$05:Exclusion Case
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Gregory M. Manga, R.Ph.,
Petitioner,
- v. -
The Inspector General.
DATE: January 18, 1996
Docket No. C-95-164
Decision No. CR409
DECISION
The I.G. excluded Petitioner from participating in Medicare and
Medicaid for ten years, pursuant to section 1128(a)(1) of the
Social Security Act (Act). 1/ I conclude that the I.G. had
authority to exclude Petitioner and that the duration of the
exclusion is reasonable.
I. Background
On July 25, 1995, the I.G. sent a notice of exclusion to
Petitioner. Petitioner requested a hearing, and the case was
assigned to me. At a prehearing conference, Petitioner and the
I.G. agreed that an in-person hearing was not necessary, and that
the case could be decided based on written submissions, including
briefs and exhibits. The parties briefed the issues.
Additionally, the I.G. submitted three proposed exhibits with her
brief and a fourth proposed exhibit with her reply. 2/ Petitioner
did not object to my receiving these exhibits into evidence.
Therefore, I receive into evidence I.G. Exs. 1 - 4.
II. Issues, findings of fact, and conclusions of law
The issues in this case are whether the I.G. had authority to
exclude Petitioner, and whether the duration of the exclusion is
reasonable. I make the following findings of fact and conclusions
of law (Findings), which I discuss, in detail, below.
1. Section 1128(a)(1) of the Act requires the Secretary to exclude
any individual who is convicted of a criminal offense related to
the delivery of an item or service under Medicare or Medicaid.
2. Petitioner was convicted of a criminal offense related to items
or services delivered under the Pennsylvania Medicaid program and,
therefore, was convicted of a criminal offense within the meaning
of section 1128(a)(1) of the Act.
3. The I.G. was not limited to imposing a five-year exclusion
against Petitioner.
4. An exclusion imposed under section 1128(a)(1) must be for a
minimum duration of five years.
5. Regulations provide that an exclusion of more than five years
may be imposed in any case where there exist aggravating factors,
which are not offset by mitigating factors.
6. The I.G. proved that two aggravating factors exist.
7. Petitioner did not prove that any mitigating factors exist.
8. The degree of untrustworthiness established in this case proves
that an exclusion of ten years is reasonable.
III. Analysis
A. The I.G.'s authority to exclude Petitioner (Findings 1
and 2)
Section 1128(a)(1) of the Act mandates the Secretary of the United
States Department of Health and Human Services, or her delegate,
the I.G., to exclude from participation in Medicare or Medicaid any
individual or entity who is convicted of a criminal offense related
to the delivery of an item or service under Medicare or Medicaid.
Petitioner pleaded guilty to, and was convicted of, a scheme to
defraud the Pennsylvania Medical Assistance Program, by knowingly
and intentionally submitting to that program reimbursement claims
for services which he had not provided. I.G. Exs. 1, 3.
The I.G. avers that the Pennsylvania Medical Assistance Program is
the Pennsylvania Medicaid program. I.G.þs brief at 1. Petitioner
has not denied this assertion. I conclude that the Pennsylvania
Medical Assistance Program is the Pennsylvania Medicaid program.
The offense of which Petitioner was convicted consists of
perpetrating a fraud against the Pennsylvania Medicaid program.
Conviction of such an offense has been held to be conviction of a
criminal offense as defined by section 1128(a)(1). Jack W. Greene,
DAB 1078 (1989), affþd, Greene v. Sullivan, 731 F. Supp. 835 and
838 (E.D. Tenn. 1990). Thus, I conclude that Petitioner was
convicted of an offense within the meaning of section 1128(a)(1) of
the Act.
B. The duration of the exclusion (Findings 3 - 8)
1. Petitioner's argument that the I.G. agreed to impose
an exclusion of five years (Finding 3)
Petitioner argues that he was excluded by the I.G. only for a
period of five years. See I.G. Ex. 4. This argument is incorrect.
The exhibit on which Petitioner relies is the notice which the I.G.
sent to Petitioner in June 1995, proposing to exclude Petitioner.
