Eugene Shusman, R. Ph., CR No. 130 (1991)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of:
Eugene Shusman, R. Ph.,

Petitioner,
- v. -
The Inspector General.

DATE: May 24, 1991

Docket No. C-227

DECISION

Petitioner, a registered pharmacist, timely requested a hearing before an Administrative Law Judge (ALJ)
to contest a determination by the Inspector General (I.G.) of the United States Department of Health and
Human Services (DHHS) to exclude Petitioner from participation in the Medicare and Medicaid programs,
pursuant to section 1128(b)(5)(B) of the Social Security Act (Act). The I.G. stated that Petitioner's federal
exclusion was predicated on Petitioner's State preclusion from the Pennsylvania Medical Assistance
Program because of improper billings and dispensings. The I.G. informed Petitioner that his federal
exclusion was for an indefinite period (until he is reinstated in the Pennsylvania Medical Assistance
program). Petitioner argues that the I.G. has no basis to exclude him under section 1128 (b)(5)(B) because
his State preclusion was voluntary and without a determination of fault or culpability.

The parties submitted this case on cross-motions for summary disposition, with supporting documentary
evidence. Petitioner waived an in-person evidentiary hearing. Based on the documentary evidence, briefs,
and arguments submitted by the parties, and the applicable law, I conclude that the exclusion imposed by
the I.G. is reasonable and appropriate.

BACKGROUND

By letter dated February 6, 1990, the I.G. notified Petitioner that he was being excluded as a result of his
preclusion from the Pennsylvania Medical Assistance Program by the Pennsylvania Department of Welfare
(DPW) for reasons bearing upon his professional competence, professional performance, or financial
integrity within the meaning of section 1128(b)(5)(B) of the Act. The I.G. further advised Petitioner that
he was being excluded until he is "re-instated in the Pennsylvania Medical Assistance Program." In his
request for a hearing, Petitioner disputed the basis and authority of the I.G. to exclude him. I held a
telephone prehearing conference in this case on June 27, 1990, and an oral argument on December 21,
1990. During the prehearing conference and the oral argument, Petitioner waived his right to an in-person
evidentiary hearing and the parties agreed to submit the case on the basis of documentary evidence and
briefs.


APPLICABLE STATUTES AND REGULATIONS

I. The Federal Statute.

Section 1128 of the Act is codified at 42 U.S.C. 1320a-7 (West U.S.C.A., 1990 Supp.). Section
1128(b)(5)(B) of the Act permits the I.G. to exclude from Medicare and Medicaid participation any
individual or entity which has been suspended or excluded from participation, or otherwise sanctioned,
under a State health care program, for reasons bearing on the individual's or entity's professional
competence, professional performance, or financial integrity.


II. The Federal Regulations.

The governing federal regulations (Regulations) are codified in 42 C.F.R., Parts 498, 1001, and 1002
(1989). Part 498 governs the procedural aspects of this exclusion case; Parts 1001 and 1002 govern the
substantive aspects.

ISSUES

The issues are:

1. Whether Petitioner was "suspended or excluded" from participation, or "otherwise sanctioned" under a
State health care program, for reasons bearing on his "professional competence, professional performance,
or financial integrity," within the meaning of section 1128(b)(5)(B) of the Act;

2. Whether this exclusion violates the ex post facto clause of the Constitution of the United States; and

3. Whether the length of Petitioner's exclusion is reasonable and appropriate.


FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Petitioner is a registered pharmacist in Philadelphia, Pennsylvania, and was the owner of six
pharmacies. P. Br. 2.

2. By an Order to Show Cause (State Order to Show Cause) dated June 16, 1986, Petitioner was notified
by the Pennsylvania Department of Public Welfare (DPW) that DPW proposed to terminate Petitioner's
provider agreement and the provider agreement of three of his pharmacies and to preclude him and his
three pharmacies from participation in the Medical Assistance Program, which is the Pennsylvania
Medicaid program. Joint Ex. A.

3. DPW alleged that Petitioner or his pharmacies had, among other things, illegally billed for brand name
drugs, but supplied generics, at various times in 1984 and 1985. Joint Ex. A.

