Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: The Inspector General,
- v. -
Timothy L. Stern, M.D., Respondent.
DATE: August 21, 1992
Docket No. C-92-081
Decision No. CR228
DECISION ON REMAND
The Inspector General (I.G.) and Timothy L. Stern, M.D. (Respondent), appealed
from my October 10,
1991 decision where I found and concluded that Respondent violated section 1128A
of the Social Security
Act (Act) by submitting claims to the Medicare program for 688 services which
Respondent knew, had
reason to know, or should have known were not provided as claimed (DAB CR154)
(Stern I). In that
decision, I found that the I.G. had proven that Respondent had illegally submitted
claims to Medicare,
describing his services generally as office visits and local nerve blocks, when
he actually had performed
acupuncture treatments on his patients, a service for which Medicare does not
cover or pay.
In Stern I, the I.G. sought penalties of $425,000, assessments of $70,648,
and a 20 year exclusion of
Respondent from Medicare and Medicaid programs. After considering the amount
of the damages to the
government, the number of services where liability was proven by the I.G., and
weighing the aggravating
and mitigating factors, I imposed penalties of $140,000, assessments of $45,000,
and an exclusion of seven
years.
On March 18, 1992, an appellate panel of the Departmental Appeals Board (DAB)
issued a decision which
upheld my findings and conclusions that Respondent violated section 1128A of
the Act with regard to 688
services not provided as claimed. (DAB 1314) (Stern II). The appellate panel
deleted and modified some
of my findings regarding mitigating factors, and remanded the case to me "for
the sole purpose of
reconsidering the sanctions to be imposed." Stern II at 2, 32.
BACKGROUND
I. The ALJ Decision In Stern I.
In Stern I, I reduced the amount of sanctions proposed by the I.G.: (1) because
I found that the I.G. proved
liability on fewer than the 707 services he alleged were not provided as claimed,
(2) because I found that
the damages to the government were inappropriately stated and considered, (3)
because I gave less weight
to aggravating factors than the I.G., and (4) because I found certain factors
to be mitigating and the I.G. did
not.
On appeal, both parties challenged my method of determining the amount of the
sanctions. The I.G.
argued that the imposed sanctions were inadequate. Respondent asserted that
the penalties and assessments
were punitive and that it was error not to review each claim separately and
to render a decision on each
service.
II. The Appellate Panel Decision In Stern II.
The appellate panel directed that I reconsider the sanctions to be imposed
in light of the "deletions and
modifications" they made to my findings of fact and conclusions of law
(FFCL), and directed that I
substantiate the sanctions in light of the factors they "identified in
the statute and regulations." Stern II at
30, 32.
The appellate panel deleted FFCLs 179-183 and modified FFCL 184 in Stern I.
They directed that, when I
reconsidered the sanctions, I could not consider as mitigating factors: (1)
Respondent's drug addiction, (2)
Respondent's provision of other medical services to his patients, or (3) that
some beneficiaries found
Respondent to be a good doctor and benefitted from his treatments. Stern II
at 20-31. They found no
basis in fact or law for my findings that these were mitigating factors. Id.
The appellate panel suggested that I clarify whether any of 14 claims (which
I found, in Stern I at FFCLs
132 and 181, to be for reimbursable services) should be deleted from the number
of claims that would
justify sanctions. Stern II at 18. The appellate panel also rejected Respondent's
contention that each claim
should be considered separately in determining the sanctions to be imposed.
Stern II at 18.
While the appellate panel deleted all my findings regarding mitigating factors,
they stated that "the AlJ
would still have considerable discretion in determining the amount or scope
of any" sanctions. Stern II at
30-31. The appellate panel stated also that substantially less than the maximum
authorized penalty may be
appropriate even where only aggravating factors exist. Stern II at 30. 1/ The
appellate panel then
suggested that since the claims in issue affected only 31 patients, the penalties
might be substantially lower
than the maximum, and that Respondent's financial condition might "still
have some bearing" on the
amount of penalties (even if not proven to be a mitigating factor). Stern II
at 31.
III. Summary of the Parties' Arguments.
Based on the remand, the record in this case was reopened and redocketed as
No. C-92-081 (Stern III). I
then gave the parties the opportunity to apprise me of their positions. The
parties filed written submissions,
including the I.G.'s April 23, 1992 Brief (I.G. Brief), Respondent's May 7,
1992 submission and proposed
exhibit, and the I.G.'s June 8, 1992 Response (I.G. Response).
On July 23, 1992, I conducted a telephone conference to discuss the amount
of damages to the government
and to allow final arguments.
The I.G. still seeks $425,000 in penalties, $70,648 in assessments, and a 20
year exclusion of Respondent
from the Medicare and Medicaid programs. The I.G. argues that the sanctions
imposed should be greater
than the amount I found to be appropriate in Stern I, stating that I did not
give sufficient weight to certain
aggravating factors evidenced in the record. The I. G. asserts that my decision
did not reflect a systematic
analysis of the government's damages in determining the amount of penalties
and assessments to be
imposed on Respondent.
In addition to denying liability, Respondent argues that his financial condition
is a mitigating factor and
supports a reduction in the penalties and assessments. He introduced additional
evidence concerning his
available financial resources on May 7, 1992 and I have marked that submission
as Respondent's Exhibit
92-1 (R. Ex. 92-1). (R. Ex. 92-1 consists of a cover letter, a letter dated
May 3, 1992 to Respondent's
CPA, federal and state tax returns, and a "Financial Statement".)
