Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
Paul D. Goldenheim, M.D., ) Date: January 9, 2009
)
Petitioner, )
)
-Vv.- ) Docket No. C-08-492
) Decision No. CR1883
The Inspector General. )
)
DECISION

Pursuant to sections 1128(b)(1) and 1128(b)(3) of the Social Security Act (Act), the
nspector General (I.G.) has excluded Petitioner, Paul D. Goldenheim, M.D., from
participation in Medicare, Medicaid and all federal health care programs for a period of
5 years.' For the reasons discussed below, I find that the I.G. is authorized to exclude
Petitioner, and that the 15-year exclusion falls within a reasonable range.

I. Background

Petitioner Goldenheim was vice president and medical director of the Purdue Frederick
Company (Purdue), a pharmaceutical company that developed and marketed OxyContin,
an opioid analgesic and Schedule II controlled substance. I.G. Exhibit (Ex.) 5, at 1, 2;
.G. Ex. 9, at 2; 1G. Ex. 11, at2. On May 9, 2007, he, two other senior executives, and
Purdue were charged with introducing a misbranded drug into interstate commerce, in
violation of the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. §§ 331 (a),
352(a), and 333(a)(1). I.G. Ex. 5. Petitioner Goldenheim subsequently pled guilty in
United States District Court for the Western District of Virginia to one misdemeanor
count (21 U.S.C. §§ 331(a), 333(a)(1)). He agreed to pay to the Court a mandatory
assessment of $25 and a fine of $5000. He also agreed to pay $7,500,000 (seven million
five hundred thousand dollars) to the Virginia Medicaid Fraud Control Unit’s Program

' The LG. initially set a 20-year period of exclusion, but, during these proceedings,
he decreased that length based on evidence of Petitioner’s cooperation with law
enforcement. I.G. Ex. 18; see Discussion § C, infra.
2

Income Fund in “disgorgement.” I.G. Ex. 2, at 1-2; Petitioner’s Exhibit (P. Ex.) 3, at 24-
25, 34. On July 20, 2007, the District Court entered a judgment against Petitioner
Goldenheim, sentenced him to three years probation, 400 hours of community service,
and ordered him to pay the assessment, fine, and “the amount set forth in his plea
agreement to the Virginia Medicaid Fraud Unit’s Program Income Fund.” I.G. Ex. 6; LG.
Ex. 10, at 120-21.

na notice dated March 31, 2008, the I.G. advised Petitioner that he would be excluded
from program participation for 20 years. The letter explained that the exclusion action
was taken pursuant to sections 1128(b)(1) and 1128(b)(3) of the Act because he had been
convicted of a misdemeanor offense relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct in connection with the delivery ofa
ealth care item or service (1128(b)(1)) and because he had been convicted of a
misdemeanor offense related to the unlawful manufacture, distribution, prescription or
dispensing of a controlled substance (1128(b)(3)). IG. Ex. 12.

Petitioner timely requested review, and the matter has been assigned to me for resolution.
The parties agree that this matter should be resolved based on their written submissions,
and that an in-person hearing is not required. I.G. Brief (Br.) at 17; P. Br. at 73.

Pursuant to my scheduling order, the I.G. submitted a brief accompanied by 17 exhibits
(.G. Exs. 1-17).? Petitioner submitted a brief with 142 exhibits (P. Exs. 1-142).* The
.G. then filed a reply with seven additional exhibits (I.G. Exs. 18-24). Petitioner filed a
sur-reply.

Based on information contained in Petitioner’s submissions, the I.G. reduced the period
of exclusion to 15 years. I.G. Reply at 2, 26 et seq.; I.G. Ex. 18.

> On July 30, 2008, the I.G. informed me that I.G. Ex. 17 contained an extra copy
of page 4 to a letter dated December 14, 2006, which extra page was marked as page 11
of 26. The I.G. enclosed a renumbered I.G. Ex. 17, which, in the absence of objection, I
am accepting in place of the original I.G. Ex. 17.

> On October 22, 2008, Petitioner informed me that P. Ex. 90 contained one page
protected by the attorney work product doctrine and asked me to destroy the page as the
LG. had agreed to do. Petitioner also asked that I destroy P. Ex. 46 because it required
additional redactions to protect the confidentiality of third parties not involved in the case.
Petitioner provided updated copies of both exhibits. In the absence of objection, I have
complied with Petitioner’s requests and substituted the updated copies for the original P.
Exs. 90 and 46.
3

Petitioner objects to certain of the I.G.’s exhibits:

. LG. Ex. 10 is a 122-page transcript of the sentencing hearing for Petitioner and his
co-defendants. Petitioner objects to 36 pages of transcript (I.G. Ex. 10, at 4-40)
containing victim statements, primarily from angry, grieving parents who tell the
Court about the deaths of their children from OxyContin overdoses, and from
individuals who describe their own or a family member’s addiction to the drug.
Most ask the Court to reject all plea agreements and sentence the defendants to jail
time.

Petitioner characterizes the statements as hearsay, and complains that the
statements were not made under oath, and that the speakers were not subject
to cross-examination. Citing 42 C.F.R. §§ 1005.17(c) and (d), he objects to
their admission for purposes of establishing that his actions had a
significant adverse impact on program beneficiaries and others.

In fact, the statements contain very little hearsay (many of the speakers
claiming to recount their personal observations), and, since I am not bound
by the federal rules of evidence, hearsay is not necessarily excluded. 42
C.F.R. § 1005.17(b).

Section 1005.17(c) requires me to exclude evidence that is irrelevant or
immaterial. I do not consider the victim statements to be irrelevant or
immaterial.

Sections 1005.17(d), on the other hand, a//ows (but does not require) me to
exclude relevant evidence if its probative value is “substantially outweighed
by the danger of unfair prejudice, confusion of the issues, or by
considerations of undue delay or needless presentation of cumulative
evidence.” I consider of limited probative value the unsworn statements of
individuals who were not subject to cross-examination, particularly where
the sentencing judge explicitly rejected their pleas. See I.G. Ex. 10, at 113-
15; United States v. Purdue Frederick Company, Inc., 495 F. Supp. 2d 569,
573-75 (2007). On the other hand, I find that admitting the statements in
the context of a sentencing transcript presents no danger of unfair prejudice,
confusion, or undue delay. The statements may be entitled to little, if any,
weight, but they are admissible.
4

LG. Ex. 16 is the Civil Settlement Agreement entered into between the United
States and Purdue, part of a global resolution of Purdue’s civil and criminal
liability, which the I.G. offers to establish that Petitioner’s crimes caused financial
losses to government programs. Petitioner objects to its admission, claiming that it
is irrelevant because he was not a party to the agreement. In fact, although this
particular document relates specifically to Purdue, Petitioner was a party to the
proceedings that ultimately generated the global resolution of all Purdue’s criminal
and civil liabilities, of which this was a part. See, e.g., P. Ex. 3.

