Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Date: February 10, 1999

In the Case of:

,
Petitioner,

- v. -

The Inspector General.

Docket No. C-98-425
Decision No. CR575

DECISION

By letter dated June 30, 1998, the Inspector General (I.G.), U.S. Department of Health and Human Services (DHHS), notified the Petitioner, George P. Bahadue, D.O., that as a result of his failure to repay his Health Education Assistance Loan (HEAL) or to enter into an agreement to repay the debt, he would be excluded from participation in the Medicare, Medicaid, Maternal and Child Health Services Block Grant, and Block Grants to States for Social Services programs,(1) and from all federal health care programs, as defined in section 1128B(f) of the Social Security Act (Act), pursuant to sections 1128(b)(14) and 1892 of the Act. The I.G. also notified Petitioner that the exclusion would remain in effect until his debt had been satisfied completely.

Petitioner filed a request for review of the I.G.'s action. The I.G. moved for summary disposition. Petitioner also moved for summary disposition. Because I have determined that there are no material and relevant factual issues in dispute (the only matter to be decided is the legal significance of the undisputed facts), I have decided the case on the basis of the parties' written submissions in lieu of an in-person hearing.

Both parties submitted briefs in this matter.(2) The I.G. submitted 14 proposed exhibits, which are designated as I.G. Exhibits 1-14 (I.G. Ex. 1-14). Petitioner did not object to these exhibits and I accept into evidence I.G. Ex. 1-14.

Petitioner submitted numerous proposed exhibits, all of which were unmarked. Many of Petitioner's proposed exhibits are duplicates of documents which the I.G. submitted, and which I already have accepted into evidence. It is unnecessary to mark and accept these duplicate proposed exhibits into evidence. I have marked and designated all other documents Petitioner submitted as Petitioner Exhibits 1-21 (P. Ex. 1-21). The I.G. did not object to any of Petitioner's proposed exhibits. I accept P. Ex. 1-21 into evidence.

I grant the I.G.'s motion for summary disposition and I deny Petitioner's motion for summary disposition. I affirm the I.G.'s determination to exclude Petitioner from participation in the Medicare and Medicaid programs, and all other federal health care programs, pursuant to section 1128(b)(14) of the Act. I also conclude that the term of the exclusion imposed pursuant to section 1128(b)(14) is reasonable, based upon the I.G.'s representation that Petitioner will be able to apply for reinstatement to Medicare, Medicaid and federal health care programs in 2003,(3) if he cures the HEAL default or resolves the indebtedness to the satisfaction of the Public Health Service (PHS). I do not decide whether the I.G. properly excluded Petitioner under section 1892 of the Act.(4)

ISSUES

1. Whether the I.G. had a basis upon which to exclude Petitioner.

2. Whether the length of the exclusion imposed and directed against Petitioner by the I.G. is reasonable.

APPLICABLE LAW

Section 1128(b)(14) of the Act provides, in pertinent part, as follows:

(b) PERMISSIVE EXCLUSION.-The Secretary may exclude the following individuals and entities from participation in any program under title XVIII and may direct that the following individuals and entities be excluded from participation in any State health care program:

. . . .

(14) DEFAULT ON HEALTH EDUCATION LOAN OR SCHOLARSHIP OBLIGATIONS.-Any individual who the Secretary determines is in default on repayments of scholarship obligations or loans in connection with health professions education made or secured, in whole or in part, by the Secretary and with respect to whom the Secretary has taken all reasonable steps available to the Secretary to secure repayment of such obligations or loans . . . .

PETITIONER'S ARGUMENTS

In his Motion for Dismissal, Petitioner alleges that DHHS made no valid attempt to "work out" a repayment plan with Petitioner prior to his exclusion. In his Brief [In] Support of Motion (P. Br.), Petitioner alleges that he did not receive a letter demanding repayment of his HEAL loans from DHHS until June 30, 1998. Petitioner also asserts that he never refused to enter into a repayment agreement with DHHS. Petitioner further alleges that he has performed $100,000 of "free medical work" at a regional medical center, which should suffice as repayment for his HEAL loans.

Petitioner also argues that his rights under the United States Constitution have been violated. Specifically, Petitioner alleges that the I.G.'s determination to exclude him for a second time is tantamount to cruel and unusual punishment in violation of his Constitutional rights.(5)

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. On December 13, 1979, while studying osteopathic medicine, Petitioner applied for and received a HEAL loan for in the amount of $5000.00 and executed a promissory note in which he promised to repay the HEAL loan. I.G. Ex. 1, 2.

