SUBJECT:

William Arca,

Petitioner,

The Inspector General.

DECISION

I sustain the Inspector General's (I.G.) determination to exclude William Arca, Petitioner, from participation in Medicare, Medicaid, and all other federal health care programs for a period of 12 years. I find that the I.G. is authorized to exclude Petitioner under section 1128(a)(1) of the Social Security Act (Act), and that the 12-year exclusion falls within a reasonable range.

I. BACKGROUND

By letter dated September 30, 2003, 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 12 years. I.G. Exhibit (Ex.) 1. In that letter, the I.G. explained that she is authorized to exclude him under section 1128(a) of the Act based on his conviction in the Nassau County Supreme Court for the State of New York of a criminal offense related to the delivery of an item or service under the Medicaid and/or Medicare programs.

Petitioner thereafter requested a hearing, arguing that his period of exclusion should be reduced. I held a prehearing conference on December 17, 2003. The parties agreed that an in-person hearing was not necessary, and that the matter could be resolved on the written record. Petitioner, through counsel, conceded the appropriateness of exclusion, but challenged the length of the exclusion beyond five years. Scheduling Order (December 23, 2003). Both parties have submitted briefs, accompanied by documentary evidence. The I.G. filed five proposed exhibits as part of her submission, and Petitioner filed one proposed exhibit. In the absence of objection, I receive into evidence I.G. Exs. 1 - 5 and Petitioner's (P.) Ex. 1. The I.G. also submitted a reply brief.

The basic facts of this case are not in dispute. Petitioner was a pharmacist, licensed in the State of New York, who owned and operated his own pharmacy. On March 10, 2003, he waived indictment and pled guilty to one count of grand larceny, New York Penal Law § 155.40(1). I.G. Ex. 2. He admitted that between approximately January 1, 1998 and June 30, 2000, on behalf of his pharmacy, he submitted false claims to the state Medicaid program, receiving more than $50,000 in Medicaid payments to which he was not entitled. Id. He was sentenced to four weekends of incarceration followed by five years probation, and ordered to pay $83,290 in restitution, plus $14,000 in interest. I.G. Ex. 3, at 7-9. The New York State Department of Health subsequently excluded him from participation in the Medicaid program. I.G. Ex. 4.

II. ISSUE

Petitioner concedes that he was convicted of a criminal offense related to the delivery of an item or service under the Medicare/Medicaid programs, and acknowledges the mandatory imposition of a five-year exclusion. P. Hearing Request; See Scheduling Order (December 23, 2003). The sole issue before me is whether the length of the exclusion in excess of the five-year mandatory minimum is reasonable. 42 C.F.R. § 1001.2007.

III. DISCUSSION

Section 1128(a)(1) requires that the Secretary of Health and Human Services (Secretary) exclude an individual who has been convicted under federal or state law of a criminal offense related to the delivery of an item or service under Medicare or a state health care program. ⁽¹⁾ 42 C.F.R. § 1001.101. Individuals excluded under section 1128(a)(1) of the Act must be excluded for a period of not less than five years. Act, section 1128(c)(3)(B). The Secretary has delegated to the I.G. the authority to impose exclusions. 42 C.F.R. § 1001.401(a). 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 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

1. The 12-year exclusion falls within a reasonable range. 42 C.F.R. § 1001.102(b)(2). ⁽²⁾

a. Aggravating factors justify lengthening the period of exclusion beyond the five-year mandatory minimum.

By regulation, the Secretary established the criteria for determining the length of exclusions imposed pursuant to section 1128 of the Act. 42 C.F.R. § 1001.102. Evidence that does not pertain to one of the aggravating or mitigating factors specified in the regulation is not relevant and may not be used to decide whether an exclusion of a particular length is reasonable.

The following factors may serve as bases for lengthening the period of exclusion: (1) the acts resulting in the conviction, or similar acts, resulted in a financial loss to Medicare and the state health care programs of $5,000 or more; (2) the acts that resulted in the conviction, or similar acts, were committed over a period of one year or more; (3) the sentence imposed by the court included incarceration; and (4) the convicted individual or entity 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). The presence of an aggravating factor or factors, not offset by any mitigating factor or factors, justifies lengthening the mandatory five-year period of exclusion.

Here, the I.G. cited four factors as bases for extending the period of Petitioner's exclusion beyond the mandatory five-year minimum: (1) Petitioner's actions resulted in a program financial loss in excess of $5,000; (2) his actions were committed over a period of more than one year; (3) the sentence imposed by the court included incarceration; and (4) based on the circumstances that serve as the basis for imposing this exclusion, a state agency took an action adverse to Petitioner.

