Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Durrell A. Chappell,
Petitioner,
- v. -
The Inspector General.
DATE: November 8, 1990
Docket No. C-241
DECISION
In this case, governed by section 1128 of the Social
Security Act, Petitioner timely filed a request for a
hearing before an Administrative Law Judge (ALJ) to
contest the March 29, 1990 notice of determination
(Notice) issued by the Inspector General (I.G.) of the
United States Department of Health and Human Services.
The Notice informed Petitioner that he was excluded from
participating in the Medicare and Medicaid programs for
five years. 1/
Based on the entire record before me, I conclude that
summary disposition is appropriate in this case, that
Petitioner is subject to the federal minimum mandatory
exclusion provisions of sections 1128(a)(1) and
1128(c)(3)(B) of the Social Security Act, and that
Petitioner's exclusion for a minimum period of five years
is mandated by federal law. I also conclude that there
is no legal basis to stay Petitioner's exclusion pending
the outcome of Petitioner's proceedings before the
federal bankruptcy court.
APPLICABLE STATUTES AND REGULATIONS
I. The Federal Statute.
Section 1128 of the Social Security Act is codified at
42 U.S.C. 1320a-7 (West U.S.C.A., 1989 Supp.). Section
1128(a)(1) of the Social Security Act provides for the
exclusion from Medicare and Medicaid of those individuals
or entities "convicted" of a criminal offense "related to
the delivery of an item or service" under the Medicare or
Medicaid programs. Section 1128(c)(3)(B) provides for a
five-year minimum period of exclusion for those excluded
under section 1128(a)(1).
II. The Federal Regulations.
The governing federal regulations (Regulations) are
codified in 42 C.F.R. Parts 498, 1001, and 1002 (1989).
Part 498 governs the procedural aspects of this exclusion
case; Parts 1001 and 1002 govern the substantive aspects.
Section 1001.123 requires the I.G. to issue an exclusion
notice to an individual or entity whenever the I.G. has
"conclusive information" that such individual or entity
has been "convicted" of a criminal offense "related to
the delivery of an item or service" under the Medicare or
Medicaid programs; the exclusion begins 20 days from the
date on the notice. 2/
BACKGROUND
By letter dated March 29, 1990, the I.G. notified
Petitioner that he and DAC Community Services would be
excluded from participation in the Medicare program and
State health care programs (such as Medicaid) for a
period of five years. (DAC Community Services is an
ambulance transportation company owned solely by
Petitioner.) The I.G. based the exclusion on
Petitioner's conviction of a criminal offense related to
the delivery of an item or service under the Medicaid
program. The I.G. stated that such exclusions are
mandated by section 1128(a)(1) of the Social Security
Act.
On April 24, 1990, Petitioner requested a hearing to
contest the I.G.'s determination, and the case was
assigned to me for a hearing and decision. On June 12,
1990, I held a prehearing conference, at which time I
established a schedule for filing prehearing motions and
briefs. On June 15, 1990, I issued a Prehearing Order in
which I set forth the issues raised by the parties at the
June 12, 1990 prehearing conference.
Thereafter, the I.G. filed a motion for summary
disposition on all issues. Petitioner submitted a brief
in response to the I.G.'s motion. The I.G. filed a reply
brief. Neither party requested oral argument. Based on
the undisputed facts and the law, I conclude that the
exclusion imposed and directed by the I.G. in this case
is mandated by law. Therefore, I enter summary
disposition in favor of the I.G.
ADMISSIONS
Petitioner admits that: (1) he was "convicted" of a
criminal offense within the meaning of section 1128(i) of
the Social Security Act; and (2) the offense was "related
to the delivery of an item or service" under the Medicaid
program within the meaning of section 1128(a)(1) of the
Social Security Act. These admissions are set forth in
the Prehearing Order and Schedule for Filing Motions for
Summary Disposition of June 15, 1990.
ISSUES
The remaining issues in this case are:
1. Whether Petitioner's conviction of a program-related
criminal offense triggers the mandatory minimum five year
exclusion provisions of sections 1128(a)(1) and
1128(c)(3)(B) of the Social Security Act.
