Paul S. Barrentine, R.Ph., CR No. 174 (1992)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In The Case of:
Paul S. Barrentine, R.Ph.,

Petitioner,
- v. -
The Inspector General.

DATE: January 28, 1992

Docket No. C-420

DECISION

On May 24, 1991, the Inspector General (I.G.) advised Paul S. Barrentine, Petitioner,
that he was being excluded from participation in the Medicare and State health care
programs for five years, as a result of his conviction of a criminal offense related to the
delivery of an item or service under the Medicaid program. 1/ Exclusions after such a
conviction are made mandatory by section 1128(a)(1) of the Social Security Act (Act).
Section 1128(c)(3)(B) of the Act provides that the minimum period of exclusion shall
not be less than five years.

On May 24, 1991, the I.G. also advised Cedar Creek Pharmacy, Inc., that it was being
excluded from participation in the Medicare and State health care programs for five
years pursuant to section 1128(b)(8) of the Act. Section 1128(b)(8) of the Act
authorizes the I.G. to exclude entities from Medicare and State health care programs
where an individual who has been convicted of an offense described under section
1128(a), 1128(b)(1), (2) or (3) of the Act has a direct or indirect ownership or control
interest of five percent or more in the entity, or who is an officer, director, agent, or
managing employee of such entity. The I.G. stated that Cedar Creek Pharmacy, Inc., is
being excluded under section 1128(b)(8) of the Act because Petitioner was convicted of
one of the criminal offenses listed in section 1128(b)(8), and he has a relationship with
Cedar Creek Pharmacy, Inc., as described in section 1128(b)(8).

Separate administrative hearing dockets were initially created to hear these two cases
individually. However, in the interest of judicial economy, I consolidated them for the
purpose of conducting a prehearing conference on August 28, 1991. During that
conference, the parties in both cases agreed to proceed by summary disposition on the
issue of whether the I.G. has the authority to impose and direct an exclusion against
Petitioner pursuant to section 1128(a)(1) of the Act. The parties agreed to proceed in
this manner because the outcome of this issue could be dispositive of the issue of
whether the I.G. has the authority to exclude Cedar Creek Pharmacy, Inc., pursuant to
section 1128(b)(8) of the Act.

Based on the record before me, I conclude that summary disposition is appropriate on
the issue of whether the I.G. has the authority to exclude Petitioner pursuant to section
1128(a)(1) of the Act, that Petitioner is subject to the federal minimum mandatory
provisions of sections 1128(a)(1) and 1128(c)(3)(B) of the Act, and that Petitioner's
exclusion for a minimum of five years is mandated by federal law. This is the decision
of the administrative law judge in Civil Remedies Docket No. C-420 and is appealable
to the Appellate Division of the Departmental Appeals Board. Accordingly, the cases
are no longer consolidated. Cedar Creek Pharmacy, Inc., Petitioner, v. The Inspector
General, Civil Remedies Docket No. C-421, will proceed to hearing.

ISSUE

The issue in this case is whether, given the undisputed material facts, the I.G.'s
determination to exclude Petitioner from participation in the Medicare program and to
direct that he be excluded from participation in State health care programs for five
years is mandated by law.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. At all times relevant to this case, Petitioner was a registered pharmacist in the State
of Texas. I.G. Ex. 4/1. 2/

2. On January 4, 1988, the 173rd District Court of Henderson County, Texas, issued
an indictment charging Petitioner with intentionally defrauding the Texas Medicaid
program by submitting false pharmacy service billing information in order to receive
reimbursement for services he did not perform. I.G. Ex. 2.

3. On September 17, 1990, Petitioner pled guilty to the charge contained in the
indictment, and the Texas court issued an order stating that it "accepted" Petitioner's
guilty plea. I.G. Ex. 5/1.

4. In accepting Petitioner's guilty plea, the Texas court found that the evidence
substantiated that Petitioner was guilty of the offense of Securing Execution of a
Document by Deception, a crime under Texas law. I.G. Ex. 5/1.

