Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
The Inspector General
- v. -
Barbara K. Johnson, D.D.S.,
and Barbara K. Johnson,
D.D.S., P.C.,
Respondents.
DATE: February 20, 1992
Docket No. C-375
DECISION
By letter dated March 15, 1991, the Respondents herein, Barbara K. Johnson,
D.D.S. and Barbara K.
Johnson, D.D.S., P.C., were notified by the Inspector General (I.G.), acting
by delegation under the
authority conferred by statute on the Secretary of the Department of Health
and Human Services, that he
proposed to impose upon Respondents, jointly and severally, civil monetary penalties
of $33,250.00 and
assessments of $6,620.00, based upon their submission of 19 fraudulent Medicaid
claims in the amount of
$4,067.00 to the District of Columbia government. The I.G. alleged that Respondents
violated section
1128A of the Social Security Act (Act) as implemented by 42 C.F.R. 1003.100
et seq.
Respondents requested a hearing. I conducted such a hearing in Washington,
D.C., on September 30,
1991. Based on the entire record before me, I conclude that Respondents unlawfully
presented or caused
to be presented 19 claims for items or services that they knew, had reason to
know, or should have known
were not provided as claimed. I impose penalties of $33,250.00 and assessments
of $6,620.00 against
Respondents, jointly and severally.
Applicable Law
The Civil Monetary Penalties Law (CMPL), section 1128A of the Act (42 U.S.C.
1320a-7a (1988))
provides, inter alia, that any person who knowingly causes to be presented to
a State Medicaid agency a
claim for services that the person knows or should know was not provided as
claimed, shall be subject, in
addition to any other penalties that may be prescribed by law, to a civil monetary
penalty of up to
$2,000.00 for each item or service falsely claimed, plus an assessment of up
to twice the amount of such
claims.
Issue
Whether the penalties and assessments proposed by the I.G. are appropriate
to Respondents' circumstances
and to the gravity of the infractions committed.
Findings Of Fact And Conclusions Of Law 1/
1. At all times relevant to this case, Barbara K. Johnson, D.D.S. was a licensed
dentist and Medicaid
provider, practicing in the District of Columbia. "Dr. Barbara K. Johnson,
D.D.S., P.C." was the corporate
entity under which her practice was conducted. Tr. 13-14.
2. By letter (Notice) dated March 15, 1991, Respondents were notified by the
I.G. that there would be
imposed upon them a penalties of $33,250.00 and assessments of $6,620.00, based
upon their submission
to the District of Columbia government of 19 fraudulent Medicaid claims in the
amount of $4,067.00
during 1985.
3. Respondents received $1,514.00 in unwarranted Medicaid reimbursement as a result of such fraud.
4. The District of Columbia Medicaid program is a federal-state program providing
health care benefits to
the medically needy and other eligible individuals. Title XIX of the Act; 42
U.S.C. 1396 (1988) et seq.;
Tr. 18-19; I.G. Ex. 3.
5. When providers file claims for services which have not been performed as
claimed, they divert funds
that would otherwise be available to provide services for needy individuals.
Tr. 36.
6. The I.G.'s Notice alleged that Respondents presented or caused to be presented
19 claims for items or
services which were not provided as claimed. Specifically, the false claims
were claims for: crowns where
the actual service was bonding; an amalgam which was not provided; x-rays which
were not provided; and
an appliance which was not provided.
7. Both Respondents -- Dr. Johnson and her professional corporation -- were
criminally convicted by a
jury in the Superior Court for the District of Columbia of Medicaid provider
fraud for the identical claims
as are involved in this case. The court imposed a fine, restitution of $1,514.00,
and probation. I.G. Exs.
32, 33, 72.
8. Dr. Johnson was excluded from Medicare and State health care programs (such
as Medicaid) for a
period of five years, pursuant to section 1128(a)(1) of the Act, beginning November
13, 1989. Barbara
Johnson, D.D.S., DAB CR78 (1990).
9. Respondents, through counsel, admitted to have knowingly and intentionally
presented the subject
claims for items and services which were not actually provided. Order dated
September 16, 1991.
10. The admissions referred to in paragraph 9 satisfy the regulatory requirements
that the presentation of
false claims be proven by preponderant evidence and that it be proven that the
person filing the false claims
knew or had reason to know of the fraud. 42 C.F.R. 1003.102(a)(1); 42 C.F.R.