2. Whether there is any legal basis to stay Petitioner's
mandatory minimum five year exclusion pending the outcome
of his bankruptcy case before the United States
Bankruptcy Court.
3. Whether summary disposition is appropriate in this
case.
FINDINGS OF FACT AND CONCLUSIONS OF LAW 3/
Having considered the entire record, the arguments and
submissions of the parties, and being fully advised
herein, I make the following Findings of Fact and
Conclusions of Law:
1. Petitioner, at all times relevant to this case, has
been a proprietor of an ambulance transportation
business. This business operates under the name of DAC
Community Services and serves Berks County, Pennsylvania.
I.G. Ex. A/2. 4/
2. On March 9, 1989, Petitioner filed a bankruptcy
petition under Chapter 11 of the United States Bankruptcy
Code, codified at 11 U.S.C. 101, et. seq. (1978), in the
United States Bankruptcy Court for the Eastern District
of Pennsylvania. Petitioner continued to operate his
ambulance business as a "debtor-in-possession" after the
filing of his bankruptcy petition. I.G. Ex. A/1,3.
3. An undated document entitled "SECOND AMENDED
INFORMATION" which appears to amend a criminal
information (not contained in the record in this case)
was filed in the Court of Common Pleas of Berks County,
Pennsylvania charging Petitioner with the intentional
submission of fraudulent Medical Assistance invoices to
the Pennsylvania Department of Welfare on 123 separate
occasions beginning after January 1, 1986. The SECOND
AMENDED INFORMATION alleged that these invoices
"indicated that Medical Assistance recipients had
received medically necessary ambulance transportation to
a legal destination when, in fact, ambulance
transportation was not medically necessary for a
particular recipient; and/or the recipient was
transported to a destination which is specifically non-
compensable under the Medical Assistance Program; and/or
transportation for a Medical Assistance recipient was
rendered in a non-ambulance vehicle." I.G. Ex. D/1.
4. Petitioner pleaded guilty to one count of continuing
Medicaid Fraud relating to the submission of 123
fraudulent Medicaid invoices. The crime of Medicaid
Fraud is a felony of the third degree under Pennsylvania
law. I.G. Ex. E/1.
5. On June 28, 1989, Petitioner was sentenced to
incarceration in the Berks County Prison for 30 days and,
thereafter, to placement on probation for 22 months. In
addition, Petitioner was required to pay a $15,000 fine
and to reimburse the Commonwealth of Pennsylvania for the
cost of investigating and prosecuting his case. I.G. Ex.
E/1; I.G. Ex. C.
6. Petitioner admits, and I conclude, that he was
"convicted" of a criminal offense within the meaning of
section 1128(i) of the Social Security Act.
7. Petitioner admits, and I conclude, that he was
convicted of a criminal offense "related to the delivery
of an item or service" under the Medicaid Program, within
the meaning of section 1128(a)(1) of the Social Security
Act.
8. The Secretary of the United States Department of
Health and Human Services (the Secretary) delegated to
the I.G. the authority to determine, impose, and direct
exclusions pursuant to section 1128 of the Social
Security Act. 48 Fed. Reg. 21662 (1983).
9. The I.G. properly excluded Petitioner from
participation in the Medicare and Medicaid programs for a
period of five years as required by the minimum mandatory
exclusion provisions of sections 1128(a)(1) and
1128(c)(3)(B) of the Social Security Act.
10. There is no legal basis and it is not appropriate to
stay Petitioner's exclusion pending the outcome of his
bankruptcy case before the United States Bankruptcy Court
for the Eastern District of Pennsylvania.
11. Since the material facts are undisputed in this
case, there is no need for an evidentiary hearing in this
proceeding and the I.G. is entitled to summary
disposition as a matter of law.
DISCUSSION
I. A Minimum Mandatory Five Year Exclusion Is Required
In This Case.
