Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
DATE: September 12, 1990
Docket No. C-131
In the Case of:
Tommy N. Troxell, M.S.,
Petitioner,
- v. -
The Inspector General.
DECISION
By letter dated April 21, 1989 (Notice), the Inspector General (I.G.) notified
Petitioner that he would be
excluded from participation in the Medicare program and federally-financed State
health care programs for
a period of ten years. Petitioner was advised that his exclusion resulted from
his conviction of a criminal
offense related to fraud, theft, embezzlement, breach of fiduciary responsibility,
or other financial
misconduct. Petitioner was further advised that exclusion from participation
in the Medicare and Medicaid
programs of individuals convicted of such offenses is permitted by section 1128(b)(1)
of the Social
Security Act (Act).
Petitioner requested a hearing before an Administrative Law Judge (ALJ) and
the case was assigned to me
for a hearing and a decision. I conducted a hearing in Arlington, Washington,
on April 11, 1990. Based
on the evidence in the record, the undisputed material facts, and the applicable
law and regulations, I
conclude that there exists a basis in law and fact to impose and direct an exclusion
against Petitioner and I
conclude that a ten-year period of exclusion against Petitioner is appropriate.
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section ll28 of the Social Security Act is codified at 42 U.S.C. l320a-7 (West U.S.C.A., l989 Supp.).
II. The Federal Regulations.
The governing federal regulations are codified in 42 C.F.R., Parts 498, l00l,
and l002 (l989). Part 498
governs the procedural aspects of this exclusion case; Parts l00l and l002 govern
the substantive aspects.
ADMISSIONS
During the prehearing conference of October 4, 1989, Petitioner admitted that
he was "convicted" of a
criminal offense within the meaning of section 1128(i) of the Act.
During the hearing on April 11, 1990, Petitioner again admitted that he was
convicted. He also admitted
that the conviction was related to the language in section 1128(b)(1) of the
Act. Tr. 9. Petitioner stated:
. . . I know that the realities are that the money I took I learned later
was Medicare/Medicaid funds
. . . I knew it was federal monies but I was unaware that it was Medicaid/Medicare
funds.
ISSUE
The remaining issue in this case is:
Whether the length of the exclusion imposed and directed against Petitioner
by the I.G. is reasonable and
appropriate.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. During the time period relevant to this case, Petitioner was employed, on
a part-time basis, as a
case worker for the State of Washington, Department of Social and Health Services
(DSHS). Tr. 49; I.G.
Ex. 1.
2. During the time period relevant to this case, Petitioner also operated Madrona
Counseling
Services (Madrona), an independent counseling service. I.G. Ex. 1.
3. The Community Options Programs Entry System (COPES) is a part of the State
of Washington's
Medicaid program. COPES began in 1983 for the purpose of preventing unnecessary
institutionalization
of Medicaid recipients. I.G. Ex. 2; Tr. 50-53.
4. Providers contract with DSHS to provide services to the Medicaid recipients
serviced through
COPES. I.G. Ex. 2.
5. Providers complete monthly invoice forms attesting to the amount of time
worked. Based upon
their submissions, providers are paid an hourly rate by DSHS in the form of
a state warrant. I.G. Ex. 2.
6. Through his employment as a caseworker with DSHS, Petitioner had access
to DSHS forms,
computerized social service payment system, computer printouts, and files on
individuals eligible for
receipt of COPES services. I.G. Ex. 2; Tr. 54-56.
7. Madrona never had a contract to provide counseling services which were billable
to DSHS. I.G.
Ex. 1; Tr. 54.
8. On March 8, 1988, the Attorney General of the State of Washington filed
an amended information
in the Superior Court for the County of Skagit, charging Petitioner with: (1)
two counts of Medicaid false
statements; (2) one count of first degree theft; and (3) one count of computer
trespass. I.G. Ex. 3.
9. Counts One and Two charged that Petitioner, in connection with applications
for payment,
knowingly made false statements or representations of material fact in a claim
for payment for services
allegedly rendered by Madrona to Medicaid recipients. I.G. Ex. 3.
