SUBJECT:

Mark A. Frawley, D.C.,

Petitioner,

The Inspector General

DECISION

In this case Petitioner, Mark A. Frawley, D.C., a licensed chiropractor, was a major player in an elaborate scheme to defraud insurance companies. He was caught, convicted, sentenced to jail time, and ordered to pay over $800,000 in restitution. On the other hand, he was also enormously cooperative with prosecutors, providing important information on the scheme's most culpable defendant and others. Because of his conviction, the Inspector General (I.G.) excluded him from participating in Medicare, Medicaid, and all federally-funded health care programs for a period of 15 years, and he has filed this appeal.

For the reasons discussed below, I find that the I.G. is authorized to exclude Petitioner pursuant to section 1128(a)(3) of the Social Security Act (Act), and that the 15-year exclusion falls within a reasonable range.

I. Background

By letter dated June 28, 2002, the I.G. notified Petitioner that he was being excluded from participation in Medicare, Medicaid, and all federal health care programs for a period of 15 years. The I.G. advised Petitioner that he was being excluded pursuant to section 1128(a)(3) of the Act because of his conviction in the United States District Court for the Eastern District of Pennsylvania of a felony criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service. By letter dated August 15, 2002, Petitioner requested a hearing and the case was assigned to me.

On October 9, 2002, I held a prehearing conference by telephone at which the parties agreed that this matter could be resolved based on the written submissions. Petitioner acknowledged that he was convicted of a criminal offense within the meaning of section 1128(i) of the Act. See Order of October 11, 2002; Petitioner's Brief (P. Brief) at 2.

The I. G. filed six exhibits (I.G. Exs. 1 - 6) as part of her submission, and Petitioner filed two exhibits (P. Exs. 1 - 2). In the absence of objection, I receive into evidence I.G. Exs. 1 - 6 and P. Exs. 1 - 2.

II. Issue

On the merits, Petitioner does not dispute that he "can be excluded for a reasonable period for the protection to the government programs." P. Brief at 7, n.1. He argues that the length of the exclusion is unreasonably long for three reasons: (1) the I.G. relied on factually inaccurate aggravating factors; (2) the I.G. failed to consider adequately the mitigating factor of Petitioner's cooperation with law enforcement; and (3) Petitioner "is not so 'untrustworthy' as to require what is tantamount to a punitive lifetime exclusion." P. Brief at 7.

The sole issue before me, therefore, is whether the length of the exclusion in excess of the five-year mandatory minimum is reasonable. 42 C.F.R. §1001.2007.

III. Statutory and Regulatory Background

Section 1128(a)(3) of the Act authorizes the Secretary of Health & Human Services (Secretary) to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act):

[a]ny individual or entity that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996 ⁽¹⁾, 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 . . . 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 relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(3) of the Act shall be for a minimum period of not less than five years.

Specific aggravating factors that are not offset by specified mitigating factors may justify increasing the period of exclusion. 42 C.F.R. § 1001.102. The following four factors may serve as a basis for lengthening the period of exclusion: (1) the acts resulting in the conviction, or similar acts, resulted in a financial loss to one or more entities of $5,000 or more (42 C.F.R. § 1001.102(b)(1)); (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)(2)); (3) the sentence imposed by the court included incarceration (42 C.F.R. § 1001.102(b)(5)); and (4) the individual has been the subject of any other adverse action by any federal, State, or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion (42 C.F.R. § 1001.102(b)(9)).

Mitigating factors may be considered as a basis for reducing the period of exclusion only if aggravating factors justify an exclusion longer than five years. The only factors considered mitigating are: (1) Petitioner was convicted of three or fewer misdemeanor offenses and the resulting financial loss to Medicare or the State health care program was less than $1,500; (2) the record in the criminal proceedings, including the sentencing documents, demonstrates that the court determined that Petitioner had a mental, physical, or emotional condition before or during the commission of the offense that reduced his culpability; or (3) 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).

The Secretary has delegated to the I.G. the authority to impose exclusions. 42 C.F.R. § 1001.401(a). So long as the amount of time chosen for the exclusion imposed on Petitioner by the I.G. is within a reasonable range, based on demonstrated criteria, I have no authority to change it. Joann Fletcher Cash, DAB No. 1725 at 7 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

IV. Discussion

A man named Eric Keck owned and operated U.S. Rehab, a company made up of physical therapy and rehabilitation centers. Mr. Keck leased space in fitness centers, negotiating agreements that allowed U.S. Rehab patients to use the fitness facilities for therapy. U.S. Rehab was headquartered in Conshohocken, Pennsylvania, where it was co-located with the fitness center, Olympic Nautilus. I.G. Ex. 2. In September 1994, Petitioner, a chiropractor licensed in the State of Pennsylvania, went to work for U.S. Rehab at the Conshohocken facility. During his tenure there, he participated in a scheme to defraud health insurance companies by submitting fraudulent claims. Overall, U.S. Rehab submitted approximately $12 million in false claims, collecting about $6.3 million in actual payment.

