$05:Exclusion Case
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: )
)
Keith O. Irby and Michelle P. Irby, R. Ph., Petitioner,
- v. -
The Inspector General.
DATE: July 13, 1994
Docket No. C-243
Decision No. CR321
DECISION
On March 27, 1990, the Inspector General (I.G.) notified Petitioner
Keith Irby that he was being excluded from participating in
Medicare and State health care programs. On April 6, 1990, the
I.G. notified Petitioner Michelle Irby that she was being excluded
from participating in Medicare and State health care programs. 1/
The I.G. told each Petitioner that the basis for the exclusion was
that Petitioners were convicted of criminal offenses related to
Medicare, within the meaning of section 1128(a)(1) of the Social
Security Act (Act). The I.G. advised each Petitioner that the
minimum mandatory period of exclusion for an individual convicted
of an offense within the meaning of section 1128(a)(1) was five
years. The I.G. advised each Petitioner, however, that based on
the circumstances of that Petitioner's case, the I.G. had
determined to exclude each Petitioner for 20 years.
Both Petitioners requested a hearing, and the cases were assigned
to me for hearings and decisions. I decided that the cases should
be consolidated for purposes of holding a single hearing, in light
of facts which were common to both cases. Neither of the
Petitioners nor the I.G. objected to my determination to
consolidate the cases. 2/
The cases were stayed by consent of all parties while Petitioners
appealed their convictions of criminal offenses. I continued the
stays, with the mutual consent of all parties, for various
additional reasons. 3/ The cases were heard in a consolidated
hearing in Houston, Texas, on November 16 and 17, 1993. I received
additional testimony by telephone on December 15, 1993. The
parties filed posthearing briefs. 4/
I have carefully considered the applicable law, the evidence,
and the parties' arguments. 5/ I conclude that the exclusions
which the I.G. imposed on Petitioners are excessive. I modify the
exclusion which the I.G. imposed on Petitioner Keith Irby to a term
of 10 years. I modify the exclusion which the I.G. imposed on
Petitioner Michelle Irby to a term of five years.
ISSUE
The issue in this case is whether the 20-year exclusion which the
I.G. imposed and directed against each Petitioner is reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. On June 9, 1989, Petitioners were each indicted in United
States District Court for the Southern District of Texas for
fifteen counts of mail fraud. I.G. Ex. 24.
2. Petitioners were charged with scheming to defraud the Medicare
program. I.G. Ex. 24, pp. 2 - 3.
3. Petitioners were charged with fraudulently creating medical
authorization forms for the purchase of durable medical equipment
from a corporation which they owned and operated, Med-Equip, which
contained untrue and exaggerated information. I.G. Ex. 24, pp. 2
- 4.
4. Petitioners were charged with mailing such forms to physicians,
with the intent that the physicians would sign them inadvertently.
I.G. Ex. 24, p. 4.
5. Petitioners were charged with using fraudulently created
medical authorization forms that had been signed inadvertently by
physicians to document fraudulent claims for Medicare reimbursement
for durable medical equipment. I.G. Ex. 24, p. 4.
6. Petitioners were charged with delivering durable medical
equipment to Medicare beneficiaries which had not been
requested by those beneficiaries, in order to submit
fraudulent reimbursement claims to Medicare. I.G. Ex. 24, p. 5.
7. Petitioners were charged with submitting claims to Medicare for
the purchase of new medical equipment when, in fact, the equipment
was not new. I.G. Ex. 24, p. 6.
8. Petitioners were charged with fraudulently obtaining signatures
from Medicare beneficiaries in order to further their scheme to
submit fraudulent reimbursement claims to Medicare. I.G. Ex. 24,
p. 6.
9. In counts 1 - 8 of the indictment, Petitioners were charged
with committing mail fraud to implement their scheme to defraud
Medicare, by causing Medicare reimbursement checks to be mailed to
Med-Equip. I.G. Ex. 24, pp. 6 - 7.
10. In counts 9 - 15 of the indictment, Petitioners were charged
with committing mail fraud to implement their scheme to defraud
Medicare by causing medical authorization forms to be mailed to
physicians. I.G. Ex. 24, pp. 7 - 9.
11. After a trial, Petitioners were each convicted of counts 1 -
9 and 11 - 15 of the indictment. I.G. Ex. 19 - 20.
12. Petitioner Keith Irby was sentenced to five years'
imprisonment and this term of incarceration was ordered suspended
by the court. I.G. Ex. 19, p. 2.
13. Petitioner Keith Irby was placed on five years' probation.
I.G. Ex. 19, p. 2.
14. Petitioner Keith Irby was ordered to pay fines totalling
$15,000 and to pay special assessments totalling $700, and was
sentenced additionally to perform 1000 hours of community service.
I.G. Ex. 19, p. 2.
15. Petitioner Keith Irby was prohibited from engaging in any form
of employment relating to the billing of the Medicaid and Medicare
programs for durable medical equipment, and was ordered to
disengage completely from any durable medical equipment business
that he and Petitioner Michelle Irby were operating. I.G. Ex. 19,
p. 2.
16. Petitioner Michelle Irby was sentenced to five years'
imprisonment and this term of incarceration was ordered suspended
by the court. I.G. Ex. 20, p. 2.