Petitioner admits, and I conclude, that he was
"convicted" of a criminal offense within the meaning of
section 1128(i) of the Social Security Act. Petitioner
also admits, and I conclude, that he was convicted of a
criminal offense "related to the delivery of an item or
service" under the Medicaid Program within the meaning of
section 1128(a)(1) of the Social Security Act.
Sections 1128(a)(1) and 1128(c)(3)(B) of the Social
Security Act require the I.G. to exclude individuals and
entities from the Medicare and Medicaid programs for a
minimum period of five years, when such individuals and
entities have been "convicted" of a criminal offense
"related to the delivery of an item or service" under the
Medicare or Medicaid programs, within the meaning of
section 1128(a)(1) of the Social Security Act.
Congressional intent on this matter is clear:
A minimum five-year exclusion is appropriate,
given the seriousness of the offenses at
issue. . . Moreover, a mandatory five-year
exclusion should provide a clear and strong
deterrent against the commission of criminal
acts.
S. Rep. No. 109, 100th Cong., 1st Sess. 2 (1987),
reprinted in 1987 U.S. Code Cong. & Admin. News 682, 686.
Since Petitioner was "convicted" of a criminal offense
and it was "related to the delivery of an item or
service" under the Medicaid program within the meaning of
section 1128(a)(1) and (i) of the Social Security Act,
the I.G. was required by section 1128(c)(3)(B) of the
Social Security Act to exclude Petitioner for a minimum
of five years and an ALJ has no discretion to reduce the
mandatory minimum five year period of exclusion. See
Jack W. Greene v. Louis Sullivan, 731 F. Supp. 835, 838
(E.D. Tenn. Feb. 8, 1990). See also Jack W. Greene v.
Louis Sullivan, 731 F. Supp. 838, 840 (E.D. Tenn. Feb.
22, 1990).
II. It Is Not Appropriate to Stay Petitioner's Minimum
Mandatory Five Year Exclusion Pending the Outcome of
Petitioner's Bankruptcy Case.
The record shows that, on March 9, 1989, Petitioner
initiated bankruptcy proceedings in his capacity as a
sole proprietor of DAC Community Services by filing a
bankruptcy petition under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for
the Eastern District of Pennsylvania. Petitioner
continued to operate his ambulance business after filing
the bankruptcy petition, maintaining full managerial
control as a "debtor in possession" under Chapter 11 of
the United States Bankruptcy Code. Petitioner sought the
protection of the bankruptcy court while he reorganized
his business and devised a plan to make payment to his
creditors. I.G. Ex. A/1,3. In a letter dated March 29,
1990, approximately a year after Petitioner filed his
bankruptcy petition and while his bankruptcy case was
still pending in the bankruptcy court, the I.G. notified
Petitioner that he and DAC Community Services would be
excluded from participation as a provider in the Medicare
and Medicaid programs for a period of five years.
Petitioner contends that provisions of the United States
Bankruptcy Code, which are binding on this administrative
tribunal, require that Petitioner's exclusion from
participation in the Medicare and Medicaid programs be
stayed until the conclusion of his bankruptcy case.
Petitioner argues that section 362(a) of the Bankruptcy
Code imposes an "automatic stay" on all actions against a
debtor, subject to certain exceptions specified in
section 362(b). According to Petitioner, the purpose of
the automatic stay is to prevent dissipation of a
debtor's assets before an orderly distribution to
creditors can be achieved. Petitioner contends that the
Provider Agreement between him and the Department of
Health and Human Services is an "asset" of the bankruptcy
estate which must be protected by the automatic stay.
Petitioner argues that any action taken by the Department
of Health and Human Services to terminate this Provider
Agreement would severely cripple his ambulance business.
This, according to Petitioner, would be contrary to the
purpose of the Bankruptcy Code because it would prevent a
successful reorganization of his business and, therefore,
threaten the interests of creditors protected by the
Bankruptcy Code.
Petitioner contends that an important policy
consideration underlying the Bankruptcy Code is the
protection of the interest of creditors. According to
Petitioner, "(i)t is the presence of creditors that takes
this case out of the exclusive control of the Medicare
statute and requires a more comprehensive balancing of
interests." P. Br. 3. Petitioner, therefore, asserts
that since the imposition of an exclusion in this case
would be detrimental to the creditor interests protected
by the bankruptcy laws, the "policies of the Bankruptcy
Code take precedence over the administrative sanction."