For his part, Petitioner offered "free evaluations" to fitness club members in order to diagnose phony medical problems justifying physical therapy or medical treatment. He then offered the member an opportunity to work out at the fitness center at no cost by enrolling as a U.S. Rehab patient. He coached the patients to claim bogus injuries or diagnoses. He fabricated records of office visits, physical therapy, and medical treatment purportedly provided by physicians whose credentials and provider numbers Mr. Keck had effectively purchased for that purpose. Petitioner falsely recorded personal trainer workouts as various types of physical therapy. He fabricated progress notes to make patient records appear legitimate and to support false insurance claims. He falsely recorded treatment for patients who did not visit and for services never provided. P. Ex. 2; I.G. Ex. 2.

Petitioner pled guilty in federal district court to one count of conspiracy to commit health care fraud and mail fraud, in violation of 18 U.S.C. § 371. He agreed to cooperate fully with the government in its ongoing investigation. I.G. Exs. 2, 3. In a judgment dated June 8, 1999, he was sentenced to four months imprisonment, with the recommendation that he be placed in a work release center, followed by three years of supervised release. He was required to pay a $100 assessment and $800,000 restitution. I.G. Ex. 4. His chiropractic license was subsequently suspended for six months, followed by three years probation. I.G. Ex. 5.

V. 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. I discuss each Finding in detail.

1. Petitioner's crimes resulted in a loss to one or more entities of more than $5,000. 42 C.F.R. § 1001.102(b)(1). ⁽²⁾

Petitioner does not challenge the existence of this aggravating factor. The criminal record establishes that his participation in the scheme caused losses of $800,000 to the defrauded insurance companies, as evidenced by the district court's order that he pay $800,000 in restitution. Thus, the financial losses caused by Petitioner's criminal acts well exceed the $5,000 standard, and justify a significant period of exclusion. I.G. Ex. 4, at 5.

2. The crime that resulted in Petitioner's conviction occurred over a period of more than one year. 42 C.F.R. § 1001.102(b)(2).

The information in this case charges that "from between in or about August 1993 through in or about January 1998," the defendants, including Petitioner, conspired and executed their scheme to defraud. I.G. Ex. 2, at 5. From this, the I.G. surmised that the acts that resulted in Petitioner's conviction were committed over a period of more than four years. Petitioner characterizes this assertion as "simply inaccurate." Citing information contained in the government's sentencing memorandum, he points out that he was only involved in the scheme from September 1994 through July 1997. P. Ex. 2, at 7 n.2. In response, the I.G. charges that Petitioner is attempting to attack collaterally his conviction, which, by regulation, he may not do. 42 C.F.R. § 1001.2007(d); Susan Malady R.N., DAB No. 1816 (2002).

The information here charges a number of individuals with a variety of acts, adding up to an elaborate conspiracy to defraud the insurance companies. Review of the information shows that Petitioner was one of many conspirators, and obviously not directly responsible for every overt act charged in the information. He very likely was not engaged in the scheme any earlier than September 1994 nor any later than July 1997, and nothing in the information charges him individually with conduct throughout the entire period of the information. On the other hand, under the conspiracy laws, he may still be responsible for the acts of his co-conspirators, although the I.G. has not made that argument.

Nevertheless, as Petitioner concedes, his involvement in the crimes that resulted in his conviction occurred over a period of more than one year, and is properly considered an aggravating circumstance.

3. Petitioner's criminal sentence included incarceration. 42 C.F.R. § 1001.102(b)(5).

The I.G. argues that, as a result of his criminal activity, Petitioner was convicted and sentenced by the federal district court to four months incarceration. Petitioner claims, however, that he was never actually incarcerated, but was sentenced to a work release program where he was permitted to work and "attend other functions in accordance with policies and regulations." Both parties cite to the judgment. P. Brief at 9-10; I.G. Ex. 4.

In fact, the judgment committed Petitioner to the custody of the United States Bureau of Prisons "to be imprisoned for a total term of 4 month(s)." The court then recommended to the Bureau of Prisons that Petitioner "be placed in a community confinement facility (Work Release Center)," and that he "be permitted to work, attend religious services and attend to medical needs in accordance with the Bureau of Prisons policies and regulations." I.G. Ex. 4, at 2. The regulations interpret incarceration broadly, to mean "imprisonment or any type of confinement, with or without supervised release, including, but not limited to, community confinement, house arrest, and home detention." 42 C.F.R. §1001.2. That the judge recommended a particular type of incarceration, to which the Bureau of Prisons agreed, does not negate this as an aggravating factor. See, Jason Hollady, M.D., DAB No. 1855 at 9-10 (2002) (where the Board found irrelevant to the issue of whether his sentence included incarceration the fact that, a few days after the beginning his sentence, Petitioner was put on a work release program). Thus, Petitioner's commitment to the custody of the United States Bureau of Prisons constitutes "incarceration" within the meaning of the regulation, notwithstanding where or how he served this sentence, and is appropriately considered an aggravating factor.

