Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of: Arie Oren, M.D., Petitioner,
- v. -
The Inspector General.
DATE: August 28, 1997
Docket No. C-97-201
Decision No. CR490
DECISION
By letter dated December 18, 1996, the Inspector General
(I.G.), United States Department of Health and Human
Services, notified Arie Oren, M.D.(Petitioner), that he
would be excluded from participation in Medicare,
Medicaid, Maternal and Child Health Services Block Grant
and Block Grants to States for Social Services programs
for a period of ten years. The I.G. imposed this
exclusion pursuant to section 1128(b)(1) of the Social
Security Act (Act), based on Petitioner's conviction in
the United States District Court for the Eastern District
of Pennsylvania for criminal offenses related to "fraud,
theft, embezzlement, breach of fiduciary responsibility
or other financial misconduct."
Petitioner requested review of his ten-year exclusion by
letter dated February 5, 1997. A prehearing conference
was held on March 19, 1997. During the conference, the
parties agreed that the case could be heard and decided
based on written submissions, including briefs and
exhibits. The I.G. submitted a brief accompanied by 13
proposed exhibits (I.G. Ex. 1 - 13). Petitioner
submitted a response brief. The I.G. submitted a reply
brief. Petitioner did not object to my receiving into
evidence the I.G.'s proposed exhibits, and I receive into
evidence I.G. Ex. 1 - 13.
I affirm the I.G.'s determination to exclude Petitioner
from participating in Medicare and other federally-funded
health care programs, including Medicaid, for a period of
ten years.
PETITIONER'S CONTENTIONS
Petitioner maintains that section 1128(b)(1) of the Act
does not apply to his situation because the criminal
offenses to which he pled guilty involved activity with
private insurance companies. Petitioner argues that the
I.G. has no authority to exclude him, inasmuch as he was
not convicted of an offense against or involving a
government-funded health care program. He further
contends that, even if the statute does apply to such
conduct as a result of a statutory amendment, his
criminal offenses occurred before the 1996 amendment of
the Act and that such amendment cannot, under the Ex-post
Facto Clause of the Constitution, apply in his case.
Petitioner also maintains that the length of exclusion is
not reasonable because there are mitigating circumstances
present in his case which make a ten-year exclusion
excessive.
APPLICABLE LAW
Under section 1128(b)(1) of the Act, the Secretary may
exclude "[a]ny individual or entity that has been
convicted, under Federal or State law, in connection with
the delivery of a health care item or service or with
respect to any act or omission in a program operated by
or financed in whole or in part by any Federal, State, or
local government agency, of a criminal offense relating
to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct." 1/
42 C.F.R. § 1001.201(b)(1) provides that an exclusion
imposed under section 1128(b)(1) of the Act shall be for
a period of three years, unless specified aggravating or
mitigating factors are present which form a basis for
lengthening or shortening the period of exclusion.
42 C.F.R. § 1001.201(b)(2) provides that the following
factors may be considered to be aggravating and a basis
for lengthening the period of exclusion "(i) [t]he acts
resulting in the conviction, or similar acts, resulted in
financial loss of $1500 or more to a government program
or to one or more other entities, or had a significant
financial impact on program beneficiaries or other
individuals. (The total amount of financial loss will be
considered, including any amounts resulting from similar
acts not adjudicated, regardless of whether full or
partial restitution has been made); (ii) [t]he acts that
resulted in the conviction, or similar acts, were
committed over a period of one year or more; (iii) [t]he
acts that resulted in the conviction, or similar acts,
had a significant adverse physical or mental impact on
one or more program beneficiaries or other individuals;
(iv) [t]he sentence imposed by the court included
incarceration; or (v) [t]he convicted individual or
entity has a prior criminal, civil, or administrative
sanction record."
