DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board
Civil Remedies Division
In the Case of:
Elias Goldstein, D.C.,
Petitioner,
- v.-
The Inspector General.
DATE: November 28, 1989
Docket No: C-104
DECISION OF ADMINISTRATIVE LAW JUDGE
On December 14, 1988, the Inspector General (the I.G.) notified Petitioner
that he was being excluded
from participation in the Medicare program and State health care programs for
five years. The I.G. told
Petitioner that he was being excluded as a result of his conviction in a Florida
court of a criminal offense
related to fraud, theft, embezzlement, breach of fiduciary responsibility, or
other financial misconduct.
Petitioner was advised that exclusion from participation in Medicare and Medicaid
of individuals or entities
convicted of such an offense is permitted by section 1128(b)(1) of the Social
Security Act. The I.G. stated
that the five-year exclusion imposed and directed against Petitioner was based
on factors which included:
(1) the length of the period of time during which the criminal acts resulting
in Petitioner's conviction
occurred; (2) the amount of the financial damage resulting from Petitioner's
criminal activity; and (3) the
fact that the sentence resulting from Petitioner's conviction included incarceration.
Petitioner requested a hearing, and the case was assigned to me for a hearing
and a decision. I held a
hearing in Ft. Lauderdale, Florida, on August 8, 1989. Based on the evidence
introduced at the hearing,
and on applicable law, I conclude that there exists a basis in law and fact
to impose and direct a substantial
exclusion against Petitioner. However, given the presence of mitigating evidence,
the five-year exclusion
imposed and directed against Petitioner by the I.G. is excessive. A three-year
exclusion will satisfy the
remedial purpose of the exclusion law. Therefore, I am modifying the exclusion
imposed and directed
against Petitioner to a period of three years.
ISSUE
The issue in this case is whether the exclusion imposed and directed against
Petitioner by the I.G. is
reasonable.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Petitioner is a licensed chiropractor in the State of Florida. Tr. at 128.
2. Petitioner was charged with criminal offenses in the State of Florida. I.G.
Ex. 3.
3. On May 27, 1988, Petitioner was convicted on five counts of the criminal
information filed against him.
I.G. Ex. 4.
4. In Count Two, Petitioner was convicted of grand theft from Metropolitan
Life Insurance Company.
I.G. Ex. 3/2; 4/1.
5. This theft began on or about September 1, 1982, and ended on or about November
30, 1982, and the
amount stolen by Petitioner was $100.00 or more. I.G. Ex. 3/2; 4/1.
6. In Count Three, Petitioner was convicted of grand theft from United States
Fidelity and Guaranty
Company. I.G. Ex. 3/3; 4/1.
7. This theft began on or about September 1, 1983, and ended on or about May
31, 1984, and the amount
stolen by Petitioner was $100.00 or more. I.G. Ex. 3/3; 4/1.
8. In Count Four, Petitioner was convicted of an additional count of grand
theft from United States
Fidelity and Guaranty Company. I.G. Ex. 3/3; 4/1.
9. This theft began on or about November 1, 1983, and ended on or about December
31, 1983, and the
amount stolen by Petitioner was $100.00 or more. I.G. Ex. 3/3; 4/1.
10. In Count Fifteen Petitioner was convicted of criminal fraud of Travelers
Insurance Company. I.G. Ex.
3/9; 4/1.
11. This fraud involved Petitioner's filing of a false insurance claim on a
policy that had been issued by
Travelers Insurance Company to Arthur Williams. I.G. Ex. 3/9; 4/1.
12. This fraud began on or about April 1, 1985, and ended on or about August
31, 1985. I.G. Ex. 3/9; 4/1.
13. In Count Sixteen, Petitioner was convicted of an additional count of criminal
fraud of Travelers
Insurance Company. I.G. Ex. 3/9; 4/1.
14. This fraud involved Petitioner's filing of a false insurance claim on a
policy that had been issued by
Travelers Insurance Company to David Friedland. I.G. Ex. 3/9; 4/1.
15. This fraud began on or about April 1, 1985, and ended on or about August 31, 1985. I.G. Ex. 3/9; 4/1.
16. Petitioner was convicted under Florida law of criminal offenses relating
to theft and fraud in
connection with the delivery of a health care item or service. Findings 3-15.