4. Petitioner has been the subject of other adverse action by a State agency or board, and the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion. 42 C.F.R. § 1001.102(b)(9).

On September 27, 2001, citing his criminal conviction, the Pennsylvania State Board of Chiropractic suspended Petitioner's license to practice for a period of six months followed by three years probation. I.G. Ex. 5. Petitioner does not dispute that this occurred nor that this suspension constitutes "adverse action by a State Board" based on the same set of circumstances that served as the basis for his exclusion.

Thus, this case presents four aggravating factors, establishing Petitioner's significant involvement in and profit from a massive crime. I conclude that these four aggravating factors justify an exclusion significantly in excess of the five-year mandatory minimum.To determine whether a 15-year exclusion falls within a reasonable range, I balance these aggravating factors with the one mitigating factor that the case presents.

5. Petitioner's cooperation with federal officials resulted in others being convicted of program-related crimes.

Because aggravating factors justify increasing the period of exclusion, mitigating factors may be considered as a basis for reducing the period of exclusion. 42 C.F.R. § 1001.102(c). The parties agree that this case presents one mitigating factor: Petitioner cooperated with Federal law enforcement officials, and his cooperation led to the convictions of others. Petitioner, however, complains that the I.G. did not adequately consider this mitigating factor. Citing the administrative law judge's decision in Parvin D. Syal, M.D., DAB CR643 (2000), he argues: 1) that the I.G. did not explain how it used this mitigating factor in weighing the length of the exclusion, and 2) because Petitioner assisted significantly in the government's prosecution, a 15-year exclusion is harsh and unreasonable.

First, in this de novo review of the exclusion, I find irrelevant "how the I.G. used this mitigating factor" in determining the length of the exclusion. Based on the evidence presented to me, I make an independent evaluation of the aggravating and mitigating factors. See Jason Hollady, at 10; Parvin D. Syal, at 7 (www.hhs.gov/dab/decisions). Second, I recognize that Petitioner assisted significantly in the government's prosecution, which justifies lessening the period of exclusion from what it would have been absent his cooperation. However, I would ordinarily expect a conviction for conduct of this magnitude to result in a period of exclusion much lengthier than 15 years. I find particularly aggravating that Petitioner himself caused losses of $800,000 to the defrauded insurance companies, 160 times the amount necessary to be considered aggravating. Also significant, by his own admission, Petitioner's involvement in the scheme lasted almost three years, well beyond the one year necessary to be considered aggravating.

The sentencing report, while recognizing the "substantial assistance" Petitioner provided in the government's prosecutions of others, nevertheless noted Petitioner's "significant role" in the fraudulent scheme. He was the principal chiropractor in the Conshohocken office, "where much of the fraudulent activity occurred." P. Ex. 2, at 11. He falsified medical records, allowed U.S. Rehab to submit false claims, and "allowed his own stature as a licensed chiropractor to provide some appearance of credibility for this fraudulent billing activity." The report accurately characterizes his conduct as "reprehensible." Thus, this was not a situation simply of up-coding or exaggerating services provided; Petitioner fabricated medical records for his own gain. The scope of this scheme and the degree of Petitioner's involvement, as evidenced by the $800,000 in losses attributed directly to his involvement, speak volumes about his trustworthiness. I am therefore not able to find unreasonable the I.G.'s imposition of a 15-year exclusion.

VI. Conclusion

I find that the I.G. was authorized to exclude Petitioner pursuant to section 1128(a)(3) of the Act. The statute's purpose is remedial - the protection of federally-funded health care programs. The I.G.'s regulations set forth criteria to assess the degree of risk an individual poses to those programs. Here, the crime was huge and Petitioner's role in it was significant, spanning almost three years, and defrauding its victims out of hundreds of thousands of dollars. He was rightfully sentenced to jail time and his license to practice was suspended because of his significant role in the scheme. Notwithstanding his subsequent cooperation with law enforcement, I find that the 15-year exclusion imposed by the I.G. falls within a reasonable range.

Carolyn Cozad Hughes

Administrative Law Judge

1. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 was enacted on August 21, 1996.

2. Effective April 17, 2002, 42 C.F.R. § 1001.102(b)(1) was amended to increase, from $1,500 to $5,000, the amount of financial loss necessary to be considered an aggravating factor. 67 Fed. Reg. 11932 (March 18, 2002). The I.G. has apparently decided that the effective date means the date the I.G. issues its exclusion determination, regardless of when the underlying actions or convictions occurred. Petitioner here has not objected to that interpretation.