Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Virgilio Lopez Opinion
(OI File No.: L-01-40271-9),
Petitioner
v.

The Inspector General.
Docket No. C-11-426
Decision No. CR2434

Date: September 21, 2011

DECISION

Petitioner, Virgil Lopez Opinion, was employed as a back-office assistant to a California
physician. Petitioner participated in the physician’s scheme to administer watered-down
versions of medications to patients suffering from AIDS, HIV, and hepatitis. He was
convicted on two felony counts of health care fraud and making false statements. Based
on his convictions, the Inspector General (I.G.) excluded him from participation in
Medicare, Medicaid, and all federal health care programs for a period of ten years, and he
now appeals.

The parties agree that, based on his convictions, Petitioner Lopez Opinion is subject

a minimum five-year exclusion from participation in federal health care programs under
sections 1128(a)(1) and 1128(a)(3) of the Social Security Act (Act). They dispute the
length of his exclusion. The I.G. proposes a 10-year exclusion, and Petitioner argues that
any exclusion in excess of five years is unreasonable.

For the reasons set forth below, I find that al0-year exclusion is reasonable.
I. Background

By letter dated February 28, 2011, the LG. notified Petitioner that he was excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
10 years, because he had been convicted of a felony criminal offense related to: 1) the
delivery of an item or service under the Medicare or state health care program; and 2)
fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct in connection with the delivery of a health care item of service. The letter
explained that sections 1128(a)(1) and 1128(a)(3) of the Act authorize the exclusion.

Petitioner concedes that he was convicted and is subject to exclusion under these
sections. P. Brief (Br.) at 2.

Each party submitted a written argument (I.G. Br.; P. Br.). The I.G. also submitted five
exhibits (I.G. Exs. 1-5) and a reply brief (I.G. Reply). Petitioner submitted one exhibit
(P. Ex. 1). In the absence of an objection, I admit into evidence I.G. Exs. 1-5 and P. Ex.
1.

The parties agree that this case can be resolved without an in-person hearing. Order and
Schedule for Filing Briefs and Documentary Evidence at 2 (May 18, 2011); P. Br. at 7.

II. Issue

Because the parties agree that the I.G. has a basis upon which to exclude Petitioner from
program participation, the sole issue before me is whether the length of the exclusion (10
years) is reasonable. 42 C.F.R. § 1001.2007.

III. Discussion

Section 1128(a)(1) of the Act mandates that the Secretary of Health and Human Services
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 health care
program. 42 C.F.R. § 1001.101(a).

Section 1128(a)(3)of the Act says that an individual or entity convicted of felony fraud,
theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of a health care item or service must be excluded from
participation in federal health care programs for a minimum of five years. 42 C.F.R. §
1001.101(c).

For more than ten years, Petitioner Opinion was employed as a “back office assistant” to
Dr. George Steven Kooshian, an internist who treated patients with AIDS, HIV, and
hepatitis. 1.G. Ex. 2 at 6. Petitioner’s duties included preparing medications and
injections for Dr. Kooshian’s patients. P. Ex. 1 at 1. Acting on his employer’s orders,
Petitioner administered to patients suffering from AIDS, HIV, and hepatitis watered-
down dosages (12 to %) of the drugs Epogen, Interferon, and immune gammaglobulin
(IVIG). Sometimes, he administered plain saline or water instead of the ordered drug.
Petitioner Opinion also fabricated injection logs to indicate, falsely, that he had given the
full doses. He told at least one patient that he had administered IVIG, when, in fact, he
had administered only saline and vitamins. Although he did not do the billing himself,
Petitioner Opinion “knowingly and willfully aided and abetted” Dr. Kooshian in
fraudulently billing the patient’s health insurance companies, including the Medicare
program, for drugs that were not administered. I.G. Ex. 2 at 7-8.

On July 20, 2005, Petitioner and his employer were indicted on 29 felony counts of
conspiracy, health care fraud, making false statements related to health care matters, and
aiding and abetting. I.G. Ex. 3. On September 21, 2009, Petitioner pled guilty, in United
States District Court for the Central District of California, to one count of felony health
care fraud, aiding and abetting and causing an act to be done, in violation of 18 U.S.C.

§ 1347; and one felony count of making false statements related to health care matters, in
violation of 18 U.S.C. § 1035. I.G. Ex. 1.

The court sentenced Petitioner to three years probation and ordered him and his co-
defendant Kooshian, jointly and severally, to pay $660,955 in restitution to the Medicare
program. I.G. Ex. 1 at 1.

Based on the two aggravating factors and one mitigating
factor presented in this case, the 10-year exclusion falls
within a reasonable range.’

An exclusion under either section 1128(a)(1) or 1128(a)(3) of the Act must be for a
minimum period of five years. Act § 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a),
1001.2007(a)(2). Federal regulations set forth criteria for lengthening exclusions beyond
the five-year minimum. 42 C.F.R. § 1001.102(b). Evidence that does not pertain to one
of the aggravating or mitigating factors listed in the regulation may not be used to decide
whether an exclusion of a particular length is reasonable.

Among the factors that may serve as bases for lengthening the period of exclusion are the
two that the LG. relies on in this case: 1) the acts resulting in the conviction, or similar
acts, caused a government program or another entity financial losses of $5,000 or more;
and 2) the acts that resulted in the conviction, or similar acts, were committed over a
period of one year or more. 42 C.F.R. § 1001.102(b). The presence of an aggravating

' [make this one finding of fact/conclusion of law.
factor or factors, not offset by any mitigating factor or factors, justifies lengthening the
mandatory period of exclusion.

Program financial loss. The district court ordered Petitioner Opinion to pay $660,955 in
restitution to the Medicare program. 1.G. Ex. 1 at 1. Restitution has long been
considered a reasonable measure of program losses. See Jason Hollady, M.D., DAB No.
1855 (2002). Petitioner concedes that the Medicare program suffered significant losses
as a result of the fraudulent practices, but he denies having personally received any
financial benefit. P. Ex. 1 at 2 (Opinion Decl. 4). However, the question is not how
much the petitioner profited, but how much the program lost, and the program’s financial
losses here were substantial — more than 130 times greater than the threshold amount
necessary to establish an aggravating factor — and thus justify lengthening the period of
exclusion well beyond the minimum.

Length of criminal conduct. Petitioner Opinion pled guilty to criminal acts that were
committed over a five-to-six year period. In his plea agreement, he admitted that
“TbJeginning in or around 1995 and continuing to in or around February 2001, [he] aided
and abetted Kooshian in committing health care fraud and making false statements
relating to health care matters.” I.G. Ex. 2 at 6. Petitioner acknowledges having
“follow[ed] medical orders from a licensed physician from 1995-2001,” but claims that
his “scienter and knowing participation did not extend over the entire course of the
relevant time period.” P. Br. at 4. He also says that, until 2001, he believed that he was
“not harming any patient by diluting medications, and there existed a sound medical basis
for sub-dosing or switching medications for vitamins.” P. Ex. 1 at 2 (Opinion Decl. 3).

That Petitioner did not intentionally harm patients is irrelevant to the issues before me.
Petitioner Opinion is not charged with knowingly harming patients. Exclusion for that
reason could have been brought under section 1128(a)(2) of the Act, which authorizes
exclusion based on criminal offenses relating to neglect or abuse of patients. Nor has the
1.G. lengthened the period of exclusion based on aggravating factors that relate to adverse
impact on program beneficiaries (42 C.F.R. § 1001.102(b)(3)) or patient abuse or neglect
(42 C.F.R. § 1001.102(b)(4)).

Further, the period of Petitioner’s participation in criminal acts was resolved by the
district court. Not only did Petitioner admit, in his plea agreement, to conduct that
spanned a five-to-six year period, he pled guilty to counts two and twenty-eight of the
indictment. LG. Ex. 1 at 1. Count two incorporated paragraph 4 of the indictment, and
paragraph 4 says that the illegal conduct occurred from about January 1995 through
February 2001. I.G. Ex. 3 at 2, 11. Petitioner may not, in this forum, collaterally attack
his conviction.

When the exclusion is based on the existence of a criminal
conviction . . . where the facts were adjudicated and a final
decision was made, the basis for the underlying conviction . .
. is not reviewable and the individual or entity may not
collaterally attack it, either on substantive or procedural
grounds, in this appeal.

42 C.F.R. § 1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000); Chander
Kachoria, R.Ph., DAB No. 1380 at 8 (1993) (“There is no reason to ‘unnecessarily
encumber the exclusion process’ with efforts to reexamine the fairness of state
convictions.”); Young Moon, M.D., DAB CR 1572 (2007).

Thus, Petitioner engaged in criminal conduct five or six times longer than necessary to
constitute an aggravating factor, costing the Medicare program significant losses. The
1.G. could reasonably impose a period of exclusion much greater than the mandatory
five-year minimum.

I now consider the one mitigating factor presented in this case.

Mitigating factor. The regulations consider mitigating just three factors: 1) a petitioner
was convicted of three or fewer misdemeanor offenses, and the resulting financial loss to
the program was less than $1,500; 2) the record in the criminal proceedings demonstrates
that a petitioner had a mental, physical, or emotional condition that reduced her
culpability; and 3) a petitioner’s cooperation with federal or state officials resulted in
others being convicted or excluded, or additional cases being investigated, or a civil
money penalty being imposed. 42 C.F.R. § 1001.102(c). Characterizing a mitigating
factor as “‘in the nature of an affirmative defense,” the Board has ruled that Petitioner has
the burden of proving any mitigating factor by a preponderance of the evidence. Barry
D. Garfinkel, M.D., DAB No. 1572 at 8 (1996).