Petitioner also argues that the agreement does not adjudicate liability, so it
is not admissible to prove liability under Rule 408 of the Federal Rules of
Evidence. The regulations explicitly limit the applicability of Rule 408 in
these proceedings: only “[e]vidence concerning offers of compromise or
settlement made in this action will be inadmissible to the extent provided in
Rule 408 .. .” (emphasis added). 42 C.F.R. § 1005.17(f). Since the
settlement agreement was made in a separate action, it is admissible so long
as it is relevant and material.

Moreover, the I.G. neither needs nor offers the settlement agreement to
establish liability. Petitioner’s guilty plea establishes his liability under the
exclusion statute. The agreement is offered as evidence of an aggravating
factor — financial losses to government programs.

As discussed below, Petitioner was criminally convicted because he was in
a position to prevent Purdue’s crimes, but did not do so. Purdue’s
settlement agreement includes evidence of the loss suffered by government
programs as a result of Purdue’s crimes. The document should therefore be
admitted because it is relevant and material, and no rule precludes its
admission.

I note also that the Sentencing Court incorporated many of the particulars of
this agreement into its published decision. Purdue, 495 F. Supp. 2d 569,
572. Even without the agreement itself, I could rely on the Sentencing
Court’s articulation of its contents in reaching my decision here.

Petitioner characterizes I.G. Ex. 17 as a confidential settlement communication,
and argues that it is protected by Federal Rules of Evidence 408 and 410, which
preclude admission of compromises, offers of compromise (Rule 408), withdrawn
pleas, plea discussions, and related statements (Rule 410).
5

Prior to imposing an exclusion, the I.G. must send to the exclusion target a
written notice of his intent to exclude that explains the basis for the
proposed exclusion, and the exclusion’s potential effect. The recipient may
respond with documentary evidence and written argument concerning
whether the exclusion is warranted and addressing any related issues. 42
C.F.R. § 1001.2001(a). On November 15, 2007, the I.G. sent Petitioner this
notice of intent, inviting him to provide “any information which you want
the OIG to consider prior to making a determination on whether or not to
exclude you.” IG. Ex. 21. Petitioner responded with a written
memorandum and 29 attached exhibits. I.G. Ex. 17 includes the
memorandum and one of the attached exhibits, a December 14, 2006 letter
from Petitioner’s (and his co-defendants’) counsel to Greg Demske, the
Assistant Inspector General for Legal Affairs. Written across the letter is
“SETTLEMENT COMMUNICATION SUBJECT TO FED. R. EVID. 408
AND 410.” LG. Ex. 17, at 10.

As noted above, evidence concerning offers of compromise or settlement
made in this action are generally inadmissible. 42 C.F.R. § 1005.17(f).
However, the written memorandum (1.G. Ex. 17, at 1-8) is not, and never
was, a settlement communication. The attached letter to Mr. Demske may
have been a settlement communication when sent more than a year earlier
during the criminal proceedings — obviously a different action — but in the
context of the I.G.’s exclusion, it is simply another bit of evidence and
argument that Petitioner asked the I.G. to consider in determining whether
to exclude him. Petitioner had no reasonable expectation of confidentiality
when he sent the document to the LG. Moreover, Petitioner obviously
considered the submission relevant when he submitted it for the I.G.’s
consideration in determining whether to exclude him. It is no less relevant
in this review of the I.G.’s determination to do so.

I.G. Exs. 1-24 and P. Exs. 1-142 are admitted into evidence.
II. Issues
The issues before me are whether the I.G. had a basis upon which to exclude Petitioner

from participation in the Medicare, Medicaid and all federal health care programs, and
whether the 15-year period of exclusion falls within a reasonable range.
III. Discussion

A. Petitioner may be excluded because he was convicted of a misdemeanor
offense relating to fraud in connection with the delivery of a health care item or
service within the meaning of section 1128(b)(1) of the Act.’

Section 1128(b)(1)(A) of the Act authorizes the Secretary of Health and Human Services
to exclude from participation in all federal health care programs® any individual who has
been convicted of a misdemeanor criminal offense “relating to fraud . . . (i) in connection
with the delivery of a health care item or service.” See 42 C.F.R. § 1001.201(a). The
Secretary has delegated to the I.G. his authority to impose exclusions. See, e.g., 42 C.F.R.
§§ 1001.201(a), 1001.401(a).

The parties agree that Petitioner violated the FDCA and was convicted of a misdemeanor
criminal offense. I.G. Br. at 3; P. Br. at 1. Section 331 of the FDCA prohibits the
introduction or delivery into interstate commerce of any adulterated or misbranded food,
drug, device or cosmetic. 21 U.S.C. § 331(a). Based on his conviction, Petitioner was
subject to imprisonment for up to a year, and a fine of no more than $100,000, or both.
Purdue, 495 F. Supp. 2d 569, 573; LG. Ex. 2, at 1.

Petitioner signed an Agreed Statement of Facts, which was filed with the Sentencing
Court along with his plea agreement. I.G. Ex. 9. That document describes multiple
instances in which Purdue supervisors and employees “with the intent to defraud or
mislead” misbranded OxyContin. For years, they marketed and promoted the drug as less
addictive, less subject to abuse and diversion, and less likely to cause tolerance and
withdrawal than other pain medications. Their actions included providing false
information to sales representatives and health care providers. I.G. Ex. 9, at 5-11 (ff 20-
27, 29); Purdue, 495 F. Supp. 2d 569, 571. While denying personal knowledge of the
fraudulent conduct, Petitioner admitted that he was a “responsible corporate officer”

4 My findings of fact and conclusions of law are set forth, in italics and in bold, in
the discussion captions.

* “Federal health care program” is defined in section 1128B(f) of the Act as any
plan or program that provides health benefits, whether directly, through insurance, or
otherwise, which is funded directly, in whole or in part, by the United States Government,
or any State health care program.
7

within the meaning of 21 U.S.C. §§ 331(a), 333(a)(1) and 352(a). I.G. Ex. 9, at 14-15
(4 45). He also acknowledged that, as a “responsible corporate officer,” he had the
“responsibility and authority” to prevent in the first instance or to correct promptly the
conduct that resulted in the drug’s misbranding. I.G. Ex. 9, at 3 (f 11).

In Petitioner’s view, section 1128(b)(1) requires the individual’s unambiguous intent to
defraud. He asserts that he was convicted solely because he was a “responsible corporate
officer,” not because he was guilty of any actual misconduct, and argues that, since he
committed no wrong-doing, his crime is not “related to” fraud and the I.G. has no
authority to exclude him from program participation.

First, the plain language of section 1128(b)(1) establishes a much broader scope than that
suggested by Petitioner. Petitioner’s underlying conduct does not itself have to constitute
fraud. As the Board has repeatedly held, where the statute says “related to,” it means
“nexus or common sense connection” between (in this case) the conduct giving rise to the
offense and the fraud in connection with the delivery of the health care item or service.
Timothy Wayne Hensley, DAB No. 2044 (2006); Neil R. Hirsch, M.D., DAB No. 1550
(1995); see Chander Kachoria, R.Ph., DAB No. 1380 (1993).

