Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
David G. Harow, D.P.M.,
and Associated Podiatrists
of Worcester, P.C.,
Petitioners,
- v. -
The Inspector General.
DATE: December 11, 1991
Docket No. C-394
DECISION
By letters dated April 12, 1991, the Inspector General
(I.G.) notified Petitioners David G. Harow, D.P.M.
(Petitioner Harow) and Associated Podiatrists of
Worcester, P.C. (Petitioner Associated Podiatrists), that
they were being excluded from participation in the
Medicare program, and any State health care program, as
defined in section 1128(h) of the Social Security Act
(Act). 1/ The I.G.'s notices informed Petitioners that
their exclusion resulted from State convictions of a
criminal offense related to the delivery of an item or
service under Medicare. The I.G. further informed
Petitioners that section 1128(a)(1) of the Act requires
that individuals and entities convicted of such program-
related offenses be excluded for a minimum period of five
years. The I.G. told Petitioners that they were being
excluded for a period of seven years, two years longer
than the mandatory minimum under section 1128(c)(3)(B).
Petitioners timely requested a hearing and the case was
assigned to me for a hearing and decision. Two
prehearing conferences were held on July 11 and 17, 1991.
The substance of those conferences was summarized in my
July 30, 1991 Prehearing Order and Notice of Hearing.
The Petitioners, through counsel, indicated that they did
not contest the authority of the I.G. to exclude them
pursuant to section 1128(a)(1) of the Act. They stated
they were contesting only the reasonableness of the
length of the seven year exclusion. Petitioners stated
on July 11, 1991 that an in-person hearing would not be
necessary to decide this case. Counsel for the I.G.
indicated her agreement with this view. The parties were
given until July 17, 1991 to consider their litigation
strategies, and, at the July 17 prehearing conference,
they agreed to proceed with this case based on a written
record instead of an in-person hearing.
The parties have timely submitted their list of
stipulated facts and briefs. Petitioner moved for leave
to submit an additional exhibit (marked as Petitioner's
Exhibit 11) and the I.G. did not object. I have admitted
all of the exhibits, including P. Ex. 11 2/, into
evidence. I have considered the evidence, the parties'
written briefs and supporting exhibits, and the
applicable laws and regulations. I conclude that the
I.G. was mandated by section 1128(a)(1) to exclude
Petitioners for at least five years. I conclude further
that the seven year exclusions which the I.G. imposed and
directed against Petitioners are reasonable. Therefore,
I sustain the exclusions.
ISSUE
The issue in this case is whether the seven year
exclusions imposed and directed against Petitioners by
the I.G. are reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner Harow is, and at all material times has
been, licensed as a podiatrist in the State of
Massachusetts. Stip. 3.
2. Petitioner Harow established Petitioner Associated
Podiatrists of Worcester, P.C., a professional
corporation incorporated under the laws of Massachusetts.
At all material times, Petitioner Harow has been the
president and sole shareholder of Associated Podiatrists.
Stip. 4; P. Ex. 1/1.
3. Petitioners were, at all times relevant, approved
providers under the Medicare program. As approved
providers, Petitioners were authorized to claim
reimbursement from Medicare for certain podiatric
services provided to Medicare beneficiaries. P. Ex. 1/2.
4. On March 6, 1989, Petitioners were indicted by a
federal grand jury for violation of 41 U.S.C. 1320a-
7b(a)(1) for making false representations of material
fact in an application for payment under the Medicare
program. The original indictment contained 15 counts.
Subsequently, one of the counts was dropped. Stip. 6; P.
Ex. 1/4.
5. The government alleged in each count of the
indictment that Petitioners had submitted false claims
for reimbursement to Medicare. Petitioners were alleged
to have claimed to have provided podiatric services to
Medicare recipients while knowing the services had not
been provided as claimed. The false claims allegedly
resulted in payments to Associated Podiatrists of between
$1,500 and $3,000. Stip. 7; P. Exs. 1/4, 1/5, 8.