After years of assisting Dr. Kooshian in his fraud, Petitioner Opinion’s “conscience was
killing him,” and he blew the whistle on the scheme by going to the press, which was
how the U.S. Attorney’s Office learned of the scheme. Petitioner then cooperated with
the prosecutors, providing information and documentation. His level of cooperation was
considerable and led to Dr. Kooshian’s indictment and guilty plea. I consider it
particularly praise-worthy that Petitioner came forward before law enforcement had any
notion of the scheme, even though doing so meant that he was also indicted and
convicted. His actions justify significantly decreasing the period of exclusion. However,
that significant decrease is already reflected in the 10-year exclusion, which would have
been substantially longer had Petitioner not cooperated.

Additional defense. Petitioner also asks that the effective date be changed from 2011 to
2006, because he was suspended from his work at that time and has not worked in the
medical field since. As a matter of law, an exclusion becomes effective 20 days after the
date of the I.G.’s notice of exclusion. 42 C.F.R. § 1001.2002. An administrative law
judge has no authority to review the timing of the I.G.’s determination to impose an
exclusion or to alter retroactively the date of the imposition of the exclusion. Tanya A.
Chuoke, R.N., DAB No. 1721 (2000); Samuel W. Chang, M.D., DAB No. 1198 (1990).

IV. Conclusion

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 7
(citing 57 Fed. Reg. 3298, 3321 (Jan. 29, 1992)). Here, Petitioner’s crimes caused
significant program financial losses, far above the regulatory threshold for aggravation.
His crimes continued for more than five and probably six full years. I recognize that he
cooperated fully with law enforcement and that his cooperation led to his employer’s
conviction. Nevertheless, based on the totality of the aggravating and mitigating factors, I
find that the 10-year exclusion falls within a reasonable range.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Max Kent Cannon, M.D.,
Petitioner,
v.
The Inspector General.
Docket No. C-11-485
Decision No. CR2433

Date: September 20, 2011

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Max
Kent Cannon, M.D., from participating in Medicare and other federally funded health
care programs for a minimum period of five years.

I. Background

Petitioner is a physician who practiced medicine in the State of Utah. The I.G. notified
Petitioner that he was excluded from participating in Medicare, Medicaid, and other
federally funded health care programs for at least five years, citing as authority the
mandatory exclusion provisions of sections 1128(a)(2) and (a)(4) of the Social Security
Act (Act). Petitioner requested a hearing, and the case was assigned to me for a hearing
and a decision.

The LG. filed a brief and a reply brief and exhibits (Ex.) that he designated as I.G. Ex. | -
1G. Ex. 9. Petitioner filed a brief and three exhibits that he designated as P. Ex. A-C. I
receive these exhibits into evidence.
Petitioner objects to the I.G.’s reliance on two exhibits, I.G. Ex. 2 and L.G. Ex. 3, on the
ground that they contain irrelevant evidence. I rely on these exhibits only for those facts
that I find to be relevant.

IL. Issue, Findings of Fact, and Conclusions of Law
A. Issue

The issue in this case is whether Petitioner was convicted of a crime that mandates his
exclusion from Medicare, Medicaid, and other federally funded health care programs for
a minimum of five years.

B. Findings of Fact and Conclusions of Law
I make the following findings of fact and conclusions of law.

1. Petitioner was convicted of crimes that mandate his exclusion from
Medicare, Medicaid, and other federally funded health care programs.

Section 1128(a)(2) of the Act mandates the exclusion of any individual who is convicted
of a State or federal criminal offense relating to neglect or abuse of patients in connection
with the delivery of a health care item or service. Section 1128(a)(4) of the Act mandates
the exclusion of any individual who is convicted of a felony occurring after August 21,
1996 relating to the unlawful manufacture, distribution, prescription, or dispensing of a
controlled substance.

It is not necessary for the I.G. to prove that Petitioner has been convicted of an 1128(a)(2)
and an 1128(a)(4) crime to sustain an exclusion. A conviction that falls within the reach
of either section will suffice to mandate that the convicted individual be excluded.
However, and as I shall discuss, the evidence in this case supports my finding that
Petitioner was convicted of crimes that are described in each of the two statutory
sections.

On October 21, 2008, Petitioner pled guilty to Counts 1, 2, 5, and 6 of a criminal
information that had been filed against him in a Utah State court. I.G. Ex. 4 at 1-2.
Petitioner pled guilty to two felony charges of unlawfully distributing Lortab, a Schedule
Il controlled substance, and two misdemeanor charges of prostitution (defined under Utah
law as engaging in sexual activity with another person for a fee). I.G. Ex. 7 at 1-2.

The charges to which Petitioner entered his pleas were grounded on allegations that he
had solicited sexual favors in exchange for prescription drugs. I.G. Ex. 6 at 1. In
pleading guilty, Petitioner admitted to having solicited sexual favors from two of his
patients, women whom I refer to as MJ and BB, in return for prescriptions for controlled
substances. Petitioner’s Brief at 5-6.

The relationships between these two women and Petitioner that are the basis for the
charges against Petitioner and his guilty pleas are described in detail in an investigative
report (“investigative summary”) compiled by the Utah County, Utah Attorney’s Office.
1.G. Ex. 3. MJ gave the following information to investigators. She met Petitioner in
about 2003, when he performed hernia surgery on her. /d. at 8. Petitioner performed a
second hernia operation on MJ in about March 2006. Id. Ina follow up visit, MJ
complained to Petitioner of experiencing continued post-operative pain. Petitioner
offered to waive his fee for his services, if MJ would perform oral sex on him.

From March 2006 until December 2007, Petitioner gave MJ prescriptions for Lortab
every two weeks. IG. Ex. 3 at 8. From December 2007 until January 20, 2008, MJ
received weekly prescriptions for 50 tablets of Lortab from Petitioner. MJ had sexual
contact with Petitioner at least 100 times during this period. Only rarely would Petitioner
prescribe Lortab to MJ without receiving a sexual favor in return. Jd.

BB told investigators the following. She first went to see Petitioner in May 2007 for
advice about her migraine headaches. I.G. Ex. 3 at 9. Petitioner prescribed 50 tablets of
Lortab for BB and offered to give her a renewed prescription once a week. Petitioner
solicited oral sex from BB in return for his prescribing Lortab. BB was reluctant and
refused at first, but eventually performed oral sex on three occasions. Id.

The evidence that I have described, coupled with Petitioner’s guilty pleas, is more than
enough to prove that Petitioner was convicted of crimes described at sections 1128(a)(2)
and (a)(4) of the Act. First, Petitioner was convicted of crimes involving sexual abuse of
two of his patients, MJ and BB, in connection with the delivery of health care items or
services to these two individuals. Petitioner had a doctor-patient relationship with both
MJ and BB. He abused the authority and power that this relationship conferred by
coercing sexual favors from both individuals in exchange for his prescribing controlled
substances to them. His actions were harmful to MJ and BB because they facilitated their
dependence on controlled substances.

Second, Petitioner was convicted of felonies related to the unlawful prescribing of
controlled substances. He prescribed Lortab, a Schedule II controlled substance, to MJ
and BB in exchange for sexual favors rather than for a legitimate medical purpose.

Petitioner argues that Petitioner’s conviction was based only on two discrete events, these
being an incident occurring on or about October 1, 2007, when Petitioner provided a
Lortab prescription to BB in exchange for sexual favors, and an incident occurring on
January 20, 2008, when MJ exchanged sexual favors for a Lortab prescription.
Petitioner’s Brief at 6. Therefore, according to Petitioner, one may not look at any other

facts relating to his relationships with MJ and BB to decide the nature of Petitioner’s
convictions.

Read narrowly, the criminal charges to which Petitioner pled guilty address only the
discrete events that took place on October 1, 2007, and on January 20, 2008. I find that it
is unreasonable to look at these events in isolation. Clearly, the basis for the criminal
charges against Petitioner was his abuse of MJ and BB over a period of time. But, even if
the facts of this case were limited to the specific unlawful acts that occurred on those
dates, those acts would be sufficient to establish that Petitioner was convicted of crimes
described at section 1128(a)(2) of the Act. The acts that are the basis for Petitioner’s
conviction are abuse of the doctor-patient relationship, even if they are only the isolated
incidents that occurred on two dates. In each incident, Petitioner coerced sexual favors
from patients in exchange for prescribing controlled substances to them.

Petitioner argues also that the crimes of which he was convicted did not relate to abuse or
neglect. He asserts that his crimes did not involve the elements of physically or mentally
abusive conduct. He describes his crimes as being, essentially, victimless crimes, which
involved only improperly prescribing controlled substances. The essence of Petitioner’s
argument is that, while his behavior was illegal, it was “completely consensual.”
Petitioner’s Brief at 9. Petitioner describes his relationship with MJ and BB as a
voluntary relationship in which Petitioner never forced either of these women to do
anything that they did not want to do. According to Petitioner:

Each party provided something the other party wanted, namely
prescriptions for sexual acts. There is no evidence that . . . [Petitioner] was
ever verbally abusive towards the two women. Nor is there any evidence
that these two women suffered any physical or mental harm at the hands of
... [Petitioner].

Petitioner’s Brief at 9.

I find this argument to be without merit. Petitioner’s assertions to the contrary, his
relationships with MJ and BB were not consensual relationships openly entered into
between willing adults. The relationships were predicated on Petitioner’s power, his
ability to prescribe controlled substances to individuals who were drug dependent. The
relationships were inherently coercive. Petitioner obtained sexual favors from MJ and
BB in exchange for something that they, in their dependent state, had to have.

The assertion that there was nothing harmful in these relationships is belied by the
relationships’ core elements. The coerced exchange of controlled substances for sexual
favors is inherently harmful. So also is facilitating an individual’s drug dependency by
prescribing medically unnecessary controlled substances to that individual. But, even if
no explicit psychological or physical harm occurred from these relationships, the
potential for such harm existed. Furthermore, Petitioner’s conduct was neglect within the
meaning of the Act. His duty of care to MJ and BB was to prescribe only those
medications to these individuals that were medically necessary. Prescribing drugs in
return for sexual favors plainly breached that duty.