5. The Texas court also ordered that all further proceedings would be deferred
without an entry of a Judgment of Guilt against Petitioner, pursuant to Article 42.12,
Section 3d of the Texas Code of Criminal Procedure. I.G. Ex. 5/1.

6. The Texas court ordered that Petitioner be placed on probation for a period of two
years with certain conditions, including that Petitioner pay court costs, a fine, and that
he surrender his pharmacy license for 60 days. I.G. Ex. 5/2.

7. Petitioner was "convicted" of a criminal offense within the meaning of section
1128(i) of the Act.

8. Petitioner was convicted of a criminal offense "related to the delivery of an item or
service" under the Medicaid program, within the meaning of section 1128(a)(1) of the
Act.

9. The Secretary of the United States Department 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).

10. On May 24, 1991, the I.G. notified Petitioner of his determination to exclude him
for five years pursuant to section 1128(a)(1).

11. The I.G. properly excluded Petitioner from participation in the Medicare and
Medicaid programs for a period of five years, as required by sections 1128(a)(1) and
1128(c)(3)(B) of the Act.

12. The I.G.'s application of the minimum mandatory exclusion provisions to this case
is contemplated by the language of the statute, and the absence of implementing
regulations does not prevent the I.G. from imposing the mandatory minimum exclusion
against Petitioner.

13. There are no disputed material fact in this case, and the I.G. is entitled to
summary disposition.

ANALYSIS

I. The mandatory exclusion provisions of the Act apply to this case.

Section 1128(a)(1) of the Act mandates an 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 under . . . [Medicaid].

The Act further requires, at section 1128(c)(3)(B), that in the case of an exclusion
imposed and directed pursuant to section 1128(a)(1), the minimum term of such
exclusion shall be five years. The I.G. asserts that Petitioner was convicted of a
criminal offense within the meaning of section 1128(a)(1) of the Act, and therefore he
must be excluded for at least five years pursuant to section 1128(c)(3)(B). I.G. Brief at
pages 12-14.

The authority to impose and direct an exclusion under section 1128(a)(1) is based on
the fulfillment of the following statutory criteria: (1) an individual or entity must be
"convicted" of a criminal offense within the meaning of sections 1128(a)(1) and
1128(i) of the Act, and (2) the conviction must be "related to the delivery of an item or
service" under the Medicare or Medicaid programs.

A. Petitioner was "convicted" of a criminal offense within the meaning of sections
1128(a)(1) and 1128(i) of the Act.

There are no disputed material facts in this case. The undisputed facts establish that,
on January 4, 1988, the 173rd District Court of Henderson County, Texas, issued an
indictment charging that Petitioner intentionally defrauded the Texas Department of
Human Services by submitting false pharmacy service billing information to Bluff Creek
Systems, the claims processing service for the Texas Medicaid Program. The
indictment alleged that the information provided by Petitioner indicated that a
medication was dispensed to a Texas Medicaid recipient when in fact that medication
had not been dispensed to the Medicaid recipient. I.G. Ex. 2.

On September 17, 1990, Petitioner pled guilty to the charge contained in the
indictment, and on that same day the court issued an Order stating that it "accepted"
Petitioner's guilty plea. In accepting Petitioner's guilty plea, the Texas court stated that
it "is of the opinion that the evidence substantiates that [Petitioner] is guilty of the
offense of Securing Execution of a Document by Deception, Class A Misdemeanor." I.G.
Ex. 5/1. The court also ordered that all further proceedings would be deferred without
the entry of a Judgment of Guilt against Petitioner as provided in Article 42.12, Section
3d of the Texas Code of Criminal Procedure. The court then placed Petitioner on
probation for a period of two years. The court also ordered several conditions of
probation, including that Petitioner pay court costs, a fine, and that he surrender his
pharmacy license for 60 days. I.G. Ex. 5/1-2.