10. Count One encompassed 33 separate and distinct criminal acts of knowingly
filing false claims
over the 22-month period from December 1985 to October 1987. I.G. Ex. 3.
11. Count Two encompassed two separate and distinct criminal acts of knowingly
filing false claims
over an eight-month period in 1987. I.G. Ex. 3.
12. Count Three, first degree theft, charged that Petitioner obtained control
over $161,391.16
belonging to the State of Washington through the submission of false invoices,
as stated above, and
DSHS's payment to Madrona, based upon the invoices. I.G. Ex. 3 and 4.
13. Count Four, computer trespass, charged that Petitioner, without authorization
and with intent to
commit a crime, intentionally gained access, instructed, and communicated with
the computer system and
data base of DSHS's Social Service Payment System (SSPS). I.G. Ex. 3.
14. On March 8, 1988, Petitioner pled guilty to the four counts enumerated above. I.G. Ex. 5.
15. Petitioner was convicted of criminal offenses "relating to fraud,
theft, embezzlement, and breach
of fiduciary responsibility or other financial misconduct," within the
meaning of section 1128(b)(1) of the
Act. FFCL 8-14.
16. On June 10, 1988, Petitioner was: (1) sentenced to 36 months of incarceration
for each of the four
counts, the terms of incarceration to run concurrently; and (2) ordered to make
restitution to DSHS in the
amount of $161,391.16. I.G. Ex. 7.
17. Petitioner's sentence was affirmed on appeal to the Court of Appeals for
the State of Washington.
I.G. Ex. 22.
18. Pursuant to section 1128(b)(1) of the Act, the Secretary of the Department
of Health and Human
Services (Secretary) has authority to impose and direct exclusions against Petitioner
from participation in
the Medicare and Medicaid programs.
19. The Secretary has delegated to the I.G. the duty to impose and direct exclusions
pursuant to
section 1128 of the Act. 48 Fed. Reg. 21662 (May 13, 1983).
20. The exclusion provisions of section 1128 of the Act do not establish a
minimum or maximum
period of exclusion to be imposed and directed in cases where the I.G. has discretion
to impose and direct
exclusions. Act, section 1128(b)(1)-(14).
21. The major purposes of the exclusion law (section 1128 of the Act) are to:
(1) protect Medicare
beneficiaries and Medicaid recipients from incompetent practitioners and inappropriate
or inadequate care;
(2) protect the Medicare and Medicaid programs from fraud and abuse; and (3)
deter individuals from
engaging in conduct which is detrimental to the Medicare and Medicaid programs
and to the respective
beneficiaries and recipients of those programs.
22. The trustworthiness of a Petitioner is a consideration in determining an
appropriate period of
exclusion.
23. In addition to indicia of trustworthiness, the length of Petitioner's exclusion
is to be determined by
reviewing: (1) the number and nature of the offenses; (2) the nature and extent
of any adverse impact the
violations have had on beneficiaries; (3) the amount of damages incurred by
the Medicare, Medicaid, or
social services programs; (4) the existence of mitigating circumstances; (5)
the length of sentence imposed
by the court; (6) any other factors bearing on the nature and seriousness of
the violations; and (7) the
previous sanction record of Petitioner. 42 C.F.R. 1001.125(b)(1)-(7).
24. The fact that the criminal acts forming the basis for Petitioner's convictions
were committed over
a period of time in excess of one year is an aggravating factor and was considered
in my determination of
an appropriate length of exclusion. FFCL 10-11.
25. The fact that Petitioner's criminal conviction was based upon four counts
(that included over 400
false claims of services rendered) is an aggravating factor and was considered
in my determination of an
appropriate length of exclusion. I.G. Ex. 4; FFCL 10-13.
26. The fact the Petitioner was ordered to pay $161,391.16 in restitution is
an aggravating factor and
was considered in my determination of an appropriate length of exclusion. FFCL
16.