4. DPW and Petitioner entered into a stipulation (State (Stipulation). On December 13, 1988, the State
Stipulation became final and was adopted by DPW. The State Stipulation stated that: (1) Petitioner was
precluded from participation in the Pennsylvania Medical Assistance Program for a period from March 28,
1988 through and including March 28, 1992 (four years); (2) the three pharmacies owned by Petitioner
(and the subject of allegations in the State Order to Show Cause) were sold by Petitioner effective March
28, 1988; and (3) there was no determination of fault or culpability. Joint Ex. B.

5. By letter dated October 24, 1989, the I.G. informed Petitioner that the DHHS was considering excluding
Petitioner from participation in the Medicare and Medicaid programs until he is reinstated in the
Pennsylvania Medicaid Program by DPW. Joint Ex. C.

6. By letter dated November 22, 1989, Petitioner responded to the I.G.'s October 24, 1989 letter. Joint Ex.
D.

7. By letter dated February 6, 1990, the I.G. notified Petitioner that he was being excluded from
participating in the Medicare and Medicaid programs pursuant to section 1128(b)(5)(B) of the Act until he
is reinstated in the Pennsylvania Medical Assistance Program by DPW. I.G. Ex. 6.

8. The Pennsylvania Medical Assistance program, which is administered by DPW, is a State health care
program, within the meaning of sections 1128(h) and 1128(b)(5)(B) of the Act.

9. Petitioner was "excluded or suspended" or "otherwise sanctioned" under "a State health care program
for reasons bearing" on his "professional competence, professional performance, or financial integrity",
within the meaning of section 1128(b)(5)(B) of the Act.

10. The Secretary of Health and Human Services (the Secretary) delegated to the I.G. the authority to
determine, impose, and direct exclusions pursuant to section 1128 of the Act. 48 Fed. Reg. 21662, May
13, 1983.

11. The I.G. was authorized to impose an exclusion against Petitioner under section 1128(b)(5)(B) of the
Act. 42 U.S.C. 1320a-7(b)(5)(B).

12. This exclusion does not violate the ex post facto clause of the United States Constitution.

13. The exclusion imposed and directed by the I.G. is reasonable and appropriate.


DISCUSSION

I. Petitioner Was "Suspended Or Excluded" From or "Otherwise Sanctioned" Under A "State
Health Care Program, For Reasons Bearing On [His] Professional Competence, Professional Performance,
or Financial Integrity," Within The Meaning Of Section 1128(b)(5)(B) Of The Act.

Section 1128(b)(5)(B) of the Act grants the authority to exclude any individual who has been:


...suspended or excluded from participation, or otherwise sanctioned, under -
. . .
(B) a State health care program, for reasons bearing upon the individual's or entity's professional
competence, professional performance, or financial integrity.

Thus, the first question to be resolved here is whether Petitioner was "suspended", "excluded", or
"otherwise sanctioned". This question can be resolved by examining the terms of the State Stipulation.
There is no dispute that Petitioner agreed to be "precluded" from the Pennsylvania Medical Assistance
Program for a period of four years. FFCL 4. Accordingly, I conclude that Petitioner was "excluded,"
within the meaning of section 1128 (b)(5)(B). Next, under the terms of the State Stipulation, Petitioner
agreed that he sold his three pharmacies. FFCL 4. Accordingly, I conclude that Petitioner was "otherwise
sanctioned," within the meaning of section 1128 (b)(5)(B).

I conclude that the term "excluded" in section 1128 (b)(5)(B) is synonymous with the term "precluded" in
the State Stipulation. Under the terms of the State Stipulation, Petitioner agreed to be "precluded" from
participation in the State Medical Assistance Program. The dictionary defines "preclude" as "2. to shut
out...: prevent or hinder by necessary consequence or implication : deter action of, access to, or enjoyment
of...." Webster's Third New International (unabridged) Dictionary, 1976 edition at 1785. The same
dictionary (at p. 793) defines "exclude" as to "bar from participation" or to "shut out." The definition of the
term "preclude" is so similar to the term "exclude" as to make the terms synonymous. Thus, the State
Stipulation, although entered into without a finding of culpability, shut out or "excluded" Petitioner from
the enjoyment of the Pennsylvania Medical Assistance Program, within the meaning of Section 1128
(b)(5)(B) of the Act.

The definition of the word sanction includes "a mechanism of social control that punishes deviancy from or
rewards conformance to the normative standards of behavior existing in a society." Webster's Third New
International (unabridged) Dictionary, 1976 Edition at 2009. As part of the settlement between Petitioner
and DPW, and in the wake of serious charges of wrongdoing, Petitioner sold his three pharmacies. Such a
forced sale is a "mechanism of social control." Thus, Petitioner was "otherwise sanctioned", within the
meaning of section 1128 (b)(5)(B) of the Act.

