G. Ex.
1.

10. Count 1 of the information charged Petitioner with
the offense of endangering the welfare of an incompetent
person. The information alleged that Petitioner
knowingly endangered the health, safety or mental welfare
of a person who is unable to care for himself by
performing CRNA functions such as administering
anesthesia while impaired by the scheduled drugs
sufentanil and morphine. I.G. Ex. 1.

11. Count 2 of the information charged Petitioner with
the offense of stealing drugs. The information alleged
that Petitioner committed the theft of the scheduled
drugs sufentanil and morphine from WOH. I.G. Ex. 1.

12. Count 3 of the information charged Petitioner with
the offense of reckless conduct. The information alleged
that Petitioner recklessly created a substantial risk of
serious bodily injury to patients at WOH by tampering
with the scheduled drugs sufentanil and morphine which
4

were used by WOH personnel to provide patients relief
from pain during surgery. I.G. Ex. 1.

13. On April 9, 1992, Petitioner entered a plea of
guilty to all three counts of the information. I.G. Ex.
2, Pp. 1.

14. The court accepted Petitioner's guilty plea and
found him guilty of the offenses of endangering the
welfare of an incompetent person, stealing drugs, and
reckless conduct as charged. I.G. Ex. 2, p. 1.

15. Based on its acceptance of Petitioner's guilty plea,
the court sentenced Petitioner to 364 days of
imprisonment on each count, sentence suspended, placed
him on probation for one year, and fined him $1650. Asa
special condition of probation, the court ordered
Petitioner to abstain from the possession and use of
alcohol and drugs, except upon the prescription of a
licensed physician, and to participate in an alcohol and
substance abuse treatment program. I.G. Ex. 2, p. 1.

16. The Secretary of DHHS has delegated to the I.G. the
authority to determine, impose, and direct exclusions
pursuant to section 1128 of the Act. 48 Fed. Reg. 21662
(1983). :

17. Petitioner's guilty plea, and the court's acceptance
of that plea, constitute a conviction of a criminal
offense within the meaning of sections 1128(a)(2) and
1128(i) of the Act. FFCLs 9 - 15; I.G.'s Proposed FFCLs,
paragraph 20; Petitioner's Response to I.G.'s Proposed
FFCLs, paragraph 20.

18. Petitioner's conviction for the offense of
endangering the welfare of an incompetent person
constitutes a conviction of a criminal offense relating
to neglect of patients in connection with the delivery of
a health care item or service, within the meaning of
section 1128(a)(2) of the Act. FFCLs 1 - 6, 9 - 10, 13 -
15, 17.

19. Petitioner's conviction for the offense of reckless
conduct constitutes a conviction of a criminal offense
relating to neglect of patients in connection with the
delivery of a health care item or service, within the
meaning of section 1128(a)(2) of the Act. FFCLs 1, 7 -
9, 12 - 15, 17.

20. Pursuant to section 1128(a)(2) of the Act, the I.G.
is required to exclude Petitioner from participating in
Medicare and Medicaid.
5

21. The minimum mandatory period of exclusion pursuant
to section 1128(a)(2) is five years. Act, section
1128(c) (3) (B).

22. The I.G. properly excluded Petitioner from
participation in Medicare and Medicaid for a period of
five years pursuant to sections 1128(a)(2) and
1128(c)(3)(B) of the Act.

23. The determination of the I.G. to impose and direct a
five-year exclusion in this case does not violate
Petitioner's right to equal protection of the law under
the United States Constitution.

24. Neither the I.G. nor an administrative law judge has
the authority to reduce the five-year minimum exclusion
mandated by sections 1128(a) (2) and 1128(c) (3) (B) of the
Act.

DISCUSSION

The I.G. excluded Petitioner from participating in
Medicare and directed that Petitioner be excluded form
participating in Medicaid, pursuant to section 1128(a) (2)
of the Act. This section mandates the exclusion of
individuals who are:

convicted, under Federal or State law, of a criminal
offense relating to neglect or abuse of patients in
connection with the delivery of a health care item
or service.