Respondent argues that the imposed penalties and assessments should not exceed
the actual amount of
money paid to him by Medicare, which amounts only to approximately $9,000. Respondent
argues further
that $9,000 is the only true amount of real damages to the government, and that
imposition of the excessive
amounts of sanctions sought by the I.G. are punitive and counterproductive to
Respondent's rehabilitation.
Finally, Respondent argues that the I.G. has misled the DAB by overstating the
government's damages and
including damages that are outside the scope of this present action.
The I.G. argued that financial condition cannot be considered a mitigating
factor in this case, and that R.
Ex. 92-1 or any other information regarding Respondent's financial condition
is not reliable or relevant.
I.G. Response.
RULING On R. Ex. 92-1
The I.G. has challenged the admission of R. Ex. 92-1, asserting that the record
should not be reopened and
that the exhibit is unreliable. I.G. Response at 2-5.
However, I find that R. Ex. 92-1 (Financial Statement) is relevant to the issues
in this case because the
governing federal regulations require consideration of financial resources available
to a respondent when
determining the amount of penalties and assessments. 42 C.F.R. 1003.106(b)(4)
(1989).
Moreover, the appellate panel in Stern II suggested that I consider whether
Respondent's financial
condition has some bearing on the amount of sanctions to be imposed. Stern II
at 31. Accordingly, I admit
the Financial Statement into evidence as R. Ex. 92-1.
I find also that Respondent's Financial Statement is not independently verified
by a CPA. See I.G.
Response at 3. Since Respondent's own CPA was not willing to vouch for the truthfulness
or accuracy of
Respondent's data, and since I do not have confidence in Respondent's credibility,
ordinarily I would not
have given this evidence much weight. However, Respondent's brother, Arthur
Stern, a lawyer and officer
of the courts of New York State, stated during the July 23, 1992 telephone conference
that he vouched for
the accuracy of the financial data and that he was intimately familiar with
Respondent's available financial
resources. Arthur Stern has been credible in the past and I have no reason to
doubt his word now.
Accordingly, I have accorded the Financial Statement some probative value.
ISSUES
The main issue is whether the sanctions proposed by the I.G. are reasonable
and appropriate. The
subordinate issues are:
1. Whether the failure of the I.G to prove liability for all 707 services listed
in his Notice letters to
Respondent requires a reduction in the sanctions proposed by the I.G.
2. Whether any of 14 services identified in Stern I at FFCLs 132 and 181 should be deleted.
3. Whether the I.G.'s failure to prove all of the damages he alleged requires
a reduction in the sanctions
proposed by the I.G.
4. Whether Respondent proved any mitigating factors which would require a reduction
of the sanctions
proposed by the I.G.
SUMMARY OF THIS DECISION
After following the appellate panel's mandate in Stern II, I find and conclude
that the evidence in the
record requires imposition of penalties of $345,000, assessments of $70,648,
and an exclusion from
Medicare and Medicaid programs for ten years
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Findings of Fact And Conclusions Of Law set forth in my decision in Stern
I remain unchanged,
unless modified here.
1. The I.G.'s expert witness identified 14 instances in which Respondent's
medical records reflected that
some reimbursable service had been provided by Respondent. Transcript (Tr.)
II/1541-1549.
2. Only eight of the 14 services identified by the I.G.'s expert were at issue
in this proceeding; six were
not. Tr. II/1541, 1542, 1545-1549; attachment to I.G.'s Notice at 5-14.
3. Upon re-examining the eight services at issue which were identified by the
I.G.'s expert and identified in
Stern I at FFCLs 132 and 181, I find that count 291, a claim for services to
Eloise Jenkins on May 7, 1985,
was provided at the level of service claimed by Respondent. Tr. II/1546-54;
I.G. Posthearing Brief at 114,
n.27. This leaves seven services at issue, of the original 14.
4. Count 291 is deleted from the number of services that justify sanctions,
leaving 687 services which
were claimed by Respondent in violation of section 1128A of the Act.
5. Respondent submitted or caused to be submitted to the Medicare carrier,
Blue Shield of Western New
York (BSWNY), claims on behalf of Medicare beneficiaries for 687 items or services
which he knew, had
reason to know, or should have known were not provided as claimed, in violation
of section 1128A of the
Act.
6. Upon re-examining the remaining seven services in issue (of the 14 services
identified by the I.G.'s
expert), I find that these seven services claimed (counts 208, 347, 349, 361,
372, 377, 378) would have
been reimbursable, if properly claimed, because a service was provided, in addition
to acupuncture, albeit
at a lower level than claimed.
7. Congress intended that section 1128A sanctions be primarily remedial in
nature and that there be some
reasonable relationship between the determination of the sanctions and the amount
of damages to the
government.
8. In determining the amount of penalties and assessments to be imposed, and
the length of exclusion,
section 1128A of the Act and its implementing regulations direct the ALJ to
consider several factors which
may be aggravating or mitigating. 42 U.S.C. 1320a-7a; 42 C.F.R 1003.106.
9. The I.G. has the burden of proving the existence of any aggravating factors
by a preponderance of the
evidence.
10. Respondent has the burden of proving the existence of any mitigating circumstances
by a
preponderance of the evidence.
11. The aggravating and mitigating factors that must be considered are:
a. the nature and circumstances under which the requests for payment were made;
b. the degree of a respondent's culpability;
c. the existence of prior offenses;
d. the financial condition of a respondent;
e. any other matters that justice may require.