Petitioner argues, in effect, that he was not "suspended or excluded" or "otherwise sanctioned" by a State
health care program because his was a voluntary preclusion from the Pennsylvania Medical Assistance
Program and culpability was not established. P. Br. 5. Petitioner, in effect, asserts that since the findings
of DPW in the State Order To Show Cause are only allegations, and since the State Stipulation specifically
states that there is no determination of culpability or wrongdoing, I must conclude that Petitioner was not
"suspended or excluded" or "otherwise sanctioned." He relies on the case of Joel A. Korins, D.P.M., DAB
Civ. Rem. C-176 (1989), and argues, in effect, that individuals who agree to be excluded from or
sanctioned by a State Medicaid Program without admitting wrongdoing are not susceptible to section 1128
(b)(5)(B) exclusions.

Korins involved a petitioner who had been indicted in Massachusetts for the criminal offenses of larceny
and filing false claims with the Massachusetts Medicaid program. Petitioner there entered into an
agreement with prosecuting authorities which resolved the criminal charges against him. As an element of
that agreement, Petitioner agreed to withdraw as a provider from the Massachusetts Medicaid Program, but
did not admit that he had violated any laws. ALJ Kessel concluded that no "sanction" had been imposed
because no wrongdoing was ever established.

The I.G. argues that Petitioner's federal exclusion is properly based upon a review of the State Stipulation
and the State Order To Show Cause, and is authorized by section 1128(b)(5)(B) of the Act. I.G. Br. 3-10.
The I.G. attempts to distinguish Korins. The I.G. argues that the State Stipulation here stated that
Petitioner was "precluded" from participation, whereas in Korins the agreement stated that Petitioner
"withdrew" from participation. Thus, the I.G. argues, under the terms of the State Stipulation itself,
Petitioner was excluded from the State Medicaid program by DPW and the central issue of Korins need not
be reached (i.e., whether Petitioner was "sanctioned" if no wrong was ever admitted).

The I.G. erroneously tries to distinguish the term "exclusion" from the term "sanction". An exclusion is a
sanction; there is no distinction between an exclusion and a sanction under section 1128 (b)(5)(B).
Petitioner, in effect, erroneously argues that wrongdoing must be found in order for his State "preclusion"
to be held to be a "sanction" under section 1128 (b)(5)(B). I conclude that an individual can voluntarily
agree to be excluded or sanctioned without a finding of culpability or wrongdoing. Petitioner correctly
argues that such a conclusion requires a departure from the decision in Korins. I disagree with Korins
insofar as I conclude that a voluntary preclusion and a sale of three pharmacies during the pendency of
charges or allegations of serious wrongdoing, as here, is an "exclusion" and a "sanction."

My findings and conclusions that Petitioner was "excluded" and "otherwise sanctioned" are based on my
analysis of the terms of the State Stipulation and State Order to Show Cause. That the State Stipulation
may have been entered into voluntarily by Petitioner, and that no determination of fault or culpability was
made, does not mean that an exclusion or sanction was not involved. The State Stipulation stated that
Petitioner was "precluded from direct and indirect participation in the Medical Assistance Program for the
time period March 28, 1988 through and including March 28, 1992." Joint Ex. B/1. The State Stipulation
noted that "as a result of withdrawing the appeals," Petitioner had sold the three pharmacies in question on
March 28, 1988, the first day of the preclusion, and had no further ownership interest or involvement in the
pharmacies. Joint Ex. B/1. The State Stipulation also stated that Petitioner was acknowledging that he
would not engage in specified practices constituting "indirect participation." Joint Ex. B/2. The State
Stipulation incorporated the first paragraph of the State Order To Show Cause. Joint Ex. B/2. Finally, the
State Stipulation stated that Petitioner was not acknowledging fault or culpability. Joint Ex. B/3.

In addition to the fact that section 1128 (b)(5)(B) does not specifically require a finding of wrongdoing, I
am influenced by my belief that Congress did not intend that an individual could automatically evade
exclusion under section 1128(b)(5)(B) by simply entering into a stipulation or agreement during the
pendency of serious charges of wrongdoing. I conclude that such an outcome is contrary to the legislative
intent of section 1128(b)(5)(B). The legislative history states:

The purpose of the provision is to correct the anomaly in current law whereby individuals
or entities found unfit to participate in one Federal health care program, or in one Federally funded State
health care program, may continue to participate in Medicare or Medicaid or the other State programs.