Second, Petitioner incorrectly suggests that his conviction involved no wrong-doing. As
a matter of law, conviction under the FDCA means, at a minimum, a culpable omission.
In United States v. Park, 421 U.S. 658 (1975), the Supreme Court reiterated that an
individual convicted of violating the FDCA cannot claim to be blameless because the
statute under which he is convicted “imports” to him a “measure of blameworthiness.”
421 U.S. 658, 673 (1975); see also United States v. Dotterweich, 320 U.S. 277 (1943);
Purdue, 495 F. Supp. 2d 569, 576 (“The defendants voluntarily accepted responsibility
over this business enterprise, for which they were generously rewarded.”) An individual
who was powerless to prevent or correct the prohibited condition is not guilty under the
statute. See P. Br., Attach. 2, at 4 (“Officials who lack authority to prevent or correct
violations, or who were totally unaware of any problem and could not have been expected
to be aware of it in the reasonable exercise of their corporate duties, are not the subject of
criminal action.”)

Thus, inherent in Petitioner’s conviction is the finding that he was in a position to prevent
or correct the company’s fraud, but failed to do so. Park, 421 U.S. at 673. And, but for
the fraud, there would have been no crime and no conviction. Petitioner’s misdemeanor
offense was therefore related to fraud in connection with the delivery of a health care item
and the I.G. is authorized to exclude him.
8

Finally, Petitioner’s personal knowledge of the fraud is irrelevant. The exclusion derives
from his criminal conviction, and the underlying basis for that conviction may not be
attacked. In Lyle Kai, R.Ph., a pharmacist pled no contest to a charge of recklessly
exposing for sale mislabeled commodities, and the I.G. excluded him under section
1128(a)(1) of the Act because he had been convicted of a criminal offense related to the
delivery of an item or service under the Medicaid program. An Administrative Law
Judge reversed the I.G.’s exclusion, finding that the pharmacist had no knowledge of or
responsibility for the underlying scheme. The Departmental Appeals Board reversed,
noting that section 1128(a)(1) requires a relationship between the offense and the
program, but does not require that the excluded individual have knowledge of that
relationship. The Board deemed “irrelevant” the petitioner’s specific role in the scheme,
the degree of his responsibility, or whether he knew that Medicaid was being billed. Lyle
Kai, R.Ph., DAB No. 1979 (2005), aff'd, Kai v. Leavitt, Civ. No. 05-00514-BMK (D.
Haw. 2006) (unpublished).

B. Petitioner may be excluded because he was convicted of a misdemeanor
offense relating to the unlawful manufacture, distribution, prescription, or
dispensing of a controlled substance within the meaning of section 1128(b)(3) of
the Act.

The I.G. has an alternative basis for excluding Petitioner. Section 1128(b)(3) of the Act
authorizes the LG. (acting on behalf of the Secretary) to exclude from participation in all
federal health care programs an individual who has been convicted, “under Federal or
state law,” of a misdemeanor “relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance.”

OxyContin is a Schedule II controlled substance. I.G. Ex. 11. Petitioner was convicted
of introducing or delivering misbranded OxyContin into interstate commerce, in violation
of section 331(a) of the FDCA. Based solely on that statutory language, Petitioner’s
offense seems plainly related to the distribution of a controlled substance. What is
“introducing or delivering” a product “into interstate commerce,” if not distribution?
Moreover, as the agreed Statement of Facts explains, under the FDCA, labels are
designed for and used in the distribution and sale of the drug. A drug is “misbranded” if
its labeling is false or misleading in any particular. I.G. Ex. 9, at 2-3 (4 9-10). Thus, the
crime of misbranding is directly related to the drug’s distribution. But for the drug’s
introduction/delivery into interstate commerce, there would have been no federal
conviction under the FDCA.
9

Petitioner, nevertheless, asks me to reject such a straight-forward reading of the statutes

and plea agreement. He argues that, because both section 1128(b)(3) and the Controlled
Substances Act, 21 U.S.C. §§ 841-864, contain the language “manufacture, distribution,

prescription or dispensing of a controlled substance,” only an individual convicted under
the Controlled Substances Act or a “similar statute” is subject to exclusion under section
1128(b)(3). P. Br. at 24.

I find Petitioner’s argument wholly unsupported and unpersuasive. Nothing in section
1128, its legislative history, or implementing regulations suggests that the I.G. (or the
reviewing tribunals) should look behind every drug-related conviction outside the
Controlled Substances Act to determine whether the state or federal law in question is
sufficiently “similar” to the Controlled Substances Act to justify exclusion. To the
contrary, the statute includes any misdemeanor conviction under federal or state law, so
long as it is related “to the manufacture, distribution, prescription, or dispensing of a
controlled substance.” In fact, Congress anticipated that “most” convictions relating to
controlled substances would result in exclusion, giving the Secretary the discretion to
avoid exclusion in order to avoid a situation in which an “exclusion would jeopardize
another investigation.” S. Rep. No. 100-109, at 6, 7 (1987).

C. The 15-year exclusion falls within a reasonable range.

Having found a basis for the exclusion, I now consider whether the 15-year exclusion
falls within a reasonable range. The statute provides that the period of exclusion under
section 1128(b)(1) or section 1128(b)(3) “shall be 3 years, unless the Secretary
determines in accordance with published regulations that a shorter period is appropriate
because of mitigating circumstances or that a longer period is appropriate because of
aggravating circumstances.” Act, § 1128(c)(3)(D); 42 C.F.R. § 1001.201(b)(1); 42 C.F.R.
§ 1001.401(c)(1). So long as the period of exclusion is within a reasonable range, based
on demonstrated criteria, I have no authority to change it. Joann Fletcher Cash, DAB
No. 1725, at 17-18 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

1. Three aggravating factors justify substantially
lengthening the period of exclusion beyond the three year
baseline.

The L.G. cites three aggravating factors as bases for lengthening Petitioner’s period of
exclusion: (1) Petitioner’s acts caused, or reasonably could have been expected to cause,
financial losses of $5000 or more to a government program or other entity or had a
significant financial impact on program beneficiaries or other individuals; (2) the acts that
10

resulted in Petitioner’s conviction (or similar acts) were committed over a period of more
than one year; and (3) 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); 1001.401(c)(2).