Petitioner argues that neither MJ nor BB were his patients at the time that he traded
prescriptions for controlled substances for sexual favors. He has offered no evidence to
support this assertion. Moreover, his claim is belied both by the statements provided by
MJ and BB, but also by Petitioner’s own admission. MJ and BB both contended that they
ad an ongoing doctor-patient relationship with Petitioner to obtain prescription
medications from him. Petitioner has admitted as much by admitting that he prescribed
controlled substances to the two individuals. The fact that he prescribed them for a
medically unnecessary purpose does nothing to vitiate the fact that the drugs were
prescribed in the context of a doctor-patient relationship.

Moreover, there is nothing in section 1128(a)(2) of the Act that requires the presence of
an ongoing doctor-patient relationship. Crimes that grow out of a doctor patient
relationship occurring at some point in the past are covered by the section, even as are
crimes that take place within the context of a current treatment relationship.

Petitioner argues that there was no “valid” doctor-patient relationship because he
prescribed drugs unlawfully to MJ and BB. Petitioner’s Brief at 11. That argument,
carried to its end, produces the result that no crime committed by a physician against his
or her patient can be covered by section 1128(a)(2) of Act because the section is not
intended to reach “illegitimate” acts performed by a physician. In fact, it is precisely
those acts that the section applies to. To read the section as is advocated by Petitioner
would be to read it out of the Act entirely.

Petitioner argues similarly that he did not commit his crimes in connection with the
delivery of a health care item or service because his prescriptions were illegal and thus,
according to him, cannot be viewed as health care items or services. Petitioner’s Brief at
12. I reject this argument for the reasons that I reject Petitioner’s assertions that no
doctor-patient relationship existed between him and MJ and BB. Furthermore, there were
health care items or services that underlay the unlawful prescription of controlled
substances to these individuals. Neither of these individuals would have sought drugs
from Petitioner had they not visited him for valid medical reasons. Petitioner’s unlawful
prescription of drugs to MJ and BB was the end product of a chain of events that began
with legitimate health care items or services. That nexus is sufficient to establish the
requisite statutory connection between Petitioner’s crimes and health care items or
services.

With respect to section 1128(a)(4) of the Act, Petitioner concedes that he was convicted
of unlawfully prescribing controlled substances. He argues, however, that he was not

convicted of a felony and, thus, may not be excluded pursuant to this section of the Act.
Petitioner acknowledges that he pled guilty to two felonies of unlawful prescription of
controlled substances. He asserts, however, that the felony convictions were
subsequently reduced to misdemeanor convictions. Petitioner’s Brief at 14. Thus,
according to Petitioner, he was actually convicted only of misdemeanors.

This argument is unpersuasive. The unequivocal proof in this case is that Petitioner was
convicted of two felonies involving unlawful prescription of controlled substances. The
fact that a court subsequently reduced his convictions from felony convictions to
misdemeanor convictions, for reasons related to Petitioner’s successful completion of his
sentence, does not change the fact that Petitioner was convicted of felonies.

The Act does not specifically address a situation in which a court reduces a conviction
from a felony to a misdemeanor after a convicted individual successfully completes his
sentence. However, it does address analogous circumstances, and I find the Act’s
treatment of such circumstances to be a clear expression of statutory intent.

[he Act defines the word “convicted” to include the circumstance when:

a judgment of conviction has been entered against the individual or entity
by a Federal, State, or local court, regardless of whether there is an appeal
pending or whether the judgment of conviction or other record relating to
criminal conduct has been expunged... .

Act Section 1128(i)(1). Thus, for example, if an individual pleads guilty to a felony of
unlawful prescription of controlled substances and his or her conviction is subsequently
expunged as a part of a plea agreement, that person is nevertheless convicted of a felony
for purposes of the Act. It would be an absurd result if an individual who pleads guilty to
an identical offense escapes the reach of the Act because his conviction is subsequently
reduced as a consequence of his or her plea agreement but not expunged completely, and
I do not find that Congress intended the Act to produce absurd results.

2. As a matter of law, Petitioner must be excluded for at least five years.

The I.G. must exclude any individual who is convicted of a crime described at section
1128(a)(2) or (a)(4) of the Act for a minimum period of five years. Act Section
1128(c)(3)(b). Petitioner was convicted of offenses that fall within the reach of both
sections 1128(a)(2) and (a)(4) of the Act. Consequently, an exclusion of at least five
years is mandatory as a matter of law.

Petitioner argues that his crimes were a manifestation of a mental disorder that he
suffered from. He contends that he was in the throes of bipolar disorder when he
committed his crimes and that he poses no current threat either to federally funded health
care programs or to program beneficiaries and recipients of program funds. Thus, he
asserts, imposing an exclusion against him would be unreasonably punitive.

This argument is irrelevant because, as I have discussed, Congress made exclusion a
mandatory remedy for conviction of an 1128(a)(2) or (a)(4) crime. The I.G. has no
discretion in the matter, he must exclude Petitioner. I have no discretion to modify that
exclusion inasmuch as the I.G. imposed it for the minimum period mandated by the Act.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Palm Garden of Sun City
(CCN: 10-5736),
Petitioner
v.
Centers for Medicare and Medicaid Services.
Docket No. C-10-878
Decision No. CR2432

Date: September 19, 2011

DECISION

Petitioner, Palm Garden of Sun City (Petitioner or facility), is a long-term care facility, located
in Sun City Center, Florida, that participates in the Medicare program. Based on a survey
completed April 30, 2010, the Centers for Medicare and Medicaid Services (CMS) determined
that the facility was not in substantial compliance with Medicare program requirements.

Because of its deficiencies, CMS imposed against the facility a civil money penalty (CMP) of
$250 per day for 30 days of substantial noncompliance (April 30 — May 29, 2010), for a total
penalty of $7,500. Petitioner appealed CMS’s determination.

For the reasons set forth below, I find that the facility was not in substantial compliance with
program requirements and that the penalty imposed is reasonable.

I. Background
The Social Security Act (Act) sets forth requirements for nursing facility participation in the

Medicare program and authorizes the Secretary of Health and Human Services to promulgate
regulations implementing those statutory provisions. Act § 1819. The Secretary’s regulations
are found at 42 C.F.R. Part 483. To participate in the Medicare program, a nursing facility must
maintain substantial compliance with program requirements. To be in substantial compliance, a
facility’s deficiencies may pose no greater risk to resident health and safety than “the potential
for causing minimal harm.” 42 C.F.R. § 488.301.

The Secretary contracts with state survey agencies to conduct periodic surveys to determine
whether skilled nursing facilities are in substantial compliance. Act § 1864(a); 42 C.F.R. §
488.20. The regulations require that each facility be surveyed once every twelve months and,
more often, if necessary, to ensure that identified deficiencies are corrected. Act §
1819(g)(2)(A); 42 C.F.R. §§ 488.20(a); 488.308.

Here, following a recertification survey completed April 30, 2010, CMS determined that the
facility was not in substantial compliance with five Medicare participation requirements,

specifically:

e 42 C.F.R. § 483.10(b)(11) (Tag F157 — resident rights, notification of changes);

42 C.F.R. § 483.25 (Tag F309 — quality of care);

42 C.F.R. § 483.25(c) (Tag F314 — prevention/treatment of pressure sores);

42 C.F.R. § 483.25(d) (Tag F315 — urinary incontinence); and

42 C.F.R. § 483.25(h)(2) (Tag F323 — accident prevention).

CMS Ex. 1; Order Summarizing Prehearing Conference (March 28, 2011). CMS subsequently
determined that the facility returned to substantial compliance on May 30, 2010, and has
imposed against the facility a CMP of $250 per day for 30 days of substantial noncompliance,
from April 30 through May 29, 2010. CMS Ex. 15 at 7, 11.

Petitioner timely requested a hearing.

On April 20, 2011, I convened a hearing, via teleconference, from the offices of the
Departmental Appeals Board in Washington, D.C. Mr. Howard Lewis appeared on behalf of
CMS,! and Mr. R. Davis Thomas appeared on behalf of the Petitioner. Witness Sandra Santiago
testified from St. Petersburg, Florida.

I have admitted into evidence CMS Exhibits (CMS Exs.) 1-21 and Petitioner’s Exhibits (P. Exs.)
1-6. Order Summarizing Prehearing Conference at 4 (March 28, 2011). The parties have filed
pre-hearing briefs (CMS Pre-hrg. Br.; P. Pre-hrg. Br.), post-hearing briefs (CMS Post-hrg. Br.;
P. Post-hrg. Br.), and Petitioner filed a reply brief (P. Reply).

‘Ms. Erin Shear also represents CMS in this matter but was not present for the hearing.
II. Issues

The issues before me are:

1. From April 30 through May 29, 2010, was the facility was in substantial compliance with
Medicare participation requirements, specifically:

42 C.F.R. § 483.10(b)(11) (Tag F157 — notification of changes);

42 C.F.R. § 483.25 (Tag F309 — quality of care);

42 C.F.R. § 483.25(c) (Tag F314 — prevention/treatment of pressure sores);

42 C.F.R. § 483.25(d) (Tag F315 — urinary incontinence); and

42 C.F.R. § 483.25(h) (Tag F323 — accident prevention).

2. Ifthe facility was not in substantial compliance, is the penalty imposed — $250 per day
for 30 days of substantial noncompliance (total $7,500) — reasonable?

III. Discussion

A, The facility was not in substantial compliance with 42 C.F.R. §§ 483.10(b)(11),
483.25, and 483.25(d) because its staff did not immediately consult a physician or
otherwise appropriately address one resident’s complaints of painful urination.

Program requirements.
regard, it must immedi:

The facility must protect and promote the rights of each resident. In this
ately inform the resident, consult the resident’s physician, and (if known)

notify the resident’s legal representative or interested family member, when there is a significant

change in the resident’
mental or psychosocia
need to alter treatment

s physical, mental or psychosocial status (i.e., a deterioration in health,
status in either life-threatening conditions or clinical complications), or a
significantly (i.e., a need to discontinue an existing form of treatment due

to adverse consequences or to commence a new form of treatment). 42 C.F.R. § 483.10(b)(11).