P. Br. 4.
While Petitioner argues that the scope of the automatic
stay of actions against a debtor in bankruptcy is broad,
he concedes that it is not unlimited. According to
Petitioner, section 362(b)(4) of the Bankruptcy Code
creates an exception to the automatic stay where there is
a "bona fide exercise of police power" directed at the
protection of public health or safety. P. Br. 4.
Although Petitioner recognizes the exception to the
automatic stay for the exercise of government actions
taken to protect the public welfare, he takes the
position that the exclusion imposed by the I.G. is not
the type of government action which falls within the
exception. Petitioner therefore concludes that the
exclusion imposed by the I.G. against him must be stayed
pending the outcome of his bankruptcy case.
The I.G. argues that I do not have the authority to
decide the issue of whether the exclusion imposed by the
I.G. must be stayed. The I.G. contends that an ALJ
hearing federal exclusion cases must confine his decision
to the three issues set forth in section 1001.128(a) of
the Regulations. 42 C.F.R. section 1001.128(a). The
I.G. contends that Petitioner's attempt to stay his
exclusion in this case "is not within the parameters" of
the three issues set forth in the Regulations and
therefore Petitioner's attempt to stay his exclusion in
this case is "not appealable in this forum." I.G. Br. 9.
The I.G. also argues that there is no legal support under
either the Social Security Act or the United States
Bankruptcy Code for staying Petitioner's exclusion. The
I.G. states that once it has been established that a
conviction exists, and that the conviction is related to
the delivery of an item or service under the Medicaid
program, the Social Security Act requires the I.G. to
impose an exclusion for a minimum period of five years.
According to the I.G., in cases where a petitioner has
admitted a conviction of a program-related offense, the
imposition of a five year exclusion is mandatory and
there is no legal basis to stay it.
The I.G. also disagrees with Petitioner's position that
the automatic stay provision at section 362(a) of the
Bankruptcy Code applies to this case. The I.G. asserts
that by enacting certain exceptions to the automatic stay
at section 362(b) of the Bankruptcy Code, Congress
recognized that there are competing and more compelling
policy considerations which take precedence over the goal
of preserving a debtor's assets. Specifically, the I.G.
argues that the exception to the automatic stay for the
exercise of government police and regulatory power set
forth at 362(b)(4) of the Bankruptcy Code applies to
Petitioner's exclusion in this case.
I have carefully considered the contentions of the
parties and the relevant law, and I will address first
the jurisdictional question regarding the scope of my
review raised by the I.G. While I agree with the I.G.
that 42 C.F.R. 1001.128(a) sets forth guidelines
concerning the scope of an ALJ's review in hearing
federal exclusion cases, I do not read that regulation as
narrowly as the I.G. does. Section 1001.128(a) of the
Regulations provides that an ALJ has the authority to
hear and decide issues of whether: (1) a petitioner was,
in fact, convicted; (2) the conviction was related to his
or her participation in the delivery of medical care or
services under the Medicare, Medicaid, or social services
program; and (3) the length of the exclusion is
reasonable. Read together, the three issues set forth in
section 1001.128(a) of the Regulations permits inquiry by
the ALJ into the propriety of the imposition of an
exclusion in particular cases. In order to accomplish
this, an ALJ must interpret, construe, and apply relevant
statutory provisions to individual cases. As stated by
the Departmental Appeals Board in Jack W. Greene, DAB
App. 1078 at 17 (1989):
The ALJ must consider the meaning of the
pertinent statutory provision as well as
related provisions, relevant legislative
history, the effective date of the statute,
case law interpretations, and implementing
regulations and policy issuances. It would
literally be impossible to apply the issue
identified by [42 C.F.R. 1001.128] in a legally
correct manner without considering these
factors, as appropriate.