17. Petitioner Michelle Irby was placed on five years' probation.
I.G. Ex. 20, p. 2.
18. Petitioner Michelle Irby was ordered to pay fines totalling
$7,500 and to pay special assessments totalling $700, and was
sentenced additionally to perform 500 hours of community service.
I.G. Ex. 20, p. 2.
19. Petitioner Michelle Irby was prohibited from engaging in any
form of employment relating to the billing of the Medicaid and
Medicare programs for durable medical equipment, and was ordered to
disengage completely from any durable medical equipment business
that she and Petitioner Keith Irby were operating. I.G. Ex. 20, p.
2.
20. Petitioners were convicted of criminal offenses related to the
delivery of items or services under Medicare. Findings 1 - 11; Tr.
at 21; Social Security Act, section 1128(a)(1).
21. The Secretary of the United States Department of Health and
Human Services (Secretary) delegated to the I.G. the authority to
determine, impose, and direct exclusions pursuant to section 1128
of the Act. 48 Fed. Reg. 21,662 (1983).
22. The I.G. had authority to impose and direct an exclusion
against Petitioners pursuant to section 1128(a)(1) of the Act.
Findings 20 - 21.
23. The minimum period of exclusion which must be imposed for an
individual who is convicted of a criminal offense within the
meaning of section 1128(a)(1) of the Act is five years. Social
Security Act, section 1128(c)(3)(B).
24. On March 27, 1990, the I.G. excluded Petitioner Keith Irby
from participating in Medicare and Medicaid for 20 years, pursuant
to section 1128(a)(1) of the Act. I.G. Ex. 6.
25. On April 6, 1990, the I.G. excluded Petitioner Michelle Irby
from participating in Medicare and Medicaid for 20 years, pursuant
to section 1128(a)(1) of the Act. I.G. Ex. 18.
26. Regulations published on January 29, 1992 establish criteria
to be employed by the I.G. in determining to impose and direct
exclusions pursuant to sections 1128(a) and (b) of the Act. 42
C.F.R. Part 1001 (1992).
27. The regulations include criteria to be employed by the I.G. in
determining to impose and direct exclusions pursuant to section
1128(a)(1) of the Act. 42 C.F.R. 1001.101, 1001.102.
28. On January 22, 1993, the Secretary published a regulation
clarifying that the criteria to be employed by the I.G. in
determining to impose and direct exclusions pursuant to sections
1128(a) and (b) of the Act are binding also on administrative law
judges, appellate panels of the Departmental Appeals Board (DAB),
and federal courts in reviewing the imposition of exclusions by the
I.G. 42 C.F.R. 1001.1(b); 58 Fed. Reg. 5617, 5618 (1993).
29. The regulations published on January 29, 1992 governing
exclusions pursuant to section 1128(a)(1) of the Act are not
applicable to these cases, because the Secretary did not intend to
strip Petitioners retroactively of rights vested prior to January
29, 1992.
30. Section 1128 of the Act is a remedial statute.
31. The standard to be employed in evaluating the reasonableness
of the length of the exclusions which the I.G. imposed against
Petitioners is whether the exclusions are necessary to protect the
integrity of federally financed health care programs and the
welfare of the beneficiaries and recipients of those programs from
individuals who are untrustworthy.
Findings as to the reasonableness of the exclusion imposed against
Petitioner Keith Irby 6/
32. Petitioner Keith Irby was convicted of 14 counts of mail fraud
arising from a scheme to defraud the Medicare program. Findings 1
- 11.
33. The crimes of which Petitioner Keith Irby was convicted
transpired over a period beginning in December 1985 and ending in
July 1988, a period of more than one year. I.G. Ex. 19, p. 1; I.G.
Ex. 24, pp. 7 - 9.
34. The total dollar amount of the crimes of which Petitioner
Keith Irby was convicted was approximately $10,000. I.G. Ex. 19,
p. 1; I.G. Ex. 24, p. 7.
35. The crimes of which Petitioner Keith Irby was convicted are
serious offenses involving a willful scheme to defraud the Medicare
program. Findings 32 - 34.
36. Petitioner Keith Irby has not completed the five-year term of
probation to which he was sentenced. Tr. at 168.
37. Subsequent to his conviction and sentencing, Petitioner Keith
Irby was convicted of the offense of driving while intoxicated.
Tr. at 172, 201 - 203.
38. Petitioner Keith Irby withheld from his probation officer the
fact of his conviction for driving while intoxicated. Tr. at 172
- 173, 201 - 203.
39. Petitioner Keith Irby did not testify credibly as to the
circumstances of his being convicted for driving while intoxicated,
or the reasons for his withholding the fact of his conviction from
his probation officer. See Tr. at 201 - 203.
40. Petitioner Keith Irby has not completed the community service
which he was sentenced to perform as a consequence of his
conviction for mail fraud. Tr. at 169.
41. Petitioner Keith Irby has paid the $15,000 fine which he was
sentenced to pay for his conviction for mail fraud. P. Ex. 25.
42. The I.G. did not prove that Petitioner Keith Irby caused the
Medicare program to sustain losses beyond the approximately $10,000
in fraudulent claims for which Petitioner Keith Irby was convicted.
See I.G. Ex. 27, 28; Tr. at 142 - 163.
