Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Sanford Orloff, R.Ph.,
Petitioner,
- v. -
The Inspector General.
DATE: June 16, 1992
Docket No. C-92-058
DECISION
By letter dated January 13, 1992, Sanford A. Orloff, R.Ph., the Petitioner
herein, was notified by the
Inspector General (I.G.), U.S. Department of Health & Human Services (HHS),
that it had been decided to
exclude him for a period of five years from participation in the Medicare and
Medicaid programs
("Medicaid" here represents those State health care programs mentioned
in section 1128(h) of the Social
Security Act (the Act)). The I.G. explained that the five-year exclusion was
mandatory under sections
1128(a)(1) and 1128(c)(3)(B) of the Act because Petitioner had been convicted
of a criminal offense
related to the delivery of an item or service under Medicaid.
Petitioner filed a timely request for review of the I.G.'s action.
The parties agreed that I should decide the case on the basis of written submissions
in lieu of an in-person
hearing.
APPLICABLE LAW
Sections 1128(a)(1) and 1128(c)(3)(B) of the Act make it mandatory for any
individual who has been
convicted of a criminal offense related to the delivery of an item or service
under Medicare or Medicaid to
be excluded from participation in such programs, for a period of at least five
years.
Section 1128(i)(1) of the Act provides that an individual is deemed to have
been convicted of a criminal
offense when a judgment of conviction has been entered against the individual
or entity by a federal, State,
or local court, regardless of whether there is an appeal pending or whether
the judgment of conviction or
other record relating to criminal conduct has been expunged.
Section 1128(b) et seq. permits, but does not mandate, the exclusion from these
same programs of any
person whom the Secretary of HHS (or his delegate, the I.G.) concludes is guilty,
or has been convicted, of
health care related fraud, kickbacks, false claims, or similar activities. Before
a person is excluded
pursuant to these provisions, he is entitled to a hearing before an administrative
law judge (1128(f)(2)).
FINDINGS OF FACT AND CONCLUSIONS OF LAW 1/
1. During the period relevant herein, Petitioner, a registered pharmacist,
was part owner of Kaplan
Pharmacy, of Brooklyn, New York, a Medicaid provider.
2. During 1984 and 1985, Petitioner invested in Marcy Vernon Soul Shoes, a
retail store which
participated in the Medicaid program. Petitioner held a 20 percent ownership
interest and had management
responsibilities and/or control. P. Ex. 1; I.G. Ex. 1, 2, 7.
3. Marcy Vernon Soul Shoes defrauded Medicaid of approximately $200,000 by
submitting claims for
orthopedic shoes when, in fact, it had only provided ordinary shoes. P. Ex.
1; I.G. Ex. 1, 2.
4. Petitioner received a share of the proceeds of the Medicaid fraud amounting
to at least $50,000. P. Ex.
1; I.G. Ex. 2, at 6-7.
5. On September 24, 1990, Petitioner pleaded guilty in New York State Supreme
Court to Grand Larceny
in the Second Degree. P. Ex. 1; I.G. Ex. 2-5.
6. Petitioner was sentenced to a conditional discharge and paid restitution
of $50,000 to Medicaid. P. Ex.
1; I.G. Ex. 3-5.
7. The Secretary of Health and Human Services has delegated to the I.G. the
authority to determine and
impose exclusions pursuant to section 1128 of the Act. 48 Fed. Reg. 21662 (May
13, 1983).
8. On January 13, 1992, Petitioner was notified by the I.G. that it had been
decided to exclude him for a
period of five years from participation in the Medicare and Medicaid programs
because of his conviction of
a criminal offense related to the delivery of an item or service under Medicaid.
9. A criminal conviction for fraudulently billing Medicaid for services not
rendered or goods not delivered
is sufficiently related to the delivery of an item or service under Medicare
or Medicaid to justify
application of the mandatory exclusion provisions of section 1128(a)(1).
10. The I.G. is under no obligation to proceed under the permissive exclusion
provisions of sections
1128(b)(1) or (7) of the Act against a person who might have committed fraud.
However, once there has
been a conviction of a program-related offense, a five-year exclusion is mandatory
under section 1128(a).
11. The mandatory minimum exclusion provisions of section 1128(a) apply to
all exclusions based on
convictions occurring after August 18, 1987, the effective date of the Medicare
and Medicaid Patient and
Program Protection Act of 1987.