In this case, Petitioner has argued that the imposition
of an exclusion prior to the conclusion of his bankruptcy
case is legally impermissible. Since this issue concerns
the propriety of the imposition of an exclusion under the
facts of this case, it falls within the scope of review
set forth in 42 C.F.R. 1001.128(a). I therefore have a
duty to consider how Congress intended to apply all
relevant statutory provisions to this case.
With regard to Petitioner's position that I am required
to stay his exclusion until the conclusion of his
bankruptcy case, I agree with the I.G. that there is no
legal basis to stay the exclusion in this case.
The I.G. excluded Petitioner from participating in
Medicare and State health care programs pursuant to
section 1128(a)(1) of the Social Security Act. 42 U.S.C.
1320a-7(a)(1). That section provides that the Secretary
of the Department of Health and Human Services must
exclude from participation in Medicare, and direct the
exclusion from participation in State health care
programs, any individual or entity that has been
convicted of a criminal offense related to the delivery
of an item or service under the Medicare or Medicaid
programs. The Secretary has delegated to the I.G. the
responsibility for excluding or directing the exclusion
of individuals or entities pursuant to the law. 48 Fed.
Reg. 21662 (1983).
The Social Security Act provides that exclusions "shall
be effective at such time and upon such reasonable notice
to the public and to the individual or entity excluded as
may be specified in regulations . . ." 42 U.S.C. 13201-
7(c)(1). It further provides that, with exceptions not
relevant to this case, "an exclusion shall be effective
with respect to services furnished to an individual on or
after the effective date of the exclusion." 42 U.S.C.
1320a-7(c)(2)(A). 5/ In the case of an exclusion under
section 1128(a)(1) for convictions for program-related
offenses, the Social Security Act provides that the
minimum period of exclusion shall be not less than five
years. The only exception to this is where, upon the
request of a State, the Secretary, in his discretion,
waives the exclusion for an individual or entity "that is
the sole community physician or sole source of essential
specialized services in a community." 42 U.S.C. 1320a-
7(c)(3)(B).
There is nothing in the Social Security Act which
provides that interim relief, such as staying exclusions
pending the outcome of a bankruptcy case, is available to
excluded parties. Nor does the legislative history of
the Social Security Act reveal Congressional intent to
provide excluded parties involved in bankruptcy
proceedings the opportunity to obtain stays of their
exclusions pending the outcome of their bankruptcy case.
On the contrary, the Social Security Act requires a
minimum five year exclusion in cases such as this where
Petitioner has admitted that he has been convicted of a
program-related offense. Congress' silence on the
availability of stays pending the outcome of bankruptcy
cases supports the conclusion that Congress did not
intend that stays be available as interim relief for
excluded debtors involved in proceedings before the
bankruptcy courts.
Moreover, a review of the statutory scheme for handling
the nation's bankruptcy matters as set forth by Congress
in the United States Bankruptcy Code shows that Congress
recognizes that the goal of preserving a debtor's assets
for the benefit of creditors is not invariably paramount,
and that in some circumstances that goal must yield to
overriding public policy considerations.
Under section 362(a) of the Bankruptcy Code, 11 U.S.C.
362(a), Congress provided that the filing of a bankruptcy
petition automatically operates as a stay of all judicial
and nonjudicial proceedings against the debtor or his
property. According to the legislative history of
section 362(a), the automatic stay is one of the
fundamental protections for the debtor's assets provided
by the Bankruptcy Code. It gives the debtor a breathing
spell from his creditors. It stops all collection
actions and all harassment. It provides the debtor with
an opportunity to compose, rehabilitate, and attempt a
repayment or reorganization plan. The purpose of the
automatic stay provision is to preserve the debtor's
assets so that an orderly distribution to creditors can
be arranged. H. Rep. No. 95-595, 95th Cong., 1st Sess.
340 (1977), reprinted in 1978 U.S. Code Cong. & Admin.
News 5787.