Program Financial Loss. Petitioner’s criminal conduct (a “culpable omission”) allowed
his company to engage in a fraudulent scheme that resulted in staggering financial losses
to government programs and others. As reflected in the Sentencing Court’s opinion, the
amounts Purdue and the individual defendants were required to repay to federal and state
government programs, and to settle private civil claims were enormous:

. Purdue paid $100,615,797.25 (one hundred million, six hundred fifteen thousand,
seven hundred ninety-seven dollars and twenty-five cents) to federal government
ealth care agencies;

. Purdue put in escrow $59,384,202.75 (fifty-nine million, three hundred eighty-four
thousand, two hundred two dollars and seventy-five cents) for those states electing
to settle their claims against Purdue;

. Purdue paid to Medicaid programs $3,471,220.68 (three million, four hundred
seventy-one thousand, two hundred twenty dollars and sixty-eight cents) “for
improperly calculated rebates;”

. Purdue paid $5.3 million to the Virginia Medicaid Fraud Control Unit’s Program
ncome Fund;

. Purdue paid $276.1 million in forfeiture to the United States, pursuant to 18 U.S.C.
§ 1957;

and

. Purdue set aside $130 million to settle private civil claims.

Purdue, 495 F. Supp. 2d 569, 572; I.G. Ex. 1, at 3-6 (Plea Agreement 3). In addition,
Petitioner personally paid $7.5 million to the Virginia Medicaid Fraud Control Unit’s
Program Income Fund in “disgorgement,” i.e. this amount represents his unjust
enrichment from the fraud. Purdue, 495 F. Supp. 2d 569, 573; L.G. Ex. 2, at 2.
11

Restitution has long been considered a reasonable measure of program losses. Jason
Hollady, M.D., DAB No. 1855 (2002). Petitioner nevertheless suggests that the
restitution Purdue paid bears no relationship to any financial losses suffered by
government programs or any other entity, and claims that the Sentencing Court therefore
“declined to make any finding that the misbranding caused any financial harm.” P. Br. at
38. But Petitioner has mischaracterized the Court’s ruling. Addressing the objections of
alleged victims who were not included in the plea agreements, the Court recognized that,
to be awarded restitution, these individuals and institutions had to demonstrate that they
were “directly and proximately harmed” from the misbranding offense. In the Court’s
view, giving them the opportunity to make their cases before him “would unduly
complicate and prolong the sentencing process.” The Court therefore ordered that
restitution (far in excess of $100 million) be paid directly to the state and federal health
care programs to compensate for their losses, and that additional monies be set aside to
settle the unadjudicated claims. Purdue, 495 F. Supp. 2d 569, 572-76.

This hardly suggests the Court failed to find any financial harm attributable to the
defendants’ crimes. To the contrary, the Sentencing Court never questioned the very real
and extensive losses suffered by those government programs listed in the settlement
agreement. It recognized that the restitution process is complicated and most likely
inexact; no one could determine exactly how much OxyContin the government financed
as a result of the criminal conduct. In explaining what it would consider an acceptable
settlement agreement, the Court looked for an amount that the company could afford to
pay and still continue as an ongoing entity (“therefore we can’t demand a trillion
dollars”), but “would be a significant amount and likely cover costs that the government
had incurred in this healthcare program.” P. Ex. 5, at 61. The Court subsequently
accepted the amounts set forth in the parties’ plea agreements and, in sentencing, ordered
those amounts repaid to the injured programs as restitution. I.G. Ex. 15, at 5. The Court
also acknowledged the allegations of additional losses to individuals and institutions, but
determined that they would have to be adjudicated at a later time.

Petitioner personally agreed to pay to the Virginia Medicaid Fraud Control Unit’s
Program Income Fund the $7.5 million he gained unjustly as a result of his and his co-
defendants’ crimes. I.G. Ex. 16; I.G. Ex. 2, at 2.

The Board has characterized restitution in an amount so substantially greater than the
statutory standard as an “exceptional[ly] aggravating factor” that is entitled to significant
weight. Jeremy Robinson, DAB No. 1905 (2004); Donald A. Burstein, Ph.D., DAB No.
1865 (2003). L agree.
12

Moreover, even if I disregarded completely the restitution amounts, I would nevertheless
find that program and related losses are an exceptionally aggravating factor in this case.
The regulation does not require me to find actual program losses. If Petitioner’s acts
“reasonably could have been expected to cause” financial losses of $5000 or more, the
LG. is authorized to lengthen the period of exclusion. Here, Purdue and its employees
falsely marketed and promoted OxyContin, presenting it as less addictive, less subject to
abuse and diversion, and less likely to cause tolerance and withdrawal than other pain
medications. Purdue, 495 F. Supp. 2d 569, 571. No one disputes that over the five and a
half years of the fraud, Purdue sold massive amounts of OxyContin. Drug sales increased
from 300,000 prescriptions in 1996, to nearly six million in 2001. Evaluating the
Propriety and Adequacy of the OxyContin Criminal Settlement, 110" Cong. 37 (2007);
see also U.S. Gen. Accounting Office, Prescription Drugs: OxyContin Abuse and
Diversion Efforts to Address the Problem, at 18 (2003) (Purdue’s promotion led to
increase of non-cancer pain prescriptions from 670,000 in 1997 to 6.2 million in 2002).

I find that Purdue’s fraudulent marketing scheme “reasonably could” be expected to
increase dramatically OxyContin sales, and that a good portion of that increase would
represent sales for a drug that should not have been prescribed. And someone — the drug
recipient, a government program or other third party payor — wrongly paid for that
inappropriate drug. On this basis alone, without regard to the restitution actually paid, I
find that Petitioner’s crime could reasonably have been expected to cause financial losses
well in excess of the $5000 threshold for aggravation.°

Duration of crimes. The fraud that underlay Petitioner’s conviction lasted for more than
five and a half years; it began on or about December 12, 1995, and continued until on or
about June 30, 2001. This is well beyond the one year necessary for aggravation. I.G.
Ex. 9, at 5 (4 20); I.G. Ex. 2.

° See also West Virginia Department of Health and Human Services, DAB No.
2185 (2008). The State of West Virginia settled its 2001 OxyContin lawsuit against
Purdue for $10 million payable to the Attorney General’s Consumer Protection Fund to
be used for drug education, treatment and enforcement programs. Even though the State
Medicaid Program was not explicitly included in the settlement, the Board held that a
share of the settlement resolved claims for reimbursement of Medicaid expenses. DAB
No. 2185, at 10. The Board also rejected as without merit the State’s assertion that
Purdue did not want to settle the reimbursement claims, but only wanted “positive ‘P.R.’
by settling the claims for prospective relief, thereby funding some worthy programs and
getting some good press.” DAB No. 2185, at 18.
13

Again Petitioner argues that the “unlawful acts” were the acts of others, and claims that,
under the Board’s reasoning in John (Juan) Urquijo, DAB No. 1735 (2000), he should
not be held accountable for the crimes of others. In Urquijo, the petitioner was involved
in a long-running conspiracy, but his own participation in that conspiracy lasted less than
a year. The Board therefore concluded that the acts that resulted in his conviction lasted
less than a year, so the I.G. could not increase his period of exclusion based on the
duration of his participation in the conspiracy. Here, in contrast, Petitioner was culpable
for the entire period of the fraud. Had he reasonably exercised his corporate duty from
December 1995 through June 2001, he could have been expected to learn of the violations
and to prevent or correct them. The I.G. may therefore increase the period of exclusion
based on the duration of his crime.