12. After an extensive investigation, the New York Attorney General (A.G.)
concluded there was no
indication that Petitioner, in his capacity as a pharmacist, violated any regulations
relating to Medicare or
Medicaid. P. Ex. 1.
13. Petitioner cooperated with the A.G. in the prosecution of the instigator
of the Marcy Vernon scheme, a
Dr. Robert Rosenblitt. P. Ex. 1.
ARGUMENT
Petitioner's principal contention is that exclusion is not mandated in his
case, but rather is permissive.
Specifically, he states that his "...conviction relates to the filing of
false or improper claims by the corporate
entity, Marcy Vernon Soul Shoes, for the occasions on which it dispensed non-conforming
shoes and this
conduct is classified in subpart C of Part 1001 of the regulations as grounds
for permissive action." If any
action against him is taken under the permissive exclusion sections of the Act
-- i.e., if he is no longer
subject to a nondiscretionary five-year exclusion -- Petitioner believes that
his history of cooperation with
the New York Attorney General and the community's appreciation of his services
as a pharmacist (see P.
Ex. 2) will tend to mitigate the gravity of his offense.
In the alternative, he argues that the unlawful acts in his case occurred,
and were known to the authorities,
prior to the inception of the mandatory exclusion law on September 1, 1987.
He maintains that it is unjust
to retroactively apply such law to conduct which actually took place in 1984
and 1985 in that it denies him
equal application of the law.
DISCUSSION
The first statutory requirement for mandatory exclusion pursuant to section
1128(a) is that the the
individual or entity in question be convicted of a criminal offense under federal
or State law. In the present
case, the transcript of the New York Supreme Court proceedings and the certificate
of the clerk of the court
(I.G. Ex. 2, 5) prove that Petitioner pled guilty and that a conviction was
entered against him, thus
satisfying the definition of "convicted" in section 1128(i) of the
Act.
I also find that the requirement of section 1128(a)(1) that the criminal offense
leading to the conviction be
related to the delivery of an item or service under Medicare or Medicaid has
been satisfied. Specifically, it
is well-established in DAB precedent that submitting fraudulent Medicaid claims
constitutes a program-
related offense which justifies mandatory exclusion. Russell E. Baisley, et
al., DAB CR128 (1991), and
Marie Chappell, DAB CR109 (1990).
Petitioner argues that the I.G. should have proceeded under those sections
of the Act that deal with
permissive exclusion. In this regard, although there is apparent subject matter
overlap between the
mandatory exclusion provisions of section 1128(a) and the permissive exclusion
section 1128(b), section
1128(a) addresses only program-related crimes and requires action by HHS. Permissive
exclusions, by
contrast, may be based upon a much wider spectrum of misdeeds and their invocation
is wholly
discretionary. This distinction was central to the decision of the appellate
panel in Samuel W. Chang,
M.D., DAB 1198 (1990), which held that "the permissive exclusion provisions
of section 1128(b) apply to
convictions for offenses other than those related to the delivery of an item
or service under either the
Medicare or Medicaid ... programs." Precedent dealing with the scope of
the Secretary's discretion holds
that HHS is under no obligation to institute a permissive exclusion under section
1128(b), but that once a
person has been convicted of a program-related criminal offense, exclusion is
mandatory. See e.g., Leon
Brown, M.D., DAB CR83, aff'd DAB 1208 (1990).
Lastly, Petitioner attacked his exclusion as an unlawful retroactive application
of section 1128(a)(1). This
point, however, has been repeatedly litigated and it has been established that
the mandatory minimum
exclusion provisions apply to all exclusions based on convictions occurring
after August 18, 1987 -- the
effective date of the Medicare and Medicaid Patient and Program Protection Act
of 1987, Pub. L. 100-93
15(b), 101 Stat. 698 (1987). See Francis Shaenboen, R.Ph., DAB 1249 (1991).
CONCLUSION
Petitioner's conviction requires his exclusion pursuant to section 1128(a)(1).
____________________________
Joseph K. Riotto
Administrative Law Judge
1. Petitioner and the I.G. submitted documentary exhibits, briefs and reply
briefs. I admitted all of the
exhibits into evidence and refer to them herein as "P. Ex. (number)"
or "I.G. Ex. (number)."