2. On March 2, 1981, Petitioner applied for and received a second HEAL loan in the amount of $10,000.00 and executed a promissory note in which he promised to repay the HEAL loan. I.G. Ex. 3, 4.

3. On April 21, 1981, Petitioner applied for and received a third HEAL loan in the amount of $10,000.00 and executed a promissory note in which he promised to repay the HEAL loan. I.G. Ex. 5, 6.

4. Under the terms each of the promissory notes, Petitioner agreed to repay each loan in periodic installments beginning the first day of the tenth month after he ceased to be a full-time student at a HEAL-recognized school or an intern or resident in an accredited program.

5. In promising to repay the HEAL loans, Petitioner agreed to repay his loans in not less than 10 years, or more than 23 years, and that he would make annual payments of at least the annual interest on the unpaid principal balances of the HEAL loans. I.G. Ex. 2, 4, 6.

6. In promising to repay the HEAL loans, Petitioner agreed that, in the event of his default, the entire unpaid loan including interest due and accrued would, at the option of the holder, become immediately due and payable. I.G. Ex. 2, 4, 6.

7. Petitioner failed to make any repayments on his HEAL loans, and, on September 7, 1994, the Circuit Court of the Thirteenth Judicial Circuit, State of Florida (Hillsborough County, General Civil Division) entered judgment in favor of the Student Loan Marketing Association (SLMA), against Petitioner for the amount of $68,320.41, including principal, interest, court costs, and attorneys' fees. I.G. Ex. 7.

8. On November 8, 1994, for consideration of $52,290.06 to satisfy its interest in Petitioner's debt, SLMA assigned its interest in the judgment against Petitioner to the United States. I.G. Ex. 8.

9. By letter dated January 31, 1996, the Debt Management Branch, Division of Fiscal Services, Health Resources and Services Administration (HRSA), DHHS, notified Petitioner that: 1) his HEAL loans had been assigned to the United States; 2) his HEAL loans had been consolidated using the lowest interest rate allowed by law; 3) he should remit the total amount due ($50,023.00) within 30 days of the date of the letter or request a repayment agreement; and, 4) he would be subject to numerous other actions should he fail to pay the total amount due or make repayment arrangements, including but not limited to, a referral to the I.G. for initiation of an exclusion from the Medicare program. I.G. Ex. 9.

10. Petitioner did not respond to HRSA's January 23, 1996 letter, nor did he cure his HEAL debt default or make arrangements to repay his loans.

11. On May 2, 1996, HRSA notified Petitioner that it had referred his account to a collection agency, and, should he fail to repay his HEAL loans in full or make repayment arrangements, his account would be referred to the United States Department of Justice (DOJ). I.G. Ex. 10.

12. Petitioner did not respond to HRSA's May 2, 1996 letter, nor did he repay any HEAL loans or make arrangements to repay his loans.

13. On February 26, 1997, HRSA notified Petitioner that his account remained seriously delinquent, and, unless he repaid his HEAL loans in full or make repayment arrangements, his account would be referred to other federal agencies for administrative offset under the Debt Collection Improvement Act of 1996. I.G. Ex. 11.

14. Petitioner did not respond to HRSA's February 26, 1997 letter, nor did he repay any HEAL loans or make arrangements to repay his loans.

15. On November 10, 1997, HRSA issued a final notice to Petitioner, advising him that should he fail to respond within 60 days of the date of the letter, his case would be referred to the I.G. for initiation of an exclusion from the Medicare program. I.G. Ex. 12.

16. Petitioner did not respond to HRSA's November 10, 1997 letter, nor did he repay any HEAL loans or make arrangements to repay his loans.

17. On June 30, 1998, the I.G. notified Petitioner that he was excluded from participation in the Medicare, Medicaid and all federal health care programs, pursuant to sections 1128(b)(14) and 1892 of the Act.

18. As of the date of this Decision, Petitioner is in default on his HEAL debt and has not entered into an agreement acceptable to HRSA to repay his HEAL debt. Findings 1-17; I.G. Ex. 7, 9, 10, 11, 12, 13.

19. Petitioner's HEAL debt is an indebtedness on loans in connection with health professions education, which have been secured by the Secretary. Findings 1-18; section 1128(b)(14) of the Act; 42 C.F.R. § 60.1(c).

20. The Secretary has taken all reasonable steps available to her to secure Petitioner's repayment of his HEAL debt. Findings 9, 11, 13, 15; section 1128(b)(14) of the Act.