27. The fact that Petitioner was sentenced to 36 months of incarceration for
each of the four counts, to
run concurrently, is an aggravating factor and was considered in my determination
of an appropriate length
of exclusion. FFCL 16.
28. The fact that Petitioner's convictions were based upon his theft from a
program designed to
address the needs of elderly Medicaid recipients is an aggravating factor which
I have considered in
determining an appropriate length of exclusion. FFCL 3, 9-13.
29. The fact that Petitioner chose to steal from a program which possessed
more funds than other
programs in the State of Washington is not a mitigating factor. Tr. 61.
30. The fact that Petitioner may be eligible for work release and may not be
incarcerated for the entire
36 months is a mitigating factor. Tr. 101.
31. The fact that Petitioner does not have a prior record of criminal convictions
is a neutral factor.
I.G. Ex. 4.
32. The fact that Petitioner cooperated with the Medicaid Fraud Control Unit
investigators after
pleading guilty, by debriefing them on SSPS computer security and program vulnerability
issues, is a
mitigating factor and was considered in determining an appropriate length of
exclusion. I.G. Ex. 4.
33. The COPES program suffered a substantial loss as a result of Petitioner's
criminal acts. FFCL 12,
16.
34. The I.G. does not have to prove the percentage of the total amount of COPES
funds stolen by
Petitioner in order to prove that the program suffered a substantial loss.
35. I do not have the authority to determine the scope of Petitioner's exclusion
from participation in
the Medicare and Medicaid programs, once I determine that the exclusion has
a sufficient basis in law and
fact and I determine the appropriate length of exclusion.
36. Petitioner's misconduct establishes that he is an individual who is not
trustworthy to deal with
program funds or with beneficiaries or recipients. FFCL 25-33.
37. In this case, a ten-year period of exclusion is reasonable and appropriate
given the seriousness of
Petitioner's misconduct, his lack of trustworthiness, and the dangers posed
to the integrity of federally-
funded health care programs, and to beneficiaries and recipients.
DISCUSSION
I. Petitioner was convicted of a criminal offense within the meaning of section 1128(b)(1) of the Act.
Petitioner admitted during the hearing that he was convicted of a criminal
offense. I find and conclude that
this constitutes an admission and that the record supports a finding and conclusion
that Petitioner was
"convicted" of a criminal offense within the meaning of section 1128(i)
of the Act. Tr. 9. Also, Petitioner
admitted during the hearing that the monies that he took were Medicare/Medicaid
funds. I find and
conclude that this constitutes an admission that he was convicted of a criminal
offense within the meaning
of section 1128(b)(1) of the Act. Additionally, in Petitioner's letter, dated
June 12, 1989, requesting a
hearing, he states, "I am currently incarcerated for my crimes of Medicaid
fraud, theft and computer
trespass that I committed while an employee of the State of Washington."
Thus, Petitioner admits that he
was convicted of a criminal offense within section 1128(b)(1) of the Act. Even
if Petitioner had not
admitted this, the record supports a finding and conclusion that Petitioner
was convicted of a criminal
offense "in connection with the delivery of a health care item or service
or with respect to any act or
omission" in a program financed by the State of Washington, "relating
to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial misconduct," within
the meaning of section 1128(b)(1)
of the Act. Therefore, there is no dispute in this case as to the I.G.'s authority
to impose and direct an
exclusion against Petitioner from participating in the Medicare and Medicaid
programs. The only issue
before me is whether the length of the ten-year exclusion is reasonable and
appropriate.
II. Ten years is a reasonable and appropriate period of exclusion.
Congress enacted and amended section 1128 in 1987 to protect the integrity
of federally-funded health care
programs. The law was intended to protect program funds and to protect beneficiaries
and recipients from
parties who had demonstrated by their behavior that they posed a threat to the
integrity of such funds or to
the well-being and safety of beneficiaries and recipients.