The I.G.'s authority to imposerand direct an exclusion
under section 1128(a)(2) is kased on the fulfillment of
the following statutory criteria: (1) conviction of a
criminal offense, (2) relating to neglect or abuse, (3)
of patients, and (4) in connection with the delivery of a
health care item or service.

The first criterion that must be satisfied in order to
establish that the I.G. had the authority to exclude
Petitioner under section 1128(a)(2) is that Petitioner
must be corivicted of a criminal offense. Petitioner does
not dispute that he was convicted of a criminal offense
within the meaning of the Act. The undisputed facts
establish that Petitioner entered a guilty plea to the
offenses of endangering the welfare of an incompetent
person, stealing drugs, and reckless conduct in the
Superior Court for Kennebec County, Maine, and that the
court accepted Petitioner's guilty plea. FFCLs 9 - 15.
The Act defines the term "convicted of a criminal
offense" to include those circumstances in which a plea
6

of guilty by an individual has been accepted by a
federal, State, or local court. Act, section 1128(i) (3).
Therefore, I conclude that Petitioner was convicted of a
criminal offense within the meaning of sections
1128(a)(2) and 1128(i) of the Act.

The second criterion that must be satisfied in order to
find that the I.G. had the authority to exclude
Petitioner under section 1128(a)(2) is that criminal
offense must relate to neglect or abuse of another
individual. The undisputed facts that Petitioner was
convicted of three criminal offenses: (1) endangering
the welfare of an incompetent person, (2) stealing drugs,
and (3) reckless conduct. The I.G. contends that the
offenses endangering the welfare of an incompetent person
and reckless conduct which formed the basis of
Petitioner's conviction are related to neglect of another
individual. Petitioner contends, however, that these
offenses are not related to neglect, within the meaning
of section 1128(a)(2) of the Act.”

The information to which Petitioner pled guilty does not
specifically refer to neglect. Petitioner was convicted
of the offenses of endangering the welfare of an
incompetent person and reckless conduct. I conclude that
these offenses relate to "neglect" of another individual,
as that term is used in section 1128(a) (2) of the Act.

Congress could have conditioned imposition of the
exclusion remedy on conviction of criminal offenses
consisting of patient neglect. Had it used the term "of"
instead of the term "relating to" in section 1128(a) (2),
that intent would have been a;parent. However, Congress
intended that the exclusion suthority under section
1128(a)(2) apply to a broader array of circumstances. It
mandated that the Secretary exclude providers who are
convicted of criminal offenses "relating to" patient
neglect in connection with the delivery of a health care
item or service. The question before me is whether the
criminal offense which formed the basis of the conviction

2 Since the I.G. does not argue that the offense
of stealing drugs is related to neglect or abuse, I do
not address that issue in this decision. In addition,
while the I.G. tracks the language of section 1128(a) (2)
of the Act in her statement of proposed FFCLs by using
the term abuse together with the term of neglect, she
does not argue that Petitioner's criminal offenses relate
to abuse. Accordingly, I do not address the issue of
whether Petitioner's offenses relate to abuse in this
decision.
7

relates to neglect, not whether the court convicted
Petitioner of an offense called "patient neglect."

The term neglect is not defined in section 1128(a) (2).
In the absence of a definition, the term must be defined
according to its common and ordinary meaning. Case law
precedent has consistently held that based on the common
definition of neglect, Congress intended the statutory
term neglect to include failure by a party to satisfy a
duty of care to another person. Thomas M. Cook, DAB CR51
(1989); Rosette Elliott, DAB CR84 (1990). Moreover,
neglect can be unintentional, as there is nothing in the
definition suggesting that there must be a purposeful or
malicious failure to act. Janet Wallace, L.P.N., DAB
1326 (1992).

Petitioner was convicted of endangering the welfare of an
incompetent person in violation of Title 17-A, section
555 of the statutes of the State of Maine. In Olian
Small, DAB CR136 (1991), the petitioner was convicted of
the same offense under the same Maine statute. The
petitioner in Small was a nurse's aide/medication
technician who committed the offense endangering the
welfare of an incompetent person by failing to administer
medications to nursing home patients and falsifying the
patients' records in an attempt to conceal that fact.

