CASE | DECISION | JUDGE | FOOTNOTES

Decision No. CR637
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

IN THE CASE OF  


SUBJECT:

Michael Strugats, D.P.M.,

Petitioner,

DATE: January 7, 2000
                                          
             - v -
 


The Inspector General

 

Docket No.C-99-625
DECISION
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By letter dated May 28, 1999, the Inspector General (I.G.), United States Department of Health and Human Services (DHHS), notified Michael Strugats, D.P.M. (Petitioner), that he would be excluded for a period of 20 years from participation in Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f) of the Social Security Act (Act).(1) The I.G. imposed this exclusion pursuant to section 1128(a)(1) of the Social Security Act (Act), based on Petitioner's conviction, in the United States District Court for the Eastern District of New York (District Court), for a criminal offense related to the delivery of an item or service under the Medicare program.

Petitioner filed a request for review of the I.G.'s action. The I.G. 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. The I.G. submitted a brief (I.G. Br.) accompanied by four proposed exhibits (I.G. Exs. 1-4). Petitioner did not object to my receiving into evidence the I.G.'s proposed exhibits, and I receive into evidence I.G. Exs. 1-4.

Counsel for Petitioner submitted a response without exhibits (P. Br.). Although Petitioner is represented by counsel in this matter, he also submitted a separate brief opposing his exclusion from the Medicare, Medicaid and all federal health care programs. Petitioner also attached three exhibits to his brief, which exhibits the I.G. submitted as proposed I.G. exhibits 1, 3 and 4, and which I already have received into evidence.

The I.G. also sought leave to submit a reply brief (I.G. Rep.).(2) I grant the I.G.'s request and admit its reply brief into the record.

I find that the I.G.'s determination to exclude Petitioner from participating in Medicare and other federally-funded health care programs, including Medicaid, is proper, but modify the period of exclusion to 17 years.

APPLICABLE LAW

Under section 1128(a)(1) of the Act, the Secretary, DHHS, may exclude from participation in the Medicare and Medicaid programs any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Medicare or Medicaid. Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(1) of the Act shall be for a period of five years, unless specified aggravating or mitigating factors are present which form the basis for lengthening or shortening the period of exclusion. See also, 42 C.F.R. § 1001.102(a).

The language of 42 C.F.R. § 1001.102(b) provides that the following eight factors may be considered to be aggravating and a basis for lengthening the period of exclusion:

(1) [t]he acts resulting in the conviction, or similar acts, resulted in financial loss of $1500 or more to a government program or to one or more other entities of $1500 or more. (The entire amount of financial loss to such programs or entities, including any amounts resulting from similar acts not adjudicated, will be considered regardless of whether full or partial restitution has been made);

(2) [t]he acts that resulted in the conviction, or similar acts, were committed over a period of one year or more;

(3) [t]he acts that resulted in the conviction, or similar acts, had a significant adverse physical, mental or financial impact on one or more program beneficiaries or other individuals;

(4) [i]n convictions involving patient abuse or neglect, the action that resulted in the conviction was premeditated, was part of a continuing pattern or behavior, or consisted of non-consensual sex acts;

(5) [t]he sentence imposed by the court included incarceration;

(6) [w]hether the individual or entity has a documented history of criminal, civil or administrative wrongdoing;

(7) [t]he individual or entity has at any time been overpaid a total of $1500 or more by Medicare, Medicaid and all other Federal health care programs, or other third-party payers, as a result of improper billings; or

(8) [w]hether the individual or entity was convicted of other offenses besides those which formed the basis for the exclusion, or has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion.

The language of 42 C.F.R. § 1001.102(c) provides that only the following factors may be considered as mitigating and a basis for reducing the period of exclusion:

(1) [t]he individual or entity was convicted of 3 or fewer misdemeanor offenses, and the entire amount of financial loss to Medicare and the State health care programs due to the acts that resulted in the conviction, and similar acts, is less than $1500;

(2) [t]he record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional, or physical condition before or during the commission of the offense that reduced the individual's culpability; or

(3) [t]he individual's or entity's cooperation with Federal or State officials resulted in -- (i) [o]thers being convicted or excluded from Medicare, Medicaid, or all other Federal health care programs, (ii) [a]dditional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or (iii) [t]he imposition against anyone of a civil money penalty or assessment under part 1003 of this chapter.