Under the statute and t
facility must provide, t

e “quality of care” regulation, each resident must receive, and the
e necessary care and services to allow a resident to attain or maintain the

highest practicable physical, mental, and psychosocial well-being, in accordance with the
resident’s comprehensive assessment and plan of care. Act § 1819(b); 42 C.F.R. § 483.25. To
this end, the facility must, among other requirements, ensure that a resident who is incontinent

of bladder “receives appropriate treatment and services to prevent urinary tract infections and to

restore as much norma!

bladder function as possible.” 42 C.F.R. § 483.25(d).
Resident 68 (R68). R68 was a 63-year-old woman, readmitted to the facility on December 21,
2009. CMS Ex. | at 4; CMS Ex. 2 at 1, CMS Ex. 7 at 1. Among other problems, she suffered
from heart disease, chronic kidney disease, and diabetes. Because of a stroke, she also had
dysphasia and was not easily understood. CMS Ex. 7 at 3; CMS Ex. 11 at 9. She had a history
of urinary tract infections (UTIs). CMS Ex. | at 4; CMS Ex. 2 at 1; CMS Ex. 7 at 7; CMS Ex.
21 at 14.

The parties agree that, on April 10, 2010, R68 complained of burning when she urinated
(dysuria). CMS Exs. 3, 5; CMS Ex. 11 at 11, 17; P. Ex. 2 at 2, 11,21. She may even have
started complaining earlier than that; at least one nurse later reported that R68’s complaints
began on April 9. CMS Ex. 11 at 17; P. Ex. 2 at 14. In any event, facility staff noted a potential
“need for meds” and called her brother but did not report the complaints to R68’s physician.
CMS Ex. 2 at 7; CMS Ex. 5; P. Ex. 2 at 2. Instead, without first obtaining the required
physician’s order, staff performed a UTI screening test, referred to as a diascreen.” They did not
then inform R68’s physician of the test results. CMS Ex. 18 at 3 (Santiago Decl. {ff 8, 9); P. Ex.
2 at 3, 4.

R68’s physician examined her on April 22, but his notes do not mention complaints of painful
urination. P. Ex. 2 at 10. On April 27, however, he diagnosed her with dysuria and prescribed
pyridium, a medication that treats urinary tract pain and other symptoms sometimes associated
with a UTI. P. Ex. 2 at 2; CMS Ex. 13.

The parties argue about the duration of R68’s bout of dysuria. CMS claims that she suffered the
condition from April 10 until her physician treated her for it on April 27. Petitioner concedes
that R68 complained of pain on April 10 and April 27, but asserts that the initial condition
resolved quickly and only re-appeared on April 26. I consider this dispute irrelevant to the
question of whether facility staff complied with the physician consultation requirement. Facility
staff were simply not supposed to wait until they could verify that the resident’s pain would
endure or that she had a full-blown UTIL. They are supposed to consult the physician
immediately whenever a resident exhibits a significant change or need to alter treatment.
“Significant” means “all cases, whether or not there is a medical emergency.” 56 Fed. Reg.
48,826, 48,833 (Sept. 26, 1991). “Immediately” means “as soon as the change . . . is detected,
without any intervening interval of time.” Magnolia Estates Skilled Care, DAB No. 2228 at 8
(2009); The Laurels at Forest Glen, DAB No. 2182 at 13 (2008).

Citing the testimony of its Director of Nursing (DON), Andrea Cornwell — offered during a state
administrative hearing — Petitioner argues that “there was no need to notify the physician on
April 10 after the urine test was done and came back negative.” P. Post-hrg. Br. at 6 (citing P.

* The test involves placing a reagent strip in the resident’s urine and comparing the resulting
strip color against a chart printed on the bottle label. CMS Ex. 18 at 3 (Santiago Decl. § 8); P.
Ex. 2 at 3-7.
Ex. 1 at 29). There are significant problems with this position: 1) it wrongly assumes that
R68’s physician would alter treatment only if the resident tested positive for a UTI, when, in
fact, he treated her complaints of urinary pain (when he knew about them) without regard to test
results; 2) staff were not supposed to perform the test without a physician order; and 3) the test
did not come back negative.

First, DON Cornwell wrongly assumes that R68’s physician would alter treatment only if the
resident tested positive fora UTI. She should have known otherwise. On March 19, 2010,
without diagnosing a UTI, the physician ordered Cranberry Tab 450 mg. to treat R68’s “pain on
urination.” CMS Ex. 11 at 10. On April 27, when the physician learned that R68 complained of
painful urination, he did not order any testing, but altered her treatment by ordering medication

(pyridium) for her pain. P. Ex. 1 at 33-34; P. Ex. 2 at 2.

Second, Petitioner wrongly claims that staff were authorized to perform the diascreen test
without a physician order. In her testimony, DON Cornwell suggested that staff could first run
the test and then obtain a physician’s order for it:

We have a standing agreement with our physicians that if we suspect
a resident possibly has a UTI, that [staff] will go ahead and
administer the diascreen and they would write the order. We are not
going to call a physician to ask is that something we can do. That’s
a nursing practice and our physicians have given us the okay to do
that.

P. Ex. 1 at 20. The record includes no evidence that staff ever obtained a physician’s order for
R68’s April 10 diascreen test, either before or after the test was administered. Further, as DON
Cornwell conceded, the facility had no standing order or written policy allowing staff to perform
the test without consulting a physician and obtaining an order. See CMS Ex. 21 at 14; see also
CMS Ex. 18 at 3 (Santiago Decl. 9) (declaring that the facility did not have such a standing
order). In fact, the facility’s protocol says the opposite: “[t]his test is considered a routine
urinalysis and requires a physician’s order.” P. Ex. 2 at 3 (emphasis added).

I may reasonably rely on the facility’s protocol as evidence of professional standards of quality
as well as the facility’s “own judgment as to what must be done to attain or maintain its
residents’ highest practicable physical, mental and psychosocial well-being, as required by
section 483.25.” Agape Rehab. of Rock Hill, DAB No. 2411 at 7, 18 (2011); Senior Rehab and
Skilled Nursing Ctr., DAB No. 2300 (2010), aff’d Senior Rehab and Skilled Nursing Ctr. v.
HHS, No. 10-60241 (2011) (quoting Sheridan Health Care Ctr., DAB No. 2178 at 15 (2008));
Spring Meadows Health Care Ctr., DAB No. 1966 at 18 (2005) (holding that “it is reasonable to
presume that the facility’s policy reflects professional standards of quality, absent convincing

evidence to the contrary”).
Third, the test result was not completely negative. At 250, R68’s glucose level was significantly
elevated. P. Ex. 2 at 8. According to the facility’s protocol, staff must contact the physician
whenever the test can be considered positive. Among the examples of what could be considered
positive is: “glucose is positive, indicating elevated blood glucose level which may require
additional clinical testing if the resident is not known as a diabetic.” P. Ex. 2 at 6-7. [recognize
that R68 was diabetic and that her underlying condition may have explained the high level of
glucose found in her urine. On the other hand, as Petitioner concedes, a high glucose level may
indicate a UTI. P. Br. at 2. A high glucose level in a diascreen can also cause a false negative
result. CMS Ex. 18 at 3 (Santiago Decl. § 10); Tr. at 18. Or, it may suggest that the resident’s
diabetes is not well-controlled. Tr. at 19. The test results should therefore have been reported to
the resident’s physician so that he could determine the significance of the elevated glucose.

The diascreen protocol also includes documentation guidelines. Staff were supposed to record:
1) the date and time they initiated the procedure; 2) the resident evaluation; 3) the diascreen
results; 4) nurse/physician communications; and 5) signature and title of the reporting staff. P.
Ex. 2 at 7. Facility staff plainly did not document as instructed; on the report form, they note
that the resident’s glucose is elevated but leave blank the time staff initiated the procedure, the
spaces for documenting physician notification, and the signature and title of the reporting staff.
P. Ex. 2 at 8.

The facility also had in place a protocol for handling potential cases of UTI. Staff were
supposed to chart the resident’s vital signs and UTI symptoms for 72 hours following the onset
of symptoms. CMS Ex. 3. In response to R68’s April 10 complaints, facility staff supposedly
initiated the protocol but did not follow through on it. CMS Ex. 3. They maintained no nursing
notes and recorded no vital signs from April 10 through April 27. Tr. at 23.

The facility excuses its failure to document by claiming that its policy was to “document by
exception.” P. Post-hrg. Br. at 3. Not only is this claim incompatible with the facility’s written
protocol requiring staff to chart the resident’s vital signs, Petitioner produces no written policy
nor any other reliable evidence showing that staff were instructed to limit their documentation to
abnormalities. In fact, even though the record here includes few nurses’ notes, the page
submitted shows that staff regularly reported “no complaints.” CMS Ex. 5; P. Ex. 2 at 2; Tr. at
29.

I also question whether staff reliably recorded the residents’ complaints. Facility staff justified
their actions (or inactions) by characterizing the resident as a “chronic complainer.” CMS Ex. 2
at 7; accord P. Ex. | at 30. Yet, according to Petitioner, this “chronic complainer” voiced not
one single complaint between April 10 and April 27. P. Ex. 1 at 22-23. Moreover, Petitioner
submits documents titled “24-Hour Change of Condition Report” that purport to record
“residents experiencing any change of condition within the past 24-hours.” CMS Ex. 11 at 49-
82; P. Ex. 2 at 38-54. Even though R68 unquestionably complained of dysuria on April 10 and
April 26/27, staff did not document those complaints on the change-of-condtion report. DON
Cornwell testified that the resident’s complaints “would have been entered on the 24-hour report
possibly,” but staff’s obvious failure to do so did not bother her. P. Ex. | at 32-33.