The administrative law judge in Small found that the
petitioner's offense was related to neglect, within the
meaning of section 1128(a) (2).

In reaching this conclusion, the administrative law judge
in Small pointed out that the Maine statute under which
the petitioner was convicted d¢sfines endangering in terms
which are almost identical to the common definition of
neglect:

As used in this section, ‘endangers' includes a
failure to act only when the defendant had a legal
duty to protect the health, safety or mental welfare
of the incompetent person.

Me. Rev. Stat. Ann. tit. 17-A, § 555; see I.G.'s Brief,
footnote 1: The administrative law judge in Smal]
reasoned that the petitioner's duties as a nurse's
aide/medication technician includes the duty to
administer medications. His failure to do so constituted
an act of "neglect" within the meaning of section
1128 (a) (2).

Although the facts in the present case are not on all
fours with the facts of Smal], the rationale used by the
administrative law judge in deciding that case can be
8

applied here. In this case, count 1 of the criminal
information establishes that Petitioner committed the
offense of endangering the welfare of an incompetent
person by "perform[ing] C.R.N.A. functions such as
administering anesthesia while impaired by scheduled
drugs." The statutory elements of Petitioner's offense
establish that by administering anesthesia while impaired
by scheduled drugs, Petitioner failed to satisfy a legal
duty of care he owed to an incompetent person.

The common material element in both Small] and this case
is that, in both cases, the criminal offense involved a
failure to satisfy a duty of care owed to another
individual. In both cases, the petitioners were
convicted of the offense of endangering the welfare of an
incompetent person. The legal definition of that
offense, under Maine State law, encompasses the same
conduct that constitutes "neglect" under federal law.
Therefore, Petitioner's offense was related to neglect,
within the meaning of section 1128(a)(2) of the Act.

Petitioner's offense of reckless conduct in violation of
section 211 of Title 17-A of the Maine statutes also
relates to neglect, within the meaning of section
1128(a)(2) of the Act. Count 3 of the criminal
information to which Petitioner pled guilty establishes
that Petitioner committed this offense by "tampering with
scheduled drugs, to wit, sufentanil and morphine, which
were utilized by Waterville Osteopathic Hospital
personnel for purposes of alleviating pain during
surgery." The information establishes that through such
acts, Petitioner "recklessly create(d] a substantial risk
of serious bodily injury to patients" at the hospital.

As a CRNA at WOH, Petitioner owed the patients at WOH a
duty to care for them in a manner that would not create a
substantial risk of serious bodily injury. By tampering
with WOH's supply of drugs intended for patients at WOH,
Petitioner neglected this duty of care. I conclude that
reckless conduct that creates a substantial risk of
bodily injury falls within the common definition of
"neglect." Therefore, Petitioner's conviction for the
offense reckless conduct is plainly a conviction for an
offense related to "neglect," within the meaning of
section 1128(a)(2). See Rossette Elliott, DAB CR84
(1990).

Petitioner appears to argue that no neglect has occurred
since the I.G. has not shown that any individual suffered
ill effects as a result of Petitioner's care. I
disagree. The Petitioner in Smal] made a similar
argument. Nevertheless, the administrative law judge in
9

Smail upheld the exclusion imposed under section
1128(a)(2) in the absence of any proof of actual harm to
patients. In rejecting the petitioner's argument in
Small, the administrative law judge referred to the
common and ordinary meaning of neglect, failure by a
party to satisfy a duty of care owed to another, and
found that it does not make any reference to harm caused
by such failure. Small, DAB CR136 at 7.

What remains to be determined is whether the neglect of
which Petitioner was convicted was neglect of a patient
and whether it occurred in connection with the delivery
of a health care item or service. Petitioner does not
dispute that his criminal offenses involved patients and
occurred in connection with the delivery of a health care
item or service. Indeed, the relevant counts to which
Petitioner pled guilty establish that the offenses
involved patients in connection with the delivery of a
health care item or service.