In his July 23, 1991 letter requesting a hearing on the I.G.'s exclusion determination,
Petitioner stated that he "objects to and questions the determination that he was in fact
convicted as defined in [section 1128(i) of the Act]". 3/

The undisputed material facts of this case and the law establish that Petitioner was
"convicted" of a criminal offense within the meaning of section 1128(i)(3) of the Act.
This section [section 1128(i)(3) of the Act] defines the term "convicted" of a criminal
offense to include those circumstances in which:

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

In Robert W. Emfinger, R. Ph., DAB CR92 (1990), I applied this definition of
"convicted" to facts which are close to the facts of this case. The petitioner in
Emfinger, like the Petitioner in this case, pled guilty to a criminal offense. In addition,
Emfinger also involved a Texas State court which issued an Order finding that the
evidence against the petitioner substantiated his guilt as alleged in the charging
document and as confessed by him in his plea of guilty. The Texas State court in
Emfinger likewise deferred further proceedings against the petitioner without an
adjudication of guilt pursuant to Article 42.12, section 3d of the Texas Code of
Criminal Procedure. In Emfinger, I concluded that, under these facts, the Texas court
"accepted" petitioner's guilty plea within the meaning of section 1128(i)(3) of the Act,
and therefore, Petitioner was "convicted" according to the statutory definition of that
word.

In reaching this conclusion, I rejected the argument that the Texas court's
determination to defer adjudication until a later date meant that the court did not
"accept" Petitioner's guilty plea. I also held that it is irrelevant that, under Texas law,
Petitioner was permitted to subsequently withdraw his plea after satisfactorily
completing a period of probation.

As I stated in Emfinger, the term "accept" is not specifically defined in section
1128(i)(3) or elsewhere in section 1128. In the absence of a specific statutory
definition, the term should be given its common and ordinary meaning. "Accept" is
defined in Webster's Third New International Dictionary 1969 Edition as:

2a: to receive with consent (something given or offered) . . .

In this case, Petitioner offered to admit his guilt to a criminal offense in return for: (1)
a term of probation with certain conditions, and (2) the court's deferral of the
proceedings without the entry of a Judgment of Guilt. Petitioner offered an admission
of guilt in order to dispose of the criminal indictment against him, and the court
disposed of the case based on its receipt of Petitioner's guilty plea. That transaction
amounts to "acceptance" of a plea within the meaning of section 1128(i)(3) of the Act,
and Petitioner was therefore "convicted" of a criminal offense within the meaning of
that provision. See James F. Allen, M.D.F.P, DAB CR71 (1990).

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

Having concluded that Petitioner was "convicted" of a criminal offense, I must
determine whether the criminal offense which formed the basis for the conviction was
"related to the delivery of an item or service" under the Medicaid program, within the
meaning of section 1128(a)(1) of the Act.

In his July 23, 1991 hearing request, Petitioner asserted that the facts of this case do
not support the conclusion that he was convicted of a criminal offense "related to the
delivery of an item or service" under Medicaid. 4/ I disagree.

Petitioner was convicted of Securing Execution of a Document by Deception, a class A
misdemeanor under Texas law. I.G. Ex. 5. While the name of the offense, on its face,
does not suggest that it is related to the delivery of an item or service under the
Medicaid program, this relationship can be found from a reading of the indictment
which describes the nature of the offense to which Petitioner pled guilty and which
formed the basis of his conviction.

According to the indictment, Petitioner was charged with intentionally submitting false
pharmacy service billing information in order to receive reimbursement to which he
was not entitled from the Texas Medicaid Program for dispensing a medication to a
Medicaid recipient that in fact had never been dispensed. I.G. Ex. 2.

The Act does not define the term "criminal offense related to the delivery of an item or
service". However, case law has consistently held that convictions for criminal offenses
involving fraudulent Medicaid claims fall within the reach of section 1128(a)(1) of the
Act. In the case of Jack W. Greene, DAB 1078 (1989), an appellate panel of the
Departmental Appeals Board (DAB) held that:

[S]ubmission of a bill or claim for Medicaid reimbursement is the necessary step,
following the delivery of an item or service, to bring the `item' within the purview of
the program.

DAB 1078 (1989) at 7.