S. Rep. No. 109, 100th Cong., 1st Sess., 8, reprinted in U.S. Code Cong. and Admin. News 682, 689
("Senate Report"). While there is some support for Petitioner's argument in the words "found unfit" above,
interpreting the section as Petitioner argues would allow the anomaly Congress sought to correct. The fact
is, there would never have been a voluntary preclusion of Petitioner without the charges of wrongdoing by
DPW in its State Order To Show Cause.

Korins noted that where Congress intended to mandate or authorize exclusion of parties who voluntarily
entered into agreements in order to avoid exclusions, it specifically stated its intent. Korins looked to other
parts of section 1128 in which Congress found it necessary to provide explicitly that a plea of nolo
contendere constituted a "conviction" and that license surrender pending a disciplinary proceeding
constituted a "license revocation" under section 1128.

I do not agree with the analysis of Korins that a parallel provision would be necessary for a voluntary
agreement to be considered a "sanction" under section 1128 (b)(5)(B). As the I.G. points out, the terms
"convictions" and "license revocations" are specific, whereas the term "otherwise sanctioned" is general.
I.G. Br. 9. Hence, it is reasonable to conclude that Congress intended to include voluntary agreements,
during the pendency of proceedings involving serious allegations of wrongdoing, within the meaning of the
term "sanction" or the term "exclusion," without an explicit statement to that effect.

I also find and conclude that Petitioner's preclusion was for reasons bearing on his "professional
competence, professional performance, or financial integrity," within the meaning of section 1128(b)(5)(B)
of the Act. The determination of whether or not the State preclusion was for reasons bearing on
professional competence, performance, or financial integrity also has to be made by examining DPW's
Order to Show Cause and the State Stipulation. These documents reflect that Petitioner was notified that
DPW proposed to terminate Petitioner's provider agreement and to preclude him from participation in the
program. The State Order to Show Cause alleged that Petitioner had violated the program's regulations by
altering prescriptions, dispensing misbranded drugs by using false prescription labels, allowing employees
who were neither registered pharmacists nor supervised by registered pharmacists to dispense drugs,
dispensing drugs which were not in containers with child-proof caps, and billing DPW for different drugs
than those which were actually dispensed to medical assistance recipients. Joint Ex. A/2-4.

Although section 1128(b)(5)(B) does not define the terms "professional competence," "professional
performance," or "financial integrity," it is reasonable to conclude that these terms encompass those
circumstances where a termination or preclusion proceeding concerns a provider's qualifications and
manner of functioning in his profession. DPW's basis for proposing to preclude Petitioner was that he had
engaged in the activities described above. Although the parties agree, and the State Stipulation states, that
culpability was not established, Petitioner entered into the State Stipulation because of the allegations.
Therefore, while the facts were not established by a court, the State Stipulation must be read in the context
of the State Order to Show Cause. The allegations in the State Order to Show Cause bear on professional
competence, professional performance, and financial integrity.

Petitioner attempts to distance himself from the actions outlined in the State Order To Show Cause.
Petitioner states that the actions were those of his employees and, therefore, have no bearing on his
professional competence, performance, or financial integrity. A similar argument was rejected in Summit
Health Limited, dba Marina Convalescent Hospital, DAB Civ. Rem. C-108 (1989), aff'd DAB App. 1173
(1990). See also, Leonard Harman, D.O., DAB Civ. Rem. C-162 (1990). Petitioner signed the State
Stipulation and he agreed to be precluded, not his employees. Moreover, assuming, arguendo, that
Petitioner's statements are true, he nevertheless is responsible for the acts of his employees.

Accordingly, the exclusion imposed against Petitioner by the I.G. was authorized by section 1128(b)(5)(B)
of the Act.


II. The 1987 Amendments to Section 1128 of the Act Apply To This Case.

Congress amended section 1128 in 1987 (1987 Amendments) to include permissive exclusions, such as this
one. Petitioner argues that Congress did not intend to apply the 1987 Amendments to conduct occurring
prior to their passage, as in this case. Petitioner then argues that if Congress did intend the 1987
Amendments to apply, this would violate the ex post facto clause of the United States Constitution.