43. A 20-year exclusion is excessive when measured against the
seriousness of the crimes for which Petitioner Keith Irby was
convicted and his conduct subsequent to his conviction. Findings
32 - 42.
44. A 10-year exclusion of Petitioner Keith Irby is reasonable in
light of the remedial purposes of section 1128 of the Act.
Findings as to the reasonableness of the exclusion imposed against
Petitioner Michelle Irby
45. Petitioner Michelle Irby was convicted of 14 counts of mail
fraud arising from a scheme to defraud the Medicare program.
Findings 1 - 11.
46. The crimes of which Petitioner Michelle Irby was convicted
transpired over a period beginning in December 1985 and ending in
July 1988, a period of more than one year. I.G. Ex. 20, p. 1; I.G.
Ex. 24, pp. 7 - 9.
47. The total dollar amount of the crimes of which Petitioner
Michelle Irby was convicted was approximately $10,000. I.G. Ex.
20, p. 1; I.G. Ex. 24, p. 7.
48. The crimes of which Petitioner Michelle Irby was convicted are
serious offenses involving a willful scheme to defraud the Medicare
program. Findings 45 - 47.
49. Although Petitioner Michelle Irby was sentenced to probation
for a period of five years, her probation was terminated early --
after approximately two years and nine months. She has met all the
terms and conditions of probation and has committed no known
violations. Tr. at 166.
50. Petitioner Michelle Irby has completed the community service
to which she was sentenced. Tr. at 167 - 168.
51. Petitioner Michelle Irby has paid the $7,500 fine which she
was sentenced to pay for her conviction for mail fraud. Tr. at
170.
52. Subsequent to her conviction, Petitioner Michelle Irby has
held jobs as a pharmacist. Tr. at 49 - 62, 88 - 96, 285 - 291.
53. In performing her duties as a pharmacist, Petitioner Michelle
Irby has been entrusted with the custody of and prescription of
controlled substances. Tr. at 93, 289.
54. In performing her duties as a pharmacist, Petitioner Michelle
Irby has been found to be trustworthy by her supervisors and
coworkers. Tr. at 52 - 54, 78 - 80, 92 - 93, 287.
55. Petitioner Michelle Irby has enrolled as a student in medical
school. Tr. at 235.
56. The I.G. did not prove that Petitioner Michelle Irby caused
the Medicare program to sustain losses beyond the approximately
$10,000 in fraudulent claims for which Petitioner Michelle Irby was
convicted. See I.G. Ex. 27, 28; Tr. at 142 - 163.
57. A 20-year exclusion is excessive when measured against the
seriousness of the crimes for which Petitioner Michelle Irby was
convicted and her conduct subsequent to her conviction. Findings
45 - 56.
58. A five-year exclusion of Petitioner Michelle Irby is
reasonable, in light of the remedial purpose of section 1128 of the
Act.
RATIONALE
Petitioners do not dispute that they were convicted of criminal
offenses related to the delivery of items or services under
Medicare, within the meaning of section 1128(a)(1) of the Act. Nor
do Petitioners deny that, as a consequence of their convictions,
they must be excluded for a minimum of five years. However, each
Petitioner contends that an exclusion of that Petitioner for more
than five years is unreasonable, given the facts of that
Petitioner's case. Therefore, the issue I must resolve with
respect to each Petitioner is whether the 20-year exclusion imposed
against each Petitioner is excessive, and if so, to what extent
should I modify the term of the exclusion.
1. Regulations published by the Secretary on January 29, 1992 are
not applicable to these cases.
A threshold issue in these cases involves the standard of review I
must use in adjudicating the reasonableness of the exclusion
imposed against each Petitioner. The I.G. argues that I must apply
the criteria contained in regulations published by the Secretary on
January 29, 1992 at 42 C.F.R. Part 1001. Specifically, the I.G.
argues that the reasonableness of the length of each exclusion must
be measured only by the aggravating and mitigating factors
contained in 42 C.F.R. 1001.201. I conclude that the Secretary
did not intend that the regulations in Part 1001 apply
retroactively to cases pending as of January 29, 1992. Therefore,
I find that the reasonableness of the exclusions must be
adjudicated pursuant to the standard which prevailed as of the date
the exclusions were imposed.
Appellate panels of the DAB and administrative law judges delegated
to hear cases under section 1128 of the Act have held consistently
that section 1128 is a remedial statute. Exclusions imposed
pursuant to section 1128 have been found reasonable only insofar as
they are consistent with the Act's remedial purpose, which is to
protect the integrity of federally financed health care programs
and the welfare of beneficiaries and recipients of those programs
from individuals and entities who are not trustworthy to provide
care. Robert Matesic, R.Ph., d/b/a Northway Pharmacy, DAB 1327, at
7 - 8 (1992). Exclusions which do not comport with this remedial
purpose may be punitive, and therefore, unlawful.
In Matesic, an appellate panel of the DAB discussed the kinds of
evidence which should be considered by administrative law judges in
hearings as to the reasonableness of exclusions. That evidence
included evidence which related to:
the nature of the offenses committed by the provider, the
circumstances surrounding the offense, whether and when the
provider sought help to correct the behavior which led to the
offense, how far the provider has come toward rehabilitation, and
any other factors relating to the provider's character and
trustworthiness.