42 C.F.R.§ 1001.201(b)(3) provides that only the
following factors may be considered as mitigating and a
basis for reducing the period of exclusion: "(i) [t]he
individual or entity was convicted of 3 or fewer
misdemeanor offenses, and the entire amount of financial
loss to a government program or to other individuals or
entities due to the acts that resulted in the conviction
and similar acts is less than $1500; (ii) [t]he record in
the criminal proceedings, including sentencing documents,
demonstrates that the court determined that the
individual had a mental, emotional, or physical
condition, before or during the commission of the
offense, that reduced the individual's culpability; (iii)
[t]he individual's or entity's cooperation with Federal
or State officials resulted in -- (A) [o]thers being
convicted or excluded from Medicare or any of the State
health care programs, or (B) [t]he imposition of a civil
money penalty against others; or (iv) [a]lternative
sources of the type of health care items or services
furnished by the individual or entity are not available."
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner was a licensed medical doctor who
practiced medicine, among other places, at the C.H.
Medical Center, Inc., in Philadelphia, Pennsylvania.
I.G. Ex. 1 at 1.
2. On November 10, 1994, an indictment (No. 94-465) was
filed in the United States District Court for the Eastern
District of Pennsylvania charging Petitioner and 10 other
defendants with crimes related to a scheme designed to
obtain money from insurance companies by submitting false
medical bills and personal injury, property, and
disability claims. The indictment charged Petitioner
with mail fraud, in violation of 18 U.S.C. § 1341;
racketeering in violation of 18 U.S.C. § 1962(c); RICO
conspiracy in violation of 18 U.S.C. § 1962 (d); and
criminal forfeiture pursuant to 18 U.S.C. § 1963. I.G.
Ex. 12 at 4, I.G. Ex. 13 at 1.
3. The charges referenced in the November 10, 1994
indictment arose out of an insurance fraud scheme
involving a law office and three medical centers. The
object of the scheme was to defraud insurance companies
by filing false, fraudulent, and inflated personal injury
claims that were supported by fraudulent medical bills
and reports signed by Petitioner referring to
treatment that was never rendered. I.G. Ex. 13 at 1 - 2.
4. On December 13, 1994, another indictment (No. 94-
515) was filed in the United States District Court for
the Eastern District of Pennsylvania charging Petitioner
and eight other defendants with offenses including mail
fraud in violation of 18 U.S.C. § 1341; racketeering in
violation of 18 U.S.C. § 1962(c); racketeering
conspiracy in violation of 18 U.S.C. § 1962(d); aiding
and abetting in violation 18 U.S.C. § 2; and racketeering
forfeiture pursuant to 18 U.S.C. § 1963. I.G. Ex. 1,
I.G. Ex. 3 at 1.
5. The essence of the charges contained in Indictment
No. 94-515 against Petitioner and his co-defendants was
that they staged automobile accidents and then reported
these accidents to various insurance companies including
health insurers to collect fees for services that were
either not needed or never provided. I.G. Ex. 1, I.G.
Ex. 3 at 4 - 5.
6. On June 5, 1995, Petitioner entered into a plea
bargain in which he agreed to plead guilty to counts 38
and 40 of Indictment No. 94-465 (charging him with
racketeering and criminal forfeiture) and counts 47 and
49 of Indictment No. 94-515 (also charging him with
racketeering and criminal forfeiture); to forfeit
$250,000; to pay a special assessment and to make full
restitution; and to agree to consolidation of the two
indictments for sentencing purposes. I.G. Ex. 2.
7. On March 8, 1996, Petitioner was convicted in the
United States District Court for the Eastern District of
Pennsylvania of the offenses of racketeering and criminal
forfeiture pursuant to counts 47 and 49 of Indictment No.
94-515. I.G. Ex. 4.
8. As a result of his conviction Petitioner was ordered
to pay restitution in the amount of $272,000. I.G. Ex. 4
at 4.
9. As a result of his conviction, Petitioner was
sentenced to 24 months incarceration and three years of
supervised release. I.G. Ex. 4 at 2.
10. On April 26, 1996, Petitioner was ordered to
forfeit assets valued at $100,000. obtained through his
racketeering. I.G. Ex. 5.
11. Petitioner's participation in an unlawful scheme to
defraud insurance companies lasted from 1990 to the
latter part of 1992. I.G. Ex. 1 at 15, I.G. Ex. 4 at 1.
