SUBJECT:

Steven Caplan, R. Ph.,

Petitioner,

The Inspector General

This case is before me pursuant to a request for hearing filed on June 9, 2003 by Steven Caplan (Petitioner).

I. BACKGROUND

By letter dated April 30, 2003, the Inspector General (I.G.) notified Petitioner that he was being excluded from participation in the Medicare, Medicaid, and all other federal health care programs as defined in section 1128B(f) of the Social Security Act (Act) for a period of five years. The I.G. informed Petitioner that his exclusion was imposed pursuant to section 1128(a)(1) of the Act, due to his conviction (as defined in section 1128(i) of the Act), in the State of Hawaii Circuit Court of the First Circuit of a criminal offense related to the delivery of an item or service under the Medicaid program.

I conducted a telephone conference on July 30, 2003. The I.G. is represented in this case by the Office of Counsel to the Inspector General. Petitioner is represented by Eric Seitz, Esq. The parties agreed that the case could be decided based on written submissions without the need for an in-person hearing. On September 8, 2003, the I.G. submitted her initial brief (I.G. Br.) and proposed exhibits. The I.G. filed six proposed exhibits with her initial brief. These have been identified as I.G. Exhibits (I.G. Exs.) 1 - 6. On October 20, 2003, Petitioner filed his brief (P. Br.). With his brief, Petitioner filed three proposed exhibits. These have been identified as Petitioner Exhibits (P. Exs.) 1 - 3. On November 5, 2003, the I.G. filed a reply brief to Petitioner's brief. (I.G. Reply Br.). There being no objection to the proposed exhibits, I admitted into evidence I.G. Exs. 1 - 6 and P. Exs. 1 - 3.

Based on all the evidence in the record, it is my decision reluctantly to sustain the determination of the I.G. to exclude Petitioner from participating in Medicare, Medicaid, and all other federal health care programs for a period of five years. I base my decision on the documentary evidence, the applicable law and regulations, and the arguments of the parties. It is my finding that the mandatory exclusion provisions of §1128 (a)(1) do apply in this case because the Petitioner was convicted of a program-related crime.

II. ISSUE

The issue in this case is whether the I.G. had a basis upon which to exclude Petitioner from participation in the Medicare, Medicaid, and all other federal health care programs. Since the period of exclusion in this case is five years, the minimum mandatory period, there is no issue of reasonableness of the length of the exclusion before me.

III. APPLICABLE LAW AND REGULATIONS

Petitioner's right to a hearing by an administrative law judge (ALJ) and judicial review of the final action of the Secretary is provided by section 1128(f) of the Act (42 U.S.C. § 1230a-7(f)). Petitioner's request for a hearing was timely filed and I do have jurisdiction. However, the Secretary of the United States Department of Health and Human Services (Secretary) has by regulation limited my scope of review to two issues: (1) whether there is a basis for the imposition of the sanction; and, (2) whether the length of the exclusion is unreasonable. 42 C.F.R. § 1001.2007(a)(1). The standard of proof is a preponderance of the evidence and there may be no collateral attack of the conviction that is the basis for the exclusion. 42 C.F.R. § 1001.2007(c) and (d). Petitioner bears the burden of proof and persuasion on any affirmative defenses or mitigating factors and the I.G. bears the burden on all other issues. 42 C.F.R. § 1005.15(b) and (c).

Section 1128(a)(1) of the Act (42 U.S.C. § 1320a-7(a)(1)) requires the Secretary to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act), any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under a federal or state health care program.

An exclusion under section 1128(a) of the Act must be for a minimum period of five years. Act, section 1128(c)(3)(B). Aggravating factors can serve as a basis for lengthening the period of exclusion. 42 C.F.R. § 1001.102(b). If aggravating factors justify an exclusion longer than five years, mitigating factors may be considered as a basis for reducing the period of exclusion to no less than five years. 42 C.F.R. § 1001.102(c).

Section 1128(i) of the Act (42 U.S.C. § 1230a-7(i)) defines the term "convicted" as used in section 1128(a) as follows:

an individual or entity is considered to have been "convicted" of a criminal offense-

(1) 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;

(2) when there has been a finding of guilt against the individual or entity by a Federal, State, or local court;

(3) when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court; or

(4) 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.