The information establishes that Petitioner committed the
offense of endangering the welfare of an incompetent
person in the course performing his CRNA functions.
Specifically, Petitioner committed this offense while he
was administering anesthesia to a patient. The
information establishes also that Petitioner’ committed
the offense of reckless conduct when he tampered with
drugs which were intended for the use of patients at a
hospital for the purpose of alleviating pain during
surgery. I conclude that the language of the information
on its face establishes that the neglect of which
Petitioner was convicted involved patients and occurred
in connection with the delivery of a health care item or
service.

Petitioner seeks to invalidate his exclusion by
contending that the I.G. treated him differently than
other similarly-situated health care practitioners.
Petitioner argues that the I.G. has in several other
cases imposed "permissive exclusions" under section
1128(b) of the Act against health-care providers who,
like himself, have been "convicted of drug-related crimes
and who have endangered or jeopardized their patients’
safety due to their addictions." Petitioner's Brief, p.
12. Petitioner argues that based on the I.G.'s action in
these other cases, he should receive only a permissive
exclusion. Petitioner argues also that in treating him
differently by excluding him under the mandatory
provision, the I.G. is violating Petitioner's
constitutional right to equal protection under the law.
10

I am not persuaded by Petitioner's argument. None of the
providers in the cases cited by Petitioner was convicted
of the specific criminal offenses which formed the basis
for Petitioner's exclusion. For example, in several of
the cases cited by Petitioner, the excluded providers
were convicted of criminal offenses involving theft or
unlawful distribution of a controlled substance. These
offenses do not necessarily by themselves provide a basis
for an exclusion under section 1128(a) (2), given that a
provider may steal or unlawfully distribute controlled
substances without neglecting any duties owed to a
patient. I assume that the I.G. determined that under
the facts of the cases cited by Petitioner the relevant
offenses did not fall within the parameters of the
mandatory exclusion provisions of section 1128(a) (2).
Once that determination was made, the I.G. was free to
determine whether the offenses merited a permissive
exclusion.?

Since the parties in the cases cited by Petitioner did
not raise the issue of whether the I.G. should have
treated the provider's conviction as the basis for a
mandatory exclusion action, the I.G.'s choice to proceed
under the permissive exclusion authority was not
subjected to the scrutiny of the administrative law
judges reviewing those cases. Moreover, even if the I.G.
misapplied the law in other cases involving similarly
situated providers, that does not invalidate the
exclusion in this case. Nicholas J. Penna, D.M.D., DAB
CR338 (1994).

In this case, the I.G. made the determination that
Petitioner's offenses were govérned by section 1128 (a) (2)
of the Act. Once that determination was made, she had no
discretion to impose anything other than a mandatory
exclusion. Petitioner challenged this determination and
asked that it be reviewed by an administrative law judge.
I have carefully reviewed the record in this case, and
conclude that the I.G. properly classified Petitioner's
offenses as falling under the mandatory exclusion
authority of section 1128(a)(2) of the Act. The law

3 It is noteworthy that the Petitioner in this
case was convicted of the offense of stealing drugs, but
the I.G. did not base its authority to exclude under
section 1128(a)(2) on that offense. In her reply brief,
the I.G. stated that had stealing drugs been the only
offense of which Petitioner was convicted, the I.G. would
not have excluded him under section 1128(a)(2) of the
Act.
11

requires that Petitioner be excluded for at least five
years. Act, section 1128(c) (3) (B)-

The determination of the I.G. to impose and direct an
exclusion in this case does not violate Petitioner's
right to equal protection of the law under the United
States Constitution. The I.G. is merely carrying out the
specific directive of section 1128 of the Act that a
criminal conviction of an offense related to the delivery
of an item or service mandates an exclusion of at least
five years. I see nothing unreasonable or inequitable in
the I.G.'s exclusion of Petitioner.

CONCLUSION

Based on the law and the undisputed material facts in
this case, I conclude that the I.G. properly excluded
Petitioner from Medicare and Medicaid pursuant to section
1128(a)(2) of the Act. I further conclude that the five-
year minimum period of exclusion imposed and directed
against Petitioner is mandated by section 1128(c) (3) (B)
of the Act.

/s/

Jill s.Clifton
Administrative Law Judge