1003.114(a).
11. This proceeding is governed by the CMPL, section 1128A of the Act, and
the regulations promulgated
at 42 C.F.R. Part 1003.
12. Respondents are jointly and severally liable under the CMPL for all 19
claims set forth in the Notice.
Stipulation dated July 2, 1991.
13. Section 1128A(a)(1)(A) of the Act authorizes the Secretary to impose a
civil monetary penalty and
assessment against any person who presents or causes to be presented to an officer,
employee, or agent of
any State agency, a claim that the Secretary determines is for a medical or
other item or service that the
person knows or should know was not provided as claimed.
14. A penalty imposed under the CMPL is in addition to any other penalties
imposed by law (emphasis
added). 42 C.F.R. 1003.108.
15. The CMPL provides for the imposition of a penalty of up to $2,000.00 for
each item or service which
is falsely claimed, and an assessment, in lieu of damages, of up to twice the
amount for each item or
service which is falsely claimed. Section 1128A(a) of the Act.
16. The statute and regulations set forth five general areas which should be
considered in determining the
amount of any penalty or assessment: (1) the nature of the claim or request
for payment and the
circumstances under which it was presented; (2) the degree of culpability of
the respondent; (3) the history
of prior offenses of the respondent; (4) the financial condition of the respondent;
and (5) such other matters
as justice may require. 42 C.F.R. 1003.106(a).
17. A respondent bears the burden of producing and proving the existence of
any mitigating factors by a
preponderance of the evidence. 42 C.F.R. 1003.114(d).
18. It is a mitigating circumstance if imposition of the penalty or assessment
without reduction will
jeopardize the ability of the respondent to continue as a health care provider.
The resources available to the
respondent will be considered when determining the amount of the penalty and
assessment. 42 C.F.R.
1003.106(b)(4).
19. Respondents have the burden of proving by a preponderance of the evidence
that their financial
condition would prevent them from being able to pay the proposed penalty and
assessment. Corazon C.
Hobbs, M.D., DAB CR57 (1989) at 33; 42 C.F.R. 1003.114(d).
20. Unsupported assertions of financial distress, especially when made by a
witness of questionable
credibility, do not justify the reduction of a proposed penalty and assessment.
See Berney R. Keszler,
M.D., et al., DAB CR107 (1990) at 37; Tommy G. Frazier, et al., DAB CR79 (1990)
at 27-28.
21. An aggravating circumstance is that Respondents knew the items or services
at issue were not provided
as claimed. 42 C.F.R. 1003.106(b)(2); Stipulation dated July 2, 1991; Order
dated September 16, 1991.
22. An aggravating circumstance is that the total amount claimed by Respondents
was "substantial" within
the meaning of the regulations, i.e., more than $1,000.00. 42 C.F.R. 1003.106(b)(1).
23. Dr. Johnson's license to practice dentistry in the District of Columbia
was revoked in January 1990 and
has not been reinstated. Tr. 122.
24. Respondent is employed as a substitute teacher by the Manatee County (Florida)
School Board. Tr.
63; I.G. Ex. 34 at 1. She is not a health care provider. Tr. 122. Imposition
of the proposed penalties and
assessments would, therefore, not impede Respondents' continuing as a health
care provider. 42 C.F.R.
1003.106(b)(4); Tr. 63, 122; I.G. Ex. 34.
25. Among other assets, Dr. Johnson holds three promissory notes ($130,000.00;
$74,000.00; and
$20,000.00) representing the sale of her dental practice to Dr. Ann Murray.
I.G. Exs. 45-47; Tr. 92-96.
26. The three promissory notes could be sold at a discounted rate on the commercial
paper market. Tr.
185-186.
27. According to Dr. Johnson's sworn Financial Statement, as of May 2, 1991,
she owned three houses
which could be sold for approximately $320,000.00 (the net value of this real
estate, after mortgages are
taken into account, is approximately $137,000.00). I.G. Ex. 34 at 2; Tr. 62,
68, 187, 190-191.
28. Dr. Johnson, her husband, and her professional corporation owed a total
of approximately $50,000.00
in taxes, penalties, and interest as of September 30, 1991. I.G. Ex. 51, 54-58;
Tr. 88-91.