Pursuant to 42 C.F.R. § 1001.2007, a person excluded under section 1128(a)(1) of the Act may file a request for hearing before an ALJ.

IV. PARTIES' ARGUMENTS

1. I.G.'s Arguments

The I.G. argues that Petitioner was convicted of a criminal offense related to the delivery of an item or service under a federal or state health care program. Therefore, Petitioner is subject to the statutory minimum mandatory period of exclusion of five years.

2. Petitioner's Arguments

Petitioner argues that he was not convicted of any criminal offense but, instead, participated in Hawaii's deferred adjudication program which does not constitute a conviction under Hawaii State law. In addition, Petitioner asserts that he was not engaged in or even aware of any scheme to recycle and repackage pharmaceuticals while employed by Interstate Pharmacy Corporation (IPC).

V. FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. At all times relevant in this case, Petitioner was a licensed pharmacist in the State of Hawaii. I.G. Ex. 2.

2. On December 19, 2000, a Complaint was filed in the Circuit Court of the First Circuit for the State of Hawaii, alleging that Petitioner engaged in Medical Assistance Fraud in violation of section 346 - 43.5 of the Hawaii Revised Statutes by participating in a scheme that involved improperly recycling, repackaging, and redistributing medications that were billed to the Hawaii Medicaid program. I.G. Exs. 1 - 2.

3. On December 21, 2000, Petitioner entered a plea of no contest to Deceptive Business Practices, in violation of section 708 - 870(1)(e) of the Hawaii Revised Statues. I.G. Ex. 3.

4. In connection with the entry of Petitioner's plea, the court granted Petitioner's Motion for Deferred Acceptance of No Contest Plea and ordered that further proceedings against Petitioner be deferred for a period of one year. I.G. Ex. 4.

5. As a condition of the court's deferred acceptance of Petitioner's no contest plea, Petitioner was required not to commit another federal or State crime during the one-year deferral period and to comply with the terms and conditions of a plea agreement dated December 21, 2000. Id.

6. A Stipulation for Dismissal of Complaint and Order was filed on December 26, 2001, based on Petitioner's compliance with the terms of the court's order granting Petitioner's Motion for Deferred Acceptance of No Contest Plea. I.G. Ex. 6.

7. On April 30, 2003, the I.G. notified Petitioner of his five-year exclusion pursuant to section 1128(a)(1) of the Act.

8. Petitioner's entry of a no contest plea and the deferred acceptance of such a plea by the Hawaii Circuit Court of the First Circuit constitutes a conviction under section 1128(i)(3) of the Act.

9. Petitioner's participation in a deferred adjudication program where judgment of conviction has been withheld by the Hawaii Circuit Court of the First Circuit constitutes a conviction under section 1128(i)(4) of the Act.

10. Section 1128(a)(1) of the Act requires the exclusion of any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Medicare or any state health care program. Section 1128(a)(1) of the Act; 42 U.S.C. § 1320a-7(a)(1).

11. The facts underlying Petitioner's conviction for Deceptive Business Practices demonstrate that Petitioners conviction is related to the delivery of a health care item or service under Hawaii's Medicaid program.

12. Petitioner was properly excluded for the mandatory minimum period of five years.

VI. ANALYSIS

I discuss specific Findings in detail below.

1. Petitioner's conviction of a criminal offense related to the delivery of an item or service under the Hawaii Medicaid program justified his exclusion by the I.G. from participation in the Medicare, Medicaid, and all other federal health care programs.