Adverse Impact. Finally, I agree with the I.G. that Petitioner’s failure to prevent or stop
the misbranding of OxyContin had a significant adverse impact on program beneficiaries
and others.

Petitioner attacks as unreliable the unsworn statements of individuals who spoke at the
sentencing hearing and claimed that Purdue’s marketing practices caused addiction and
even death (I.G. Ex. 10, at 4-40). I do not rely on those unsworn statements, nor do I
consider them necessary to establish that the acts underlying Petitioner’s crime had a
significant adverse impact on program beneficiaries and others.

Petitioner argues that the I.G. failed to establish that Purdue’s criminal practices “directly
and proximately” caused harm to anyone. Nothing in the language of the regulation
requires a “direct and proximate” relationship between the acts underlying the conviction
and the adverse impact on beneficiaries and others, and no regulatory purpose is served
by inferring one. See Lyle Kai, R.Ph., DAB 1979, at 10 (Board reluctant to read in
requirements “not contained in the literal language”). As the I.G. points out, the “direct
and proximate” standard applies where a liable party is responsible for restoring an
injured party. In those circumstances, it is important to trace the injuries directly back to
the potential remunerator. But here, the goal is to protect federal health care programs
and individuals from potential harm. Joann Fletcher Cash, DAB No. 1725. Any
significant adverse impact on those individuals would be relevant in determining the risk
posed by a criminal’s continuing participation in health care programs, even where an
individual’s own conduct or the actions of others contributed to his injuries (thereby
relieving the criminal of civil liability).

Proper labeling and marketing of any drug, but particularly a controlled substance, is
critical to protecting public health and safety. I agree with Petitioner that the causes of
addiction and abuse are complex and not always well-understood, but this only increases
the importance of providing to physicians and patients accurate information about the
14

risks of addiction posed by a particular drug. I find it disingenuous to suggest that
allowing those risks to be misrepresented for more than five years had no adverse impact
on program beneficiaries or others.

Moreover, the question of harm has already been adjudicated in the criminal proceedings.
Although the Sentencing Court declined to impose a jail sentence against Petitioner and
his co-defendants (a decision it characterized as a close question), the Court found that
“the potential damage by the misbranding disclosed in this case was substantial. And I do
not overlook the danger to the public from this crime.” I.G. Ex. 10, at 117-18.

2. Just one mitigating factor justifies decreasing the length of
Petitioner’s exclusion.

By regulation, only two factors are considered mitigating, and a basis for reducing the
period of exclusion under section 1128(b)(3): 1) the individual’s cooperation with federal
or state officials resulted in others being convicted or excluded, additional cases being
investigated, reports issued identifying program vulnerabilities, or the imposition of civil
money penalties against others; and 2) alternative sources of the type of health care items
or services furnished by the individual are not available. 42 C.F.R. § 1001.401(c)(3).

Here, one mitigating factor justifies reducing the period of exclusion. The LG.
determined that Petitioner cooperated with law enforcement officials and reduced the
exclusion by 25%, from 20 to 15 years. I consider this reasonable.

Petitioner raises two additional factors: 1) he points out that he was convicted of only one
offense, and claims financial losses of less than $1500; and 2) he claims that a “mental,
emotional or physical condition” reduced his culpability. Under section 1128(b)(1), these
factors are considered mitigating. 42 C.F.R. § 1001.201(b)(3) (the individual was
convicted of three or fewer offenses, and the resulting amount of financial loss is less
than $1500; and the court determined that the individual had a mental, emotional, or
physical condition that reduced his culpability). However, because section 1128(b)(3)
provides an independent basis for exclusion, and these are not mitigating factors under
section 1128(b)(3), they would not reduce the length of his exclusion here.

In any event, neither factor is present. As discussed above, Petitioner’s offense caused
millions of dollars in financial losses. With respect to any “mental, emotional or physical
condition” reducing his culpability, Petitioner does not point to any actual “condition”
other than his ignorance of the ongoing crime. As discussed above, Petitioner was in a
position to know about and prevent the fraud. His culpable failure to do so does not
create for him a mitigating factor.
15

IV. Conclusion

Petitioner does not think he should be excluded because, notwithstanding his criminal
conviction, he does not consider himself guilty of any actual wrong-doing. But he was
not blameless. As the Sentencing Court observed, Petitioner voluntarily accepted
responsibility over a business enterprise for which he was “generously rewarded.”
Among his responsibilities, he was expected to identify and prevent the fraud. He did not
do so, and has been held criminally accountable. The fraud continued for many years. Its
costs were astronomical. It endangered the health and safety of program beneficiaries and
others.

Even factoring in Petitioner’s eventual cooperation with law enforcement, the facts of this
case establish a lack of trustworthiness and justify a substantial period of exclusion.
Fifteen years falls within a reasonable range.

I therefore conclude that the I.G. properly excluded Petitioner from participation in the
Medicare, Medicaid, and other federal health care programs, and I sustain the 15-year
exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Decision No. CR1882
The Inspector General.

In the Case of: )
)
Melissa West, ) Date: January 7, 2009
)
Petitioner, )
)
-Vv.- ) Docket No. C-08-762
)
)
)

DECISION DISMISSING REQUEST FOR HEARING

I dismiss the hearing request filed by Petitioner, Melissa West because she has no right to
a hearing.

I. Background

On September 24, 2008, Petitioner filed a letter with the Civil Remedies Division of the
Departmental Appeals Board. I.G. Ex. 1.' In her letter Petitioner complained that she
was unable to obtain a job as a certified nursing assistant (CNA) as a consequence of her
name apparently being placed on a State registry that listed the names of individuals
charged with or convicted of abuse. Petitioner requested that she be assisted in having
her name expunged from the registry and stated that, as an alternative possibility, she
might appeal the decision to put her name on that document.

The case was docketed as a hearing request involving a possible exclusion determination
by the LG. of Petitioner from participating in the Medicare program and it was assigned
to me for a hearing and a decision. | held a pre-hearing conference by telephone. During

' The Inspector General (I.G.) has identified the letter as I.G. Exhibit (Ex.) 1 and I
am receiving it into evidence as an exhibit. The letter is also part of the correspondence
file that was made in this case.
2

the conference call the I.G.’s counsel advised that the I.G. appeared not to have any
record of having excluded Petitioner. I informed the parties that I would have no
authority to hear and decide the case if, in fact, the I.G. had not excluded Petitioner. I
told Petitioner that, if she had any remedy to address the possible placement of her name
on a State abuse registry, it might lie elsewhere. I directed the I.G. to file a motion
addressing the issue of my authority to hear and decide this case.