For the same reasons I expressed in the case of Betsy Chua, M.D. and Betsy Chua, M.D., S.C., DAB Civ.
Rem. C-139 (1990), aff'd. DAB App. 1204 (1990), I conclude (1) that Congress did intend to apply the
1987 Amendments to final actions occurring after August 18, 1987 (the effective date of the 1987
Amendments), such as the state preclusion here; and (2) that the constitutional prohibition against ex post
facto laws does not bar the I.G. from imposing an exclusion in this case. The Board in Chua (at p. 7) stated
that section 1128 is a civil remedy, not a penal law, and did not trigger the Constitutional protection from
ex post facto laws. Moreover, the State preclusion, which is the predicate for this federal exclusion, took
place after the effective date of the 1987 Amendments, i.e., August 18, 1987. See Francis Shaenboen,
R.Ph., DAB App. 1249, at 5-6 (1991).

III. The Exclusion Imposed and Directed by the I.G. Is Appropriate In This Case.

The I.G. excluded Petitioner from participating in the Medicare and Medicaid programs until he is
reinstated in the Pennsylvania Medicaid program. His exclusion from the Pennsylvania Medicaid program
is until March 28, 1992, less than a year away. Since I have decided that the I.G. had discretion to impose
an exclusion in this case, I must now decide if the length of exclusion imposed is reasonable and
appropriate.

The Regulations provide that certain criteria be considered in determining the length of exclusion in this
case. 42 C.F.R. 1001.125. Although the Regulations do not define what circumstances may be considered
as mitigating, I must also consider any mitigating circumstances. See 42 C.F.R. 1001.125(b)(4).

The I.G. argues that the purpose of an exclusion under section 1128(b)(5)(B) is to protect program
recipients and beneficiaries. The I.G. argues that the exclusion in this case is reasonable because the State
precluded Petitioner for four years and Congress intended that Petitioner be excluded from Medicare and
other state health care programs for the same period.

Petitioner argued that section 1128(b)(5) does not apply here, not that mitigating factors exist for reducing
the length of the exclusion. Petitioner presented no argument that the term of the exclusion should be
reduced because of mitigating factors. Nevertheless, Petitioner's arguments contain references which could
be considered to be of a mitigating nature: that the actions were not committed by Petitioner, but by his
employees and without his knowledge.

I conclude that the exclusion here is reasonable and appropriate. My decision is influenced by the fact that
Petitioner did not present any evidence to support his assertion that the actions which led to the State
preclusion were committed by Petitioner's employees and without Petitioner's knowledge. My decision is
also influenced by the fact a shorter exclusion would result in the very anomaly which Congress has sought
to remove -- a Petitioner excluded in one state participating in Medicare or Medicaid programs in other
states during the period of the exclusion. I do not foreclose the possibility of a different outcome in
another case. But in such a case, facts would necessarily have to be established which demonstrate that the
provider is trustworthy and that program recipients and beneficiaries would not be harmed by a shorter
exclusion. This is not such a case.

IV. It Is Well Settled That Summary Disposition Is Appropriate In Exclusion Cases And That There
Is No Need For An Evidentiary Hearing In This Case.

Summary disposition is appropriate in an exclusion case where there are no disputed issues of material fact
and where the undisputed facts demonstrate that one party is entitled to judgment as a matter of law. Leon
Brown, DAB App. 1208 (1990); Surabhan Ratanasen, M.D., DAB App. 1138 at 8 (1990). Also, a
petitioner may waive an in-person evidentiary hearing and have his or her case decided on the basis of
documentary evidence and briefs, as here.

I have concluded that, based on the undisputed material facts contained in the record of this case, the I.G.
properly excluded Petitioner from the Medicare and Medicaid programs, until he is reinstated in the
Pennsylvania Medical Assistance Program. Accordingly, the I.G. is entitled to summary disposition as a
matter of law. See Charles W. Wheeler and Joan K. Todd, DAB App. 1123 at 7-9 (1990); Fed. R. Civ. P.
56.
c\
CONCLUSION


Based on the undisputed material facts and the law, I conclude that the I.G.'s determination to exclude
Petitioner from participation in the Medicare and Medicaid programs was authorized by law. I further
conclude that the exclusion is reasonable and appropriate in this case.

IT IS SO ORDERED.


__________________________
Charles E. Stratton
Administrative Law Judge