The DAB in Greene therefore concluded that "false Medicaid billing and the delivery of
the drugs to the Medicaid recipient are inextricably intertwined and therefore `related'
under any reasonable reading of that term." Id. The Greene decision was subsequently
affirmed by the United States District Court. Greene v. Sullivan, 731 F.Supp. 835, 838
(E.D. Tenn. 1990).

Applying this holding in Greene to the facts of this case, Petitioner's conviction for
submitting false billing information to the Texas Medicaid program for pharmacy
services he did not perform as claimed is "inextricably intertwined" to the delivery of
those services under the Medicaid program. Thus, Petitioner was convicted of a
criminal offense "related to the delivery of an item or service" under the Medicaid
program, within the meaning of section 1128(a)(1) of the Act.

The DAB has also held that a conviction of a criminal offense is related to the delivery
of an item or service under Medicare or Medicaid where the victim of the offense is the
Medicare or Medicaid program. Napoleon S. Maminta, M.D., DAB 1135 (1990). The
petitioner in the Maminta case was convicted of converting to his own use a Medicare
reimbursement check that was intended to be paid to another health care provider.

Although the facts of the present case are not on all fours with the facts of Maminta,
the rationale used by the DAB in deciding that case applies here. The indictment in
this case charges that Petitioner defrauded the Texas Medicaid Program knowingly and
with the intent to "harm another". The intent of Petitioner's fraud was to deceive the
Texas Medicaid Program into paying for services which were not performed as claimed.
The victim of Petitioner's crime was the Texas Medicaid Program.

Accordingly, I conclude that Petitioner's crime is a criminal offense "related to the
delivery of an item or service" under the Medicaid program within the meaning of
section 1128(a)(1) of the Act. This result fits squarely within both the Greene and
Maminta cases.

C. A five year exclusion is required in this case.

Since Petitioner was "convicted" of a criminal offense and it was "related to the delivery
of an item or service" under the Medicaid program within the meaning of section of
1128(a)(1) and (i)(3) of the Act, section 1128(c)(3)(B) requires that he be excluded
for a minimum of five years. The administrative law judge has no discretion to reduce
the mandatory minimum five year period of exclusion.

II. The mandatory exclusion applies to this case on the basis of the statute alone.

Petitioner argues that the offense which formed the basis of his conviction, filing false
claims, is the type of financial misconduct which falls into the ambit of section
1128(b)(1) of the Act. Section 1128(b)(1) permits the Secretary in his discretion to
exclude persons who have been convicted of a criminal offense "relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct" in
connection with the delivery of a health care item or service, or "with respect to any
act or omission in a program operated by or financed in whole or in part by any
Federal, State, or local government agency."

Petitioner states that there are no specific laws or regulations which give any guidance
to the I.G. "in the exercise of his discretion in making his determination of whether a
conviction is to be covered by section 1128(a)(1) or section 1128(b)(1) of the Act."
Petitioner argues that since there are no rules or regulations guiding the I.G.'s decision
making process "on this critical issue affecting a property right" and since the basis for
the decision is not set out in the Notice of exclusion, the I.G.'s decision to exclude him
is "arbitrary and capricious" and "violates fundamental due process". Petitioner Brief at
page 4.

Petitioner's argument is premised on the assertion that the I.G. has discretion to classify
financial offenses such as fraud and theft directed at the Medicaid program as falling
under either the mandatory exclusion authority of section 1128(a)(1) or the permissive
exclusion authority of section 1128(b)(1). This assertion is based on a misreading of
the statute. The plain meaning of the language of section 1128(a)(1) is to require
exclusion from participation in the Medicaid programs of those providers who commit
offenses, including fraud or financial misconduct, in connection with the delivery of an
item or service rendered pursuant to the Medicaid program. The phrase in section
1128(a)(1) "related to the delivery of an item or service" conveys legislative intent to
sweep within section 1128(a)(1) all "financial" offenses directed against the Medicaid
program.