21. The I.G. had authority to impose and direct an exclusion pursuant to section 1128(b)(14) of the Act. Findings 1-20.

22. An exclusion imposed pursuant to section 1128(b)(14) of the Act is reasonable if the excluded party is excluded until such time as PHS notifies the I.G. that Petitioner's default of his HEAL debt has been cured or that his HEAL debt has been resolved to PHS' satisfaction. 42 C.F.R. § 1001.1501(b).

23. The I.G. intended to impose an exclusion against Petitioner, pursuant to section 1128(b)(14) of the Act, until such time as Petitioner's default of his HEAL debt has been cured or that his HEAL debt has been resolved to PHS' satisfaction. I.G. Br. at 9; see 42 C.F.R. § 1001.1501(b).

24. The exclusion, which the I.G. imposed against Petitioner pursuant to section 1128(b)(14) of the Act, is reasonable. Findings 1-23.

DISCUSSION

Petitioner applied for and received three HEAL loans while he studied osteopathic medicine. I.G. Ex. 1-6. Subsequent to his graduation, Petitioner defaulted on his HEAL loans. The SLMA, as holder of Petitioner's promissory notes, unsuccessfully attempted to secure repayment from Petitioner. SLMA obtained a default judgment against Petitioner in September 1994. I.G. Ex. 7. In November 1994, SLMA assigned its interest in the judgment to the United States. I.G. Ex. 8. HRSA, on behalf of the United States, also unsuccessfully attempted to obtain repayment from Petitioner. I.G. Ex. 9-12.

There is no dispute in this case that Petitioner's HEAL debt arises from loans made "in connection with health professions education." Section 1128(b)(14) of Act. Nor does Petitioner dispute that he defaulted on repayment of his HEAL debt. Therefore, I must find that the I.G. had authority to exclude Petitioner under section 1128(b)(14) if I conclude that the Secretary "took all reasonable steps available" to secure Petitioner's repayment of his HEAL debt. The term "all reasonable steps" has been construed to mean all reasonable and legitimate means of debt collection. Cynthia M. Ramkelawan, D.D.S., DAB CR415 (1996).

Petitioner contends, however, that notwithstanding these undisputed material facts, the I.G. is without authority to exclude him under section 1128(b)(14) of the Act. First, he asserts that the I.G. has failed to show that all reasonable efforts were made to collect Petitioner's debts prior to excluding him. P. Br. at 1-2. Second, he asserts that he has provided $100,000 in medical services to persons who could not pay for such services. Id. at 3. Finally, he asserts that the I.G. cannot exclude him twice as her actions would violate his Constitutional rights. Id.

The record in this case is replete with examples of the efforts that entities, acting on the Secretary's behalf, made to obtain Petitioner's repayment of his HEAL debt. These efforts included sending several notices to Petitioner's home address over a period of nearly two years, from January 1996 until November 1997, asking him either to cure his HEAL debt default or make repayment arrangements. I.G. Ex. 9-12. In the notices, Petitioner was informed that should he fail to cure his HEAL debt default or make repayment arrangements, other actions would be taken, including: referral of his account to a private collection agency; referral of his account to other federal agencies for administrative offset under the Debt Collection Improvement Act of 1996; and referral to the I.G. for initiation of exclusion proceedings. When all collection efforts failed, the Secretary referred Petitioner's case to the DOJ for commencement of a lawsuit against Petitioner in federal court, and to the I.G. for the initiation of an exclusion from the Medicare program. I.G. Ex. 12, 13. Petitioner never responded to these notices.

Petitioner contends that he did not receive any notices from DHHS regarding his HEAL loans prior to June 1998. Therefore, in Petitioner's view, the Secretary did not take "all reasonable steps" to collect repayment of his HEAL debt prior to his exclusion. In this case, HRSA mailed notices by regular mail to the home address Petitioner provided. Petitioner has not asserted that HRSA mailed those notices to an incorrect address. In Charles K. Angelo, Jr., M.D., DAB CR290 (1993), the petitioner alleged that he had not received an offset offer by mail from PHS. As I stated in that case:

. . . the paramount purpose of section 1128(b)(14) is to provide the Secretary with a tool by which to collect a debt once voluntary persuasion has failed. It would frustrate the purpose of the Act and jeopardize the integrity of Federally funded programs if clever or lucky debtors were able to avoid their federal obligations. Yet that is precisely the result that would occur were I to construe the Act or regulations to require actual service on debtors

. . . .