42 C.F.R. 1003.106, 1003.107.
12. With regard to the nature and circumstances of the claims, the I.G. proved
that it is an aggravating
factor that: (a) the claims at issue were presented over a lengthy period of
time; (b) there were a substantial
number of claims involved; and (c) that the $42,875 claimed for the 687 services
at issue was substantial.
13. With regard to the degree of Respondent's culpability, the I.G. proved
that Respondent acted with
knowledge and reckless disregard for Medicare rules and regulations. He knowingly
disseminated false
information about the Medicare program to Medicare beneficiaries and the public
at large. Respondent
assured patients that electrical stimulation treatments would be reimbursed
by Medicare, thereby inducing
the patients to undergo electrical stimulation treatments and to pay Respondent
at the time of treatment (or
to take a Medicare assignment from them) when he knew or had reason to know
that the services provided
were not reimbursable under Medicare.
14. The I.G. did not prove the existence of prior offenses as an aggravating
factor. I.G. Posthearing Brief
at 175.
15. It is an aggravating factor that Respondent has a history of misrepresenting
facts. Stern I at FFCL 149-
171.
16. Respondent did not prove that his financial condition would impair his
ability to continue as a health
care provider (i.e., that it was a mitigating factor).
17. The implementing regulations require that Respondent's known financial
resources must be considered
in determining the amount of the penalties and assess-ments. 42 C.F.R. 1003.106(b)(4).
18. Respondent's Financial Statement, which is part of R. Ex. 92-1, is not
independently verified by a
CPA.
19. I find believable the statements of Arthur Stern, Respondent's brother,
which were made during the
July 23, 1992 telephone conference, concerning Respondent's financial resources.
20. While I do not find Respondent to be a credible witness, I find Respondent's
Financial Statement to be
an accurate and honest account of his net worth and I have considered it in
determining the amount of
penalties and assessments. See FFCL 19.
21. The $121,247 stated net worth of Respondent, by his own account, is a substantial amount.
22. Justice requires consideration, as a mitigating factor, that the I.G.'s
expert concluded that a
reimbursable service was performed in seven of the 687 services remaining in
issue, albeit at a lower level
than claimed.
23. Justice requires me to consider that Respondent lives a life which emphasizes
rehabilitation and
recovery from drug abuse and its underlying causes; in addition, Respondent
and his brother reported on
July 23, 1992 that Respondent now works in excess of 40 hours per week as a
counselor at a substance
abuse rehabilitation agency.
24. The I.G. did not prove all of the aggravating factors which he alleged,
including that Respondent has
knowingly practiced acupuncture without appropriate authorization and has resisted
paying restitution
under a previous plea agreement.
25. The I.G.'s proposed penalties, assessments, and exclusion were based on
his assertion that 707 services
were not provided as claimed, whereas I have concluded that 687 were not provided
as claimed.
26. Based on the government's damages in this case, Respondent's known financial
resources, and the
other factors and circumstances set out in section 1128A of the Act and the
implementing regulations, the
imposition of penalties in the amount of $425,000 and an exclusion of 20 years
are not reasonable. The
imposition of assessments in the amount of $70,648 is reasonable.
27. Penalties of $345,000, assessments of $70,648, and an exclusion of ten
years are reasonable in this
case.
DISCUSSION
I. The I.G. Proved That Respondent Claimed 687 Services In Violation Of Section 1128A Of The Act.
The I.G. alleged that Respondent claimed reimbursement from Medicare for 707
services in violation of
section 1128A of the Act. In Stern I, I found that the I.G. proved liability
with regard to 688 services
claimed by Respondent. The appellate panel in Stern II stated that I correctly
determined that the I.G.
proved that Respondent violated section 1128A of the Act by using the terms
"office visit" and "local nerve
blocks" on claims submitted to Medicare to mask the acupuncture treatment
he actually delivered to his
patients. Stern II, at 13. The appellate panel stated that "the FFCLs provide
numerous detailed and
frequently overlapping reasons in support of the ultimate conclusion concerning
at least 674 claims." Stern
II at 18.
The appellate panel requested that I clarify whether any of 14 claims identified
by the I.G.'s expert "should
be deleted from the number of claims that would justify" the sanctions.
Stern II at 18-19. The I.G.'s expert
witness identified 14 instances in which Respondent's medical records reflected
that some reimbursable
service had been provided by Respondent. FFCL 1.
Upon re-examining the 14 services identified by the I.G.'s expert, and identified
in Stern I at FFCLs 132
and 181, I find that only eight of those 14 services were at issue in this proceeding.
FFCL 2. I find, also,
that count 291, a claim for services to Eloise Jenkins on May 7, 1985, was provided
at the level of service
claimed by Respondent. FFCL 3. The I.G.'s expert testified that this service
"where an allergic reaction
was treated with epinephrine ... would be covered under Medicare and reimbursable."
Tr. II/1547. The
expert did not qualify his statement, as he had done elsewhere, by adding that
the service should have been
claimed at a lower level.
Accordingly, I deleted count 291 from the number of claims that justify sanctions,
leaving 687 services
claimed in violation of section 1128A of the Act by Respondent. The I.G.'s proposed
penalties,
assessments, and exclusion were based on his assertion that 707 services were
not provided as claimed. I
have concluded, however, that 687 services were not provided as claimed. This
requires a slight reduction
in the sanctions proposed.