On November 12, 2008 the I.G. filed a motion asking that I dismiss Petitioner’s hearing
request. Petitioner had until December 19, 2008 to answer the motion. I have received
nothing from Petitioner.

II. Issue, findings of fact and conclusions of law
A. Issue

The issue in this case is whether I have the authority to hear and decide it.
B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this
case. I set forth each Finding below as a separate heading.

1. My authority to hear and decide cases is limited to that which has been
delegated to me by the Secretary of the United States Department of
Health and Human Services.

My authority to hear and decide cases is strictly limited to that which has been delegated
to me by the Secretary. That delegated authority is spelled out in the regulations. In cases
involving exclusions, the authority is described at 42 C.F.R. Parts 1001 and 1005.2 A
party who is excluded pursuant to any of the exclusion sections of 42 Part 1001 is entitled
to a hearing. 42 C.F.R. § 1005.2(a). Absent a determination to exclude there is simply no
authority for me to hear and decide a case.

? There are numerous other delegated hearing and decision authorities, some
involving determinations made by the I.G. and others involving determinations made by
other agencies in this Department. I do not discuss them because they plainly are not at
issue here.
3

2. The I.G. made no determination to exclude Petitioner. Therefore, I
have no authority to conduct a hearing in this case.

Counsel for the I.G. represents — and Petitioner does not dispute — that the IG. performed
a search of its list of excluded individuals and entities and also performed a search of its
pending exclusion actions. He found nothing, either as an effectuated exclusion, or as an
exclusion action that is pending.

Consequently, the I.G. has made no determination against Petitioner pursuant to any of
the sections of 42 C.F.R. Part 1001. And, as there is no adverse determination, I have no
authority to hear and decide this case and Petitioner has no right to a hearing. I must
dismiss her hearing request for that reason.’

/s/
Steven T. Kessel
Administrative Law Judge

> Alternatively, I could dismiss Petitioner’s hearing request as having been
abandoned by her given her failure to answer the I.G.’s motion. It is unnecessary that I
do so because I so clearly lack any authority to hear and decide her hearing request.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
Paul Donald Apusen, Date: January 7, 2009
)
Petitioner, )
)
-Vv.- ) Docket No. C-08-708
) Decision No. CR1881
The Inspector General. )
)
DECISION

Here, Petitioner, Paul Donald Apusen, asks review of the Inspector General’s (1.G.’s)
determination to exclude him for five years from participation in Medicare, Medicaid and
all federal health care programs under section 1128(a)(1) of the Social Security Act. For
the reasons discussed below, I find that the I.G. is authorized to exclude Petitioner, and
that the statute mandates a minimum five-year exclusion.

I. Background

On September 20, 2007, Petitioner pled guilty in California State Court to one count of
petty theft, a violation of sections 484 and 488 of the California penal code. I.G. Ex. 2, at
1; LG. Ex. 5, at 3.

Thereafter, in a letter dated June 30, 2008, the I.G. advised Petitioner that, because he had
been convicted of a criminal offense related to the delivery of an item or service under the
Medicare or state health care program, the I.G. was excluding him from participation in
Medicare, Medicaid and all other federal health care programs for a minimum period of
five years. I.G. Ex. 1. Section 1128(a)(1) of the Social Security Act (Act) authorizes
such exclusion. Petitioner requested review, and the matter has been assigned to me for
resolution.
2

The parties have submitted their briefs. Attached to the I.G.’s brief are I.G. Exhibits 1-7
(I.G. Exs. 1-7). Attached to Petitioner’s brief are Petitioner’s Exhibits 1-4 (P. Exs. 1-4).
The L.G. filed a reply brief with one additional exhibit, I.G. Ex. 8. In the absence of any
objections, I admit into evidence I.G. Exs. 1-8 and P. Exs. 1-4.

II. Issues

The sole issue before me is whether the I.G. has a basis for excluding Petitioner from
program participation. Because an exclusion under section 1128(a)(1) must be for a
minimum period of five years, the reasonableness of the length of the exclusion is not an
issue.

III. Discussion

Petitioner must be excluded for five years because he was
convicted of a criminal offense related to the delivery of an
item or service under a state health care program, within the
meaning of section 1128(a)(1) of the Social Security Act.'

Section 1128(a)(1) of the Act requires that the Secretary of Health and Human Services
(Secretary) exclude an individual who has been convicted under federal or state law of a
criminal offense related to the delivery of an item or service under Medicare or a state
ealth care program.’ 42 C.F.R. § 1001.101. Individuals excluded under section
128(a)(1) of the Act must be excluded for a period of not less than five years. Act §
128(c)(3)(B).

Petitioner was apparently the office manager of a medical clinic located in Huntington
Park, California. In a felony complaint dated April 25, 2007, he was charged with three
felony counts: grand theft, making fraudulent claims, and falsifying records in support of
a fraudulent claim. I.G. Ex. 3. A Declaration of Support accompanied the complaint.
Signed by an employee of the California Department of Justice, Bureau of Medi-Cal
Fraud and Elder Abuse, the declaration charged that Petitioner was part of a scheme to
submit false claims to the Medi-Cal and Family PACT (Planning, Access, Care and

' My findings of fact/conclusions of law are set forth, in italics, in the discussion
eadings of this decision.

> The term “state health care program” includes a state’s Medicaid program.
Section 1128(h)(1) of the Act; 42 U.S.C. § 1320a-7(h)(1). California’s Medicaid program
is called “Medi-Cal.”
3

Treatment) programs. I.G. Ex. 4. The Family PACT program is administered and funded
by Medi-Cal, the State Medicaid program. I.G. Ex. 8.

On September 20, 2007, the criminal complaint was amended to add an additional count
of petty theft, in violation of section 488 of the penal code. Thereafter, the three felony
charges were dismissed, and Petitioner pled guilty to petty theft. The court accepted his
plea. I.G. Ex. 5, at 3. As part of his plea agreement, Petitioner explicitly agreed that “the
loss to the Medi-Cal program as a result of [his] criminal activities was $10,000,” and
that he would make restitution in this amount to the California Department of Healthcare
Deposit Fund. I.G. Ex. 2, at 1. The criminal court incorporated this restitution provision
into Petitioner’s sentence. I.G. Ex. 5, at 3.

Petitioner agrees that he was convicted of a misdemeanor, but argues that he is not subject
to exclusion under section 1128(a)(1) because his offense was not “related to the delivery
of an item or service” under Medicare or a state health care program. Citing Lyle Kai, R.
Ph., DAB 1979 (2005), he articulates the correct standard for determining “relatedness” —
a nexus or common sense connection between the offense and the delivery of an item or
service under a covered program — but claims that “there is simply insufficient evidence
[here] to establish the requisite nexus or common sense connection required.” P. Br. at 3.