12. Under section 1128(b)(1) of the Act, the I.G. is
authorized to exclude any individual or entity that has
been convicted, under federal or State law in connection
with the delivery of a health care item of service or
with respect to any act or omission in a program operated
by or financed in whole or in part by any federal, State,
or local government agency, of a criminal offense
relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.
13. Where the I.G. determines to exclude an individual
pursuant to section 1128(b)(1) of the Act, the term of
the exclusion will be for a period of three years, in the
absence of aggravating or mitigating factors that would
support an exclusion of more or less than three years.
14. In a case involving an exclusion under section
1128(b)(1) of the Act, an exclusion of more than three
years may be justified where there exist aggravating
factors that are not offset by mitigating factors.
15. Petitioner was convicted under federal law, in
connection with the delivery of a health care item or
service, of criminal offenses relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or
other financial misconduct.
16. The I.G. is authorized to exclude Petitioner
pursuant to section 1128(b)(1) of the Act.
17. The I.G. proved the presence of an aggravating
factor, in that the acts resulting in Petitioner's
conviction, or similar acts, resulted in financial loss
of $1,500 or more to an insurance company.
18. The I.G. proved the existence of a second
aggravating factor in that the sentence that was imposed
on Petitioner for his crimes included a period of
incarceration.
19. The I.G. proved the presence of a third aggravating
factor in that the acts that resulted in Petitioner's
conviction, or similar acts, were committed by Petitioner
over a period of one year or more.
20. Petitioner did not prove the presence of any
mitigating factor.
21. The evidence which relates to the aggravating
factors proved by the I.G. establishes Petitioner to be
untrustworthy to provide care to beneficiaries and
recipients of federally-funded health care programs.
22. A ten-year exclusion of Petitioner is reasonable.
DISCUSSION
Petitioner does not dispute that he has been convicted
under federal law, in connection with the delivery of a
health care item or service, of criminal offenses
relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.
Instead he maintains that section 1128(b)(1) of the Act
does not apply in his case because he was convicted for
activities related to defrauding private insurers. He
contends that section 1128(b)(1) of the Act applies only
if an individual is convicted of a criminal offense that
is related to the delivery of an item or service under a
government-funded health care program such as Medicare or
a State Medicaid program.
I find no merit to this argument. I conclude that
section 1128(b)(1) of the Act is clearly written to
encompass Petitioner's criminal offenses, without any
"requisite", as he contends, that such offenses must be
related to "a program operated by or financed in whole or
part by any Federal, State, or local government agency."
Petitioner's brief at 6.
Under section 1128(a)(1) of the Act, the I.G. is mandated
to exclude an individual who is convicted of a program-
related offense of the type described by Petitioner in
his argument (i.e. involving a government-financed
program such as Medicare or Medicaid). However, the
I.G.'s exclusion authority is not limited to exclusions
for convictions of program-related offenses. The other
parts of section 1128, including section 1128(b)(1),
authorize the I.G. to impose exclusions for a far broader
range of offenses than the program-related offenses that
are described in section 1128(a)(1).
Section 1128(b)(1) plainly provides that an exclusion may
be imposed where an individual is convicted of an offense
relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct,
that is committed in connection with the delivery of a
health care item or service. There is no requirement in
this section that the offense be directed against a
government-funded program, although conviction of an
offense against a government-funded program would
constitute an additional basis for an exclusion under
section 1128(b)(1).
The wording of the implementing regulations at 42 C.F.R.
§ 1001.201(a), which separates the statutory language
into two distinct bases for exclusion (one involving
defrauding of private parties and the other involving
defrauding of government-funded programs) makes this
interpretation clear that either situation justifies
permissive exclusion under section 1128(b)(1) of the
Act. 2/
The legislative history of this provision also
establishes that Petitioner's interpretation is
incorrect. Section 1128(b)(1) was enacted by Congress as
part of the Medicare and Medicaid Patient and Program
Protection Act of 1987, Pub. L. 100-93 (the MMPPPA). By
enacting the MMPPPA, Congress authorized the Secretary to
exclude persons or entities who have already been
convicted of offenses relating to financial integrity,
"if the offenses occurred in delivering health care to
patients not covered by public programs." S. Rep. No.