II. Congress Intended That Section 1128A Sanctions Be Primarily Remedial.
Section 1128A of the Act was enacted by Congress to provide a civil mechanism
to protect federally-
financed health care programs from fraud and abuse. Scott v. Bowen, 845 F.2d
856 (9th Cir. 1988):
Mayers v. U.S. Dept. of Health and Human Services, 806 F.2d 995, 997 (11th Cir.
1986), aff'g, William J.
Mayers, D.C., DAB CR1 (1985); cert. denied, 484 U.S. 822 (1987).
Congress provided penalties and assessments to make the government whole for
the damages caused by
violations of section 1128A. Bernstein v. Sullivan, 914 F.2d 1395, 1397 (10th
Cir. 1990). However, the
intent of Congress may be negated if the sanctions are so excessive so as to
transform them from a "civil
remedy into a criminal penalty." Mayers at 998. Penalties and assessments
which are grossly
disproportionate to the costs sustained by the government would make them punitive
and not remedial.
United States v. Halper, 490 U.S. 435 (1989); Mayers at p. 999; Chapman v. U.S.
Dept. of Health and
Human Services, 821 F.2d 523 (10th Cir. 1987); Mayers at 999.
While section 1128A penalties and assessments cannot be excessive, they must
be great enough to (1)
enable the I.G. to recoup the financial loss to the government and the costs
of bringing a violator to justice
and (2) send a strong message to other would be offenders to deter them from
engaging in illegal practices.
Mayers at 999.
The exclusion is designed to protect federally financed health care programs
from future misconduct by a
respondent. Anesthesiologists Affiliated, DAB CR65 at 58 (1990), aff'd, 941
F.2d 678 (8th Cir. 1990).
The exclusion gives an errant provider time to become rehabilitated and trustworthy.
The exclusion also
serves to deter others from engaging in similar misconduct. Manocchio v. Sullivan,
768 F. Supp. 814 (S.D.
Fla. 1991), aff'd, 961 F.2d 1539 (11th Cir. 1992); Greene v. Sullivan, 731 F.
Supp. 838, 840 (E.D. Tenn.
1990); Dewayne Franzen, DAB 1165 (1990); see also, 57 Fed. Reg. 3744 (January
29, 1992).
III. There Are Maximum And Minimum Sanctions Provided For By Section 1128A And
Its Implementing
Regulations.
Section 1128A of the Act and its implementing regulations provide for maximum
penalties of up to $2,000
for each item or service not provided as claimed and assessments of not more
than twice the amount
claimed, "in lieu of damages sustained by the United States". Section
1128A(a); 42 C.F.R. 1003.103,
1003.104, and 1003.106.
In this case, the maximum penalties that may be imposed are $1,374,000 ($2,000
multiplied by the 687
claims proved by the I.G. to be false or improper). The I.G. seeks $425,000,
or approximately $600 per
claim.
The maximum assessments provided for by section 1128A and the regulations are
$85,826, or twice the
amount claimed by Respondent on the 687 claims ($42,875 multiplied by two).
The I.G. seeks $70,648,
slightly less than the maximum. 2/
While there are no minimum amounts for penalties or assessments set forth in
section 1128A of the Act or
its legislative history, section 1003.106(c)(3) of the regulations states that
the penalties and assessments
should never be less than double the approximate amount of damages sustained
by the government, unless
there are extraordinary mitigating circumstances. 42 C.F.R. 1003.106(c)(3).
3/
There is no maximum or minimum length of exclusion set by the statute or regulations.
See 42 C.F.R.
1003.107.
IV. Section 1128A And Its Implementing Regulations Require Consideration Of
Several Factors To
Determine The Amount Of The Sanctions.
The actual amounts of the sanctions should be determined only after considering
several factors listed
under five broad categories in the statute and the regulations. These categories
of factors are: (1) the nature
of claims presented and the circumstances under which the claims were presented,
(2) the degree of
culpability, (3) the history of prior offenses, (4) the financial condition
of the person presenting the claims,
and (5) such other matters as justice may require. 42 C.F.R. 1003.106. Section
1003.106(b) of the
regulations (which is entitled "determinations regarding the amount of
penalties and assessments") contains
some general guidelines for the interpretation and application of these factors,
which are referred to as
aggravating and mitigating factors.
V. Several Factors Should Be Weighed To Determine The Amount Of The Sanctions.
The guidelines in section 1003.106 do not ascribe specific weight to be given
to these five categories of
factors or circumstances listed in the statute and regulations.
However, section 1003.106 (c)(1) of the regulations states that the penalties
and assessments should be set
at an amount sufficiently below the maximum permitted if there are substantial
or several mitigating
circumstances. If there are substantial or several aggravating circumstances,
the aggregate amount of the
penalties and assessments should be set closer to the maximum. Section 1003.107
of the regulations
provides that the determination to exclude and the duration of an exclusion
should be made by taking into
account the circumstances set forth in section 1003.106 of the regulations.
Finally, section 1003.106(d)
surprisingly states that the "guidelines set forth in this section are
not binding" (emphasis added).
The preamble to the regulations specifically states that "fixed numbers"
have been "eliminated" as
"triggering devices" and "we believe that increased flexibility
is preferable." 48 Fed. Reg. 38827 (Aug.
26, 1983). See Dean G. Hume, DAB CR40 at 21-29 (1989). Since the regulations
provide guidelines and
flexibility, logic suggests that other section 1128A decisions be compared in
determining the appropriate
sanctions. This could assist in ascribing weight to the aggravating or mitigating
circumstances which are
found in this case.