Section 1128(a)(1) encompasses the same kinds of "financial" offenses which are
described in 1128(b)(1), but is limited to those offenses which are directed against, or
committed in connection with, the rendering of services pursuant to the Medicare or
Medicaid programs. The legislative scheme apparent from reading 1128(a)(1) and
1128(b)(1) in conjunction with each other is to mandate exclusions of those who
commit financial crimes directed against Medicare and Medicaid, and to permit
exclusions of those who commit financial crimes in connection with the delivery of a
health care item or service pursuant to programs, other than Medicare or Medicaid,
which are financed by federal, State, or local government agencies. As the fraud
committed by Petitioner was directed against Medicaid, his exclusion is mandated by
section 1128(a)(1). See Greene, 731 F.Supp. at 838.

There is no question that if 1128(b)(1) is read in isolation, its language would literally
encompass the offense for which Petitioner was convicted. However, when this section
is read in context with section 1128(a)(1), it becomes clear that Petitioner's exclusion
may not be governed by the permissive exclusion provisions. This is so because the
law specifically requires a minimum five-year term for exclusions of parties who
commit offenses described in section 1128(a)(1).

The petitioner in Greene, like Petitioner in this case, also argued that he lacked
adequate notice of the effect of section 1128(a)(1) because the Secretary has not
published regulations implementing the minimum mandatory provisions of the Act.
The DAB addressed this argument as a subsidiary issue to the question of whether the
mandatory exclusion was required by statute in cases involving convictions for filing
false Medicaid claims. The DAB found that section 1128(a)(1) on its face covers
convictions involving false billings under Medicaid. In addition, the DAB stated that
the I.G.'s application of the mandatory provisions of the Act to false billings under
Medicaid was not only encompassed by the language of the statute, but that it is
consistent with the meaning and effect of parallel exclusion provisions, and is
supported by the legislative history of the Act. Moreover, the DAB pointed out that the
Act does not contain any provision requiring that exclusions be "tolled" until the
Secretary promulgates regulations. See Jack W. Greene, DAB 1078 (1989) at 13-15.

The DAB therefore concluded that the standards for applying the mandatory provisions
of section 1128(a)(1) of the Act were "ascertainable" based on the statute alone, and
the Secretary is not required to promulgate regulations before he imposes a mandatory
minimum exclusion against health care providers. The DAB also held that the
exclusion notice was sufficient to provide Petitioner with notice of the basis for his
exclusion because it fully and accurately portrayed the applicable statutory standard.
DAB 1078 (1989) at 14. A federal district court reviewed the DAB's decision in Greene
and agreed that the mandatory minimum provisions of the Act "are self-executing and
do not require the formation of additional regulations prior to their application". 731
F.Supp. at 837.

I find to be without merit Petitioner's argument that the absence of implementing
regulations prevents the I.G. from imposing the mandatory minimum exclusion
provisions against him. Petitioner was convicted of a criminal offense related to the
delivery of an item or service under the Medicaid program. Under these circumstances,
sections 1128(a)(1) and 1128(c)(3)(B) of the Act require the imposition of an
exclusion for a minimum of five years. Regulations which give guidance to the I.G.
regarding "the exercise of his discretion" in deciding whether a conviction comes within
the scope of the mandatory or permissive exclusion provisions are not necessary
because the I.G. is required to exclude health care providers under the mandatory
provisions in cases where there are convictions for program-related offenses. The
exclusion Notice provided Petitioner on May 24, 1991 accurately stated the statutory
provision that applies to this case, and Petitioner therefore had sufficient notice of the
basis of his exclusion.

III. The Secretary delegated to the I.G. the authority to determine, impose, and direct
exclusions and the record establishes that the I.G. excluded Petitioner.

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.)
Petitioner does not dispute that the Secretary delegated his authority to impose
exclusions under section 1128 of the Act to the I.G. Nor does Petitioner argue that the
Secretary's delegation of this authority to the I.G. is unlawful. 5/ Instead, Petitioner
asserts that the exclusion Notice is "null and void" because the record does not
establish that James F. Patton, the signatory of the Notice, has the authority to act in
the capacity of the I.G.