109, 100th Cong., 1st Sess. 7; reprinted in 1987
U.S.C.C.A.N. 687 (emphasis added). This provision
therefore expanded the Secretary's authority beyond
section 1128(a)(1) to permit the exclusion of individuals
or entities convicted of criminal offenses which are not
related to Medicare or Medicaid or the other State health
care programs. In expanding the Secretary's authority,
"Congress reasoned that those who cheat private health
care payers cannot be trusted to deal honestly with
program beneficiaries and recipients." William D. Miles,
M.D., DAB CR354 (1995) at 3. See David E. Scheiner,
D.P.M., DAB CR471 (1997); Chander Kachoria, R.Ph., DAB
No. 1380 (1993).
Petitioner also contends that, even if section 1128(b)(1)
of the Act applies in his case, such section was not
enacted until August 21, 1996 and therefore cannot be a
basis for his exclusion because he pled guilty to the
offenses prior to August 21, 1996. Petitioner's brief at
7. Petitioner is mistaken. As stated above, section
1128(b)(1) of the Act was enacted by Congress as part of
the MMPPPA. The MMPPPA was enacted in 1987,
approximately eight years prior to Petitioner's agreement
to plead guilty. I conclude that the 1987 statute
covered the activities for which Petitioner was excluded
under section 1128(b)(1).
I further find that the ten-year exclusion that the I.G.
imposed against Petitioner is reasonable. The evidence
relating to the aggravating factors established by the
I.G. pursuant to 42 C.F.R. § 1001.201(b)(2) proves that
Petitioner is a highly untrustworthy individual.
Petitioner failed to establish the existence of any
mitigating factors described in 42 C.F.R.
§1001.201(b)(3). A ten-year exclusion will serve as a
reasonable protection for federally-funded health care
programs and the beneficiaries and recipients of those
programs in view of the unrebutted evidence of
Petitioner's lack of trustworthiness.
The I.G. proved the presence of three aggravating
factors, consisting of the following:
1) The acts resulting in Petitioner's conviction, or
similar acts, resulted in financial loss of $1,500 or
more to a government program or to one or more other
entities. 42 C.F. R. § 1001.201(b)(2)(i). Petitioner's
fraud caused very substantial losses to be incurred by
entities other than government programs. The financial
losses to non-government entities caused by Petitioner's
fraud approximated $272,000. I make this conclusion
based on Petitioner's sentence that he pay restitution
for his crimes in the amount of $272,000. I infer that
the amount of restitution is at least an approximation of
the damages that Petitioner caused by his fraud. I.G.
Ex. 4 at 4.
2) The acts that resulted in Petitioner's conviction, or
other similar acts, were committed by Petitioner over a
period of one year or more. 42 C.F.R. §
1001.201(b)(2)(ii). Petitioner perpetrated his crimes
from 1990 to the latter part of 1992. I.G. Ex. 1 at 15,
I.G. Ex. 4 at 1.
3) The sentence that was imposed upon Petitioner for his
crimes included a period of incarceration. 42 C.F.R. §
1001.201(b)(2)(iv). Petitioner was sentenced to 24
months' incarceration. I.G. Ex. 4 at 2.
The evidence which relates to the aggravating factors
established by the I.G. proves Petitioner is a highly
untrustworthy individual. Petitioner's lack of
trustworthiness is established by his ongoing involvement
in a massive scheme to defraud insurers. Petitioner's
protracted involvement in that scheme demonstrates that
he is capable of engaging in well-organized and complex
fraud. His fraud was persistent and deliberate, not
random or impulsive. The extent to which Petitioner
persisted in defrauding insurers is established by the
large losses he caused insurers to incur.