The facility was thus not in substantial compliance with 42 C.F.R. § 483.10(b)(11) because staff
did not immediately consult R68’s physician when she complained of dysuria, a condition they
knew, or should have known, would likely require a new form of treatment (medication). This,
as well as staff’s performing the diascreen without a physician’s order, failing to report the test
results to the physician, and failing to chart the resident’s vital signs and symptoms meant that
the facility was not providing appropriate treatment and services to allow R68 to attain or
maintain the highest practicable well-being and to prevent urinary tract infections. The facility
was therefore not in substantial compliance with 42 C.F.R. §§ 483.25 and 483.25(d).

B. The facility was not in substantial compliance with 42 C.F.R. §§ 483.25 and 483.25(c)
because it failed to take all necessary precautions to prevent pressure sores from
developing.

Program requirements. To assure that the resident receives necessary care and services, the
“quality of care” regulation also requires that the facility ensure, based on the resident’s
comprehensive assessment, that a resident who enters the facility without pressure sores does
not develop them unless his/her clinical condition shows that they were unavoidable. 42 C.F.R.
§ 483.25(c)(1). If the resident has pressure sores, the facility must ensure that he/she receives
the treatment and services necessary to promote healing, prevent infection, and prevent new
sores from developing. 42 C.F.R. § 483.25(c)(2). In assessing the facility’s compliance with
this requirement, the relevant question is: did the facility “take all necessary precautions” to
prevent new sores from developing. If they did so and the resident develops sores anyway, I
could find no deficiency. But if the evidence establishes that the facility fell short of taking all
necessary precautions, then the regulation is violated. Senior Rehab. and Skilled Nursing Ctr.,
DAB No. 2300 at 13-14 (2010), aff'd, Senior Rehab. and Skilled Nursing Ctr. v. HHS, No. 10-
60241, 2010 WL5186658 (5th Cir. Dec. 20, 2010); Koester Pavilion, DAB No. 1750, at 32
(2000).

Resident 138 (R138). R138 had Alzheimer’s disease and had suffered a stroke. He was at risk
for pressure sores because of his incontinence and decreased functional mobility. He hada
history of skin breakdowns. CMS Ex. 19 at 9, 27. At the time of the survey, R138 had two
open sores on his buttocks. According to his treatment records, he had suffered from the open
wounds since at least March 15, 2010. CMS Ex. 19 at 23, 27; P. Ex. 3 at 2. The open wounds
were on “bony prominences.” CMS Ex. 18 at 5 (Santiago Decl. § 19); CMS Ex. 21 at 19.

Petitioner insists that the wounds were not pressure sores but “excoriations,” which DON
Cornwell defined as “a skin impairment caused by urine, urine/stool.” P. Ex. 1 at 40. She
distinguished “excoriations” from pressure sores because “[e]xcoriations can come and go rather
quickly,” so “it does not follow the characteristics of a pressure ulcer.” P. Ex. 1 at 40-41. In
contrast, according to DON Cornwell, pressure sores do not heal quickly. P. Ex. 1 at 41. She
claimed that excoriations do not require the level of monitoring that pressure sores require; they
need not be measured. P. Ex. 1 at 42. She also said that pressure sores do not blanch and that
this wound “blanched,” which means that when pressure was applied, it turned white and then
returned to its previous color. P. Ex. 1 at 44. Finally, she declared that nothing in the resident’s
record indicates a clinical determination, by staff or physician, that the area was a pressure sore.

P. Ex. | at 42.

Petitioner does not support DON Cornwell’s me

standard treatise, medical textbook, scholarly arti

ical opinions with any authoritative source (a
cle), and, according to Dorland’s Medical

Dictionary, an excoriation is “a scratch or an abrasion of the skin.” Similarly, the American
Association for Long Term Care Nursing explicitly rejects the suggestion that a wound caused

by exposure to urine/feces is an “excoriation.” T.

at organization defines “excoriation” as

“destruction of the skin by mechanical means.” http://Itcnursing.org/ask-the-wound-coach.httm.

A skin impairment caused by exposure to urine o!

r feces is referred to as “incontinence

associated dermatitis” (IAD). www.ncbi.nim.nih.gov/pubmed17228207;

www.ncbi.nim.nih.gov/pubmed 19374674. If no
sores. Id.; see Senior Rehab., DAB No. 2300 at

On March 15, 2010, when R138’s wounds were

t properly treated, IAD can lead to pressure
3 et seq.

first reported in his care plan, they were

described as “open area to buttocks.” According to the facility’s policies for wound prevention,
staff were supposed to prepare a “differentiation of non-pressure ulcer” form within 24 hours of
discovery of the wound. CMS Ex. 19 at 32. I see no such document in the record.

The care plan set a goal of “area will resolve [without] further breakdown” by June 15, 2010.
CMS Ex. 19 at 27. For reasons that are not explained, someone, who is not identified, crossed
out “open area to buttocks” and the goal date. In an entry dated April 7, 2010, someone wrote
instead “excoriation [secondary to] incontinence” and changed the goal date to July 7, 2010.
CMS Ex. 19 at 27.

According to facility records, by April 12, the wound had developed into a pressure sore. A
“wound treatment evaluation record,” dated April 12, 2010, says that R138 had a stage I
pressure ulcer’ on his sacrum, measuring 4.2 cm. x 3.1 cm., which was less than .1 cm.

* Pressure sores (also referred to as pressure ulcers or decubitus ulcers) are classified into stages,
based on the extent of the damage to skin and underlying tissues. At stage I, the skin may
appear reddened, like a bruise. Although the integrity of the skin remains intact, the area is at
high risk of further breakdown, so it is crucial that the area be identified promptly and treated
properly. At stage IL, the skin breaks open, wears away, and forms an ulcer. At stage III, the
sore worsens and extends beneath the skin surface, forming a small crater, presenting a high risk
of tissue death and infection. By stage IV, deeper tissues (muscles, tendons, bones) suffer
extensive damage, which can cause serious complications, such as osteomyelitis (infection of
the bone) or sepsis (infection carried through the blood). J. AM. MED. ASS’N, Vol. 296, No. 8, at
1020 (available at www.jama.com).
deep.* The wound is described as purple red, the surrounding tissue/ulcer edge is red, and
exudates is serous. CMS Ex. 19 at 28. The underlying condition contributing to the wound is
listed as “pressure,” although someone has also written in “excoriation.” CMS Ex. 19 at 29.
As discussed below, excoriation (or IAD) could well be an underlying condition contributing to
the development of a pressure sore, so that notation is compatible with the finding that R138’s
wounds had developed into pressure sores.

Surveyor Santiago saw the wounds at the end of April and concurred that they appeared to be
Stage 2 pressure ulcers. CMS Ex. 18 at 5 (Santiago Decl. 4 19). One of them measured 3.5 cm.
x 2 cm., and the other measured 1 cm. x 0.50 cm. Both areas were surrounded by blanchable
reddened tissue. CMS Ex. | at 8-9.

Petitioner makes much of the fact that no physician order refers to the wounds as “pressure
sores.” Citing DON Cornwell’s testimony, Petitioner inaccurately claims that “every doctor’s
order dealing with treatment to the area called it an excoriation, not a pressure sore.” P. Br. at 4.
This is simply not so. Two of the orders refer to an “excoriation.” CMS Ex. 19 at 23; P. Ex. 3
at 2, 6.° The other six call it an “open area,” a “wound,” or nothing at all. CMS Ex. 19 at 24-
26; P. Ex. 3 at 2-6. Ultimately, however, it does not matter if these wounds had become
pressure sores. Ifa facility does not carefully monitor and treat the IAD (or excoriation), it is
not taking all necessary precautions to prevent the compromised skin from developing into new
pressure sores.

The facility’s protocol for “wound prevention/skin and wound treatment” does not limit itself to
the care of residents with pressure sores. Contrary to DON Cornwell’s assertions, it says that
“all residents at risk will have skin condition checked and documented daily.” It also says that
all residents will have skin checks completed weekly and documented on the Weekly Skin
Condition Evaluation form. “Skin integrity, color, moisture, temperature and turgor will be
addressed.” And it repeats that all wounds are to be evaluated upon discovery and weekly and
again documented on the “Wound Treatment and Evaluation Record.” A weekly wound report,
titled “Weekly Wound/Skin Abnormality Tracking Log,” is to be completed by the wound nurse

*The document allows the reporter to select among a variety of wound types: pressure, surgical,
venous insufficiency, arterial ulcer, skin tear, abrasion, laceration, diabetic neuropathic ulcer,
burn, or other. CMS Ex. 19 at 28.

> One of these orders is dated March 19, well before the wound treatment evaluation indicated
that it was a pressure sore. The other is dated April 13, one day after the wound treatment
evaluation. This April 13 order is also one of three questionable treatment orders dated the same
day, at least one of which DON Cornwell conceded was not completely accurate. CMS Ex. 21
at 16; see discussion, below. Moreover, the orders are not written by physicians; they are
written by nurses and later signed by the physician. CMS Ex. 21 at 16. No physician testified
that the wounds were “excoriations.”
10

or her designee, with copies given to the DON, Administrator, MDS Coordinator, Dietician, and
Unit Managers. CMS Ex. 19 at 32.

Elsewhere, the protocol says that if skin integrity is compromised, staff must document their
findings on the “Wound Treatment and Evaluation Record.” They must “evaluate, measure,
stage and document findings” on the “Wound Treatment Evaluation Record.” CMS Ex. 19 at
34. The complete evaluation should be done weekly and should include: 1) location; 2) staging;
3) size, depth, and any undermining or tunneling; 4) exudates, if any; 5) pain; 6) wound bed; and
7) description of wound edges and surrounding tissue. CMS Ex. 19 at 34.