29. Respondents have other liabilities (other than mortgages or tax debt) totalling
approximately
$37,000.00 as of September 30, 1991. I.G. Ex. 37-44; Tr. 76-83.
30. Taking into account all major assets and liabilities, Respondents have
a net worth of approximately
$270,000.00 as of September 30, 1991.
31. Respondents are financially able to pay the entire proposed penalties and assessments.
32. The government's expenses in its civil prosecution of Respondents (comprised
primarily of lawyers'
and investigators' salaries) total approximately $22,000.00. I.G. Ex. 74-77.
33. The federal government has the right to be compensated for the damages
caused by medical practi-
tioners who have submitted false claims for medical services to the government
and the right to penalize
such practitioners. Tr. 135-136.
34. The penalties and assessments proposed by the I.G. herein are reasonably
related to the government's
actual damages and expenses, and thus do not constitute "punishment"
in violation of the Double Jeopardy
Clause of the Fifth Amendment. United States v. Halper, 490 U.S. 435 (1989).
Discussion
Prior to the hearing, the parties stipulated that Respondents Barbara K. Johnson,
D.D.S. and Barbara K.
Johnson, D.D.S., P.C. were liable, jointly and severally, under the CMPL, 1128A
of the Act, for all 19
claims as provided in the Notice. Furthermore, during a telephone prehearing
conference conducted on
September 9, 1991, Respondents admitted that their convictions represented an
adjudication that they knew
that the items or services were not provided as claimed. Therefore, Respondents
represented that they
would not contest the issue of knowledge at the hearing. Accordingly, I ruled
that the issue of
Respondents' knowledge had been fully and completely adjudicated in a prior
proceeding and relitigation
of that issue would be precluded in the in-person evidentiary hearing held on
September 30, 1991. Order
dated September 16, 1991.
The assessment and penalty provisions of the Act are designed to implement
the remedial purposes of the
Act by protecting government financed health care programs from fraud and abuse
by providers. To
accomplish this, the assessment and penalty provisions of the Act seek (1) to
enable the government to
recoup the cost of bringing a respondent to justice and the financial loss to
the government resulting from
the false claims presented by that respondent; and (2) to deter other providers
from engaging in the false
claims practices engaged in by a particular respondent. Berney R. Keszler, M.D.,
et al., DAB CR107
(1990).
The regulations which implement the CMPL provide, at 42 C.F.R. 1003.114, that
the I.G. bears the
burden of proving that a respondent knowingly presented or caused to be presented
claims for items or
services that were not provided as claimed. In the case at hand, though, Respondents,
through counsel,
admitted having knowingly and intentionally presented the false claims at issue.
Order dated September
16, 1991.
Section 1128A(d) of the CMPL states that in determining the amount of any penalty
or assessment, it is
necessary to consider "the nature of claims and the circumstances under
which they were presented, the
degree of culpability, history of prior offenses, and financial condition of
the person presenting the claims."
These guidelines are elaborated upon in the regulations at 42 C.F.R. 1003.106.
Applying the criteria set forth in 42 C.F.R. 1003.106 to the instant case,
I make the following
determinations: (1) As to the nature of the claims and the circumstances under
which they were presented,
an aggravating factor is that the total amount wrongfully claimed was "substantial,"
within the meaning of
the regulations, i.e., more than $1,000.00. (2) As to the degree of culpability,
it is an aggravating
circumstance that Respondents knew that the items and services at issue were
not provided as claimed. (3)
As to prior offenses, there is no evidence of a history of related conduct.
(4) With regard to financial
condition, the regulation states (i) that it should be considered a mitigating
circumstance if imposition of
the full penalty or assessment would jeopardize a respondent's ability to continue
to provide health care;
and (ii) that in all cases, a respondent's financial resources should be considered
when determining the
amount of penalty and assessment.
In evaluating Respondents' financial resources and ability to pay, relevant
guidance is found in prior
decisions of this Departmental Appeals Board. It is well established that a
respondent bears the burden of
proving by a preponderance of the evidence that his financial condition prevents
him from being able to
pay the proposed penalty and assessment. 42 C.F.R. 1003.114(d); Corazon C. Hobbs,
M.D., DAB CR57
(1989). Furthermore, unsupported assertions of financial distress do not justify
the reduction of a proposed
penalty and assessment. Tommy G. Frazier, et al., DAB CR79 (1990).