Petitioner does not challenge the existence of any of these factors. His crimes resulted in a program financial loss well in excess of $5,000, with the court ordering him to pay $83,290 in restitution. The acts that resulted in his conviction occurred over a period of about two and a half years - from January 1, 1998 through June 30, 2000 - well longer than the one year required for aggravation. He acknowledges that the sentence imposed by the court included incarceration; although he points out that his period of incarceration was very limited. Nor does he dispute that the state agency imposed its own adverse action. On April 7, 2003, the New York State Department of Health notified him that it was excluding him from participation in the Medicaid program, effective five days from the date of the notice. He may request reinstatement two years from the date of the notice. I.G. Ex. 4.

Although Petitioner does not challenge the presence of aggravating factors, he points out, correctly, that the sheer number of aggravating factors does not determine a reasonable length of exclusion. Petitioner argues that "the quality of the circumstances" should dictate the period of exclusion and that, in his case, the I.G. failed to consider the "variety of personal circumstances" that led to his misconduct. Without exactly denying his own culpability, he argues that "a variety of personal circumstances" led to his reliance on three pharmacy employees who did not keep adequate records, ultimately resulting in his criminal conviction.

The record, however, does not support such a benign characterization of Petitioner's conduct. His felony conviction was not based on a simple lack of oversight. He was convicted of acting "with intent" to appropriate for himself and his corporation a large sum of money. He admitted that, for approximately two and a half years, he submitted Medicaid claims "which he knew falsely represented" that his pharmacy had provided pharmaceuticals to beneficiaries. I.G. Ex. 2, at 5. I am bound to accept this characterization in assessing the "quality of circumstances" surrounding his crime. The regulations explicitly preclude my review of the facts underlying his conviction:

When the exclusion is based on the existence of a conviction . . . the basis for the underlying determination is not reviewable and the individual or entity may not collaterally attack the underlying determination, either on substantive or procedural grounds, in this appeal.

42 C.F.R. § 1001.2007(d); Joann Fletcher Cash at 7; Chandler Kachoria, R. Ph., DAB No. 1380, at 8 (1993).

Petitioner thus knowingly and intentionally engaged in illegal conduct for two and a half years. He stole a lot of money from the Medicaid program; more than 16 times the amount sufficient to justify increasing the mandatory minimum period of exclusion. Although the sentencing judge apparently (and perhaps appropriately) sympathized with Petitioner's personal domestic situation and limited Petitioner's jail time to four week-ends, he nevertheless found Petitioner's conduct serious enough to require some incarceration. I.G. Ex. 3. Moreover, as the Board has noted, in contrast to other aggravating factors, the incarceration factor contains no threshold figure below which the aggravating factor would not exist. "[T]he focus of this aggravating factor . . . is the fact that the sentence included incarceration." Gerald A. Snider, M.D., DAB No. 1637, at 8 (1997).

Based on these factors, I am unable to find a 12-year exclusion outside the reasonable range. I next consider whether any mitigating factors justify reducing the 12-year exclusion.

b. No mitigating factors offset the aggravating factors.

The regulations consider just three factors to be mitigating: (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 demonstrates that a petitioner had a mental, physical, or emotional condition that reduced his 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 the mitigating factor as "in the nature of an affirmative defense," the Board has ruled that a 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).

Obviously, because Petitioner's felony conviction involved financial losses to the program significantly greater than $1,500, the first factor does not apply here. And, although Petitioner alludes generally to past cooperation with law enforcement officials ("reporting instances of suspicious narcotics, enabling them to make a number of cases over the years against the individuals presenting the prescriptions and the physicians engaged in misconduct"), he offers no evidence of such cooperation and does not argue that his past cooperation establishes a mitigating circumstance for this case. Nor does Petitioner claim that a medical condition reduced his culpability.

Petitioner refers to his personal domestic situation, his reliance on employees, his valuable service to his community, and his age as factors that justify a shorter period of exclusion. However, under the regulations, I may not consider these to be mitigating factors that offset the aggravating factors. Since this case presents none of the three mitigating factors set forth in the regulation, I find that no mitigating factors justify reducing the period of exclusion.

c. The fact that the I.G. has imposed shorter periods of exclusion in other cases, does not entitle Petitioner to a shorter period of exclusion.