17. On June 6, 1988, Petitioner was sentenced to serve three years' probation
on each count of his
conviction, the terms of probation to run concurrently. I.G. Ex. 5.
18. Additionally, Petitioner was sentenced to 90 days' incarceration. I.G. Ex. 5.
19. Petitioner was also sentenced to pay restitution in the amount of $2,130.00
to the Florida Department
of Insurance Fraud. I.G. Ex. 5.
20. The criminal offenses for which Petitioner was convicted are criminal offenses
as described in section
1128(b)(1) of the Social Security Act. Social Security Act, section 1128(b)(1).
21. The Secretary of the Department of Health and Human Services (the Secretary)
had authority to
impose and direct an exclusion against Petitioner from participating in Medicare
and Medicaid, pursuant to
section 1128(b)(1) of the Social Security Act. Social Security Act, section
1128(b)(1).
22. The Secretary delegated to the I.G. the duty to impose and direct exclusions
pursuant to section 1128
of the Social Security Act. 48 Fed. Reg. 21662 (May 13, 1983).
23. On December 14, 1988, the I.G. notified Petitioner that he was being excluded
from participation in
the Medicare and Medicaid programs as a result of his conviction of a criminal
offense related to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other financial
misconduct within the meaning
of section 1128(b)(1) of the Social Security Act.
24. Petitioner was told that he was being excluded from participation in Medicare
and Medicaid for a
period of five years.
25. Petitioner was further advised that the length of his exclusion was, in
part, based on the following
circumstances: (1) the criminal acts that resulted in Petitioner's conviction
were committed over a period
exceeding one year; (2) financial damage resulting from Petitioner's criminal
activity exceeded $1,500.00;
and (3) the sentence resulting from Petitioner's conviction included a period
of incarceration.
26. The exclusion provisions of section 1128 of the Social Security Act establish
neither minimum nor
maximum exclusion terms in circumstances where the I.G. has discretion to impose
and direct exclusions.
Social Security Act, section 1128(b)(1)-(14).
27. The Social Security Act mandates a five-year exclusion from participation
in the Medicare and
Medicaid programs for an individual convicted of a criminal offense related
to the delivery of an item or
service under the Medicare or Medicaid programs. Social Security Act, sections
1128(a)(1), (c)(3)(B).
28. The crimes committed by Petitioner are distinguishable from offenses mandating
five-year exclusions
by the fact that they were perpetrated against private health care insurers,
rather than against the Medicare
and Medicaid programs. Findings 3-16; Social Security Act, sections 1128(a)(1),
(b)(1).
29. A remedial objective of section 1128 of the Social Security Act is to protect
program beneficiaries and
recipients and program funds by mandating or permitting the Secretary to disqualify
or to direct
disqualification from participation in Medicare and Medicaid of those individuals
and entities who
demonstrate by their conduct that they cannot be trusted to administer program
funds. Social Security Act,
section 1128.
30. An additional remedial objective of section 1128 of the Social Security
Act is to deter individuals and
entities from engaging in conduct which jeopardizes the integrity of federally-funded
health care programs.
Social Security Act, section 1128.
31. The offenses of which Petitioner was convicted are serious criminal offenses,
which resulted in his
incarceration. Findings 16-17.
32. Petitioner perpetrated the conduct which resulted in his conviction over
a period of more than one
year, a lengthy period of time. Findings 4-15.
33. The amount of money stolen by Petitioner was substantial. Finding 19.
34. Given the seriousness of Petitioner's criminal acts, an exclusion is appropriate
in this case. Findings 4-
15; 32-34; Social Security Act, section 1128.
35. The investigation which led to Petitioner's convictions began in 1986. Tr. at 134-135.
36. Since the inception of the investigation of Petitioner, there have been
no additional complaints
concerning his billing practices. Tr. at 139.
37. Petitioner's claims for reimbursement have been audited by private insurers
since 1986. Tr. at 136-
137.
38. There have been no findings by private insurers that Petitioner has engaged
in fraudulent practices
concerning his reimbursement claims since 1986. Tr. at 139.