A. Petitioner was convicted of a criminal offense within the meaning of section 1128 of the Act.

On December 21, 2000, Petitioner entered a plea of no contest to Deceptive Business Practices, in violation of section 708 - 870(1)(e) of the Hawaii Revised Statues. I.G. Ex. 3. In connection with the entry of Petitioner's plea, the court granted Petitioner's Motion for Deferred Acceptance of No Contest Plea and ordered that further proceedings against Petitioner be deferred for a period of one year. I.G. Ex. 4. As a condition of the court's deferred acceptance of Petitioner's no contest plea, Petitioner was required not to commit another federal or State crime during the one-year deferral period and to comply with the terms and conditions of a plea agreement dated December 20, 2000. Id. Petitioner entered into a plea agreement. Petitioner agreed, among other things, to make a $10,000 donation to one or more approved charities and provide proof of this donation within the one-year deferral period in exchange for the State of Hawaii's agreement to permit Petitioner to plead no contest to one count of Deceptive Business Practices. I.G. Ex. 5. A Stipulation for Dismissal of Complaint and Order dismissing the complaint and discharging Petitioner was filed on December 26, 2001, based on Petitioner's compliance with the terms of the court's order granting Petitioner's Motion for Deferred Acceptance of No Contest Plea. I.G. Ex. 6.

Under section 1128(i)(4) of the Act, an individual or entity is considered convicted 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. DAB decisions which have dealt with such deferred adjudications have held that such procedures constitute convictions within the scope of section 1128(i)(4) of the Act. Carlos E. Zamora, M.D., DAB CR22 (1989) aff'd DAB No. 1104 (1989); Benjamin P. Council, M.D., DAB CR391 (1995); Donald J. Purcell, II, M.D., DAB CR572 (1999); Conrad J. Sarnecki, DAB CR722 (2000). Further, whether an individual has been convicted within the meaning of section 1128(i) of the Act is a matter of federal not state law. Id. In addition, Petitioner's entry of a no contest plea and the deferred acceptance of such a plea by the Hawaii Circuit Court of the First Circuit constitutes a conviction under section 1128(i)(3) of the Act. Donald J. Purcell, II, M.D., DAB CR572 (1999).

B. Petitioner's offense was a criminal offense related to the delivery of an item or service under the Medicaid program.

On December 19, 2000, a Complaint was filed in the Circuit Court of the First Circuit for the State of Hawaii, alleging that Petitioner engaged in Medical Assistance Fraud in violation of section 346 - 43.5 of the Hawaii Revised Statutes by participating in a scheme that involved improperly recycling, repackaging, and redistributing medications that were billed to the Hawaii Medicaid program. I.G. Exs. 1 - 2. The Complaint alleged that Petitioner engaged in this scheme from on or about January 1, 1998 to and including November 31, 2000. I.G. Ex. 1. It was alleged that Petitioner, who was a pharmacist employed by the IPC, was involved in a scheme where unused pharmaceuticals previously dispensed to long-term care facilities but then returned to IPC were removed from heat-sealed blister packs and redeposited into pharmacy stock bottles from which they were later retrieved, placed in new heat-sealed blister packs, and then redispensed to other long-term care facilities. I.G. Ex. 2. Some of these recycled (and therefore, mislabeled) pharmaceuticals were billed by IPC to the Hawaii Medicaid program. Id. As a result, IPC submitted fraudulent claims to the Hawaii Medicaid program and IPC received monetary payments to which it was not entitled from the Hawaii Medicaid program. Id.

Section 1128(a)(1) of the Act requires the Secretary to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act), any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under a federal or state health care program. Hawaii's Medicaid program is a state health care program.

I must first determine if Petitioner's offense is "related" to the delivery of an item or service under the Hawaii Medicaid. Program. The language in Tanya A. Chuoke, R.N., DAB CR633 (1999) states:

[t]o determine if an offense is program-related, the ALJ must analyze the facts and circumstances underlying the conviction to determine whether a nexus or common sense connection links the offense for which the petitioner has been convicted with the delivery of an item or service under a covered program. Berton Siegel, D.O., DAB No. 1467 (1994); Krishna Kumar Batra, M.D., DAB CR537 (1998). Petitioner need not be convicted of Medicaid fraud to be subject to exclusion under section 1128(a)(1) of the Act; it is sufficient if the delivery of a Medicaid item or service is an element in the chain of events giving rise to the offense.

Tanya A. Chuoke, R.N., DAB CR 537, at 4.

It is well settled that an ALJ must examine the entire record, reviewing all facts and circumstances that illuminate the chain of events giving rise to the offense, and then determine whether a common sense connection exists between the offense and the delivery of an item or service under a covered program. Brenda J. Motley, DAB CR414 (1996); Roberta E. Miller, DAB CR367 (1995); Andrew Anello, DAB No. 1803 (2001); Salvacion Lee, M.D., DAB CR920 (2002).