6. Petitioners entered into a plea agreement whereby
Petitioner Harow pled guilty to eight counts of Medicare
fraud. Petitioner Associated Podiatrists pled guilty to
14 counts of Medicare fraud. Stip. 10, 11; P. Exs. 5 and
6.
7. Pursuant to the plea agreement, Petitioner Harow was
sentenced to one year's imprisonment on each of the eight
counts, to run concurrently. Petitioner Harow was fined
$5,000 on each of the eight counts he pled guilty to and
was additionally assessed $400, for a total of $40,400.
Petitioner Associated Podiatrists was fined $5,000 on
each of the fourteen counts it had pled to and was
additionally assessed $700, for a total of $70,700.
Stip. 15; P. Exs. 5, 6 and 8/1.
8. Petitioners, in a separate proceeding, entered into
a civil settlement agreement with the United States
Government. In the settlement agreement, Petitioners
agreed to jointly and severally pay the United States
$100,000 as a full and final settlement of any and all
potential civil claims and causes of action arising from
Petitioners' criminal cases. Petitioner Harow has paid
the United States the full $100,000. Stip. 12; P. Ex. 4.
9. Petitioner Harow was imprisoned for two months and
served two and a half months in a halfway house. He was
released early from his halfway house obligation because
of good behavior. Stip. 17; P. Ex. 8/1.
10. Petitioners were investigated by the Medicaid Fraud
Control Unit of the Department of the Massachusetts
Attorney General in 1988. The investigation resulted in
a Disposition Agreement in a Massachusetts State court
whereby Petitioners were indicted for false Medicaid
claims. The case was continued without a finding by the
court, and the charge was subsequently dismissed as per
the Disposition Agreement, pursuant to which Petitioner
Harow paid $19,948 in investigative costs and $52 in
restitution, for a total of $20,000. Stip. 19; P. Exs.
4, 8/2.
11. Petitioners were convicted of a criminal offense
related to the delivery of an item or service under the
Medicare program. Findings 4 - 7; Social Security Act,
section 1128(a)(1).
12. Petitioners' fraud included knowingly presenting
claims for Medicare reimbursement for items or services
which Petitioners did not provide. P. Exs. 1 - 5.
13. Petitioners' fraudulent activity occurred over
approximately an eight-month period, from August 1984
until March 1985. P. Br. at 4.
14. The Medicare program suffered pecuniary loss as a
result of Petitioners' fraud. P. Br. at 4 - 7; I.G. Br.
at 4; P. Ex. 1/4; P. Ex. 2; P. Ex. 4.
15. Petitioner Associated Podiatrists is, and at all
relevant times has been, wholly controlled by Petitioner
Harow and is essentially Petitioner Harow's corporate
alter ego. P. Br. at 2; See Stip. 4; P. Ex. 1/1.
16. Petitioner Harow's contention that his bout with
pneumonia and subsequent lung operation were a
contributing cause to his commission of fraud against the
Medicare program is not supported by any evidence of
record and is not credible.
17. On September 11, 1991, after a lengthy hearing
process, the Massachusetts Board of Registration in
Podiatry suspended Petitioner Harow's license to practice
podiatry for a period of three years. The three year
suspension was stayed for two years, with the remaining
year being reduced to six months to account for
Petitioner's incarceration. Petitioners'
characterization of the Massachusetts Board's procedure
as a six month suspension is misleading. P. Ex. 11.
18. The Secretary of Health and Human Services
(Secretary) delegated to the I.G. the authority to
determine, impose, and direct exclusions pursuant to
section 1128(a)(1) of the Act. 48 Fed. Reg. 21622 (May
13, 1983).
19. On April 12, 1991, the I.G. excluded Petitioners
from participating in Medicare and directed they be
excluded from Medicaid, pursuant to section 1128(a)(1) of
the Act.
20. The exclusion imposed and directed against
Petitioners is for seven years. I.G. Br. 1; P. Br. 1.
21. The I.G. had authority to impose and direct an
exclusion against Petitioner pursuant to section
1128(a)(1) of the Act, because Petitioner had been
convicted of a criminal offense related to the delivery
of an item or service under Medicare. Finding 11; Social
Security Act, section 1128(a)(1).