Matesic, DAB 1327, at 12.
On January 29, 1992, the Secretary published regulations which,
among other things, governed the I.G.'s imposition of exclusions
pursuant to section 1128 of the Act. 42 C.F.R. Parts 1001 - 1007.
These regulations contain criteria which apply specifically to
exclusions imposed by the I.G. pursuant to section 1128(a)(1). 42
C.F.R. 1001.101 - 1001.102. The regulations state that, in the
case of an exclusion imposed pursuant to section 1128(a)(1), the
exclusion may be increased beyond the statutory five-year minimum
exclusion period if any of specified aggravating factors are
present. 42 C.F.R. 1001.102(b)(1) - (6). Specified mitigating
factors may be used to offset aggravating factors and may serve as
a basis to reduce the length of an exclusion imposed pursuant to
section 1128(a)(1). 42 C.F.R. 1001.102(c)(1) - (3). However,
in no event may an exclusion be reduced below the five-year
statutory minimum exclusion period. This regulation makes plain
that only factors which are identified in the regulation as
aggravating or mitigating may be used as a basis for lengthening or
reducing an exclusion. To the extent that factors identified in
Matesic as being relevant to the trustworthiness of a party do not
fall within the aggravating and mitigating factors identified by
the regulation, they may not be used to determine the length of an
exclusion.
After the 1992 regulations were published, the I.G. contended that
the Part 1001 regulations should apply to establish criteria for
adjudicating the reasonableness of the length of exclusions
determined pursuant to section 1128 of the Act in all cases which
were pending as of January 29, 1992. However, an appellate panel
of the DAB held that the Secretary did not intend that these
regulations were to apply retroactively to exclusion determinations
made prior to the regulations' publication date. Behrooz Bassim,
M.D., DAB 1333, at 5 - 9 (1992). 7/
A central conclusion in Bassim is that the 1992 regulations effect
a change in the substantive criteria by which exclusions are
determined. Id., at 6, 7. The appellate panel noted that
retroactivity is not favored in the law. Id., at 6. It held that
the authority to promulgate rules having a retroactive effect must
be granted to an agency expressly by Congress. Id. It held
further that if Congress does include such a statutory grant in its
enabling legislation, the promulgated rules will not be applied
retroactively unless their language clearly requires this result.
Id. The appellate panel found that neither the legislative history
of the statute which authorized the 1992 regulations, nor section
1128 of the Act, provided any support for concluding that the 1992
regulations should be applied retroactively. Id., at 7. In so
holding, it stated that:
In our view, if the Secretary had intended to effect
substantive changes in pending cases, this intent would have been
expressly stated since this effect would create administrative
complications in the appeals process, as well as potential
prejudice for petitioners.
Id.
On January 22, 1993, the Secretary published additional
regulations. These regulations include a provision which clarifies
the Part 1001 regulations by stating that the Part 1001 regulations
apply to establish a standard of review in adjudications of
exclusions before administrative law judges, appellate panels of
the DAB, and federal courts. 42 C.F.R. 1001.1(b). 8/
This clarification was to be applied to "all pending and future
cases under this authority." 58 Fed. Reg. 5618 (1993).
Then-Secretary Sullivan waived the proposed notice and public
comment period specified by the Administrative Procedure Act. In
doing so, he cited as authority the exception for "interpretive
rules, general statements of policy or rules of agency
organization, procedure, or practice" at 5 U.S.C. 553(b)(A).
Id. The Secretary stated that the clarification "does not
promulgate any substantive changes to the scope of the January 29,
1992 final rule, but rather seeks only to clarify the text of that
rulemaking to better achieve our original intent." Id.
These cases involve exclusions which were imposed prior to January
29, 1992. 9/ The I.G. asserts that the effect of the 1993
clarification is to require that these cases be adjudicated
pursuant to the criteria contained in the Part 1001 regulations
published in January 1992. The I.G. premises this argument
entirely on the Secretary's intent to apply the clarification to
"all pending cases . . . ." In effect, the I.G. would have the
1992 regulations apply retroactively to adjudicate the
reasonableness of the exclusions imposed against Petitioners, based
on the 1993 clarification and the commentary published with that
clarification. 10/
I conclude that the Secretary did not require expressly in the 1993
clarification that the 1992 regulations be applied retroactively to
cases pending as of January 29, 1992. To the contrary, the more
persuasive reading of the 1993 clarification is that it did nothing
to change the interpretation of the 1992 regulations prevailing as
of the date of publication of the 1993 clarification, which was
that the 1992 regulations were not intended to apply retroactively.
The issue of whether then-Secretary Sullivan intended the 1993
clarification to apply the 1992 regulations retroactively -- to
exclusions imposed prior to January 29, 1992 -- was decided by
Administrative Law Judge Steinman in Domingos R. Freitas, DAB
CR272, at 37 - 40 (1993). I have considered Judge Steinman's
analysis and find it to be persuasive. The I.G. has offered no
arguments in these cases which were not considered and decided by
Judge Steinman in Freitas.