Here, the facility fell far short of meeting any of these requirements. Staff assessed R138’s
wounds only once, on April 12. Otherwise, there is no evidence that they checked the resident’s
skin condition daily, or that they assessed and documented his wound’s progression weekly.
When the wounds first appeared, no one documented skin integrity, color, moisture, temperature
and turgor; no one measured the wounds until April 12, 2010. Staff did not evaluate the wounds
at any time thereafter. CMS Ex. 18 at 6 (Santiago Decl. § 22). CMS Ex. 19 at 28. Thus, the
facility did not follow the practices it had deemed necessary to prevent and treat the resident’s
pressure sores. It was therefore not is substantial compliance with 42 C.F.R. § 483.25(c).

Nor is this the only example of staff’s failure to take all necessary precautions to promote
healing and prevent infection. Surveyor Santiago testified that she observed a facility nurse
providing his wound care. The nurse put on gloves. With a gloved hand, she closed the curtain
around the resident and removed the dressings on the resident’s wounds, thereby risking
contamination. According to Surveyor Santiago, she contaminated the gloves when she touched
the curtains. Standard nursing practice dictates that a nurse not touch anything before touching a
wound. CMS Ex. 18 at 5 (Santiago Decl. J 17). DON Cornwell, agreed that removing the
dressing after she pulled the privacy curtain with her gloved hand was “not the best practice”
and could create “an infection problem.” CMS Ex. 21 at 4.

After the nurse removed R138’s dressing, she changed her gloves but did not first wash her
hands, as dictated by standard nursing practices. She then cleaned both wounds with the same
gauze, which can result in cross-contamination. According to Surveyor Santiago, the wounds
should be cleaned separately. CMS Ex. 18 at 5 (Santiago Decl. § 20).

Because the facility was not taking all necessary precautions to promote the healing of pressure
sores, to prevent infection, and to prevent new sores from developing, it was not in substantial
compliance with 42 C.F.R. §§ 483.25 and 483.25(c).

Finally, CMS also alleges that the facility failed to follow R138’s physician order to apply
Optase gel twice a day to the resident’s wounds. CMS Ex. 18 at 6 (Santiago Decl. 21).
Petitioner claims that staff were correct in not applying the gel because the order had been
discontinued. I decline to reach that issue because my findings are more than sufficient to
sustain the penalty imposed. I explicitly reject, however, Petitioner’s accusation that Surveyor
11

Santiago perjured herself because she testified that staff failed to follow the physician’s order.
According to Petitioner, “prior to the submission of her statement in this case,” Surveyor
Santiago had “been made aware of the discontinuation of the Order and testified, under oath ina
state administrative proceeding that there was no requirement for staff to apply the Optase Gel.”
P. Br. at 5-6.

In fact, Surveyor Santiago testified that she “did a very thorough examination of the medical
record for this resident” and “this order was not there.” When she reviewed the telephone orders
for that pressure ulcer,” she found no such order. P. Ex. 5 at 36. The facility subsequently
produced an order dated April 13, 2010 discontinuing the Optase. But, as pointed out during the
state proceeding, the facility produced three orders — all dated April 13, 2010 — for treatment of
the open wound. According to one, purportedly taken at 2:30 a.m., staff were to apply
“hydrocolloid.” P. Ex. 3 at 5.° But two other orders are dated April 13, 2010; neither indicates
atime. One says to discontinue the “hydrocolloid” and apply Optase. P. Ex. 3 at 5. The other
says to discontinue the Optase. P. Ex. 3 at 5. Surveyor Santiago testified that she had “never
seen” three such orders “in my life.” P. Ex. 5 at 37.

Thus, while Surveyor Santiago agreed that staff should not have applied the Optase if a valid
physician order discontinued it, she legitimately questioned whether that order was in place at
the time of the survey.

C. The penalty imposed — $250 per day — is reasonable. 7

To determine whether a CMP is reasonable, I apply the factors listed in 42 C.F.R.

§ 488.438(f): 1) the facility’s history of noncompliance; 2) the facility’s financial condition; 3)
factors specified in 42 C.F.R. § 488.404; and 4) the facility’s degree of culpability, which
includes neglect, indifference, or disregard for resident care, comfort or safety. The absence of
culpability is not a mitigating factor. The factors in 42 C.F.R. § 488.404 include: 1) the scope
and severity of the deficiency; 2) the relationship of the deficiency to other deficiencies resulting
in noncompliance; and 3) the facility’s prior history of noncompliance in general and
specifically with reference to the cited deficiencies.

I consider whether the evidence supports a finding that the amount of the CMP is at a level
reasonably related to an effort to produce corrective action by a provider with the kind of
deficiencies found, and in light of the section 488.438(f) factors. I am neither bound to defer to
CMS’s factual assertions, nor free to make a wholly independent choice of remedies without

° No one, including DON Cornwell, believed that the physician ordered this medication at 2:30
a.m. CMS Ex. 21 at 16.

71 do not address the deficiencies cited under 42 C.F.R. § 483.25(h), because my findings more
than justify the penalty imposed. Senior Rehab., DAB No. 2300 at 6 n.5.
12

regard for CMS’s discretion. Barn Hill Care Ctr., DAB No. 1848, at 21 (2002); Cmty. Nursing
Home, DAB No. 1807, at 22 et seg. (2002); Emerald Oaks, DAB No. 1800, at 9 (2001);
CarePlex of Silver Spring, DAB No. 1638, at 8 (1999).

Here, the penalty imposed — $250 per day — is at the very low end of the penalty range for per-
day CMPs ($50-$3,000). 42 C.F.R. §§ 488.408(d), 488.438(a)(1).

Petitioner has a significant history of substantial noncompliance. Since at least May 2006, it has
been out of substantial compliance at every annual survey.* Based on the survey completed in
June 2009, the facility was not in substantial compliance with regulations governing seven
health requirements and one life safety code provision. Then and now, the facility was not in
substantial compliance with the 42 C.F.R. § 483.25(c) (tag F314), governing prevention and
treatment of pressure sores. CMS Ex. 16 at 1.

A year earlier, for the survey completed in May 2008, thirteen deficiencies were cited, including
deficiencies under 42 C.F.R. § 483.25 (tag F309), governing quality of care, and 42 C.F.R. §
483.25(d) (tag F315), governing treatment of urinary incontinence.

In May 2006, the facility was also not in substantial compliance with 42 C.F.R.
§ 483.25(d).

The facility’s history alone is thus sufficient to justify this modest CMP.

Petitioner does not claim that its financial condition affects its ability to pay this relatively small
CMP.

With respect to the remaining factors, I find particularly disturbing staff’s failure to assess at
least weekly R138’s skin, which they knew to be seriously compromised, and DON Cornwell’s
dismissive attitude toward their inactions. R138’s wounds had been identified more than six
weeks earlier and did not appear to be resolving. In that time, the staff had assessed the wounds
only once, which, according to DON Cornwell, was sufficient. This demonstrates indifference
and disregard for the resident’s care, comfort and safety, for which the facility is culpable.

For these reasons, I find the penalties imposed reasonable.

‘CMS proffers the facility’s CASPER (Certification and Survey Provider Enhanced Reports)
report, which includes a synopsis of survey findings for the years 2006 through 2009. CMS Ex.
16.
13

IV. Conclusion

From April 30 through May 29, 2010, the facility was not in substantial compliance with
Medicare participation requirements and I affirm, as reasonable, the penalty imposed.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Charice D. Curtis,
Petitioner
v.
The Inspector General.
Docket No. C-11-425
Decision No. CR2430

Date: September 16, 2011

DECISION

This matter is before me in review of the Inspector General’s (I.G.’s) determination to
exclude Petitioner pro se Charice D. Curtis from participation in Medicare, Medicaid,
and all other federal health care programs for a period of five years. The I.G.’s
determination to exclude Petitioner is based on the terms of section 1128(a)(3) of the
Social Security Act (Act), 42 U.S.C. § 1320a-7(a)(3). The facts of this case mandate the
imposition of a five-year exclusion, and so I grant the I.G.’s Motion for Summary
Disposition.

I. Procedural Background

Petitioner Charice D. Curtis is a registered nurse. During the spring and early summer of
2008 she was employed as the nurse administrator in the Evansville, Indiana office of
Omni Home Care (Omni). Omni provides home health care services to approximately 30
communities in five states, including Indiana. Beginning in April 2008, Petitioner
fraudulently opened a credit card account in Omni’s name and used that credit card
account to buy approximately $304,319 in gift cards over a seven-week period. In late
June 2008, she attempted to obtain additional gift cards worth $265,000, but Omni
officials learned of her plan and filed a criminal complaint with local authorities.
Petitioner and a co-defendant named Kathina Reynolds, the manager of Omni’s
Evansville office, were arrested when they attempted to obtain the additional gift cards.
When questioned, Petitioner asserted that the gift cards were intended to be used as bonus
awards for Omni employees, although she later admitted having used some of the gift
cards to purchase major household appliances and other merchandise for herself.

Federal authorities took over the investigation in September 2008, and on January 7,
2009, the Federal Grand Jury sitting for the United States District Court for the Western
District of Kentucky handed up an Indictment charging Petitioner and Reynolds with two
felony counts of Fraud in Connection with Access Devices, in violation of 18 U.S.C. §
029(a)(2), (a)(3), (b)(1), and (c)(1)(A)(i).. On July 29, 2009, Petitioner appeared with
counsel in the United States District Court and pleaded guilty to both charges. She was
sentenced on March 19, 2009, to a 15-month term of imprisonment, was assessed $200,
and was ordered to pay restitution to the credit card issuer in the sum of $90,947.

As required by the terms of section 1128(a) of the Act, 42 U.S.C. § 1320a-7(a), the I.G.
began the process of excluding Petitioner from participation in Medicare, Medicaid, and
all other federal health care programs. On February 28, 2011, the I.G. notified Petitioner
that she was being excluded pursuant to the terms of section 1128(a)(3) of the Act for the
mandatory minimum period of five years.