The automatic stay is not without its exceptions, as
Petitioner aptly points out. Section 362(b)(4), 11
U.S.C. 362(b)(4), provides that the filing of a
bankruptcy petition does not operate as a stay "of a
commencement or continuation of an action or proceeding
by a government unit to enforce such governmental unit's
police or regulatory power." In enacting this exception
to the automatic stay, Congress explicitly articulated
its intent that actions taken against a debtor and his
property by a governmental unit seeking to exercise its
police and regulatory powers should not be stayed, even
though the debtor files a bankruptcy petition, because
the interest in protecting the public welfare is more
compelling than the interest in preserving an individual
debtor's assets.
While Petitioner acknowledges the exception set forth in
section 362(b)(4), he contends that the exclusion imposed
by the I.G. in this case is not a governmental action
which falls within this exception.
I disagree with Petitioner. In my view, the language of
section 362(b)(4), its legislative history, and the case
law requires an opposite conclusion.
On its face, section 362(b)(4) exempts from the automatic
stay an action by a governmental unit "to enforce such
governmental unit's police or regulatory power." It is
indisputable that the I.G. is a "governmental unit." The
question is whether the action taken by the I.G. in
imposing an exclusion was the exercise of a "police or
regulatory power".
Just what is meant by the language of section 362(b)(4)
is explained in its legislative history, which states:
. . . where a governmental unit is suing a
debtor to prevent or stop a violation of fraud,
environmental protection, consumer protection,
safety, or similar police or regulatory
laws . . . the action or proceeding is not
stayed under the automatic stay. S. Rep. No.
95-989, 95th Cong., 2d Sess. 52 (1978),
reprinted in 1978 U.S. Code Cong. & Admin. News
5787, 5838.
The legislative history of section 362(b)(4) of the
Bankruptcy Code specifically mentions the protection
against fraud as an exercise of the governmental police
or regulatory power. In this case, Petitioner was
convicted of the criminal offense of continuing Medicaid
fraud involving the intentional submission of fraudulent
invoices to the Medicaid program on 123 separate
occasions. Section 1128 of the Social Security Act
requires the I.G. to exclude individuals and entities
from the Medicare and Medicaid programs for a minimum
period of five years when such individuals or entities
have been convicted of a criminal offense related to the
Medicare or Medicaid programs. As stated in the
legislative history of the Social Security Act, a major
purpose of the exclusion sanction is "to protect the
[Medicare and Medicaid programs] from fraud and abuse."
S. Rep. No. 109, 100th Cong., 1st Sess. 2 (1987),
reprinted in 1987 U.S. Code Cong. & Admin. News 682.
Petitioner argues that the exclusion sanction imposed by
the I.G. in this case does not fall within the section
362(b)(4) exception to the automatic stay because the
I.G. is not seeking to stop or prevent a present danger
of fraud. Petitioner points out that the language of the
legislative history of section 362(b)(4) states that in
order to be exempt from the automatic stay, the action of
the governmental unit must be undertaken to "prevent or
stop a violation of fraud." Petitioner interprets this
language to mean that the section 362(b)(4) exception to
the automatic stay applies only to government actions
taken to protect against a "present and immediate harm"
to the public. P. Br. 6. While Petitioner does not deny
that he engaged in fraudulent activities in the past, he
points out that there is no evidence that he is presently
engaging in such activities. Petitioner reasons that the
exclusion imposed by the I.G. in this case is not an
exercise of governmental power directed at stopping or
preventing a present and immediate harm to the public
because the danger of fraud no longer exists in this
case. Petitioner therefore concludes that the exclusion
sanction imposed on him is "purely punitive and financial
in nature" and that it "bears no relationship to a
present or future threat to public health or safety."