Petitioner's conviction of Deceptive Business Practices was based on his participation in a scheme concerning the sale of "recycled" pharmaceuticals to long-term care facilities that were billed to the Hawaii Medicaid program by IPC, Petitioner's employer. IPC made false claims to the Hawaii Medicaid program and received funds from the Hawaii Medicaid program to which it was not entitled. The facts underlying Petitioner's conviction show that his conviction was related to the delivery of an item or service under the Hawaii Medicaid program. Mark A, Maher, DAB CR678 (2000); Carlos Rivera-Cruz, DAB CR677 (2000).

C. Petitioner may not use this forum to collaterally attack his conviction for Deceptive Business Practices.

For this decision, I have assumed as true Petitioner's allegations that:

• he was not engaged in or even aware of any scheme to recycle and repackage pharmaceuticals while employed by IPC;

• instead of facing a felony charge, Petitioner was offered the opportunity to plead no contest to a reduced charge which would be dismissed with prejudice and without any adjudication after a period of one year because he was not guilty or because the case against him could not be proven;

• Petitioner accepted this opportunity because of the financial burdens of defending himself and to avoid the risk of criminal conviction;

• Petitioner's employer, IPC, advanced the monies for the charitable contribution that he was required to make because it was IPC's fault that he was in a position where he had to respond to criminal allegations.

Since Petitioner has never admitted to the underlying facts alleged against him, Petitioner now argues that an evidentiary hearing should be held before me so that Petitioner may confront witnesses and present evidence of his own. Because of the Act and implementing regulations, which I must follow, however, Petitioner's allegations that I have accepted as true are unavailing to him in this case. Nor would an in-person hearing help him. His conviction stands on its own and cannot be collaterally attacked. The time to attack his conviction is past. Under the regulations, I am not permitted to review the underlying determination that is the basis of the exclusion. 42 C.F.R. § 1001.2007(d). An individual may not collaterally attack the conviction that is the basis for the exclusion. Id. I am bound by both the regulations and prior DAB decisions on this point. In numerous decisions, the DAB has held such arguments to be ineffectual in the context of an exclusion appeal, as the I.G. and the ALJ are not permitted to look beyond the fact of conviction. Mark Zweig. M.D., DAB CR563 (1999); Paul R. Scollo, D.P.M., DAB No. 1498 (1994); Ernest Valle, DAB CR309 (1994); Peter Edmondson, DAB No. 1330 (1992).

I do not have the authority to find invalid either federal statutes or regulations. 42 C.F.R. 1005.4(c)(1). Further, I do not have the authority to decide the constitutionality of the Act and regulations.

The government is powerful and dealing with allegations of criminal wrong doing must be daunting. Those faced with such charges must weigh many factors before accepting a plea arrangement. I suspect the criminal defense bar is largely unaware that one of the factors in medically-related cases that must be considered before the client pleads to a crime is the potential for the client to lose his or her career due to the possibility of being excluded from federal health care programs.

I am not convinced by the record evidence that Petitioner is the type of untrustworthy individual from whom Medicare and Medicaid beneficiaries need to be protected. But the Act is clear. For purposes of exclusion, a deferred or withheld conviction is the same as a jury verdict of guilty. A five-year exclusion is mandatory for a conviction that is related to the delivery of an item or service under a federal or state health care program.

D. Petitioners' exclusion for a period of five years is the mandatory minimum period as a matter of law.

An exclusion under section 1128(a)(1) of the Act must be for a minimum mandatory period of five years. Section 1128(c)(3)(B) of the Act. When the I.G. imposes an exclusion for the mandatory five-year period, the reasonableness of the length of the exclusion is not an issue. 42 C.F.R. § 1001.2007(a)(2).

VII. CONCLUSION

Sections 1128(a)(1) and 1128(c)(3)(B) of the Act mandate that Petitioner be excluded from Medicare, Medicaid, and all other federal health care programs for a period of at least five years because of his conviction of a criminal offense related to the delivery of an item or service under a federal or state health care program. The five-year exclusion is therefore sustained.

Anne E. Blair

Administrative Law Judge