The first financial issue to be considered -- whether imposition of the full
penalties or assessments would
jeopardize Respondents' ability to continue to provide health care -- clearly
does not inhibit imposition of
the full penalties and assessments. Dr. Johnson's license to practice dentistry
in the District of Columbia
was revoked in January 1990 and has not been reinstated. She is employed as
a substitute teacher by the
Manatee County (Florida) School Board. Thus, she does not have any continuing
role as a health care
provider.
The second consideration is that, in all cases, a respondent's financial resources
should be considered when
determining the amount of penalty and assessment. I find that here, too, there
is no impediment to
imposition of the full penalty and assessment. The evidence of record shows
that, although Respondents'
net worth declined between the time Dr. Johnson completed a financial disclosure
form in May 1991, and
her hearing in September 1991, Respondents always had sufficient resources to
pay the penalty and
assessment advocated by the I.G. without rendering Dr. Johnson destitute.
With regard to assets, Dr. Johnson holds three promissory notes ($130,000.00;
$74,000.00; and
$20,000.00) which were payment for the sale of her dental practice to Dr. Ann
Murray. Expert testimony
established that the three promissory notes could be sold at a discounted rate
on the commercial paper
market. Also, according to Dr. Johnson's sworn Financial Statement, as of May
2, 1991, she owned three
houses which could be sold for approximately $320,000.00 (the net value of this
real estate, after
mortgages are taken into consideration, is approximately $137,000.00). Finally,
Dr. Johnson, her husband,
and her professional corporation owed a total of approximately $50,000.00 in
taxes, penalties, and interest
as of September 30, 1991. Respondents have other liabilities (other than mortgages
or tax debt) totalling
approximately $37,000.00 as of September 30, 1991.
Taking into account all major assets and liabilities, Respondents had a net
worth of approximately
$270,000.00 as of September 30, 1991. Thus, Respondents' assets were six to
seven times greater than the
proposed penalties and assessments. Noting that it has been held that where
a respondent has a net worth of
$200,000.00, penalties and assessments totalling $80,500.00 (a ratio of assets
to penalty plus assessment of
only 2 1/2:1) should not be reduced based on lack of financial resources. George
A. Kern, M.D., DAB
CR12 (1987). I conclude that the present Respondents have not shown themselves
financially unable to
pay the entire proposed penalties and assessments.
Additionally, the Act has been interpreted to permit imposition of penalties
and assessments which exceed
the amount actually taken by a respondent. Chapman v. U.S. Dep't of Health &
Human Services, 821 F.2d
523 (10th Cir. 1987). This reflects the legislative conclusion that activities
in violation of the Act result in
damages in excess of the actual amount disbursed by the government to the fraudulent
claimant. Berney R.
Keszler, M.D., et al., DAB CR107 (1990). In the present case, undisputed evidence
indicates that the
government's expenses in its civil prosecution of Respondents (comprised primarily
of lawyers' and
investigators' salaries) total approximately $22,000.00. Thus, more than half
the proposed penalties plus
assessments represents the government's expenses in investigating and prosecuting
this case.
These governmental expenses are also relevant to certain constitutional considerations.
Inasmuch as the
penalties and assessments proposed by the I.G. herein are reasonably related
to the government's actual
damages and expenses, they do not amount to "punishment" which would
be violative of the Double
Jeopardy Clause of the Fifth Amendment and which would be, therefore, unlawful.
United States v.
Halper, 490 U.S. 435 (1989).
Conclusion
I find, in light of the nature of the Respondents' offenses, the aggravating
factors attaching to them, their
costs to the government, and Respondents' financial and other circumstances,
that the full penalties and
assessments proposed by the I.G. are appropriate and reasonable.
________________________
Joseph K. Riotto
Administrative Law Judge
1. The documentary record of this case will be cited as follows:
I.G.'s Exhibits I.G. Ex. (number/page)
Respondents' Exhibits R. Ex. (number)
Transcript Transcript (page)
I.G.'s Post-hearing brief I.G. Br. (page)