As Judge Steinman observed in Freitas, the DAB's appellate panels
are delegated authority to make final interpretations of law on
behalf of the Secretary in reviewing decisions of administrative
law judges. DAB CR272 at 37; Gideon M. Kioko, M.D., DAB CR256
(1993). At the time that the 1993 clarification was published, the
Secretary's final interpretation of the 1992 regulations was the
Bassim decision, which stated that the Secretary did not intend the
1992 regulations to apply retroactively. Nothing in the 1993
clarification or the comments to that clarification suggests that
the Secretary intended to overrule this interpretation. To the
contrary, the comments to the 1993 clarification state
unequivocally that the 1993 clarification did not make "any
substantive changes" to the "scope" of the 1992 regulations.
58
Fed. Reg. 5618. Therefore, the reasonable implication of the 1993
clarification is that it did not intend to overrule an existing
interpretation on behalf of the Secretary that the 1992 regulations
were not to be applied retroactively to cases pending prior to
January 29, 1992.
Had then-Secretary Sullivan intended the 1993 clarification to
overrule the DAB's appellate panel decision in Bassim, he would
have in effect overruled his own previous interpretation of the
1992 regulations. That in turn would have constituted a
substantive change in the manner in which the 1992 regulations were
applied. Such a substantive change could not have been published
legitimately without compliance with the notice and comment
requirements of the Administrative Procedure Act. The
determination to publish the 1993 clarification as an excepted
statement means that the Secretary did not intend to change his
previously stated interpretation. As Judge Steinman found in
Freitas:
Since the January 29, 1992 regulations lacked retroactive
effect for the reasons stated in Bassim, they could not have
acquired such effect with subsequent textual clarifications that do
not purport to modify the scope of the January 29, 1992 regulations
and have been published without satisfying the procedures necessary
under the Administrative Procedure Act for effecting substantive
changes.
DAB CR272 at 40.
I conclude that the statement that the 1993 clarification applied
to "pending" cases does not mean that the Secretary intended to
apply the 1992 regulations retroactively to cases pending as of
January 29, 1992. Given the fact that the Secretary did not
overrule his own statement of interpretation in Bassim, given that
the Secretary stated that he did not intend the 1993 clarification
to effect any substantive change, and given further, the fact that
the 1993 clarification was published under an exception to the
Administrative Procedure Act which does not apply to regulations
having substantive effect, I conclude that the Secretary intended
the 1993 clarification to apply the 1992 regulations only to those
exclusions which were imposed after January 29, 1992. Cases
involving exclusions imposed before that date must be adjudicated
pursuant to the standard in effect as of the date of the exclusion,
which consists of the remedial criteria of section 1128 as
explained in the Matesic decision.
2. The exclusions which the I.G. imposed against Petitioners are
excessive.
The exclusions which the I.G. imposed against Petitioners are
excessive when examined in light of the remedial criteria of
section 1128 and the Matesic decision. I conclude that the
exclusions must be modified to avoid an unlawful punitive effect.
Both Petitioners were convicted of the same crimes. These crimes
consisted of 14 counts of mail fraud. The essence of the crimes
was that Petitioners, through the vehicle of a durable medical
equipment company which they owned and operated, deceived
physicians into certifying that their patients, Medicare
beneficiaries, qualified for certain durable medical equipment.
Petitioners then used the certifications which they obtained from
physicians to defraud the Medicare program into reimbursing them
for durable medical equipment for which beneficiaries did not, in
actuality, qualify. Findings 2 - 11. Petitioners were convicted
of mail fraud totalling about $10,000. Findings 34, 47. These are
serious crimes. They were committed over a period of more than one
year. Findings 33, 46. They embody elements of willfulness and
intent. I infer from Petitioners' convictions that they engaged in
a deliberate scheme to defraud Medicare. It is reasonable to find
from the circumstances of these crimes that Petitioners are
untrustworthy individuals and that federally funded programs need
to be protected from the possibility that they may engage in
conduct in the future which is damaging.
On the other hand, the offenses of which Petitioners were convicted
do not appear nearly so serious as has been asserted by the I.G.
It is evident that the I.G. premised the determination to impose
20-year exclusions against Petitioners on the conclusion that the
crimes of which Petitioners were convicted were merely indicia of
far more serious fraud by Petitioners. Petitioners' convictions
were depicted by the I.G. as comprising merely the tip of an
iceberg that consisted of a wide-ranging, massive fraud against
Medicare.
In both the notices which the I.G. sent to Petitioners and at the
hearing, the I.G. contended that Petitioners had engaged in fraud
which resulted in approximately $1.5 million in overpayments by
Medicare to entities which Petitioners controlled. However, the
I.G. failed to prove, by a preponderance of the evidence, that
these Petitioners engaged in fraud beyond the approximately $10,000
for which they were convicted. The I.G. did not substantiate the
allegations of a broader and more damaging scheme. Consequently,
exclusions cannot be premised on offenses beyond that for which
Petitioners were convicted.