A. The Nature and Circumstances of the Claims Presented.
An aggravating circumstance exists where the requests for payment were of several
types, occurred over a
lengthy period of time, were large in number, indicated a pattern of making
such requests for payment, or
where the amount was substantial. 42 C.F.R. 1003.106(b).
It is a mitigating circumstance if the nature and circumstances of the requests
for payment were all of the
same type, occurred within a short period of time, were few in number, and the
total amount requested was
under $1,000. Id.
The I.G. proved that the claims for services at issue were provided over a
lengthy period of time (more
than one year), were a substantial number (687 services not provided as claimed),
indicated a pattern, and
involved a substantial amount ($42,875 claimed and approximately $9,000 paid
to Respondent). The I.G.
did not prove that the requests for payment were for several types of services.
I gave these aggravating circumstances great weight in Stern I and do so here.
The appellate panel in Stern
II did not question my findings regarding these circumstances. 4/ 5/
B. Respondent's Culpability
Knowledge of wrongdoing is an aggravating factor and "unintentional or
unrecognized error" is a
mitigating factor if a respondent "took corrective steps promptly after
the error was discovered." 42 C.F.R.
1003.106(b)(2); 48 Fed. Reg. 38831 (Aug. 26, 1983).
I found in Stern I that the I.G. proved that it is an aggravating circumstance
that Respondent knew that the
services he claimed were not provided as claimed. I also found that Respondent
had reason to know and
had a reckless disregard for the Medicare rules in that he knowingly ignored
the requirements when
presenting claims to Medicare. The appellate panel agreed with my findings and
stated in Stern II at 9-10
that Respondent had knowledge of his wrongdoing.
While I found that Respondent had actual knowledge, I concluded in Stern I
that much of this behavior was
due to Respondent's drug addiction. I concluded that the I.G. proved culpability
as an aggravating factor,
but I found that this aggravating circumstance was mitigated because of Respondent's
drug addiction. 6/
However, the appellate panel in Stern II at 21-25 stated that my finding that
Respondent's drug addiction
was mitigating was "not supported by substantial evidence in the record
and lacks legal justification." The
appellate panel asserted that mitigating culpability because of drug addiction
would send the wrong
message to the public and that Respondent did not substantiate why he should
be permitted to present
additional evidence on this issue. Finally, the appellate panel deleted FFCL
from my decision in Stern I.
See Stern II at 25.
Thus, Respondent's drug addiction cannot be considered to mitigate the severity
of his culpability.
Because the appellate panel directed me to reconsider the sanctions without
regard to Respondent's drug
addiction as a factor mitigating his culpability, I have, accordingly, increased
the sanctions to be imposed
on Respondent by a moderate amount. 7/ 8/
C. History Of Prior Offenses
Lack of prior offenses is not a mitigating factor. George A. Kern, DAB CR12
at 67 (1987). The I.G.
conceded that there are no specific prior offenses "which could be construed
as aggravating." I.G.
Posthearing Brief at 175.
However, the I.G. urges me to consider Respondent's prior improper actions.
I.G. Brief at 10-12. The I.G.
did not prove these prior actions to be an aggravating factor under this category.
Anesthesiologists, at 60-
61. See I.G. Posthearing Brief at 175.
Accordingly, I have given this factor no consideration in determining the amount
of the sanctions to be
imposed.
D. Financial Condition of Respondent
The financial condition of a respondent should constitute a mitigating circumstance
if the penalties or
assessments, without reduction, would jeopardize the ability of a respondent
to continue as a health care
provider. 42 C.F.R. 1003.106 (b)(4). Respondent has not demonstrated that the
sanctions imposed here
would jeopardize his ability to continue as a health care provider.
However, the regulations also require that in "all cases, the resources
available to the respondent will be
considered when determining the amount of the penalty and assessment."
Id. Thus, the ALJ should
consider a respondent's financial condition. It is apparent that the I.G. did
not take into consideration
Respondent's financial condition.
As I stated earlier, I have given some weight to Respondent's Financial Statement.
Although the I.G.
suggests that Respondent may have failed to disclose all of his assets, by Respondent's
own account of his
net worth, $121,247 is a substantial amount of money. See I.G. Response at 4-5.
Accordingly,
Respondent's financial condition does not require a reduction in the sanctions.
9/
E. Other Factors As Justice May Require
1. Damages to the government
(a) Measurable damages related to the false claims submitted by Respondent
The statute, the regulations, and case law all single out the approximate amount
of damages to the
government as the most important factor to be used in determining the appropriate
amount of penalties and
assessments because they are intended to make the government whole. Mayers at
999.
Damages to the government include the amounts paid by the Medicare program
to Respondent and the
costs of bringing Respondent to justice. Mayers at 998-999; Berney R. Keszler,
DAB CR107 (1990); 48
Fed. Reg. 38831 (Aug. 26, 1983); H.R. Rep. No. 158, 97th Cong., 1st Sess. 329,
461-462 (1981), reprinted
in 1981 U.S.C.C.A.N. at 727-28.
Here, the I.G. proved that Respondent improperly claimed reimbursement from
Medicare for 687 services
not performed as claimed. The amount paid to Respondent on these 687 claims
is approximately $9,000.