In fact, when, in his plea agreement, Petitioner acknowledged that his crime cost Medi-
Cal $10,000, he left no doubt that his crime was related to the state health care program.
LG. Ex. 2, at 1. Further, he agreed to pay, and the sentencing court ordered him to pay
restitution to the state’s healthcare fund. Restitution has long been considered a
reasonable measure of program losses. See Jason Hollady, DAB No. 1855 (2002).

Thus, Petitioner’s crime falls within the ambit of 42 C.F.R. § 1128(a)(1), so the I.G. has a
basis for the exclusion, and the exclusion must be for a minimum mandatory period of
five years. Act § 1128(c)(3)(B).

IV. Conclusion

For these reasons, I conclude that the I.G. properly excluded Petitioner from participation
in Medicare, Medicaid and all other federal health care programs, and I sustain the five-
year exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: )
)
University Behavioral Health of ) Date: January 6, 2009
El Paso, LLC, (CCN: 45-4109), )
)
Petitioner, ) Docket No. C-08-627
) Decision No. CR1880
-V.- )
)
Centers for Medicare & Medicaid )
Services. )
)
DECISION

I enter summary judgement in favor of the Centers for Medicare & Medicaid Services
(CMS) and against University Behavioral Health of El Paso, LLC. (Petitioner). I find that
Petitioner’s effective date of participation in the Medicare program is March 5, 2008.

I. Background

Petitioner is a hospital located in El Paso, Texas. By letter dated March 26, 2008, CMS
advised Petitioner that it was certified to participate in the Medicare program as a
psychiatric hospital effective March 5, 2008. By letter dated April 8, 2008 Petitioner
contended that the effective date of certification should be February 21, 2008, and asked
that CMS reconsider its decision. By letter dated May 23, 2008 CMS advised Petitioner
that it could not change the Medicare participation date, and that the effective date would
remain the same. By letter dated July 21, 2008, Petitioner requested a hearing
challenging CMS’s decision to certify it on March 5, 2008.

The case was assigned to me for hearing and decision. By my direction the parties were
sent an Acknowledgment and Initial Docketing Order dated July 25, 2008. The Order set
forth certain procedures and a schedule for the initial development of the case. In
2

response to the Order, Petitioner filed a “Report of Readiness” dated August 25, 2008,
and CMS filed a motion for summary judgement on August 28, 2008.

By Order dated September 26, 2008, I issued a Notice and Order to Show Cause to
Petitioner because Petitioner’s “Report of Readiness” had failed to comply with specific
requirements for an adequate Report of Readiness set out in paragraph 4(c) of my Order
of July 25, 2008, and was not responsive to CMS’s motion for summary judgment.'

By letter dated October 2, 2008, Petitioner filed a response to my Notice and Order to
Show Cause. By letter dated October 14, 2008, Petitioner submitted a response to CMS’s
motion for summary judgement.

advised Petitioner by direction letter dated October 16, 2008, that I accepted Petitioner’s
October 2, 2008 filing as having shown good cause, and its October 14, 2008 submission
as properly filed. Additionally, I advised the parties that no further briefings on the merits
of the CMS motion for summary judgement or other pleadings related to that motion
would be received pending my ruling and decision on it.

CMS submitted five proposed exhibits (CMS Exs. 1-5) along with its motion for
summary judgement. Petitioner submitted several unmarked documents along with its
July 21, 2008 request for hearing. These documents are: 1) a letter dated May 23, 2008
from CMS denying Petitioner’s request for reconsideration; 2) Petitioner’s April 8, 2008
request for reconsideration letter; 3) a March 26, 2008 certification letter from CMS; 4) a
ealth insurance benefit agreement (CMS form 1551) between the Department of Health
and Human Services and Petitioner; 5) an electronic mail dated March 31, 2008 from
Patrick Walden to David Wright; 6) CMS form 1539; and 7) a survey of Petitioner’s
facility dated February 21, 2008. For the purposes of the record, I have designated these
exhibits as Petitioner’s Exhibits (P. Exs.) 1-7 respectively. I receive into evidence CMS
Exs. 1-5, and P. Exs. 1-7.

If. Applicable Law

n order to be approved for participation in the Medicare program, a provider must meet
the applicable statutory definition and be in compliance with conditions or requirements
for participation. 42 C.F.R. § 488.3. 42 C.F.R. Part 488 sets forth the survey and
certification process by which CMS and its authorized agents determine whether a
provider is complying with the applicable conditions for participation.

' Petitioner is represented by the facility’s senior vice-president of financial
operations, a non-lawyer.
Medicare participation requirements for psychiatric hospitals are found in 42 C.F.R. Part
482. These regulatory requirements establish that psychiatric hospitals must meet all
conditions of participation applicable generally to hospitals, as well as special certain
conditions. See 42 C.F.R. §§ 482.61, 482.62. Conditions of participation are broken
down into standards. A provider, or prospective provider, that is found to be deficient
with respect to one or more standards in the conditions of participation, may participate in
Medicare only if the facility submits an acceptable plan of correction for achieving
compliance within a reasonable period of time as required by 42 C.F.R. § 488.28(a).

A Medicare provider agreement is effective on the date the survey is completed, if on that
date the provider meets all federal requirements. 42 C.F.R. § 489.13(b). If on the date
the survey is completed the provider fails to meet any of the requirements specified

in 42 C.F.R. Chapter IV the effective date of certification is the earlier of the following:

the date on which the provider meets all requirements; or

the date on which a provider is found to meet all conditions of participation or
coverage, but has lower level deficiencies, and CMS or the State survey agency
receives an acceptable plan of correction for the lower level deficiencies.

As an applicant for certification and as a participant in the Medicare program, Petitioner
has the burden of establishing that it satisfies participation requirements. 42 C.F.R.

§ 489.10(a). Petitioner also has the ultimate burden of rebutting, by a preponderance of
the evidence, any prima facie case of noncompliance established by CMS. Hillman
Rehabilitation Center, DAB No. 1611 (1997), aff'd, Hillman Rehabilitation Center v. U.S.
Dep't of Health and Human Services, No. 98-3789 (GEB), at 21-38 (D.N.J., May 13,
1999).

CMS meets its burden to establish a prima facie case merely by establishing that
Petitioner has not supplied it with sufficient affirmative evidence that it is complying with
participation requirements. As an applicant for certification, Petitioner must show
affirmatively that it is complying with such requirements.
II. Discussion

A. Issues

The issues in this case are:

1. Whether summary judgment is appropriate; and if so
2. Whether the effective date of Petitioner’s participation is March
5, 2008, or an earlier date.

B. Findings and Analysis

I make findings of fact and conclusions of law (Findings) to support my decision in this
case. I set forth each Finding below as a separate heading. I discuss each Finding in
detail.