39. Petitioner's billing activity since 1986 serves to mitigate the need for
a lengthy exclusion in this case.
Findings 36-39; see 42 C.F.R. 1001.125(b)(6).
40. In light of the mitigating factors that are present in this case, a five-year
exclusion of Petitioner is
excessive. Findings 31-39; Social Security Act, section 1128.
ANALYSIS
There is no dispute in this case that Petitioner was convicted of criminal
offenses relating to theft and fraud
in connection with the delivery of health care items or services. Therefore,
the I.G. has authority, pursuant
to section 1128(b)(1) of the Social Security Act, to impose and direct an exclusion
against Petitioner from
participating in the Medicare and Medicaid programs. The only contested issue
is the reasonableness of
the length of the exclusion -- five years -- that the I.G. determined to impose
and direct against Petitioner.
In order to decide whether the I.G.'s exclusion determination is reasonable
in a particular case, I must judge
that determination in light of the evidence presented and the intent of the
exclusion law. The purpose of
the hearing is not to determine how accurately the I.G. applied the law to the
facts before him, but whether,
based on all relevant evidence, the exclusion comports with the legislative
purpose. The hearing is, by law,
de novo. Social Security Act, section 205(b). In a hearing on an exclusion,
evidence which is relevant to
the reasonableness of the exclusion will be admitted and considered, even if
that evidence was not
available to the I.G. at the time the exclusions were imposed and directed.
An exclusion will be held to be reasonable where, given the evidence of the
case, it is shown to fairly
comport with legislative intent. "The word 'reasonable' conveys the meaning
that . . . [the I.G.] is required
at the hearing only to show that the length of the . . . [exclusion] determined
. . . was not extreme or
excessive." (Emphasis added). 48 Fed. Reg. 3744 (Jan. 27, 1983). However,
should I determine, based
on the law and the evidence, that an exclusion is not reason-able, I have the
authority to modify the
exclusion. Social Security Act, section 205(b).
The I.G. excluded Petitioner from participating in Medicare and directed that
he be excluded from
participating in Medicaid pursuant to section 1128(b)(1) of the Social Security
Act. Section 1128(b)(1)
gives the Secretary the discretion to impose and direct exclusions against individuals
convicted of crimes,
including theft and fraud, in connection with the delivery of a health care
item or service. This section
does not prescribe the minimum or maximum length of the exclusion that may be
imposed.
Congress intended the exclusion law to be remedial in application. The law
was intended to protect trust
funds from the misconduct of larcenous individuals and entities. The exclusion
law also embodied
Congress' conclusion that the Secretary had a duty to protect program beneficiaries
from individuals or
entities whose conduct demonstrated that they posed a threat to beneficiaries'
and recipients' well-being.
This policy was evident in Congress' original enactment of the exclusion law
in 1977. Successive revisions
of the law have continued to express legislative purpose in progressively stronger
terms.
There are two ways that exclusions imposed and directed pursuant to this law
advance the law's remedial
purpose. First, the law insulates federally funded health care programs from
untrustworthy providers until
such time as they demonstrate that they can again be trusted to deal with trust
fund monies, beneficiaries
and recipients. Second, exclusions serve as examples to deter individuals and
entities from engaging in
unlawful conduct which jeopardizes the integrity of federally funded health
care programs. See House
Rep. No. 95-393, Part II, 95th Cong., 1st Sess., reprinted in 1977 U.S. Code
Cong. & Admin. News, 3072.
The remedial objective of deterrence may only be satisfied in a particular
case by excluding an individual
for a period of time, even where the evidence establishes that that person no
longer poses a serious threat to
the integrity of federally funded health care programs. On the other hand, exclusions
fashioned solely to
achieve the objective of deterrence may, given the evidence in a particular
case, be punitive. Therefore,
judging the reasonableness of an exclusion requires a balancing of the remedial
considerations in light of
the evidence.
Aside from this legislative policy, there is no statutory formula to calculate
exclusions in cases involving
permissive exclusions. The I.G. argues that the felonies for which Petitioner
was convicted are, but for the
fact that they were perpetrated against private health care insurers, indistinguishable
from offenses which
would mandate a minimum five-year exclusion pursuant to section 1128(a)(1) of
the Social Security Act.