P. Br. 5.
While I agree with Petitioner's assertion that the
section 362(b)(4) exception to the automatic stay applies
to governmental actions taken to prevent or stop a
present and immediate danger to the public, I disagree
with his conclusion that no such danger exists in this
case. Petitioner was convicted of a criminal offense
involving Medicaid fraud. He therefore is an individual
who has caused harm to the integrity of the Medicaid
program, and by his conduct has demonstrated that he is
untrustworthy. The purpose of the exclusion sanction is
to protect program integrity by preventing untrustworthy
providers from having ready access to Medicare and
Medicaid trust funds. See Orlando Ariz and Ariz
Pharmacy, Inc., DAB Civ Rem. C-115 (1990). In discussing
the reasons for enacting the mandatory minimum five year
exclusion for conviction of program-related offenses, the
Senate Finance Committee stated in its report that the
minimum five year exclusion "is appropriate, given the
seriousness of the offenses at issue." The Senate
Finance Committee also stated that five years is the
minimum amount of time necessary to provide the
government "with adequate opportunity to determine
whether there is a reasonable assurance that the types of
offenses for which the individual or entity was excluded
have not recurred and are not likely to do so." S. Rep.
No. 109, 100th Cong., 1st Sess. 2 (1987), reprinted in
1987 U.S. Code Cong. & Admin. News 682, 686. Thus, it is
clear that the legislative purpose for the enactment of
the mandatory minimum five year exclusion is to prevent
violations of fraud by untrustworthy individuals from
recurring. In achieving this goal to prevent the
recurrence of fraud, the exclusion imposed by the I.G.
against Petitioner satisfies the requirement to "prevent
or stop a violation of fraud." The exclusion therefore
is the type of governmental action which falls within the
exception to the automatic stay under section 362(b)(4)
of the Bankruptcy Code.
To support his position that the exclusion imposed by the
I.G. must be stayed, Petitioner relies on several cases
where courts determined that actions taken by a
governmental unit against a debtor were not exempt from
the automatic stay. Petitioner's reliance on these cases
is misplaced.
In University Medical Center, 93 B.R. 412 (Bankr. E.D.
Pa. 1988) the bankruptcy court applied the automatic
stay to the United States Department of Health and
Human Services so that it could not recover Medicare
overpayments it had made to the debtor hospital. The
facts in University Medical Center are distinguishable
from the facts in this case because in University Medical
Center the Department of Health and Human Services was
not pursuing its police or regulatory powers. Instead,
it was attempting to obtain unwarranted preferential
treatment in its capacity as a creditor. This is
contrary to the Bankruptcy Code's intent that
governmental and private creditors be treated alike for
most purposes. In the instant case, the I.G. is not
seeking to obtain preferential treatment as a creditor of
Petitioner's estate, but instead is taking an action
against Petitioner for the purpose of protecting the
public welfare. It is actions of this kind that are
exempt from the automatic stay under the Bankruptcy Code.
Petitioner also relies on the case Corporacion De
Servicios Medicos Hospitalarios de Fajardo, 60 B.R.920
(D. Puerto Rico 1986). In Corporacion, the Department of
Health of the Commonwealth of Puerto Rico negotiated a
contract whereby Corporacion, a private entity, agreed to
operate a government owned hospital in exchange for an
annual fee. During the contract period, the Department
of Health conducted an audit which revealed financial
irregularities in the operation of the hospital. As a
result of these financial irregularities, the Department
of Health initiated court proceedings to terminate its
contract with Corporacion for non-compliance of the terms
of the contract. Corporacion subsequently filed a
petition for reorganization under Chapter 11 of the
Bankruptcy Code. The Department of Health, fully aware
of the bankruptcy proceedings, notified Corporacion that
its license to operate the hospital would be revoked on
the grounds that Corporacion's continued operation of the
hospital was creating a public health risk. The United
States District Court in Corporacion determined that the
automatic stay applied to the Department of Health's
threatened actions to terminate its contract with
Corporacion and to revoke the hospital's operating
license.
The facts in Corporacion are more similar to the facts
in the case before me than the facts presented in
University Medical Center for the reason that the
Department of Health in Corporacion, like the I.G. in
this case, was not acting in the capacity as a creditor
in its attempt to terminate its contract with the
debtor. In spite of this similarity, Corporacion is
distinguishable from the facts of this case and it is not
controlling. In Corporacion the court carefully
scrutinized the reason for the Department of Health's
actions, and concluded that even though the Department of
Health was not a creditor of the estate, its actions
against the debtor were nevertheless undertaken for the
primary purpose of protecting the government's pecuniary
interest in the debtor's property rather than to protect
the public welfare. The court was not persuaded by the
Department of Health's stated claim that its actions were
taken to protect public health, but instead determined
that this claim was merely an excuse to justify an
attempt to protect its pecuniary interests under the
contract rather than to protect the public welfare.