Finally, Petitioner points to reported I.G. decisions, and argues that his 12-year exclusion does not fall within a reasonable range because he has been more harshly treated than others convicted of similar offenses. These exclusion matters are very fact specific. A case decision, which may rest on limited points of law or fact, does not always reflect the totality of the circumstances. To compare cases in this manner, therefore, presents the risk of comparing apples to oranges. On the other hand, careful review of the I.G.'s actions could offer some guidance as to whether a particular exclusion period falls within a reasonable range.

Here, however, comparing Petitioner's situation to the circumstances set forth in the cases he cites does not place his period of exclusion outside a reasonable range. Two of the cases cited, Barry D. Garfinkel, supra, and Frank A. DeLia, D.O., DAB No. 1620 (1997), are simply not comparable because they involve permissive exclusions under section 1128(b) of the Act, in contrast to Petitioner's mandatory exclusion under section 1128(a). The benchmark period for exclusion under section 1128(b) is three years, not five, and the convictions which ultimately led to exclusion in Garfinkel and DeLia were misdemeanors, rather than felonies. That shorter periods of exclusion are imposed in cases brought under section 1128(b) is, therefore, not surprising. Compare 42 C.F.R. § 1001.101 with 42 C.F.R. § 1001.102.

Petitioner places particular emphasis on the resolution of John (Juan) Urquijo, DAB No. 1735 (2000). That case involved an exclusion under section 1128(a). Citing three aggravating factors - financial loss in excess $1,500, ⁽³⁾ criminal acts committed over a period of more than one year, and Petitioner's sentence of incarceration ⁽⁴⁾ - the I.G. imposed a 15-year exclusion. On appeal, the ALJ reduced the period of exclusion to seven years. However, he based the seven-year exclusion on findings of only two aggravating factors, and one significant mitigating factor. The ALJ rejected the I.G.'s determination that the criminal actions were committed over a period of more than one year. The administrative law judge (ALJ) also found a mitigating factor - the Petitioner's "full and total" cooperation with federal authorities resulting in additional cases being investigated. In sustaining the ALJ decision, the Board noted "that the ALJ gave considerable weight to the high degree of cooperation Petitioner gave to prosecuting authorities based on the testimony of an Assistant U.S. Attorney." Urquijo at 11. I agree. In light of the significant aggravating factors presented in Urquijo, only affording very significant weight to the mitigating circumstance could justify such a short exclusion period. Here, in contrast, I have found no mitigating circumstance. Moreover, I give considerable weight to the duration of Petitioner's crimes. So, even though Petitioner's crimes here involved less financial loss to the government program, and Petitioner served a shorter jail sentence, given the totality of the circumstances in both cases, I do not find the 12-year exclusion imposed here out of line with the seven-year exclusion ultimately imposed in Urquijo.

With respect to Petitioner's reliance on Gerald Snider, supra, I consider the 10-year exclusion imposed there to be "within range" of this 12-year exclusion. Snider presented three aggravating circumstances - the amount of loss to the program (probably $119,532 although the record contains inconsistencies as to the exact amount), length of time over which the criminal activity occurred (20 months), and the criminal sentence included incarceration (one year and one day). Although the amount stolen was greater in Snider, the duration of criminal activity was significantly shorter. Petitioner's criminal conduct here lasted 10 months (or 50%) longer. Dr. Snider was sentenced to far more jail time, but his was the minimum length of sentence that the court could impose for his offense, and, as noted above, under the regulation, the length of sentence is not so significant as the "fact that the sentence included incarceration." 42 C.F.R. § 1101.102(b)(5). Thus, given the totality of the circumstances in both cases, I do not find the 12-year exclusion imposed here out of line with the 10-year exclusion imposed in Snider.

Based on these three factors, and in the absence of any mitigating factors, I am unable to find unreasonable a 12-year exclusion. The length of time over which Petitioner's criminal conduct occurred, as well as the amount of restitution, suggest significant risk to program integrity.

IV. CONCLUSION

For the reasons set forth above, I conclude that the I.G. was authorized, under section 1128(a)(1) of the Act, to exclude Petitioner from participation in Medicare, Medicaid, and all other federal health care programs. Considering the totality of the evidence, I find the 12-year exclusion within a reasonable range.

Carolyn Cozad Hughes

Administrative Law Judge

1. The term "state health care program" includes a state's Medicaid program. Act, section 1128(h)(1); 42 U.S.C. § 1320a-7(h)(1).

2. I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding, in italics, as a separate hearing.

3. 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). Petitioner Urquijo was ordered to pay $360,000 in restitution.

4. Petitioner Urquijo was sentenced to 30 days of incarceration followed by 11 months of house arrest.