Angelo, DAB CR290 (1993), at 14. The circumstances in this case are not identical to those which I addressed in Angelo, but they are analogous. I cannot construe the Act or regulations to require actual service on Petitioner. Once the Secretary (or her delegates) sends a notice (or notices) through regular mail to Petitioner's last known address, then the Secretary will be deemed to have taken "all reasonable steps" to collect the outstanding debt. Finally, I note that the I.G. mailed the exclusion notice, of which Petitioner acknowledged receipt, to the same home address that HRSA used for sending its letters to Petitioner.

Petitioner also contends that he provided free medical services (presumably to Medicare and/or Medicaid eligible persons), ostensibly to show that he has either offset his HEAL debt by providing such services or that he has made a constructive offer to repay his HEAL debt. Petitioner (aside from his own assertions) has made no showing that he proposed an offset arrangement to the Secretary or proposed any other written repayment arrangement. Even assuming, arguendo, that Petitioner had made an offer to enter into a reimbursement offset agreement involving his medical services, the Secretary would not be required to accept such an arrangement as a prerequisite to imposing an exclusion. 42 C.F.R. § 1001.1501(a); see James F. Cleary, D.D.S., DAB CR252 (1993), at 12-13. Petitioner also has failed to show that those services would have been reimbursable under Medicare and Medicaid, and therefore, eligible for offset against his HEAL debt. Finally, Petitioner would have been ineligible for such an arrangement, due to his 1993 exclusion by the I.G.(6)

Petitioner also argues that to exclude him from the Medicare and Medicaid programs would violate his Constitutional protection from cruel and unusual punishment, as the I.G. excluded him previously.(7) An administrative law judge, however, has no authority to rule upon the constitutionality of the I.G.'s actions. Moreover, the DAB and federal courts have found that exclusions imposed under section 1128 of the Act are remedial in nature, rather than punitive. See, e.g., Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); John Strausbaugh, R.Ph., DAB CR186 (1992), at 8.

In her notice of exclusion, the I.G. advised Petitioner that he would be excluded under both sections 1128(b)(14) and 1892 of the Act, until his HEAL debt had been completely satisfied. However, the I.G. now avers that the intent is that the exclusion imposed under section 1128(b)(14) of the Act be effective until PHS notifies the I.G. that Petitioner's default has been cured or his debt has been resolved to PHS' satisfaction. I.G. Br. at 9.

The I.G.'s clarification of the term of Petitioner's exclusion is consistent with the requirements of 42 C.F.R. § 1001.1501(b). Therefore, I find that the exclusion which the I.G. imposed under section 1128(b)(14) is reasonable, and I sustain it. Furthermore, the exclusion is reasonable on its face because Petitioner is able to negotiate an agreement with PHS to repay his HEAL debt.

CONCLUSION

I conclude that the I.G. had the authority to exclude Petitioner from participating in Medicare, Medicaid and all other federal health care programs, pursuant to section 1128(b)(14) of the Act. I conclude further that the exclusion, which the I.G. imposed pursuant to section 1128(b)(14) of the Act is reasonable. I make no findings or conclusions as to whether the I.G. had the authority to exclude Petitioner pursuant to section 1892 of the Act or whether the exclusion which the I.G. imposed pursuant to section 1892 is reasonable.

Steven T. Kessel
Administrative Law Judge


1. In this decision, I use the term "Medicaid" to refer to all State health care programs from which Petitioner was excluded.

2. The I.G.'s Brief in Support of Motion for Summary Disposition is referred to herein as (I.G. Br.).

3. The I.G. excluded Petitioner for 10 years in 1993, pursuant to section 1128(a)(1) of the Act, based on his conviction, in the United States District Court, Southern District of Florida, of a criminal offense related to Medicare. P. Ex. 1 at 1. Therefore, he cannot apply for reinstatement to the Medicare and Medicaid programs until 2003. P. Ex. 1; I.G. Br. at 6, n.2.

4. I do not address Petitioner's exclusion under section 1892 of the Act, because it is not clear that I have the authority to review an exclusion imposed pursuant to section 1892 of the Act. See James F. Cleary, D.D.S., DAB CR252 (1993); Charles K. Angelo, Jr., M.D., DAB CR290 (1993); and Joseph Marcel-Saint Louis, M.D., DAB CR320 (1994).

5. See footnote 3, supra.

6. Under the terms of the exclusion the I.G. imposed in 1993, Petitioner may not bill the Medicare or Medicaid programs for his services.

7. See, n.3, supra.