22. The minimum mandatory exclusion which the I.G. must
impose and direct against an individual pursuant to
section 1128(a)(1) of the Act is five years. Social
Security Act, section 1128(c)(3)(B).
23. An exclusion of seven years is needed in this case
to protect federally-funded health care programs and
their beneficiaries from the commission of future harm by
Petitioners. Findings 11 - 15.
ANALYSIS
The parties do not dispute that Petitioners were
convicted of a criminal offense related to the delivery
of an item or service under Medicare. Petitioner Harow
pled guilty to eight counts of Medicare fraud and
Petitioner Associated Podiatrists pled guilty to 14
counts of Medicare fraud. Petitioners' fraud consisted
of billing the Medicare program for procedures that were
not actually performed. The criminal conviction, on its
face, plainly relates to the delivery of an item or
service under Medicare. Jack W. Greene, DAB 1078 (1989),
aff'd sub nom. Greene v. Sullivan, 731 F. Supp. 835, 838
(E.D. Tenn. 1990); John A. Crawford, M.D., DAB CR160
(1991); Christino Enriquez, M.D., DAB CR119 (1991).
Petitioners do not dispute that they are subject to the
mandatory minimum five-year exclusion. What Petitioners
are contesting is the reasonableness of the seven year
exclusion imposed by the I.G. P. Br. 3.
Specifically, Petitioners contend that adding two years
to the mandatory minimum amounts to vindictive and
punitive action on the part of the I.G. P. Br. 3.
Petitioners further argue that the Medicare trust fund is
not in jeopardy from any of their future activities. P.
Br. 3. Petitioners contend that based on their
acceptance of criminal responsibility and the relatively
small amounts of money involved, their level of fault or
criminality is less than what exists in many, if not
most, Medicare fraud prosecutions. P. Br. 3 - 4, 6 - 8.
In deciding whether or not Petitioners' exclusions are
reasonable, I must review the evidence with regard to the
exclusion law's remedial purpose. Section 1128 is a
civil remedies statute. The remedial purpose of section
1128 is to enable the Secretary to protect federally-
funded health care programs and their beneficiaries and
recipients from individuals and entities who have proven
by their misconduct that they are untrustworthy.
Exclusions are intended to protect against future
misconduct by providers. Manocchio v. Sullivan, No. 90-
8114, slip op. at 1 (S.D. Fla. July 12, 1991).
Federally-funded health care programs are no more
obligated to deal with dishonest or untrustworthy
providers than any purchaser of goods or services would
be obligated to deal with a dishonest or untrustworthy
supplier. The exclusion remedy allows the Secretary to
suspend his contractual relationship with those providers
of items or services who are dishonest or untrustworthy.
The remedy enables the Secretary to assure that
federally-funded health care programs will not continue
to be harmed by dishonest or untrustworthy providers of
items or services. The exclusion remedy is closely
analogous to the civil remedy of termination or
suspension of a contract to forestall future damages from
a continuing breach of that contract.
Exclusions may have the ancillary benefit of deterring
providers of items or services from engaging in the same
or similar misconduct as that engaged in by excluded
providers. However, the primary purpose of an exclusion
is the remedial purpose of protecting the trust funds and
beneficiaries and recipients of those funds. Deterrence
cannot be a primary purpose for imposing an exclusion.
Where deterrence becomes the primary purpose, section
1128 no longer accomplishes the civil remedies objectives
intended by Congress. Punishment, rather than remedy,
becomes the end.
[A] civil sanction that cannot fairly be said
solely to serve a remedial purpose, but rather
can be explained only as also serving either
retributive or deterrent purposes, is
punishment, as we have come to understand the
term.
United States v. Halper, 490 U.S. 435, 448 (1989).
Therefore, in determining the reasonableness of an
exclusion, the primary consideration must be the degree
to which the exclusion serves the law's remedial
objective of protecting program recipients and benefi-
ciaries from untrustworthy providers. An exclusion is
not excessive if it does reasonably serve these
objectives.