The evidence on which the I.G. relied to prove the alleged
overpayments consisted primarily of the results of audits that Blue
Cross and Blue Shield of Texas, the Medicare carrier for the State
of Texas, performed of Medicare reimbursement claims that had been
presented by corporations owned and operated by Petitioners. The
I.G. presented the testimony of an employee of Blue Cross and Blue
Shield of Texas, Debbie Lewis. Tr. at 142 - 161. Ms. Lewis
testified that she is a supervisor of claims examiners. Tr. at
143. She testified that Blue Cross and Blue Shield of Texas
concluded that entities controlled by Petitioners had been overpaid
by Medicare by approximately $1.5 million based on an audit which
consisted of a random sampling of claims presented by these
entities. I.G. Ex. 27, 28; Tr. at 143 - 144, 147 - 149, 151. The
claims actually reviewed by Blue Cross and Blue Shield comprised a
small percentage of the total claims which were estimated to be
overpaid. Tr. at 154 - 157. She characterized sampling as a
"valid methodology" in determining Medicare overpayments. Tr. at
144.
I do not find Ms. Lewis' testimony to be persuasive for the
following reasons. First, the I.G.'s assertion that the sampling
performed here is reliable is without foundation. The I.G. failed
to establish that Ms. Lewis has sufficient expertise in statistics
to certify the accuracy of the sampling performed here. The I.G.
offered no evidence as to Ms. Lewis' education in statistics. Nor
did the I.G. offer evidence as to the statistical validity of the
sampling which Blue Cross and Blue Shield of Texas performed,
except to assert without foundation that sampling (not necessarily
this sampling) is a valid methodology for ascertaining the
existence of overpayments. 11/
Indeed, Ms. Lewis suggested in her testimony that the sampling
performed here may have been biased in favor of finding
overpayments. She testified that where an inquiry to a provider
produced no response, that non response would be used as a basis
for finding an overpayment for the sampled claim about which the
inquiry was made. Tr. at 157 - 158. I am not persuaded that a
provider's failure to respond to an inquiry justifies the
conclusion that an overpayment was made. Yet, based on Ms. Lewis'
testimony, it appears that Blue Cross and Blue Shield of Texas
would use the failure to respond to the inquiry not only to find an
overpayment, but to find many overpayments, inasmuch as Blue Cross
and Blue Shield of Texas would extrapolate the finding of one
overpayment over the entire universe of claims from which the
sample was taken.
Second, the I.G. never defined what she meant by the term
"overpayment." I do not infer from the way this term was used by
Ms. Lewis that Blue Cross and Blue Shield of Texas' findings of
overpayments necessarily were limited to claims that Blue Cross and
Blue Shield of Texas concluded to be false or fraudulent. From the
context, the term could mean payments based on simple error by Blue
Cross and Blue Shield of Texas or by the entities whose claims were
examined. It could mean also payments based on a good faith,
albeit incorrect, interpretation of payment guidelines by Blue
Cross and Blue Shield of Texas or by the entities whose claims were
examined. I cannot conclude that entities controlled by
Petitioners were overpaid based on fraud unless the evidence
establishes that the determination that overpayments were made is
based on fraudulent claims.
The I.G. offered evidence to prove that Petitioners have been found
to be liable in a lawsuit brought against them under the False
Claims Act, 31 U.S.C. 3729 et seq., as amended, in the amount of
$180,056.76. I.G. Ex. 55. I do not find from the judgment against
Petitioners that Petitioners were found to have committed fraud
against Medicare in an amount greater than the approximately
$10,000 of which they were convicted. The judgment was based
solely on the 14 counts of mail fraud of which Petitioners were
convicted. P. Ex. 21, pp. 4 - 7. The damages comprise a trebling
of the dollar amount of Petitioners' fraud plus civil penalties in
the amount of $150,000. Id., p. 6.
In addition, throughout this proceeding, the I.G. has contended
that the criminal activity which resulted in Petitioners'
convictions occurred over a period of at least five years. To
support this contention, the I.G. relies on a general statement in
the indictment alleging that Petitioners engaged in a criminal
scheme from October 7, 1983 through the date of the return of the
indictment on June 9, 1989. However, the 14 specific counts which
formed the basis of Petitioner's conviction covered a period
spanning from December 13, 1985 through July 15, 1988. Thus,
notwithstanding the allegation contained in the indictment that
Petitioners' criminal activity occurred over a period of more than
five years, I find that the evidence establishes that the specific
counts of which Petitioners were convicted occurred over a period
of only two and a half years.
In summary, I conclude that the I.G. did not prove that the ambit
of Petitioners' crimes extends beyond the 14 counts of mail fraud
totalling about $10,000, of which they were convicted. These are
serious crimes, and they certainly provide evidence to support the
conclusion that Petitioners are not trustworthy providers of care.
On the other hand, the record of this case fails to establish
anything approaching the offenses which the I.G. alleges
Petitioners committed. That calls into question the need for such
severe exclusions as the I.G. imposed, inasmuch as the I.G. plainly
premised those exclusions on the conclusion that Petitioners had
committed fraud greatly in excess of that of which they had been
convicted.
a. The exclusion imposed against Petitioner Keith Irby
I conclude that the offenses of which Petitioner Keith Irby was
convicted are not so serious as to justify the imposition of a
20-year exclusion. An exclusion of that length is for all
practical purposes, a permanent ban on claiming reimbursement from
Medicare or Medicaid. Given the remedial purpose of section 1128,
exclusions of such length must be reserved for those individuals
and entities who have demonstrated by their conduct that they can
never again be trusted to provide care or to claim reimbursement
for the items or services which they provide. The 14 counts of
mail fraud of which Petitioner Keith Irby was convicted, while
serious offenses, simply do not amount to offenses that are so
serious as to merit on their face what amounts to a permanent
exclusion.