There are two ways that exclusions imposed and directed pursuant to section
1128 advance the remedial
purpose of the Act. First, the law protects the programs and protects their
beneficiaries and recipients from
an untrustworthy provider until the provider demonstrates that he or she can
be trusted to competently deal
with program funds and to properly service beneficiaries and recipients. Second,
exclusions deter
providers of items or services from engaging in improper or illegal conduct
which threatens the well-being
and safety of beneficiaries and recipients or the integrity of program funds.
See House Rep. No. 95-393,
Part II, 95th Cong. 1st Sess., reprinted in 1977 U.S. Code Cong. & Admin.
News 3072.
An exclusion imposed and directed pursuant to section 1128 will likely have
an adverse financial impact
on the person against whom the exclusion is imposed. However, the law places
the well-being and safety
of beneficiaries and recipients and the integrity of program funds ahead of
the pecuniary interests of
providers. The primary purpose of an exclusion is remedial, not punitive, even
if the exclusion has a
severe adverse financial impact on the person against whom it is imposed.
The Secretary has adopted regulations to be applied in exclusion cases. The
regulations were enacted when
section 1128 of the Act only applied to exclusions for "program-related"
offenses (convictions for criminal
offenses relating to the delivery of an item or service under the Medicare and
Medicaid programs).
However, the regulations also express the intent of the Secretary in cases where
a permissive exclusion is
imposed. See Frank J. Haney, DAB Civ. Rem. C-156 at 8 (1990). Thus, the regulations
are instructive as
broad guidelines for determining the appropriate length of exclusions in cases
where the Secretary has
discretionary authority to exclude parties. See Vincent Baratta, M.D., DAB App.
1172 at 10-11 (1990).
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). See Baratta, supra.
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 of
protecting the Medicare and Medicaid programs and their beneficiaries and recipients
from untrustworthy
individuals. The hearing is, by law, de novo. Act, section 205(b). Accordingly,
in deciding the
appropriate length of an exclusion, I must make an independent assessment of
the seven factors listed in
section 1001.125 of the regulations and consider all of the purposes designated
by Congress for the
enactment of section 1128 of the Act. See Vincent Baratta, M.D., DAB Civ. Rem.
C-144 at 8 (1990);
Charles J. Burks, M.D., DAB Civ. Rem. C-111 (1989).
An exclusion determination will be held to be reasonable where, given the evidence
in 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 (January 27, 1983). Thus,
based on the law and the
evidence, I have the authority to and will modify an exclusion if I determine
that the exclusion is not
reasonable. Act, section 205(b).
The record illustrates that Petitioner pled guilty to charges of: knowingly
making a false statement or a
representation of a material fact in a claim for payment for services allegedly
rendered to Medicaid
recipients; intending to deprive another of property exceeding the amount of
$l,500.00; and intentionally
gaining access and, without authorization, instructing and communicating with
a computer system and data
base of another with the intent to commit a crime. FFCL 9-14.
There is no dispute that Petitioner was employed as a caseworker with DSHS
and had access to DSHS
forms, computerized SSPS computer printouts, and files on individuals eligible
for receipt of COPES
services. Petitioner also operated an independent counseling service called
Madrona. He obtained an
unauthorized provider number for Madrona and created fictitious authorization
transactions for services
that were alleged to have been performed by Madrona for various COPES recipients,
by using the SSPS
computer terminal. However, Madrona never had a contract to provide the services
billed to DSHS.
DSHS was billed in excess of 400 times for services alleged to have been provided
by Madrona to
Medicaid recipients. Between December 1985 and December 1987, Petitioner signed
37 service invoices
and received 43 warrants totaling $161,391.16. The warrants were negotiated
and deposited into
Madrona's bank account, which was controlled by Petitioner.