The hearing in an exclusion case is, by law, de novo.
Social Security Act, section 205(b). Evidence which is
relevant to the reasonableness of the length of an
exclusion will be admitted in a hearing on an exclusion
whether or not that evidence was available to the I.G.
at the time the I.G. made his exclusion determination.
Evidence which relates to a petitioner's trustworthiness
or the remedial objectives of the exclusion law is
admissible at an exclusion hearing even if that evidence
is of conduct other than that which establishes statutory
authority to exclude a petitioner.
The purpose of the hearing is not to determine how
accurately the I.G. applied the law to the facts before
him, but whether, based on all relevant evidence, the
exclusion comports with legislative intent. My purpose
is not to second-guess the I.G.'s determination but to
decide whether the determination was extreme or
excessive. 48 Fed. Reg. 3744 (Jan. 27, 1983). Should I
determine that an exclusion is extreme or excessive, I
have authority to modify the exclusion, based on the law
and the evidence. Social Security Act, section 205(b).
The Secretary has adopted regulations to be applied in
exclusion cases. The regulations specifically apply to
exclusion cases for "program-related" offenses
(convictions for criminal offenses relation to Medicare
and Medicaid). The regulations express the Secretary's
policy for evaluating cases where the I.G. has discretion
in determining the length of an exclusion, including
exclusion periods beyond the mandatory minimum. The
regulations require the I.G. to consider factors related
to the seriousness and program impact of the offense and
to balance those factors against any factors that may
exist demonstrating trustworthiness. 42 C.F.R.
1001.125(b)(1) - (7).
I conclude that the crimes admitted to by Petitioners
establish that they are untrustworthy providers of care.
Given the extent and seriousness of Petitioners' crimes,
the lengthy exclusions imposed here are a reasonable
remedy. Petitioner Associated Podiatrists was convicted
of 14 counts of Medicare fraud. Petitioner Harow was
convicted of eight counts of Medicare fraud. Moreover,
Petitioner Harow admits in his own brief that the
corporation was his alter ego, in that he owned all of
the stock and had complete control over the daily
operation of the corporation. P. Br. at 2, 4.
Therefore, while Petitioner Harow was not convicted of
the same crimes as Petitioner Associated Podiatrists,
Harow was the controlling entity behind the corporation's
fraudulent billing procedures and had ultimate
responsibility for those procedures.
The evidence is uncontroverted that Petitioners engaged
in systematic fraud of the Medicare program for approxi-
mately an eight-month period. The scheme involved
interlacing requests for reimbursement for medical
services that were not performed with claims for
compensable services and resulted in the unlawful
appropriation of approximately $3,000. Thus, the
offenses admitted to by Petitioners involve a large
number of separate crimes, committed with a very high
level of culpability on Petitioners' part, over a
substantial period of time. 42 C.F.R. 1001.125(b)(1),
(b)(2). They involve a substantial amount of program
funds and considerable damage to the Medicare program.
42 C.F.R. 1001.125(b)(3). I conclude from this evidence
that Petitioners have a propensity to commit conduct that
is harmful to the program. The number of offenses, as
well as their duration, establish that these were not
isolated incidents. Petitioners fully intended to profit
from defrauding the Medicare program, while attempting to
conceal the fraud by intermingling compensable and
fraudulent claims.
Petitioners contend that the amount of money involved
was small when compared with the number of procedures
actually performed and that most of the procedures
performed were compensable. P. Br. at 4 - 5.
Petitioners also contend that since Medicare customarily
pays only 80 percent of a patient's charges, the amount
which Petitioners could have expected to receive was only
a small amount of the amount actually charged the
patient. P. Br. at 5. I find these arguments
unpersuasive. First, I do not find that the amount of
money involved in this case is small. The amounts
involved in this case are certainly not staggering, but
neither are they insignificant. Furthermore, I find it
significant as to the extent of Petitioners' fraud that
Petitioners were obliged to pay a $100,000 civil
settlement to the United States. Such a settlement is
evidence that their fraudulent activities were serious
and substantial.