Acting pro se, Petitioner timely sought review of the I.G.’s action by letter dated April
24, 2011. I convened a telephonic prehearing conference on May 24, 2011, pursuant to
42 C.F.R. § 1005.6, in order to discuss the issues presented by the case and procedures
for addressing those issues. By Order of May 26, 2011, I established a schedule for the
submission of documents and briefs. All briefing is now complete, and the record in this
case closed on August 30, 2011.

There are eight exhibits in this case. The I.G. proffered five exhibits marked I.G.
Exhibits 1 through 5 (LG. Exs. 1-5), and they are admitted without objection. For
purposes of clarity, I note that Petitioner’s Answer Brief (P. Ans. Br.) in letter form dated
July 22, 2011, and her Response Brief (P. Resp. Br.) in letter form dated August 22,
2011, were both marked “‘Petitioner’s Exhibit 1.” I have not treated them as exhibits, but
have considered them as Petitioner’s opening and final briefs. Petitioner’s actual
evidentiary proffer was made up of three exhibits marked Petitioner’s Exhibits 2, 3, and 4
(P. Exs. 2, 3, and 4). The I.G. objected to P. Exs. 2 and 3, but I have admitted them under
the circumstances set out in my letter of August 9, 2011, and the Order of September 1,
2011.

II. Issues

The issues before me are limited to those listed at 42 C.F.R. § 1001.2007(a)(1). In the
specific context of this record, they are:
1. Whether the I.G. has a basis for excluding Petitioner from participating in
Medicare, Medicaid, and all other federal health care programs pursuant to section
1128(a)(3) of the Act; and

2. Whether the length of the proposed period of exclusion is unreasonable.

Both issues must be resolved in favor of the I.G.’s position. Because her predicate
conviction has been established, there is a basis for Petitioner’s exclusion pursuant to
section 1128(a)(3) of the Act. A five-year term of exclusion is the minimum established
by section 1128(c)(3)(B) of the Act, 42 U.S.C. § 1320a-7(c)(3)(B) and is therefore not
unreasonable.

III. Controlling Statutes and Regulations

Section 1128(a)(3) of the Act, 42 U.S.C. § 1320a-7(a)(3), requires the mandatory
exclusion from participation in Medicare, Medicaid, and all other federal health care
programs of “[a]ny individual or entity that has been convicted for an offense which
occurred after [August 21, 1996,] under Federal or State law, in connection with the
delivery of a health care item or service or with respect to any act or omission in a health
care program (other than those specifically described in [section 1128(a)](1)) operated by
or financed in whole or in part by any Federal, State, or local government agency, of a
criminal offense consisting of a felony related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.” The terms of section 1128(a)(3)
are restated in similar language at 42 C.F.R. § 1001.101(c).

The Act defines “conviction” as including those circumstances “when a judgment of
conviction has been entered against the individual . . . by a Federal . . . court,” Act

§ 1128(4)(1); “when there has been a finding of guilt against the individual ... by a
Federal . . . court,” Act § 1128(i)(2); or “when a plea of guilty . . . by the individual . . .
has been accepted by a Federal . . . court,” Act § 1128(i)(3). These definitions are
repeated at 42 C.F.R. § 1001.2.

An exclusion based on section 1128(a)(3) is mandatory and the I.G. must impose it for a
minimum period of five years. Act § 1128(c)(3)(B); 42 U.S.C. § 1320a-7(c)(3)(B). The
regulatory language of 42 C.F.R. § 1001.102(a) affirms the statutory provision.

IV. Findings and Conclusions

I find and conclude as follows:

1. On her accepted plea of guilty on July 29, 2009, in the United States District Court for
the Western District of Kentucky, Petitioner Charice D. Curtis was found guilty of two
felony counts of Fraud in Connection with Access Devices, in violation of 18 U.S.C.
§ 1029(a)(2), (a)(3), (b)(1), and (c)(1)(A)(i). IG. Exs. 2, 3, 5; P. Ex. 2.

2. Final judgment of conviction was entered against Petitioner and she was sentenced on
her guilty pleas in the United States District Court on March 19, 2010. LG. Ex. 2.

3. The judgment of conviction, finding of guilt, and accepted pleas of guilty described
above in Findings | and 2 constitute a “conviction” within the meaning of sections
1128(a)(3) and 1128(i)(1), (2), and (3) of the Act, and 42 C.F.R. § 1001.2.

4. There is a nexus and a common-sense relationship between the felony offenses of
which Petitioner was convicted, as noted above in Findings 1, 2, and 3 above, and fraud
in connection with the delivery of a health care item or service. I.G. Exs. 2, 3, 5; P. Exs.
2, 3.

5. Petitioner’s conviction as noted above in Findings 1, 2, 3, and 4 constitutes a basis for
the I.G.’s exclusion of Petitioner from participation in Medicare, Medicaid, and all other
federal health care programs. Act § 1128(a)(3); 42 U.S.C. § 1320a-7(a)(3).

6. The five-year period of Petitioner’s exclusion is the mandatory minimum period
provided by law, and is therefore not unreasonable. Act § 1128(c)(3)(B); 42 C.F.R.
§§ 1001.102(a) and 1001.2007(a)(2).

7. There are no disputed issues of material fact and summary disposition is therefore
appropriate in this matter. Michael J. Rosen, M.D., DAB No. 2096 (2007); Thelma
Walley, DAB No. 1367 (1992); 42 C.F.R. § 1005.4(b)(12).

V. Discussion

The four essential elements necessary to support an exclusion based on section
1128(a)(3) of the Act are: (1) the individual to be excluded must have been convicted of
a felony offense; (2) the felony offense must have been based on conduct relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct; (3) the felony offense must have been for conduct in connection with the
delivery of a health care item or service, or the felony offense must have been with
respect to any act or omission in a health care program operated by or financed in whole
or in part by any federal, state, or local government agency; and (4) the felonious conduct
must have occurred after August 21, 1996. Andrew D. Goddard, DAB No. 2032 (2006);
Kenneth M. Behr, DAB No. 1997 (2005); Erik D. DeSimone, R.Ph., DAB No. 1932
(2004); Jeremy Robinson, DAB No. 1905 (2004); Breton Lee Morgan, M.D., DAB
CR1913 (2009); Morganna Elizabeth Allen, DAB CR1479 (2006); Theresa A. Bass,
DAB CR1397 (2006); Michael Patrick Fryman, DAB CR1261 (2004); Golden G.
Higgwe, D.P.M., DAB CR1229 (2004); Thomas A. Oswald, R.Ph., DAB CR1216 (2004);
Katherine Marie Nielsen, DAB CR1181 (2004).

Petitioner does not deny that she was convicted of two felony offenses and does not
dispute that her felonious conduct occurred after August 21, 1996. She does not
explicitly dispute the relation of the conduct underlying her convictions to fraud or theft,
but that relationship is conceded by her admissions that she had no authorization from
Omni to open and use the credit card account in its name, and that she was able to do so
only because of her administrative position at Omni. P. Ans. Br. at 1. Thus, there
appears to be no challenge to the I.G.’s proof of the first, second, and fourth essential
elements set out above. I find that the I.G. has proven those elements.

Petitioner argues that the conduct underlying her felony convictions is insufficient to
satisfy the third essential element: “I truly do not feel that it is connected to the delivery
of a healthcare item or service.” P. Ans. Br. at 1. She correctly points out that her
conduct did not include theft of a patient’s identity or submission of false billings for
goods or services. But her argument fails to appreciate the broad reading that must be
given to the phrase “in connection with the delivery of a health care item or service... .”
The Departmental Appeals Board (Board) has repeatedly emphasized that the phrase does
not require that an individual participate directly in the actual delivery of an item or
service in order to be subject to exclusion. What the Board has held the phrase does
require is that a “common sense connection or nexus” between the offense and the
delivery of a health care item or service be established after an analysis of the specific
facts involved. Kevin J. Bowers, DAB No. 2143 (2008); Andrew D. Goddard, DAB No.
2032; Kenneth M. Behr, DAB No. 1997; Erik D. DeSimone, R. Ph., DAB No. 1932. It is
significant to any such analysis that the performance of management or administrative
services in the delivery of such items or services is explicitly included in the provision’s
reach. 42 C.F.R. § 1001.101(c)(1).

In this case, it is uncontested that Omni was and is a multi-state provider of home health
care services. Petitioner was Omni’s nurse administrator in Omni’s Evansville, Indiana,
office. I.G. Ex. 3; P. Ex. 2. She and three other subordinate members of the
administrative staff in that office — including the office manager Reynolds, the patient
care director, and the Omni administrator responsible for that office’s medical records —
formed a plan to create a gift card bonus program for Omni employees to be funded in
the short term through a credit card account they planned to open in Omni’s name. LG.
Exs. 3, 5; P. Ex. 2. It was a necessary part of the plan that Petitioner and the co-
defendant Reynolds used their official positions with Omni to obtain the credit card
account. P. Ans. Br. at 1. Omni was unaware of its four administrators’ plan to establish
a bonus program for its employees, of the application for a credit card account, or of the
eventual use of that account to purchase almost a third of a million dollars’ worth of gift
cards. I.G. Exs. 3, 5; P. Ex. 2. Before Omni discovered and stopped the program,

Petitioner’s completed distributions of the unauthorized gift-card bonuses to Omni
employees amounted to at least $40,000, with another several thousand dollars in gift
cards spent on food, supplies, and decorations for Omni office functions and staff
meetings — including pedicures for Reynolds and another administrator following office
meetings. P. Ex. 3.