10/ The costs of investigating and prosecuting Respondent's unlawful conduct
in this case is approximately
$165,000. See I.G.'s April 23, 1992 Brief at 12. Accordingly, the measurable
damages to the government
are about $174,000, including the $9,000 paid to Respondent by the Medicare
program and the $165,000
in expenses to the government to bring Respondent to justice. 11/ 12/
(b) Indirect damages related to the false claims submitted by Respondent
There are other damages to the government resulting from the false claims submitted
by Respondent which
cannot be quantified, but which should be considered in determining the appropriate
amount of sanctions.
Edward J. Petrus, M.D., DAB 1264 at 37 (1991). This includes the $42,875 claimed
by Respondent in this
case and the fact that Respondent's illegal and improper activities damaged
the integrity and reputation of
the Medicare program and its carrier BSWNY. Mayers at 998; Chapman at 529; Hume
at 29-30; Keszler
at 34-39; Tr. II/1329. Also, the I.G. proved that Respondent's activities caused
harm to the Medicare
beneficiaries by misleading them. 13/ While the number of Medicare beneficiaries
involved in this case is
only 31, harm to even one beneficiary is serious.
When compared to other section 1128A cases, the indirect damages in this case
are slightly more
significant than the average case where false claims have been submitted to
the Medicare or Medicaid
programs.
(c) Past damages to the government which are unrelated to the false claims in
issue
Respondent received large sums from Medicare in the past by improperly claiming
reimbursement. I.G.
Ex. 75-4 at 29; Tr II/101. In addition, extensive sums have been expended in
the past to monitor, educate,
investigate, and prosecute Respondent. Tr I/168,586. The I.G. seems to include
these past damages in his
calculations of the total amount of damages in this case. See I.G. Brief at
10-12. I find that it would be
erroneous to include these past damages to calculate the amount of damages to
the government in this
action. These are not the damages the regulations refer to in section 1003.106(c)(3)
for purposes of
calculating the minimum amount of penalties and assessments. 14/ However, even
though these past
damages are not directly relevant to the actual damages incurred by the government
in this action, I have
considered these expenses, find them to be significant, but have given them
minimal weight as an
aggravating factor.
2. Respondent's provision of other services and impact on Medicare beneficiaries
In Stern I, I mitigated the penalties and assessments, in part, because I found
that Respondent provided
some medical services to his patients, as needed, which would have been reimbursable
if properly
documented and not falsely claimed. In addition, I found that some patients
found both the acupuncture
and the other services to be beneficial. See Stern I at FFCLs 179-181. 15/
In Stern I, I contrasted this case with others, such as Kern, Hume, and Raymond
C. Reynaud, DAB CR4
(1985), where respondents submitted claims in situations where no services or
treatments were performed.
I also considered this case to be somewhat analogous to the case of Corazon
C. Hobbs, DAB CR57 (1989),
where prescription medications were prescribed by telephone for Medicaid recipients
and then Medicaid
was improperly billed for an office visit. Finally, in Stern I, I took into
consideration that, even though
Medicare does not pay for the treatments of electro-acupuncture and injections
of marcaine, Dr. Gilies, an
international expert on the treatment of pain, thought these treatments to be
an effective treatment for pain.
See, Myers v. Secretary of Health and Human Services, 893 F. 2d 840, 846 (6th
Cir. 1990).
The appellate panel in Stern II ruled that it was error to rely on my findings
regarding the provision of
other services by Respondent and my finding that Respondent's acupuncture treatments
were an effective
treatment for pain or that Medicare beneficiaries benefitted from Respondent's
services and found him to
be a good doctor (FFCLs 179-180). Accordingly, upon reconsideration of these
factors, I have
significantly increased the penalties and assessments to be imposed. 16/
3. The I.G.'s expert identified some services in issue as having been provided
by Respondent at a lower
level of service than claimed
In Stern I, I found it to be mitigating that the I.G.'s medical expert "identified
14 items which he considered
to be reimbursable, although most of them at a lower level of service than claimed."
In Stern II, the
appellate panel concluded that the term "most" left open the possibility
that some of the 14 items were fully
reimbursable as claimed and directed that I clarify whether any of the 14 should
be deleted.
As stated much earlier, I have concluded that count 291, a service to Eloise
Jenkins, was provided as
claimed, and I have deleted it.
Of the 13 services remaining, out of the 14 services referred to by the I.G.'s
expert, only one other is
referred to, without qualification, as being reimburs-able. That service was
the surgical removal of a
toenail, provided to Eloise Jenkins on February 13, 1984. The attachment to
the I.G.'s Notice of sanctions
does not list such a date, although it does list February 13, 1985. The medical
record supporting the claim
for February 13, 1985 does not indicate that a surgical removal of a toenail
occurred on that date. I.G. Ex.
9-34. Accordingly, I conclude that the expert must have been referring to an
item or service which was not
among those in question in this case.
In all other instances (of the 14 services the appellate panel directed that
I reconsider), the I.G.'s expert
qualified his statement that the service could be considered reimbursable; he
added that the service would
be covered at a lower level than claimed. Tr. II/1542, 1549. As with the Eloise
Jenkins service on
February 13, 1984 (for surgical removal of a toenail), only seven dates referred
to by the expert correspond
with dates of items or services listed on the I.G.'s attachment to his Notice.
Thus, I conclude that the
expert's testimony included some items or services which were not at issue in
this case.