In that proposal, the I.G. advised Petitioner that she intended to
exclude Petitioner for five years. Although the June 1995 notice
was a clear statement of the I.G.þs intent as of June 1995, it did
not constitute a guarantee that the I.G. would limit the exclusion
only to five years. In fact, as is evident from the July 25, 1995
notice of exclusion which the I.G. sent to Petitioner, the I.G.
superseded her original intent to exclude for five years with a
ten-year exclusion. I find that no rights inured to Petitioner
from the June 1995 notice, nor do I conclude that the I.G.þs
determination to impose a lengthier exclusion than that
contemplated originally by the I.G. deprived Petitioner of due
process. The July 1995 notification gave Petitioner adequate
notice of the I.G.þs determination, and adequate opportunity to
request a hearing and to challenge the exclusion.
2. The criteria which govern the length of exclusions
imposed under section 1128(a)(1) (Findings 4 and 5)
The Act mandates the I.G. to exclude, for a minimum of five years,
an individual who is convicted of an offense described in section
1128(a)(1). Act, section 1128(c)(3)(B). Here, the I.G. excluded
Petitioner for ten years. The remaining issue, therefore, is
whether the ten-year exclusion is reasonable.
Section 1128 is a remedial statute. The purpose of an exclusion
imposed under section 1128, including an exclusion imposed under
section 1128(a)(1), is not to punish the excluded party, but to
protect the integrity of federally funded health care programs, and
the beneficiaries and recipients of those programs, from an
untrustworthy individual. The Secretary has published regulations
which establish criteria for determining whether an exclusion
imposed under section 1128 is reasonable. 42 C.F.R. Part 1001.
The regulation which establishes the criteria for assessing the
duration of an exclusion imposed under section 1128(a)(1) of the
Act is 42 C.F.R. 1001.102.
That regulation provides that the I.G. may impose an exclusion of
more than five years in any case where there exist one or more
aggravating factors which are not offset by one or more mitigating
factors. 42 C.F.R. 1001.102(b), (c). The factors which may be
aggravating or mitigating are enumerated specifically in the
regulation. Id. I may not consider evidence relating to the
duration of an exclusion unless that evidence relates to one of the
aggravating or mitigating factors which are identified in the
regulation.
In a case involving an exclusion imposed under section 1128(a)(1),
the presence of an aggravating factor or factors not offset by the
presence of a mitigating factor or factors, does not automatically
justify an exclusion of more than five years. The regulations
contain no formula for assigning weight to aggravating and
mitigating factors. It is apparent both from the regulations
themselves, and from the Act's remedial purpose, that I must
explore in detail, and assign appropriate weight to, those factors
which are aggravating or mitigating.
3. The presence of aggravating factors(Finding 6)
The I.G. alleged that there are three aggravating factors present
in this case. The alleged aggravating factors are that Petitioner:
(1) defrauded the Pennsylvania Medicaid program of more than
$1,500; (2) committed his criminal acts over a period of more than
one year; and (3) committed criminal acts which harmed recipients
of the Pennsylvania Medicaid program.
The I.G. proved the existence of two aggravating factors. First,
the undisputed evidence is that Petitioner defrauded the
Pennsylvania Medicaid program of more than $1,500. Under 42 C.F.R.
1001.102(b)(1), an aggravating factor exists if an individual
engages in acts resulting in financial loss to Medicare or Medicaid
of $1,500 or more. Here, Petitioner was charged with defrauding
the Pennsylvania Medicaid program of more than $175,000. I.G. Ex.
1 at 7. He was sentenced to pay restitution of $200,000. I.G. Ex.
3.
Second, Petitioner committed his crime over a period of more than
one year. Under 42 C.F.R. 1001.102(b)(2), an aggravating factor
exists if an individual engages in criminal acts against Medicare
or Medicaid of more than a yearþs duration. Here, Petitioner was
charged with and convicted of engaging in fraud against Medicaid
over a period of more than four years. I.G. Exs. 1, 3.
The I.G. did not prove the existence of the third alleged
aggravating factor. Under 42 C.F.R. 1001.102(b)(3), an
aggravating factor exists if an individualþs crimes had a
significant adverse physical, mental or financial impact on one or
more program beneficiaries or other individuals. The I.G. argues
that this section means that the aggravating factor is established
any time it is proved that an individual engages in crimes which
have a significant adverse financial impact on a program, such as
a State Medicaid program. The I.G.þs theory is that such a crime
deprives the program of money which might otherwise have been spent
on recipientsþ medical care. Under this theory, recipients are
harmed indirectly by crimes against the program, because they are
denied funding for needed medical care.