It is perfectly true that nothing in this record suggests that Medicare, Medicaid, or any
other federally-funded health care program was harmed in any way by anything
Petitioner did in obtaining and using the Omni credit card. But it is just as clear that
Petitioner’s fraudulent opening of the Omni account was “in connection with” her
employment at Omni. She could not have succeeded in doing so without holding a
position of responsibility at Omni. She formed and executed her plan with the agreement
of three other Omni administrators acting in their managerial roles. Her goal, at least at
first, was to reward and encourage Omni employees under her supervision. Some of the
gift cards were given as lagniappe to Omni administrators for attending Omni meetings.
Most of the gift cards that were actually distributed went to Omni employees.

There is an obvious “common sense connection” between Petitioner’s activity and
Omni’s function in delivering home health care items and services. The motive of
Petitioner’s criminal activity was to encourage and reward Omni employees under her
supervision. The means by which she carried out her criminal activity were Omni’s
creditworthiness and the credit card account she obtained by relying on it. And the
opportunity for bringing the entire criminal plan to fruition was her position of
responsibility as Omni’s nurse administrator in the local office. On these facts, the nexus
between crime and health care is far stronger than in Susan Malady, DAB CR835 (2001)
and Donald R. Hicks, M.D., DAB CR765 (2001), cases in which Administrative Law
Judges of this forum have found the “common sense connection” and “nexus” tests
satisfied by a showing that an individual holding a position of responsibility with a health
care provider abused that position to the provider’s financial detriment, even in the
absence of a showing that the ultimate beneficiaries of the peculations may have been
employees or programs of the provider itself.

The five-year period of exclusion proposed in this case is the minimum required by
section 1128(c)(3)(B) of the Act. As a matter of law it is not unreasonable, and neither
the Board nor I can reduce it. 42 C.F.R. § 1001.2007(a)(2); Mark K. Mileski, DAB No.
1945 (2004); Salvacion Lee, M.D., DAB No. 1850 (2002).

I note once more that Petitioner appears here pro se. Because of that I have been guided
by the Board’s reminders that pro se litigants should be offered “some extra measure of
consideration” in developing their records and their cases. Louis Mathews, DAB No.
1574 (1996); Edward J. Petrus, Jr., M.D., et al., DAB No. 1264 (1991). I have searched
all of Petitioner’s pleadings for any arguments or contentions that might raise a valid,
relevant defense to the I.G.’s Motion, but have found nothing that could be so construed.

Resolution of a case by summary disposition is particularly fitting when settled law can
be applied to undisputed material facts. Michael J. Rosen, M.D., DAB No. 2096; Thelma
Walley, DAB No. 1367. Summary disposition is authorized by the terms of 42 C.F.R.

§ 1005.4(b)(12). This forum looks to FED. R. CIV. P. 56 for guidance in applying that
regulation. Robert C. Greenwood, DAB No. 1423 (1993). The material facts in this case
are undisputed and unambiguous. They support summary disposition as a matter of
settled law. The Decision issues accordingly.

VI. Conclusion

For the reasons set forth above, the I.G.’s Motion for Summary Disposition should be,
and it is, GRANTED. The I.G.’s exclusion of Petitioner Charice D. Curtis from
participation in Medicare, Medicaid, and all other federal health care programs for a
period of five years, pursuant to the terms of section 1128(a)(3) of the Act, is sustained.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Ellen L. Morand
(O.L. File No. H-11-40110-9),

Petitioner
v.

The Inspector General.

Docket No. C-11-473

Decision No. CR2429

Date: September 15, 2011
DECISION

I sustain the determination of the Inspector General (1.G.) to exclude Petitioner, Ellen L.
Morand, from participating in Medicare and other federally funded health care programs
for a period of five years.
I. Background
On April 29, 2011, the I.G. notified Petitioner that she was being excluded for at least
five years from participating in Medicare and other federally funded health care
programs. Petitioner requested a hearing, and the case was assigned to me for a hearing
and a decision. The LG. filed a brief and four proposed exhibits that he identified as I.G.
Exhibit (Ex.) 1 — LG. Ex. 4. Petitioner filed a brief and two proposed exhibits that it
identified as P. Ex. 1 — P. Ex. 2. The I.G. then filed a reply brief and, with that brief, filed
an additional exhibit that he identified as I.G. Ex. 5. Petitioner opposed my receiving that

exhibit into evidence.

I sustain Petitioner’s objection to 1.G. Ex. 5. The exhibit — a declaration from Lt. T.
Reddy, a police lieutenant with the Lynn, Massachusetts police department — consists of
substantive evidence that is arguably relevant to proving the I.G.’s case in chief. It is not
rebuttal evidence as the I.G. contends. The I.G. should have offered this declaration with
his initial brief, and, so, I exclude the exhibit because it is untimely filed.

Petitioner additionally objected to my receiving I.G. Ex. 4. This exhibit is a copy of an
incident report from the Lynn, Massachusetts police department. Petitioner’s objections
are that the document has not been authenticated and that it contains hearsay. I overrule
these objections. First, Petitioner has provided me with nothing that would show that the
exhibit is not a report of a police investigation into allegations of theft. Petitioner has
given me no reason to conclude that the exhibit is incomplete or that it is not an accurate
copy of a police report. Second, the fact that the exhibit contains hearsay is no
impediment to my receiving it. I routinely admit hearsay in cases involving the I.G.
Moreover, the probative value of this exhibit is buttressed by the facts that it is an official
police report and that it contains admissions of culpability by Petitioner, admissions that
Petitioner has not denied.

I receive into the record I.G. Ex. 1 —1.G. Ex. 4 and P. Ex. 1 — P. Ex. 2.
IL. Issue, Findings of Fact, and conclusions of Law
A. Issue

The issue in this case is whether the I.G. is mandated to exclude Petitioner for a period of
at least five years.

B. Findings of Fact and Conclusions of Law
I make the following findings of fact and conclusions of law (Findings).

I. The I.G. was mandated to exclude Petitioner because she was
convicted of a felony as is described at section 1128(a)(3) of the Social
Security Act.

Among other things, Section 1128(a)(3) of the Social Security Act (Act) mandates the
exclusion of any individual who is convicted of a felony that was committed in
connection with the delivery of a health care item or service and relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct. The
evidence in this case establishes that Petitioner was convicted of a Section 1128(a)(3)
offense. She was convicted of stealing money from the pharmacy that employed her.
There is an obvious nexus between Petitioner’s crime and health care items or services
because the funds that Petitioner stole were composed at least in part of monies that
members of the public had paid to her employer for the purchase of health care items or
services.
Petitioner was employed as a pharmacy technician at Eaton Apothecary in Lynn,
Massachusetts. On July 8, 2010, she was charged with four counts of felony larceny.

1.G. Ex. 2 at 1. Petitioner admitted to an investigating police officer that she took funds
from the Eaton pharmacy safe, consisting of customers’ payments to the pharmacy. I. G.
Ex. 4 at 2-4. She acknowledged stealing an amount of between $4,000 and $5,000. Id. at
4. Petitioner admitted that there were sufficient facts to convict her, and the case was
continued without a finding of guilt. I.G. Ex. 3 at 2.

Petitioner argues that she was not, in fact, “convicted” of a felony. The gravamen of
Petitioner’s argument is that she entered into an arrangement pursuant to the
Massachusetts Criminal Procedure Rules that enabled her to avoid pleading guilty. I find
this argument to be without merit. She entered into an arrangement that is explicitly
recognized pursuant to the Act as a conviction and under Massachusetts law as the
functional equivalent of a guilty plea.

Petitioner entered a plea pursuant to Massachusetts Criminal Procedure Rule 12(a)(2),
which allows a defendant to enter a plea of sufficient facts to warrant a finding of guilty.
She admitted that there were sufficient facts to convict her of the felony charges that had
been filed against her. The court accepted that admission, and the case was continued
without a finding. She was sentenced to pay restitution of $8,460.20. I.G. Ex. 3 at 2.

The arrangement that Petitioner entered into is defined to be a conviction by section
1128(i)(4) of the Act. The word “convicted” is defined there to include the circumstance
when:

the individual or entity has entered into participation in a first offender,
deferred adjudication, or other arrangement or program where judgment of
conviction has been withheld.

Act Section 1128(i)(4). She entered into precisely such an arrangement.

Furthermore, under Massachusetts law, Petitioner’s plea is functionally the same as a
guilty plea. Commonwealth v. Hilaire, 752 N.E.2d 737, 740 n.4 (Mass. App. Ct. 2001);
Commonwealth v. Greene, 508 N.E.2d 93, 94 (1987). Her plea enabled the court to
sentence her — to restitution in this case — and to impose other conditions against
Petitioner just as if she had pled guilty to the charges that were filed against her.

Petitioner also argues that the I.G. offered no proof that Petitioner’s crimes were in
connection with health care items or services. Here, Petitioner asserts that there is no
evidence that the money that Petitioner stole was the proceeds of the sales of health care
items or services by her employer, reasoning that the pharmacy at which Petitioner
worked also sold non-health care related items.
I agree that there is no proof that the money that Petitioner stole constituted the proceeds
of the sales of specific health care related items or services. But, such evidence is
unnecessary. I take notice that a pharmacy sells a wide range of items including many
items that are health care items. These include prescription drugs, but they also include
over the counter medications and devices, supplies, and equipment used to deal with
health care related problems. Petitioner’s employer did not segregate the funds that it
collected into separate piles of health care related customer payments and non-health care
related customer payments. But, it is obvious that on any given day some, or even most,
of the funds that it collected were for health care items. Thus, Petitioner’s theft from a
pool of money collected by her employer would inevitably involve stealing at least some
funds that had been used by customers to purchase health care items. That is sufficient to
establish the requisite nexus between Petitioner’s crimes and health care items or
services.

2. The length of Petitioner’s exclusion is reasonable as a matter of law.

An exclusion that is imposed pursuant to section 1128(a)(3) of the Act must be for a
minimum period of five years. Act Section 1128(c)(3)(B). Here, the I.G. imposed the
mandatory minimum exclusion against Petitioner, and that is reasonable as a matter of
law.

/s/
Steven T. Kessel
Administrative Law Judge