PETITIONER'S CONTENTIONS

Petitioner, through counsel, contends that the length of his exclusion is not reasonable. He asserts that the I.G. misconstrued facts relating to aggravating circumstances in his case. He asserts that the I.G. has miscalculated the losses suffered by Medicare as a result of his misconduct. He maintains that the $292,803(3) restitution which he is to pay Medicare as part of his criminal judgment is not the amount of loss suffered by Medicare and that, in fact, he received no more than $31,000 from Medicare as a result of an illegal kickback scheme. He also asserts that such scheme was merely a technical violation of the law, as he contends that if the transactions had been in writing, such transactions would not have been illegal. Petitioner also maintains that, as the prescription of lymphodema pumps was medically necessary for his patients' well-being, Medicare did not suffer a loss for payments involving medically necessary items. Concerning one of the other aggravating factors cited by the I.G., Petitioner also notes that although he was sentenced to 24 months incarceration, he will in fact only serve approximately 11 months of that sentence.

Finally, Petitioner argues that a mitigating factor exists in his case. He asserts that the record in his criminal case clearly reflects that the District Court determined that he suffered from bipolar disorder which diminished his culpability. He notes that a psychiatrist testified before the criminal court concerning this issue and that the District Court found it was a factor which justified a reduction in Petitioner's sentence.

 

FINDINGS OF FACT AND CONCLUSIONS OF LAW (FFCL)

1. During the period of time relevant to this case, Petitioner was a licensed podiatrist practicing in the State of New York. I.G. Ex. 1.

2. On August 2, 1996, a 26-count criminal indictment (indictment) was filed in the United States District Court for the Eastern District of New York charging Petitioner with numerous violations of law, including Mail Fraud, in violation of 18 U.S.C. §§ 2, 1341 and 3551 et seq., Making Fraudulent Medicare Claims, in violation of 42 U.S.C. § 1320a-7b(a)(1) and (2), and 18 U.S.C. §§ 2 and 1351 et seq., Receipt of Unlawful [Medicare] Kickbacks, in violation of 42 U.S.C. § 1320a-7(b)(1)(A), and 18 U.S.C. §§ 2 and 3551 et seq., and Obstruction of Justice, in violation of 18 U.S.C. §§ 1512(b)(3) and 3551 et seq. I.G. Ex. 1.

3. Paragraphs 19(4) and 20 of the indictment charged that, beginning on or about November 1991 through March 1995, Petitioner participated in an illegal scheme whereby he submitted false Medicare and private insurance claims for podiatry services that were never rendered or were fraudulently billed and that Petitioner submitted such claims and received payments for such claims through the United States mail in violation of 18 U.S.C.

§ 1341. I.G. Ex. 1, at 9.

4. The indictment also charged that Petitioner engaged in an illegal kickback scheme, receiving money from fees generated by patients who purchased medical equipment, specifically, lymphodema pumps and related equipment, in violation of 42 U.S.C. § 1320a-7b(b)(1)(A).
I.G. Ex. 1.

5. In November 1998, Petitioner pled guilty to Counts 1 and 2, of the indictment, Mail Fraud, which involved claims against a private insurer from October 1992 through May 1993, and to Count 26 of the indictment, Receipt of Unlawful Kickbacks, which involved a claim against Medicare in June 1992. I.G. Ex. 3.

6. On November 4, 1998 a Judgment was entered against Petitioner in accord with the plea agreement in his case. I.G. Ex. 3.

7. As a result of his conviction, Petitioner was sentenced to 24 months in prison, three years' supervised probation, ordered to pay a penalty assessment of $150, and ordered to make restitution in the amount of $392,665.40 including restitution to Medicare in the amount of $292,803. I.G. Ex. 3.

8. Petitioner's guilty plea and the District Court's acceptance of that plea constitutes a conviction of a criminal offense within the meaning of section 1128(i)(3) of the Act.