1. Summary judgment is appropriate in this case because there are no
disputed issues of material fact.

An administrative law judge (ALJ) may decide a case on summary judgment, without an
evidentiary hearing, if the case presents no genuine issue of material fact. Crestview
Parke Care Center v. Thompson, 373 F.3d 743, 750 (6th Cir. 2004); Livingston Care
Center v. Dep't. of Health and Human Services, No. 03-3489, 2004 WL 1922168, at 3
(6th Cir. Aug. 24, 2004). By interpretive rule, this forum has established a summary
judgment procedure “akin to the summary judgment standard contained in Federal Rule
of Civil Procedure 56.” Crestview Parke Care Center, 373 F.3d 743, 750. Under that
tule, the moving party may show the absence of a genuine factual dispute by presenting
evidence so one-sided that it must prevail as a matter of law, or by showing that the non-
moving party has presented no evidence “sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Livingston Care Center, No. 03-3489, 2004 WL 1922168, at 4, citing
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The nonmoving party must then act
affirmatively by tendering evidence of specific facts showing that a dispute exists.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n.11 (1986). See
also Vandalia Park, DAB No. 1939 (2004); Lebanon Nursing and Rehabilitation Center,
DAB No. 1918 (2004).

A mere scintilla of supporting evidence is not sufficient. “If the evidence is merely
colorable or is not significantly probative summary judgment may be granted.”

Livingston Care Center, No. 03-3489, 2004 WL 1922168, at 4, quoting Anderson v.
Liberty Lobby, 477 U.S. 242, at 249-250 (1986). In deciding a summary judgment
motion an ALJ may not make credibility determinations or weigh conflicting evidence but
must instead view the entire record in the light most favorable to the non-moving party,
all reasonable inferences drawn from the evidence in that party’s favor. Innsbruck
HealthCare Center, DAB No. 1948 (2004); Madison Health Care, Inc., DAB No. 1927
(2004).
5

This case is appropriate for summary judgment. CMS has filed a motion for summary
judgment, and Petitioner has not disputed any material issues of fact in this case. Thus,
the only issues before me are legal, and can be decided based on written submissions,
without the need for an in-person hearing. The central legal issue in this case is whether
CMS correctly certified Petitioner to participate in Medicare on March 5, 2008. In
evaluating the parties submissions, | find that even if I construe the entire record in the
light most favorable to Petitioner, I find that CMS correctly certified Petitioner to
participate in Medicare on March 5, 2008.

2. The effective date of Petitioner’s participation in Medicare is March
5, 2008.

The facts of the case are undisputed. On February 21, 2008, the Texas Department of
State Health Services (TDSHS) conducted a certification survey of Petitioner to
determine whether it was in compliance with Medicare participation requirements for
psychiatric hospitals. CMS Ex. 1. TDSHS determined that Petitioner had several lower
level deficiencies. Jd. Petitioner submitted its plan of correction for the identified
deficiencies. /d. In the interim, TDSHS determined that Petitioner’s plan of correction
was acceptable, and on March 5, 2008 CMS certified Petitioner to participate in the
Medicare program. CMS Ex. 4. Between the time of the survey (February 21, 2008), and
the time of CMS’s certification (March 5, 2008), Petitioner began treating Medicare
patients believing it would be reimbursed for services rendered based on statements of
one of the TDSHS surveyors who conducted the survey. P. Ex. 1; P. Ex. 5. Thus,
Petitioner asserts that in good faith, it reasonably relied on the representations of the state
surveyor, and should be reimbursed for Medicare services provided beginning February
21, 2008, instead of March 5, 2008. Petitioner’s July 21, 2008 letter.

Petitioner is simply not entitled, as a matter of this forum’s well-settled law, to the relief it
seeks. The regulations at 42 C.F.R. § 498.13(c)(2(ii) specify when a Medicare agreement
may be effective:

If on the date the survey is completed the provider or supplier fails to meet
any of the requirements specified in paragraph (b) of this section, the
following apply: (2) For an agreement with, or an approval of, any other
provider or supplier, (except those specified in paragraph (a)(2) of this
section), the effective date is the earlier of the following: (ii) The date on
which a provider or supplier is found to meet all conditions of participation
or coverage, but has lower level deficiencies, and CMS or the State survey
agency receives an acceptable plan of correction for the lower level
deficiencies, or an approval waiver request, or both. (The date of receipt is
6

the effective date regardless of when CMS approves the plan of correction
or the waiver request, or both.)

42 CER. § 498.13(c)(2(ii).

Thus, in this instance the earliest Petitioner could have been certified by CMS to
participate as a psychiatric hospital was February 21, 2008, the date of the survey.
However, Petitioner was found not to have complied with all participation requirements
as of that date. The TDSHS surveyors who completed the February survey found that
Petitioner failed to comply with several lower level standard level participation
requirements. Petitioner submitted an acceptable plan of correction on March 5, 2008.
CMS certified Petitioner to participate as a psychiatric hospital effective March 5, 2008.
Under the regulations, this was the earliest date Petitioner was eligible to participate as a
psychiatric hospital. See Puget Sound Behavioral Health, DAB No. 1944 (2004).
Additionally, there is nothing in the regulations or the Act which obligates or enables
CMS to certify a facility to participate in Medicare based on the communication of
erroneous information given to that facility by an employee of a state survey agency.
Danville HealthCare Surgery Center, DAB CR892 (2002).

Petitioner also asserts that according to the State Operations Manual (SOM), lower level
deficiencies do not require a plan of correction, and therefore, its effective certification
date should be February 21, 2008. Petitioner is incorrect. The SOM does not have the
force and effect of law, and therefore is not controlling. Cal Turner Extended Care
Pavilion, DAB No. 2030 (2006); Aase Haugen Homes, Inc., DAB No. 2013, at 15 (2006);
Prime Care Home Health Agency, Inc., DAB CR1678, at 7 (2007).

For the limited purposes of this discussion, I accept arguendo Petitioner’s assertion that it
was told — by a state surveyor — at the completion of the February survey that it met the
conditions for participation for a psychiatric hospital. But in accepting the assertion
arguendo, | must observe that the assertion is irrelevant because any such representations
cannot bind CMS or estop CMS from following clear statutory and regulatory provisions.
Physicians Medical Center of Santa Fé, DAB CR1790, at 7-8 (2008); Oklahoma Heart
Hospital, DAB CR1719, at 10-11 (2008); Prime Care Home Health Agency, Inc., DAB
CR1678, at 7; Danville HealthCare Surgery Center, DAB CR892. However, Petitioner
was also told, by its receipt of the statement of deficiencies, that it had several standard
level deficiencies. It is entirely consistent with the regulatory scheme that Petitioner met
conditions of participation yet at the same time manifested some lower level deficiencies.
The regulations require that, in light of the presence of these lower level deficiencies,
Petitioner could not be certified by CMS to participate as a psychiatric hospital until it
either corrected them or until it submitted an acceptable plan of correction, which it did
on March 5, 2008.
IV. Conclusion

Accordingly, I grant CMS’s motion for summary judgment. I affirm CMS’s
determination that the effective date of Petitioner’s Medicare provider agreement is
March 5, 2008.

/s/
Richard J. Smith
Administrative Law Judge