I disagree with this asserted interpretation of the regulation. I
read this section as establishing a basis for finding an
aggravating factor where an individual engages in a crime that
harms a beneficiary or recipient directly, such as a crime
involving physical or psychological abuse, or a crime involving
fraud against a beneficiary or recipient. The section may be read
also as establishing a basis for an aggravating factor where the
I.G. proves that a crime directed against a program has an actual,
and not just a theoretical, adverse impact on the beneficiaries or
recipients of that program. However, I do not read this section to
mean that an adverse impact on beneficiaries or recipients can be
predicated automatically based on any offense which has an adverse
financial impact on federally funded programs.
If I were to interpret this section as the I.G. reads it, then the
section would essentially duplicate 42 C.F.R. 1001.102(b)(1).
This would mean that, any time an aggravating factor was
established under 42 C.F.R. 1001.102(b)(1), then, virtually
automatically, a second aggravating factor would be established
under 42 C.F.R. 1001.102(b)(3). It does not appear reasonable
that the Secretary would want the regulations to be read so as to,
in effect, turn the presence of a single aggravating factor into
the presence of two aggravating factors.
The I.G. has not proved that Petitionerþs crime directly harmed
beneficiaries or recipients of federally funded programs.
Moreover, even if I were to agree with the I.G.'s theory that a
financial loss to the Medicaid program could be interpreted as an
aggravating factor under 42 C.F.R. 1001.102(b)(3), the I.G. has
not proved that Pennsylvaniaþs Medicaid program was deprived of
funds that it would otherwise have paid to provide health care to
recipients, as a consequence of Petitionerþs crime.
4. The absence of mitigating factors (Finding 7)
Petitioner did not prove the presence of any mitigating factors.
See 42 C.F.R. 1001.102(c)(1) - (3). Petitioner asserts that he
has no prior criminal or anti-social record, and that he engaged in
fraud only as a means of saving his business. Petitionerþs brief
at 1 - 2. Even if true, these assertions do not establish the
presence of any mitigating factors under 42 C.F.R.
1001.102(c)(1) - (3).
C. Evaluation of the duration of the exclusion (Finding 8)
The presence of two aggravating factors not offset by a mitigating
factor means that an exclusion of more than five years may be
reasonable. It does not direct an exclusion of any particular
length, however.
In this case, the unrebutted evidence relating to the aggravating
factors proved by the I.G. shows Petitioner to be a highly
untrustworthy individual. Petitioner operated a pharmacy. I.G.
Ex. 1 at 3. Petitionerþs fraud consisted of submitting hundreds of
falsified claims to the Pennsylvania Medicaid program for drugs
which, in fact, Petitioner had never dispensed. Id. at 3 - 4, 6.
In order to perpetrate this fraud, Petitioner deliberately created
over 900 claims in which he inserted false information, including
recipient numbers, recipient names, and physician license numbers.
Id. at 3 - 6. Petitioner committed this offense over a period of
more than four years, and succeeded in defrauding Medicaid of more
than $175,000.
The evidence proves that Petitionerþs crime involved a high degree
of planning and persistence. It was a deliberate, sophisticated
crime, which, for a time, was extremely successful. I conclude
from this evidence that Petitioner is capable of engaging in
extraordinarily dishonest conduct. Under the circumstances, a
ten-year exclusion is reasonable, in order to protect federally
funded programs from the possibility that Petitioner might
perpetrate such dishonesty against these programs in the future.
IV. Conclusion
I conclude that the I.G. was authorized to exclude Petitioner. A
ten-year exclusion is reasonable in this case.
_______________________
Steven T. Kessel
Administrative Law Judge
1. I use the term "Medicaid" to refer to all State health care
programs described in section 1128(h) of the Act.
2. Although the I.G. offered I.G. Ex. 4, the I.G. objected to
my admitting the exhibit into evidence. The I.G.'s objections are
hereby overruled.