9. Petitioner's convictions for Mail Fraud and Receipt of Unlawful Kickbacks are related to the delivery of a health care item or service under the Medicare/Medicaid programs within the meaning of section 1128(a)(1) of the Act. FFCL 2-6.

10. The Secretary, DHHS, has delegated to the I.G. the duty to determine and impose exclusions pursuant to section 1128(a)(1) of the Act.

11. Where the I.G. determines to exclude an individual pursuant to section 1128(a)(1) of the Act, the term of exclusion will be for a period of five years, in the absence of aggravating or mitigating factors that would support an exclusion of more or less than five years.

12. On May 28, 1999, Petitioner was notified by the I.G. that he was being excluded from participation in the Medicare, Medicaid and all federal health care programs for a 20-year period, pursuant to sections 1128(a)(1) and 1128(c)(3)(B) of the Act.

13. The I.G. established aggravating factors which prove Petitioner to be untrustworthy.

14. The Petitioner proved the presence of one mitigating factor, which is a basis for reducing the 20-year period of exclusion.

15. A 17-year exclusion of Petitioner is reasonable and appropriate.

 

DISCUSSION

Petitioner does not challenge that he is subject to exclusion under section 1128(a)(1) of the Act, and I so find. His conviction, which was based on a plea of guilty to three criminal offenses under federal law, and the District Court's acceptance of that plea, constitutes a conviction under section 1128(i)(3) of the Act.

Next, under section 1128(a)(1) of the Act, the crime at issue must be related to the delivery of a health care item or service under Medicare or Medicaid. The record reflects that Petitioner, who was found guilty of Mail Fraud, had filed or caused to be filed fraudulent claims for medical services with Medicare. The filing of fraudulent Medicare claims has been held to constitute clear program-related misconduct. Alan J. Chernick, D.D.S., DAB CR434 (1996). Similarly, Petitioner's conviction for Receipt of Unlawful Kickbacks involved his receipt of fees generated by patients who purchased medical equipment, specifically, lymphodema pumps and related equipment, in connection with Medicare claims. I find that such conviction also involves program-related misconduct.

In determining whether the length of an exclusion is reasonable, the administrative law judge has the responsibility to consider and evaluate all of the relevant evidence brought to bear in this case. The regulation at 42 C.F.R. § 1001.102(b) sets forth the aggravating factors which may be considered in determining the length of an exclusion. I find that the I.G. proved the presence of four aggravating factors:

1. The acts resulting in Petitioner's conviction, or similar acts, caused financial loss of $1,500 or more to a government program or to one or more other entities. 42 C.F.R. § 1001.102(b)(1).

Petitioner's fraud caused very substantial losses to be incurred by Medicare. The record reflects that Petitioner was ordered to pay restitution in the amount of $292,803 to Medicare. In addition, he was ordered to pay restitution of $63,214.67 to the Aetna Insurance Company, and restitution of $31,500 to the American Postal Workers Union Health Plan. I.G. Ex. 3, at 6. Other insurers also incurred losses over $1500. Id. Petitioner disputes the amount of the losses, but the record reflects the restitution owed to each entity and reflects the total restitution amount of $392,665.40. Id. Consequently, even though the amounts owed in connection with the specific counts for which Petitioner was convicted may have been less than the total restitution stated in the record, the record makes clear that the criminal enterprise involving similar acts was of such magnitude as to establish the restitution amount as the amount of loss to insurers.

2. The acts that resulted in Petitioner's conviction, or similar acts, were committed by Petitioner over a period of one year or more. 42 C.F.R. § 1001.102(b)(2).

In her brief, the I.G. claims that under the indictment the acts occurred from November 1991 through March 1995. See I.G. Br. at 7, citing I.G. Ex. 1, at 6-9. See also, I.G. Ex. 1, at 5-6, 9-10. Under counts 1, 2, and 26 charged in the indictment, for which Petitioner was convicted, the acts in question occurred from June 1992 through March 1994. Even if I take the shorter, more lenient period of time over which Petitioner was alleged to have engaged (and for which he pled guilty for having engaged) in illegal acts, that is, June 1992 through September 1993, such period spans more than 16 months, a period which is longer than the one year specified by the regulation.