Therefore, according to the I.G., the same policy considerations should apply
to this case and a five-year
exclusion of Petitioner is reasonable. I.G.'s Brief at 6.
The I.G. correctly notes that the only distinction between the offenses of
which Petitioner was convicted
and those for which an exclusion of at least five years is mandated is that
in Petitioner's case, the offenses
were perpetrated against private insurers and in those cases in which exclusion
is mandated, the offenses
must be perpetrated against either Medicare or Medicaid. However, this is a
meaningful distinction.
Congress elected to require that individuals or entities convicted of offenses
against Medicare or Medicaid
be excluded for a minimum period. It did not enact this requirement for individuals
or entities convicted of
offenses directed against private health insurers. By not mandating exclusions
of parties convicted of the
latter class of offenses, Congress intended that the Secretary weigh all relevant
remedial considerations on
a case-by-case basis. Therefore, the five-year exclusion imposed against Petitioner
in this case cannot be
justified by simply equating Petitioner's offenses with the kinds of offenses
for which exclusions of at least
five years are mandated.
That is not to suggest that there is no benefit to comparing the facts of this
case with circumstances which
mandate exclusions. Congress made evident its concern that certain conduct posed
a serious threat to the
integrity of federally financed health care programs. The similarities between
the offenses for which
Petitioner was convicted with those for which exclusion is mandated suggest
that this case is a case where a
legitimate basis exists to impose and direct a significant exclusion.
The Secretary has adopted regulations to be applied in exclusion cases. The
regulations specifically apply
only to exclusions for "program-related" offenses (convictions for
criminal offenses related to Medicare
and Medicaid). However, they do express the Secretary's policy for evaluating
cases where permissive
exclusions may be appropriate. Thus, the regulations are instructive as broad
guidelines for determining
the appropriate length of exclusions in cases where the Secretary has authority
to exclude individuals and
entities. In determining the exclusion to be imposed, the regulations require
the I.G. to consider factors
related to the seriousness and program impact of the offense and to balance
those factors against any
mitigating factors that may exist. 42 C.F.R. 1001.125(b)(1)-(7).
The evidence in this case establishes that Petitioner was convicted of five
felony offenses involving theft or
fraud against private health care insurers. These are serious criminal offenses,
and their seriousness is in
some respects underscored by the facts that the offenses were committed over
a relatively lengthy period of
time, involved a substantial amount of money, and that the sentence imposed
on Petitioner included a
period of incarceration. See 42 C.F.R. 1001.125(b)(1),(3),(5), and (6). I conclude
from this evidence, as
well as from the similarity between offenses committed by Petitioner and offenses
which mandate
exclusion, that a significant exclusion is merited in this case. An exclusion
will serve to protect the
integrity of federally funded health care programs by deterring other providers
of services from engaging
in the criminal conduct for which Petitioner was convicted.
However, there also exists evidence in this case which establishes that a five
year exclusion is not
necessary to achieve the exclusion law's remedial objectives. The evidence establishes
that, since 1986,
when Petitioner first became the subject of an investigation, he has rendered
thousands of services under
the intensive scrutiny of health care insurers without evidence of additional
unlawful conduct. The absence
of dishonest conduct by Petitioner shows that: (1) he has learned that unlawful
conduct will not be tolerated
and (2) there exists little danger that Petitioner is now likely to engage in
theft or fraud against Medicare or
Medicaid. Thus, while a five-year exclusion would certainly serve the purposes
of deterrence, its effect on
Petitioner would be punitive, given his record beginning in 1986 as an honest
provider of services.
The I.G. objects to my considering any evidence generated after the investigation
which led to Petitioner's
conviction. According to the I.G., "(A)ctions taken subsequent to the investigation,
such as steps taken to
increase . . . [Petitioner's] record-keeping system, are likely products of
the investigation rather than of
voluntary remorse and, consequently, are not mitigating." I.G.'s Reply
Brief at 6. The I.G. cites as support
for this contention Social Security Administration Appeals Council decision
in an exclusion case, In the
Case of Jaimie Blasquez, M.D., Case No. 000-97-0016 (1986).