Similarly, in the case King Memorial Hospital, 4 B.R. 704
(Bankr. S.D. Fla. 1980), also cited by Petitioner, the
bankruptcy court applied the automatic stay to an
attempt made by the Florida Department of Health and
Rehabilitative Services to prevent the construction of a
hospital. The bankruptcy court's reasoning in King was
similar to that in Corporacion in that it found that the
administrative agency had not made the requisite showing
that public health or welfare was at stake to qualify for
an exception from the automatic stay.
In the instant case, the five year exclusion sanction was
imposed by the I.G. because Petitioner was convicted of a
program-related criminal offense. The purpose of the
exclusion sanction is to effectuate the public policy of
protecting the integrity of the Medicare and Medicaid
programs. It is not imposed by the I.G. for the primary
purpose of protecting the government's claim of
entitlement to a pecuniary interest in Petitioner's
bankruptcy estate.
In view of the foregoing, I conclude that Congressional
intent on the availability of a stay in this case is
clear under both the Social Security Act and the United
States Bankruptcy Code. The Social Security Act requires
an exclusion in cases such as this where the Petitioner
was convicted of a program-related criminal offense.
There is no exception for cases where the excluded
individual or entity is engaged in bankruptcy
proceedings. In addition, the United States Bankruptcy
Code specifically creates an exception to the automatic
stay for government actions, such as the exclusion action
taken by the I.G. in this case, which was taken for the
purpose of preventing fraud in the federal health care
programs. Congress did not intend that stays be
available as interim administrative relief for excluded
parties engaged in bankruptcy proceedings. Given this
intent, the relief requested by Petitioner in this case
has no legal basis and is not appropriate.
III. Summary Disposition Is Appropriate In This Case.
The issue of whether the I.G. had the authority to
exclude Petitioner under section 1128(a)(1) is a legal
issue. I have concluded as a matter of law that
Petitioner was properly excluded and that the length of
his exclusion is mandated by law. There are no genuine
issues of material fact which would require the
submission of additional evidence, and there is no need
for an evidentiary hearing in this case. Accordingly,
the I.G. is entitled to summary disposition as a matter
of law. See, Charles W. Wheeler and Joan K. Todd, DAB
App. 1123 (1990), and Rule 56 F.R.C.P.
CONCLUSION
Based on the law and undisputed material facts in the
record of this case, I conclude the I.G. properly
excluded Petitioner from the Medicare and Medicaid
programs pursuant to section 1128(a)(1) of the Social
Security Act, and that the minimum period of exclusion
for five years is mandated by federal law. In addition,
I conclude that there is no legal basis to stay the
exclusion imposed on Petitioner pending the outcome of
his bankruptcy proceedings.
_____________________________
Charles E. Stratton
* * * Footnotes * * *
1. The Medicaid program is one of three types of
federally-financed State health care programs from which Petitioner
is excluded. I use the term "Medicaid" to represent all three of
these programs which are defined in section 1128(h) of the Act.
2. The I.G.'s notice letter adds five days to the 15 days
prescribed in section 1001.123, to allow for receipt by mail.
3. Some of my statements in the sections preceding these
formal findings and conclusions are also findings of fact and
conclusions of law. To the extent that they are not repeated here,
they were not in controversy.
4. The citations in this Decision are as follows:
Petitioner's Brief P. Br. (page)
I.G.'s Brief I.G. Br. (page)
I.G.'s Reply Brief I.G. Rep. Br. (page)
I.G.'s Exhibits I.G. Ex. (letter)/(page)
5. The exceptions referred to in subsection (2)(A) include
payments made under Title XVIII or under a State health care
program for inpatient institutional services furnished to an
individual who was admitted to such institution before the date of
the exclusion, or home health services and hospice care furnished
to an individual under a plan of care established before the date
of the exclusion.