In summary, one item or service (item 291) was fully reimbursable as claimed,
and seven items or service
were reimbursable at a lower level than claimed (counts 208, 347, 349, 361,
372, 377, and 378). These
latter seven are considered in mitigation. This requires a slight reduction
in the penalties and assessments
proposed. 17/
4. Respondent's rehabilitation
Justice requires me to consider the effect of the penalties and assessments
on Respondent's recovery and
rehabilitation. Respondent has taken many positive steps towards rehabilitation.
He has begun to
overcome his self-destructive behavior. Arthur Stern reported at the July 23,
1992 telephone conference
that Respondent is now working full-time as a drug abuse counselor. Respondent
apparently is dealing
constructively with the very problem, which, in my opinion, brought about his
downfall. This is a
mitigating consideration.
VI. The Amount Of The Penalties, Assessments, And The Length Of The Exclusion,
As Modified Here,
Are Supported By The Record.
After reviewing all of the evidence in the record, including the aggravating
and mitigating factors and
considerations, reviewing the appellate panel's decision in Stern II, and reviewing
all the section 1128A
decisions issued by the DAB, I conclude that civil monetary penalties of $345,000,
assessments of
$70,648, and an exclusion from Medicare and Medicaid programs for ten years
is sufficient to protect the
Medicare program and its beneficiaries and to serve the remedial purposes of
section 1128A of the Act.
See Hume at pp. 29-30; Keszler at pp. 34-39.
A. Computing the assessments
As discussed previously, the amount of assessments is tied closely to the amount
claimed by a respondent.
The regulations prohibit imposing more than twice the amount claimed and state
that assessments are
designed to compensate the government in lieu of damages sustained.
Here, Respondent claimed $42,875 from Medicare on 687 claims for services which
he did not perform as
claimed. While he was paid only approximately $9,000, he did cause great expense
to the Department in
bringing him to justice.
Because the assessments are designed primarily to make the government whole,
and, upon reconsideration,
I find that the intent of Congress is best expressed by imposition of the total
amount of assessments
proposed by the I.G., the amount of $70,648. This amount is near to the maximum
of $85,826 in
assessments which could be imposed.
B. Computing the penalties
Penalties are appropriate here because the assessments alone cannot compensate
the government fully for
the harm caused by Respondent.
The penalties were arrived at not by a mechanical formula, but by an analysis
of and a weighing of all of
the aggravating and mitigating factors and considera-tions, including the damages
to the government, and
by reviewing each section 1128A decision issued by the DAB. In so doing, I have
assessed the severity of
the wrongs committed against the Medicare program and its beneficiaries by Respondent
in comparison to
other section 1128A cases. I seek to make the government whole for the damages
and expenses caused by
Respondent and to insure that the penalties and assessments are not punitive
or counterproductive to
Respondent's rehabilitation.
I find that penalties of $345,000 will best comport with the intent of Congress in this instance.
C. Computing the exclusion
In determining the length of the exclusion, it is important to consider the
degree to which Respondent is
trustworthy and rehabilitated. See, Greene v. Sullivan, 731 F. Supp. 835, 838
(E.D. Tenn. 1990). The ALJ
must also consider the same criteria that are used to determine the penalties
and assessments. 42 C.F.R.
1003.107.
In addition, I have considered that Respondent's violation of section 1128A
of the Act is similar to the kind
of misconduct that would presently result in a minimum mandatory exclusion of
at least five years under
section 1128 of the Act. See, Jack W. Greene, DAB 1078 (1989), aff'd. sub. nom.,
Greene v. Sullivan, 731
F. Supp. 835, 838 (E.D. Tenn. 1990). The legislative history to the 1987 amendments
to section 1128 of
the Act makes it clear that Congress intended to provide for exclusions of greater
than five years in
appropriate cases.
In addition, I have considered Respondent's past history of making false representations,
such as the
misleading statements made to State licensing authorities. This evidence is
relevant for purposes of
determining the length of exclusion because it has a bearing on Respondent's
trustworthiness. See
Hanlester Network, et al., DAB 1275 at 52 (1992); Lakshmi N. Achalla, M.D.,
DAB 1231 (1991).
There is evidence that Respondent has remained drug-free for several years
and has made constructive
changes in his life. The fact that Respondent is taking positive steps to rebuild
his life and is involved in
positive activities that are of service to others speaks well for his intentions.
However, because of
Respondent's history of failure to respect and honor Medicare rules and regulations,
it would be best for the
Medicare and Medicaid programs to exclude him for a period of ten years to insure
that, if and when he
applies for readmission to the programs, he is totally trustworthy and fully
capable of handling the
responsibilities entrusted to a Medicare medical provider. 18/
CONCLUSION
Following the directives and suggestions of the appellate panel in Stern II,
I have reconsidered and
determined that penalties of $345,000, assessments of $70,648, and an exclusion
of ten years from the
Medicare and Medicaid programs are the appropriate sanctions in this case.
_________________________________
Charles E. Stratton
Administrative Law Judge
1. The I.G. proposed penalties of $601.98 per service claimed by Respondent,
rather than the maximum
$2,000. Stern II at 30.
2. The amount of $42,875 claimed by Respondent was computed from the I.G.'s
"schedule of false
claims," attached to the I.G.'s amended Notice, dated November 9, 1989.
The parties agreed at the July 23,
1992 telephone conference that Respondent was paid $9,000 on the claims in issue.
3. 3 The appellate panel in Stern II at 19-20 refers to the preamble to the
regulations, rather than the
appropriate sections of the regulations (i.e., 1003.106(c)(3) and (d)) (1989).