Petitioner was sentenced to 36 months of incarceration for each of the four
counts and ordered to make
restitution to DSHS in the amount of $161,391.16. The Court of Appeals for the
State of Washington
affirmed Petitioner's sentence, finding that Petitioner's offense was a series
of major economic offenses
which involved multiple incidents occurring over an 18-month period of time,
a monetary loss of
$161,391.16, and a high degree of sophistication and planning. The Court of
Appeals found that Petitioner
held a position of trust and fiduciary responsibility and that he used his position
as a caseworker to
facilitate the commission of these offenses. I.G. Ex. 22/3; Tr. 26.
The evidence in this case establishes a pattern of serious criminal offenses
by Petitioner over a lengthy
period of time. See 42 C.F.R. 1001.125(b)(1). The seriousness of Petitioner's
offenses is in some measure
reflected in the sentence imposed on him, which included 36 months' incarceration.
See 42 C.F.R.
1001.125(b)(5). The evidence establishes that Petitioner's conduct was motivated
by considerations of
unlawful and personal gain. Furthermore, his conduct denied benefits to eligible
and needy COPES
recipients. See 42 C.F.R. 1001.125(b)(2).
The I.G. maintains that there are several factors in this case which warrant
a ten-year period of exclusion.
These factors are: (1) the serious nature of Petitioner's criminal offenses;
(2) the adverse impact of
offenses on beneficiaries; (3) the amount of damages incurred by the program;
(4) whether mitigating
circumstances exist; and (5) the length of the sentence imposed by the court.
I.G. Br. 9. The I.G. contends
that the theft of funds from the COPES program by the Petitioner involved forethought,
deceit, and a
devious mind. I.G. Br. 4. Additionally, the I.G. argues that the theft of funds
deprived other eligible needy
people from receiving the services that were available under this program. Tr.
22.
Petitioner suggests that the I.G. is barred from excluding him because of the
doctrine of double jeopardy.
Tr. 43-44. This case involves a state conviction, not a federal conviction.
Double jeopardy does not apply
to a subsequent federal prosecution based on facts which led to a state conviction.
See United States v.
Halper, 109 S. Ct. 1892 (1989). Chapman v. U.S. Dept. of Health and Human Services,
821 F.2d. 523
(10th Cir. 1987); Abbate v. United States, 359 U.S. 187 (1959). In the instant
case, the remedy imposed by
the I.G. and sustained here is not punitive. Rather, it constitutes a reasonable
mechanism to protect the
integrity of federally-funded health care programs and their beneficiaries and
recipients from an
untrustworthy provider. It serves the same remedial end, and is therefore analogous
to, revocation of a
professional license for misconduct. It also is analogous to a civil remedy
of contract termination for a
systematic breach of contract. Therefore, the exclusion imposed and directed
against Petitioner is not
double jeopardy. See David Cooper, R.Ph., DAB Civ. Rem. C-151 (1990). Dewayne
Franzen, DAB App.
1165 (1990); see Jack W. Greene v. Louis Sullivan, 731 F. Supp. 835 (E.D. Tenn.
1990).
Next, the offenses of which Petitioner was convicted were offenses which required
that Petitioner
knowingly and intentionally engaged in unlawful activity. The seriousness of
his criminal offenses 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 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 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.
The ten-year exclusion imposed against Petitioner is reasonable. I base my
conclusion on the seriousness
of Petitioner's crimes and the damage that they caused. Given the gravity of
Petitioner's crimes, it is
reasonable to conclude that Petitioner will continue to pose a threat to the
integrity of federally-funded
health care programs for the foreseeable future. Therefore, the lengthy exclusion
imposed in this case
provides reasonable protection for those programs and for their beneficiaries
and recipients. A lengthy
exclusion may have the additional benefit of deterring other providers of services
from engaging in the
conduct engaged in by Petitioner.
I am mindful of the fact that the exclusion imposed and directed against Petitioner
is for a lengthy period of
time. However, the crimes perpetrated by Petitioner were exceedingly serious,
and wrought substantial
damage to the integrity of health care programs. These crimes were motivated
by considerations of
personal gain. It is reasonable to infer from the nature of these offenses,
and from the circumstances under
which they were committed, that Petitioner is a manifestly untrustworthy individual.