I find that Petitioner has not proved the existence of
any mitigating factors. Petitioner contends that, based
on the fact that his Plea Agreement (I.G. Ex. 2)
contained a provision requiring him to "cooperate fully
and truthfully with the government" by agreeing to
"provide truthful, complete and accurate information and
testimony," he has proved the existence of a mitigating
factor under 42 C.F.R § 1001.201(b)(3)(iii). I.G. Ex. 2
at 2. Petitioner points out that the applicable
sentencing guidelines specify that he be sentenced to a
term of incarceration in the range of 33 to 41 months.
He asserts that, as a result of his cooperation, he was
sentenced to incarceration for a period of only 24
months. Petitioner's brief at 8 - 9.
Whether Petitioner cooperated with the federal government
after his federal conviction does not, without more,
determine the existence of a mitigating factor. The
regulations governing the factors that may be considered
are clear. Petitioner has the burden of proving a
mitigating factor, which is in the nature of an
affirmative defense, under 42 C.F.R. § 1001.201
(b)(3)(iii). See Jose Ramon Castro, M.D., DAB CR259
(1993); James H. Holmes, M.D., DAB CR270 (1993); Joel
Fass, DAB CR349 (1994). His burden consists of proving:
(1) that he cooperated with officials; and (2) that his
cooperation resulted in the conviction, exclusion, or
imposition of a civil money penalty against another
individual or individuals. 42 C.F.R. § 1001.
201(b)(3)(iii).
Petitioner has failed to meet this burden. Even if the
evidence offered by Petitioner concerning his cooperation
with prosecuting authorities proves that he cooperated
with them and that they considered the information which
he supplied to be valuable, there is no evidence that
Petitioner's cooperation has led to the conviction or
exclusion of other individuals or the imposition of civil
money penalties against others. It was found in Tito B.
Trinidad, M.D., DAB CR468 (1997) that a petitioner failed
to meet this standard although he had proved that he in
fact cooperated with prosecuting authorities. In that
case, the petitioner's cooperation was the "principal
reason that the United States Attorney moved to have
Petitioner's sentence of incarceration set at a level
below that which is normally required for the crimes of
which Petitioner was convicted." Id. at 7. 3/ In the
absence of any evidence that others were convicted,
excluded or fined as a result of his cooperation,
however, the petitioner failed to prove the presence of a
mitigating factor. Bali S. Reddy, DAB CR394 (1995).
Petitioner in this case has not shown that his alleged
cooperation with Federal or State government officials
resulted in others being convicted or excluded from
Medicare or any of the State health care programs or in
the imposition of a civil money penalty. 42 C.F.R. §
1001.201.(b)(3)(iii).
CONCLUSION
I conclude that the I.G. was authorized to exclude
Petitioner, pursuant to section 1128(b)(1) of the Act. I
find that the ten-year exclusion is reasonable and I
sustain it.
Joseph K. Riotto
Administrative Law Judge
* * * Footnotes * * *
1. Congress amended section 1128 of the Act
in 1996. One of the amendments to section 1128 creates a
new section, section 1128(a)(3), which mandates a minimum
exclusion of at least five years for any felony
conviction for an offense formerly described by section
1128(b)(1). Section 1128(b)(1) is retained, but provides
permissive exclusion authority for misdemeanor
convictions only. The I.G. states in footnote 3 of her
reply brief that section 1128(a)(3) applies to offenses
which occur after the date of enactment of the 1996
amendment, and that the I.G. did not exclude Petitioner
under this new exclusion authority.
2. 42 C.F.R. § 1001.201 entitled "Conviction
relating to program or health care fraud" states in part:
(a) Circumstance for exclusion. The [I.G.] may
exclude an individual or entity convicted under Federal
or State law of a criminal offense relating to
fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct -
(1) In connection with the delivery of any
health care item or service, including the performance of
management or administrative services relating to
the delivery of such items or services, or
(2) With respect to any act or omission in a
program operated by, or financed in whole or in part by,
any Federal, State or local government agency.
3. The regulation at issue in Trinidad is 42
C.F.R. § 1001.102(c)(3). The language in that regulation
is virtually the same as the language in 42 C.F.R. §
1001.201(b)(3)(iii), the regulation at issue in this
case. I conclude that the reasoning in Trinidad applies
to this case.