4. When proposing the amount of sanctions to be imposed here, the I.G. alleged
that there were 707
services improperly claimed. As I stated above, since
the I.G. only proved 687 were false or improper, the penalties and assessments
should be reduced
accordingly.
5. I have compared this case to other section 1128A decisions issued by the
DAB and I find that the
sanctions proposed by the I.G. here are consistent with other cases (when comparing
the amount paid, the
amount claimed, and the number of items to the amount of the penalties and assessments).
For example, in
Mayers, the respondents submitted requests for payments for 2,702 items (totalling
$145,550, for which
they were paid $24,697), and these were but a small part of a larger pattern
of activity. The penalties and
assessments totalled $1,791,100. In Corazon C. Hobbs, DAB CR57 (1989), the respondent
submitted
claims for 111 services (totalling $2,026.02, for which she was paid $1030.22).
The penalties and
assessments were $51,797.81. This comparison reveals that penalties of $425,000,
and assessments of
$70,648 might be reasonable in this case if warranted by the facts and circumstances.
6. This finding is supported by the American Medical Association's position
that drug addiction is a
disease.
7. Also, I have compared this case to the other section 1128A decisions issued
by the DAB and found
that generally the I.G. has proven actual knowledge on the part of most respondents
who have violated
section 1128A.
8. While I mitigated somewhat in Stern I, based on drug addiction, I reduced
the penalties and
assessments proposed by the I.G. primarily because I concluded that a substantial
number of other services
had been provided and that patients benefitted from Respondent's care.
9. I note that even if Respondent's net worth were three or four times what
Respondent claims it to be, the
amount of sanctions proposed by the I.G. could be construed as punitive, rather
than remedial, if they are
disproportionate to the amount of damages to the government. In other words,
consideration of net worth
is important, but any determination of sanctions is more closely tied to the
amount of damages.
10. While it is not directly relevant to this case (because the claims were
not the claims in issue in this
case), I note that Respondent was ordered to pay only $11,000 in restitution
to the Medicare beneficiaries
involved in his prior criminal action.
11. I have not considered the costs of conducting the hearing or any of the
proceedings in this
administrative action because to do so would have a chilling effect on the rights
of respondents to a full and
fair hearing.
12. The I.G. argued that payments made to Respondent in past cases are to be
included in the amount of
damages in this case. I.G. April 23, 1992 Brief at 10-14. The I.G. seems to
include these amounts in his
calculation of damages related to the claims in issue. These past damages have
no direct relation to the
claims in issue. Accordingly, I have not included these past damages in the
amount of related damages
which I used as the figure for determining the minimum amount of penalties and
assessments. The figure
provided in section 1003.106(c)(3) of the regulations is twice the amount of
damages. (Since the damages
related to the claims in issue amount to $174,000, the minimum amount of penalties
and assessments here
would be $348,000). I have, however, given some consideration to the fact that
Respondent has caused
damage to the Medicare program in the past as an aggravating factor.
13. There are no allegations and no proof that Respondent physically harmed any patients.
14. If these damages were factored into the amount of damages used to compute
the minimum amount of
penalties and assessments, as the I.G. seems to suggest, the amount of penalties
and assessments would be
much higher than the I.G. has actually proposed. It would be helpful if the
I.G. would reveal how he
calculates his proposed penalties and assessments. The guidelines in section
1003.106 of the regulations
suggest that, after doubling the approximate amount of related damages, the
ALJ should consider the effect
of the aggravating and mitigating circumstances and adjust the penalties and
assessments accordingly.
15. The medical records submitted by the parties show that some other medical
services besides electro-
acupuncture or injections of marcaine were provided to Medicare beneficiaries.
Respondent was a
physician and treated some patients with medical modalities as well as with
acupuncture. These notations
in the medical records were corroborated by testimony from Respondent's patients,
including those patients
testifying on behalf of the I.G. See Stern I at FFCL 98, 103,109-111. Also,
one of the I.G.'s medical
experts identified one service which he considered to be sufficiently documented
to be reimbursable, and
seven services at a lower level of service than claimed. Tr.II/1541, 1542, 1545-1547,
1549.
16. While I reduced the penalties and assessments proposed by the I.G. in Stern
I by a small amount
because of my finding that Respondent's culpability was slightly mitigated by
drug addiction, the major
reduction was due to these two factors (Respondent's provision of other services
and his impact on
beneficiaries).
17. The remaining six services of the original 14 are services which are not
at issue in this case. Even if
these six services were at issue in this case, their mitigating effect on the
amount of sanctions imposed
would be de minimis. I note that these six do serve to corroborate Respondent's
testimony that there were
many instances in which he provided medical services other than acupuncture
to patients.
The appellate panel in Stern II at 27 stated that even if the 14 services were
all found to have been
performed at a lower level of service, this could not be considered mitigating
because this only amounts to
about two percent of the 687 claims in issue. They said "this percentage
is too small in our view to justify
the use of other services as a mitigating factor." I find it illogical
to ignore the two percent. Instead,
fairness dictates that the sanctions be mitigated by two percent, or whatever
percentage is appropriate by
reason of the facts (in this case, seven services out of 687, or a little over
one percent).
18. I note that Respondent has not participated in Medicare or Medicaid since
1987, when he relinquished
his medical license as part of his criminal plea agreement. He was also suspended
from the Medicare and
Medicaid programs in a prior exclusion action. When Respondent is eligible again
to participate in the
programs, he will have been excluded, in effect, for approximately 15 years.