Therefore, substantial
protection must be created to guard against even the possibility that Petitioner
could in the future perpetrate
against Medicare or Medicaid, or the beneficiaries and recipients of these programs,
the misdeeds which
resulted in his conviction. Thus, a margin of safety should be directly built
into any exclusion imposed
against Petitioner to protect the Medicare and Medicaid programs, should Petitioner
suffer a relapse of his
former criminal behavior. See Michael D. Reiner, R.M.D., DAB Civ. Rem. C-197
at 10 (1990).
My conclusion that the exclusion in this case is reasonable takes into account
character evidence which
Petitioner offered at his hearing. This evidence included the testimony of Petitioner's
crew supervisor at
the Indian Ridge Correctional Center, as well as that of the correctional counselor.
His crew supervisor
stated that Petitioner showed up for work regularly and that he has been rated
superior in dependability,
knowledge of the work, and ability to communicate. The crew supervisor also
revealed that Petitioner has
indicated that honesty takes precedence when interacting with others and that
he would feel comfortable if
Petitioner lived in his community when he is released from jail. Petitioner
has indicated that his "integrity
and trustworthiness has returned to pre-1985 time period," the period before
his criminal activities. P. Br.
9. The counselor also indicated that Petitioner was recommended for a work release
program after he
finishes serving his time at Indian Ridge. Tr. 101.
These observations and developments are encouraging signs that Petitioner has
made a good beginning
toward recovering the trustworthiness he should have to participate in Medicare
and State health care
programs. I also note his cooperation with authorities; this shows that he began
the process of recovery as
soon as his wrongdoing came to light. His lack of a prior criminal record also
indicates that criminal
activities are more likely the exception than the rule in his life.
However, the crimes committed by Petitioner strike at the nerve center of the
Medicaid system. The
mitigating circumstances are not sufficient to reduce the exclusion to less
than ten years. Petitioner has not
provided evidence which demonstrates that his character is such that in the
near future he should be trusted
with public funds. Given the gravity and circumstances of the offense and the
timing and quality of
Petitioner's cooperation, I conclude that the intent of Congress in protecting
the integrity of the Medicare
and Medicaid programs is best served by a ten-year period of exclusion.
Petitioner also argued at the hearing that a ten-year exclusion would deny
him access to the livelihood that
he has undertaken in the past few years. I recognize that the exclusion imposed
against Petitioner will
possibly impair his ability to practice his profession as a caseworker for the
duration of the exclusion. This
exclusion may have a severe financial impact on Petitioner. However, the remedial
considerations of the
law must take precedence over the personal consequences that an exclusion may
have for an excluded
party.
III. The ALJ does not have the authority to determine the scope of Petitioner's
exclusion from
participation in the Medicare and Medicaid programs.
Petitioner has requested that I address the issue of whether it is lawful for
him to be excluded from working
with Medicare and Medicaid clients during his ten-year period of exclusion.
The exclusion Notice from
the I.G. stated:
Payment will not be made to any entity in which you are serving as an employee,
administrator,
operator, or in any other capacity for any services that you furnish on or after
the effective date of this
exclusion. . . . no payment will be made to any supplier wholly owned by you
during the exclusion period.
Once I have determined that an exclusion is properly imposed and determine
the appropriate length of an
exclusion, I do not have the authority to determine the scope of the exclusion,
unless specific statutory or
regulatory language needs to be interpreted. I conclude that there is no such
endeavor called for in this
case.
Petitioner should direct any further questions regarding the scope of his exclusion
directly to the I.G.'s
representatives.
CONCLUSION
Based on the law and undisputed material facts in the record of this case,
I conclude that Petitioner is
subject to the permissive exclusion provisions of section 1128(b)(1) of the
Act and that ten years is a
reasonable and appropriate period of exclusion.
IT IS SO ORDERED.
__________________________
Charles E. Stratton
Administrative Law Judge