I disagree with the I.G.'s contention. As is noted supra, an administrative
hearing in an exclusion case is a
de novo hearing. Social Security Act, section 205(b). The purpose of the hearing
is to test the
reasonableness of the exclusion, and not the accuracy of the I.G.'s exclusion
determination. If I accepted
the I.G.'s analysis, then the hearing would essentially become an appellate
review of the I.G.'s
determination. This circumscribed review would deny the Petitioner the rights
given to him by section
205(b) of the Social Security Act.
Furthermore, the Blasquez decision does not support the I.G.'s argument. The
Blasquez case involved an
exclusion imposed for a program-related crime pursuant to the statute which
predated the current exclusion
law. The administrative law judge who heard that case identified a number of
mitigating factors which in
his opinion established that the exclusion imposed against the petitioner in
Blasquez was unreasonable.
These included: the need for petitioner's services, the unsophisticated nature
of petitioner's office
operation, the "hard time" petitioner served in prison, the personal
trauma petitioner experienced in selling
his residence in order to make restitution for his crimes, petitioner's participation
in community service,
and the nature of petitioner's violations, and his age.
The Appeals Council analyzed each of the factors identified by the administrative
law judge and concluded
that these factors neither singly nor collectively established that the exclusion
imposed on petitioner was
unreasonable. It did not hold that it was improper for the administrative law
judge to have considered
evidence as to these factors. Indeed, the Appeals Council in Blasquez reaffirmed
that a hearing in an
exclusion case is de novo, stating that "(U)nder the regulations, the hearing
before an administrative law
judge is a de novo proceeding so that he must consider the question of the length
of the period of . . .
[exclusion] under the criteria of the regulations . . . as if it had not been
previously considered." Blasquez
at 4.
In deciding that the administrative law judge's decision as to the reasonableness
of the exclusion was not
supported by the record, the Appeals Council in Blasquez observed that "(M)itigating
factors basically
entail those considerations or conditions which occur prior to a criminal investigation
such as a
practitioner's mental health, advanced age, or a catastrophic situation within
his immediate family requiring
great financial sacrifice." Blasquez at 6. It is apparent from the context
of this observation that, in
discussing "mitigating factors," the Appeals Council was referring
to evidence which explains a petitioner's
motivation for committing a crime. This evidence is relevant in an exclusion
case, because a petitioner's
motivation will shed light on the likelihood that he will repeat the offenses
of which he was convicted.
Logically, evidence as to motivation will consist of evidence arising prior
to the date that an investigation
into a petitioner's conduct is initiated.
However, evidence as to a petitioner's motivation is only a part of the spectrum
of evidence which can
potentially be considered on the issue of trustworthiness. The evidence which
I admitted concerning
Petitioner's post-investigation billing practices is relevant because it relates
to Petitioner's propensity to
repeat the crimes of which he was convicted. That evidence is not made irrelevant
by virtue of the fact that
it was generated after the date Petitioner became aware that he was under investigation.
I conclude that in this case the remedial objectives of the exclusion law would
best be served by a three-
year exclusion. An exclusion of three years will function as an effective deterrent.
The imposition of a
three-year exclusion also takes into consideration evidence which establishes
that Petitioner is unlikely to
repeat his unlawful conduct.
CONCLUSION
Based on the evidence of this case and the law, I conclude that the I.G. had
authority to exclude Petitioner
from participating in Medicare and to direct that Petitioner be excluded from
participating in Medicaid. I
conclude further, that based on the evidence of this case, a substantial exclusion
is justified. However, I
conclude that the five-year exclusion imposed and directed by the I.G. is excessive.
The remedial purpose
of the exclusion law will be served by a three-year exclusion. Therefore, pursuant
to section 205(b) of the
Social Security Act, I modify the exclusion imposed and directed against Petitioner
to a term of three years.
The terms and conditions of the notice to Petitioner from the I.G., dated December
14, 1988, otherwise
remain in full force and effect.
_________________________
Steven T. Kessel
Administrative Law Judge