However, the evidence in Petitioner Keith Irby's case establishes
that he remains an untrustworthy individual. I conclude that,
while a 20-year exclusion is excessive, an exclusion of 10 years is
merited.
To begin with, Petitioner Keith Irby has not expressed remorse for
his criminal misconduct. To the contrary, he asserts adamantly
that he engaged in no misconduct, and that, in fact, he is not
guilty of the offenses of which he has been convicted. Tr. at 209
- 210. Absent persuasive evidence to the contrary, Petitioner's
intransigent refusal to admit misconduct might suggest a propensity
on his part to engage in similar unlawful conduct in the future.
In addition, Petitioner Keith Irby has not yet completed the terms
of his sentence. Although he has paid the fine which was imposed
by the court, he has not completed the community service which he
was sentenced to perform.
More significant is the fact that Petitioner Keith Irby has been
less than fully compliant with the terms and conditions of his
probation. He is still serving the five-year term of probation to
which he was sentenced. Subsequent to his conviction and
sentencing, Petitioner Keith Irby was convicted of the offense of
driving while intoxicated. This subsequent conviction is a
violation of the terms of his probation and it suggests a
continuing propensity to run afoul of the law.
Not only was Petitioner Keith Irby convicted of the offense of
driving while intoxicated, but he withheld from his probation
officer the fact of his conviction. Petitioner Keith Irby's
failure to disclose this conviction to his probation officer is an
additional violation of the terms of his probation. It suggests a
propensity on the part of Petitioner Keith Irby to be dishonest
with government officials when it serves his purposes.
Furthermore, I find that Petitioner Keith Irby was not credible in
his testimony at the hearing which I conducted. In his account of
his conviction for driving while intoxicated, he asserted that the
officer who arrested him threw out test results which showed that
Petitioner Keith Irby was not intoxicated, and repeated the test
three more times until he obtained a result which showed that he
was intoxicated. Tr. at 202. He suggested that, as part of his
plea to the charge of driving while intoxicated, it had been agreed
that his conviction of this offense would not be reported to
federal probation authorities. Id. This self-serving account of
the events surrounding his conviction for driving while intoxicated
lacks the ring of truth. I conclude that his dishonesty in the
hearing which I conducted is additional evidence of his continuing
lack of trustworthiness.
I modify the exclusion imposed against Petitioner Keith Irby to a
term of 10 years. That is a very lengthy exclusion and it reflects
my conclusion that he remains an untrustworthy individual. It
takes into account also the seriousness of the offenses of which he
was convicted.
b. The exclusion imposed against Petitioner Michelle Irby
As I find with respect to Petitioner Keith Irby, I conclude that a
20-year exclusion of Petitioner Michelle Irby is not merited based
on the seriousness of the offenses of which she was convicted. I
find that, based on evidence pertaining to her case, the exclusion
should be modified to a term of five years, which is the minimum
exclusion period mandated by the Act for individuals convicted of
criminal offenses, within the meaning of section 1128(a)(1).
There is substantial evidence to suggest that Petitioner Michelle
Irby will soon not pose a serious threat to federally financed
health care programs and to program beneficiaries and recipients.
The evidence in this case establishes that, since her conviction,
Petitioner Michelle Irby has conducted her life in an exemplary
fashion. This is strong evidence of rehabilitation and of
trustworthiness.
Petitioner Michelle Irby is a pharmacist. In the months following
her conviction she obtained jobs as a pharmacist in order to
support herself and her family. Her employers testified at the
hearing that I conducted that she comported herself in these jobs
with complete honesty and integrity. She was entrusted with
filling prescriptions for controlled substances. She served as a
mentor for a pharmacy student. Her exemplary performance in these
jobs is indicative of trustworthiness.
Petitioner Michelle Irby has sought to continue her education. Her
current enrollment in medical school suggests considerable
diligence on her part and is further evidence of her
rehabilitation.
Other evidence of Petitioner Michelle Irby's trustworthiness
consists of the fact that she completed her five years' probation
in 33 months. I infer from this that, during the period of her
probation, she complied strictly with the rules and requirements
established by her probation officer. She has completed the
community service aspect of her sentence, as well. There is no
evidence that, in the more than four years since she was sentenced
for her crimes, Petitioner Michelle Irby has engaged in unlawful
conduct.
I recognize that Petitioner Michelle Irby, like Keith Irby, has not
shown any remorse or acknowledged the unlawfulness of her criminal
misconduct. Under other circumstances, this refusal to admit
wrongdoing would justify an exclusion that is greater than the
minimum mandatory five-year period. However, in this case, I find
that Petitioner Michelle Irby's exemplary conduct since her
conviction outweighs any negative inferences which can be drawn
from her refusal to admit wrongdoing. Petitioner, by her actions,
has demonstrated a strong determination to be law-abiding and
trustworthy and I accord great weight to the exemplary manner in
which Petitioner has comported herself since her conviction.
I find that the preponderance of the evidence establishes a strong
likelihood that Petitioner Michelle Irby will remain trustworthy.