The exclusion Notice in this case was signed by James F. Patton in his capacity as
"Director, Health Care Administrative Sanctions, Office of Investigations." Petitioner
contends that there is no legal authority for "the Inspector General to delegate his
decision making authority to the director of Health Care Administrative Sanctions" and
that the record does not adequately establish Mr. Patton's authority to exclude health
care providers. Petitioner Brief at 5.

Petitioner's argument is premised on the assumption that Mr. Patton, rather than the
I.G., imposed the exclusion in this case. I disagree with this premise.

It is undisputed that the I.G. is a party to this proceeding. The case caption itself
makes this clear. The I.G. is represented by legal counsel, Lorin R. George, of the
Office of the General Counsel. Mr. George asserts that the I.G. excluded Petitioner.
Petitioner has not brought forward any probative evidence showing that this assertion
is a misstatement of fact. Absent a showing by Petitioner that the I.G. did not exclude
him, I have no basis to find that the I.G. did not authorize Petitioner's exclusion in this
case.

The fact that the exclusion Notice was signed by Mr. Patton does not mean that Mr.
Patton made the determination to exclude Petitioner. Instead, I find that Mr. Patton,
acting in his capacity as the Director of Health Care Administrative Sanctions in the
Office of Investigations, merely notified Petitioner of the I.G.'s determination to exclude
him. It is clear from the letterhead of the exclusion Notice that this document was
issued by the "Office of the Inspector General" in the "Department of Health and
Human Services." It is reasonable to infer from this document that Mr. Patton issued
this letter at the direction of the I.G. for the purpose of informing Petitioner that the
I.G. has excluded him. I do not conclude from the fact that Mr. Patton is the signatory
of the Notice letter that Mr. Patton, rather than the I.G., excluded Petitioner.

In view of the foregoing, I find that the I.G. excluded Petitioner in this case and that
the record adequately establishes this fact.

CONCLUSION

Based on the undisputed material facts and the law, I conclude that the I.G.'s
determination to exclude Petitioner from participation in Medicare, and to direct his
exclusion from Medicaid, for five years was mandated by law. Therefore, I am entering
a decision in this case sustaining the five-year exclusion imposed and directed against
Petitioner.

____________________________
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 I.G. attached five exhibits to his motion for summary disposition which he
identified as Exhibits "1" through "5". By letter dated September 30, 1991, the I.G.
submitted an Affidavit of William H. Hughes which I will identify as I.G. Exhibit 6.
Petitioner did not contest the authenticity or relevancy of these exhibits, nor has he
denied the relevant material facts contained in the exhibits. I have admitted these six
exhibits into evidence. Petitioner attached one exhibit to his cross-motion for summary
disposition, which he identified as Petitioner's Exhibit 1. The I.G. did not object to the
authenticity or relevancy of this exhibit, and I have admitted it into evidence. I refer to
the I.G.'s exhibits as "I.G. Ex. (number)/(page)" and to the Petitioner's exhibit as "P. Ex.
(number)/(page)".

3. I note that although Petitioner contended in his hearing request that the court
proceedings in his underlying criminal case do not support a finding that he was
"convicted" of a criminal offense within the meaning of section 1128(i) of the Act, he
did not make any arguments to support this contention in the brief he submitted in
support of his cross-motion for summary disposition.

4. Although Petitioner challenged the determination that his criminal offense was
related to the delivery of an item or service under the Medicaid program in his hearing
request, he did not brief this issue in his supporting memorandum submitted with his
cross-motion for summary disposition.

5. I note that had Petitioner argued that the Secretary's delegation of his exclusion
duties to the I.G. was unlawful, I would be without authority to decide this issue. This
issue was also raised by the petitioner in Greene, and the DAB held that the scope of
review by the administrative law judge in exclusion cases relates to the propriety of the
imposition of an exclusion in particular cases, and does not encompass "collateral
challenges to the validity of [the Secretary's] regulatory procedures based on statutory
provisions that are wholly outside the realm of the exclusion authorities." DAB 1078
(1989) at 18. In any event, I also note that a federal court in Greene held that the
Secretary appropriately delegated to the I.G. his authority to impose exclusions. 731
F.Supp. at 837.