While Petitioners admit to wrongdoing, they attempt to
minimize their wrongdoing by stating that they didn't
gain as much monetarily as other perpetrators of Medicare
fraud. Petitioners argue that the fact that they did not
obtain substantial sums of money as a result of their
actions makes them more trustworthy. However, it is
necessary for me to compare the level of Petitioner's
crimes with other known episodes of Medicare fraud in
order for me to conclude that Petitioners' conduct
independently shows that they are untrustworthy
providers.
Petitioner Harow also argues that his prolonged lung
infection and subsequent surgery led to aberrant behavior
which resulted in fraud that would not otherwise have
occurred. The record of this case, however, does not
indicate that Petitioner Harow's physical ailment induced
Petitioner to engage in fraud. Nor is there evidence
that, as a result of his illness, Petitioner was unable
to comprehend the nature or lawfulness of his acts.
Indeed, the evidence clearly indicates that Petitioner
intentionally and deliberately charged the program for
procedures that he did not perform. Petitioners' actions
were serious, systematic, and willful. Petitioners'
attempts to attribute their acts to Petitioner Harow's
illness is not credible and is additional evidence of a
lack of trustworthiness.
Petitioner Harow has offered evidence that the State of
Massachusetts suspended his license to practice podiatric
medicine for a period of six months. Pet. Ex. 11.
Petitioner argues that the length of the suspension is
indicative of his trustworthiness and therefore relevant
to the reasonableness of the exclusion.
I conclude that, while it may be relevant to look to the
actions of a State licensing authority as evidence of
trustworthiness or untrustworthiness in an exclusion case
based on fraud against Medicare, such evidence will not
necessarily establish grounds for evaluating the
reasonableness of an exclusion. Moreover, Petitioner
Harow does not accurately characterize the suspension
imposed on him by the State of Massachusetts when he
states that he was suspended for six months. While it is
true the practical effect of the Massachusetts Board's
action was a six-month suspension of Petitioner Harow's
license, the length of the suspension imposed by the
State was actually three years. The State stayed two
years of Petitioner Harow's suspension, and gave him six
months credit for the time he was imprisoned, thus making
one year the actual time Petitioner's license was
suspended. In any event, there exists ample evidence
independent of the State's action against Petitioner to
demonstrate that he is an untrustworthy provider of care.
The State action in this case does not derogate from my
conclusion that the exclusions imposed and directed
against Petitioners are reasonable.
Finally, Petitioner Harow asserts that he has so far
complied with the terms of the criminal sentence imposed
against him, including the payment of restitution and
substantial fines. He argues that his good behavior is
proof of trustworthiness. I am not belittling any
efforts Petitioner Harow has made to comply with the
terms of his sentence by saying that I do not find him to
be a trustworthy provider of care. The evidence of this
case shows that Petitioners are capable of engaging in
calculated fraud against federally-funded health care
programs. In light of that, I conclude that the lengthy
exclusions imposed by the I.G. are reasonable protections
of the integrity of those programs. I find that as a
safeguard and protection against future fraud, the
exclusions are reasonable.
CONCLUSION
Based on the law and the evidence, I conclude that the
seven year exclusions from participating in Medicare and
State health care programs imposed and directed against
Petitioners are reasonable. I therefore sustain the
exclusions.
_________________________
Steven T. Kessel
Administrative Law Judge
1. "State health care program" is defined by section
1128(h) of the Social Security Act to cover three types
of federally-financed health care programs, including
Medicaid. I use the term "Medicaid" hereafter to
represent all State health care programs from which
Petitioner was excluded.
2. The parties' exhibits, briefs, and stipulations will
be referred to as follows:
I.G.'s Exhibits I.G. Ex. (number/page)
Petitioner's Exhibits P. Ex. (number/page)
I.G.'s Brief I.G. Br. (page)
Petitioner's Brief P. Br. (page)
Stipulated Facts Stip. (number)