Given that conclusion, there is no need in this case for an
exclusion which is lengthier than the five-year statutory minimum.
CONCLUSION
I conclude that the 20-year exclusions which the I.G. imposed
against Petitioners are excessive. I modify the exclusion imposed
against Petitioner Keith Irby to a term of 10 years. I modify the
exclusion imposed against Petitioner Michelle Irby to a term of
five years.
_________________________
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. Unless the context
indicates otherwise, I use the term "Medicaid" hereafter to
represent all State health care programs from which Petitioners
were excluded.
2. The notices of exclusion which the I.G. sent to the
Petitioners refer to a corporation, Med-Equip Sales and Rentals,
Inc. (Med-Equip), as a corporation wholly owned by Petitioners.
The notices state that, by virtue of the exclusion, no payments
will be made to this corporation during the exclusion period. In
the initial prehearing conferences which I held in this case, the
I.G. contended that she may have determined also to exclude
Med-Equip. For that reason, I named Med-Equip as a party. In a
prehearing order dated June 12, 1992, I raised the issues of
whether Med-Equip had been excluded and whether the I.G. had
provided proper notification of the exclusion. In a motion dated
November 5, 1993, the I.G. asserted that she had not excluded
Med-Equip and that the corporation should not be a party. This
motion is supported by Petitioners. Accordingly, I determine that
Med-Equip is not a party to this case, and I have removed Med-Equip
from the caption of this decision.
3. These reasons included the withdrawal of Petitioners' first
counsel due to illness, the birth of a child to Petitioner Michelle
Irby, and providing the parties with an opportunity to engage in
settlement negotiations.
4. References to the record in this decision will be cited as
follows:
I.G.'s Exhibits I.G. Ex. (number), p. (page
number)
Petitioners' Exhibits P. Ex. (number), p. (page number)
Hearing Transcript Tr. at (page number)
5. The evidence which I received from the I.G. at the hearing
included six volumes of transcripts of the criminal trial of
Petitioners. I.G. Ex. 49 - 54. Counsel for Petitioners objected
to my receiving these exhibits on the ground that they were
voluminous and that the I.G. had not shown the relevance of these
exhibits to the instant case. In receiving the exhibits, I advised
counsel for the parties that I expected that, in their posthearing
briefs, they would cite to any specific excerpts of these exhibits
that they contended were relevant. Tr. at 32 - 33. I told the
parties that it would be unlikely that I would read these exhibits
and make findings from them unless they directed my attention to
specific portions of them which they wished me to consider. I have
reviewed the excerpts of these exhibits cited by the parties in
their posthearing submissions. I have not read the remainder of
I.G. Ex. 49 - 54 and, with the exception of the excerpts cited by
the parties, I have not considered these exhibits in making my
decision in these cases.
6. I make separate Findings concerning the reasonableness of
the exclusions imposed against Petitioners Keith and Michelle Irby.
For the convenience of the parties, I have captioned these findings
with headings. The headings are not Findings nor are they intended
to alter the meaning of any of my Findings.
7. At issue in Bassim was an exclusion imposed pursuant to
section 1128(b)(4) of the Act. The specific section of the Part
1001 regulations which was at issue in that case is 42 C.F.R
1001.501. That regulation establishes mitigating and aggravating
factors to be used in determining exclusions pursuant to section
1128(b)(4) which are very similar to those established by 42 C.F.R.
1001.102 for exclusions imposed pursuant to section 1128(a)(1)
of the Act. The effect of 42 C.F.R. 1001.501 is the same as the
effect of 42 C.F.R. 1001.102, in that both regulations preclude
use of many of the factors identified as remedial in Matesic to
determine the length of exclusions. Although technically, Bassim
applies only to exclusions imposed pursuant to section 1128(b)(4)
of the Act, the appellate panel's decision in that case plainly is
intended to apply broadly to all exclusions imposed pursuant to
section 1128. Bassim, DAB 1333, at 8 - 9.
8. In a number of decisions issued between January 29, 1992 and
January 22, 1993, administrative law judges held that the Part 1001
regulations did not establish a standard for adjudicating the
reasonableness of exclusions. Bertha K. Krickenbarger, R.Ph., DAB
CR250 (1993) (decisions summarized therein at 10). An effect of 42
C.F.R. 1001.1(b) is to overrule these decisions.
9. Administrative law judges have held that the 1993
clarification requires that exclusions imposed after January 29,
1992 be adjudicated pursuant to the criteria contained in the Part
1001 regulations. Jose Ramon Castro, M.D., DAB CR259 (1993).
10. The I.G. did not aver that she used the criteria of the
1992 regulations to determine the length of the exclusions imposed
against Petitioners. These criteria were not in effect in 1990,
when Petitioners were excluded. The I.G. has not explained why the
Secretary would intend that criteria first published in 1992 should
be used retroactively to adjudicate exclusions which were imposed
at a time when such criteria had not been adopted by the Secretary.
11. In her posthearing brief, the I.G. asserted that sampling
is a methodology for ascertaining Medicare overpayments that has
been upheld in the courts. I.G.'s posthearing brief at 22.
However, assuming that to be so, the I.G. offered no evidence in
these cases to prove that the sampling methodology used here was
the same as that upheld in the cases cited by the I.G. in her
brief.