3. The sentence imposed on Petitioner for his crimes included a period of incarceration. 42 C.F.R. § 1001.201(b)(2)(iv).

Petitioner was sentenced to 24 months in prison. I.G. Ex. 3. Petitioner contends that in fact he will serve only 11 months in prison, but even if true, such fact is irrelevant. The record reflects that the sentence "imposed" on Petitioner was 24 months. I.G. Ex. 3.

4. The individual or entity has at any time been overpaid a total of $1,500 or more by Medicare, Medicaid and all other Federal health care programs, or other third-party payers. 42 C.F.R. § 1001.102(b)(7).

The record clearly reflects overpayments to Petitioner by Medicare ($292,803), and to private insurers such as Aetna ($63,214.67). I.G. Ex. 3. Other insurers also incurred substantial losses. Id.

Petitioner argued in his brief that his 20-year exclusion should be reduced due to the presence of a mitigating factor in his case, pursuant to 42 C.F.R. § 1001.102(c)(2). He maintains that the record in his criminal case establishes that the court determined that he suffered from bipolar disorder which diminished his culpability.

Petitioner bears the burden of proving the existence of mitigating factors. James H. Holmes, DAB CR270 (1993). The transcript from the sentencing hearing reflects that the District Court judge found that "the defendant has established some, albeit very little, causal connection" (that is, between his mental condition and his criminal conduct), and that Petitioner was entitled "to some, albeit a limited, downward departure" from the sentencing guidelines. I.G. Ex. 4, at 9.(5) See also, P. Br. at 4. Accordingly, I find that Petitioner has established the mitigating factor listed at 42 C.F.R. § 1001.102(c)(2). Like the criminal court, however, I am not persuaded that this factor is entitled to substantial weight. Nor I am not convinced that, given the duration and magnitude of Petitioner's involvement in a criminal scheme, this mitigating factor is substantially in his favor.

Considering Petitioner's evidence of mitigation and the I.G.'s evidence of aggravating factors, I find that the aggravating factors in Petitioner's case make the imposition of a 17-year exclusion reasonable. I note that in evaluating these factors, it is not the mere presence of a greater number of aggravating factors which forms the basis for my decision here. As an appellate panel of the DAB has previously held in Barry D. Garfinkel, M.D., DAB No. 1572 (1996), it is the quality of the circumstances, whether aggravating or mitigating, which is to be dispositive in analyzing evidence of these factors. Garfinkel, DAB No. 1572, at 31.

In this case, the aggravating factors established by the I.G. prove Petitioner to be an untrustworthy individual. Petitioner's lack of trustworthiness is established by his involvement of at least 16 months in a scheme to defraud Medicare and private insurers. His fraud was persistent and deliberate, not random or impulsive. The extent to which Petitioner persisted in defrauding Medicare and private insurers is established by the large losses he caused the Medicare program and other insurers to incur. His high level of culpability is reflected in the lengthy prison sentence he received.

While Petitioner did establish the existence of a mitigating factor under 42 C.F.R. § 1001.201(c)(2), I do not find that this mitigating factor had any substantial effect on Petitioner's participation in and culpability for the criminal schemes described above. Nor do I find that the existence of this mitigating factor is substantially in his favor or should have any significant effect on the term of his exclusion. I therefore find that a 17-year exclusion is reasonable and appropriate.

CONCLUSION

I conclude that the I.G. was authorized to exclude Petitioner pursuant to section 1128(a)(1) of the Act. I find that an exclusion for a 17-year period is reasonable.






JUDGE
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Joseph K. Riotto

Administrative Law Judge

 

FOOTNOTES
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1. In this decision, I use the term "Medicaid" to refer to State health care programs.

2. Counsel for the I.G. stated in the reply brief that Petitioner's counsel did not prepare the additional submission, and that it was not addressed to the Departmental Appeals Board (DAB). I.G. Rep. at 1, fn. 1. For those reasons, counsel for the I.G. stated that she did not address any of the arguments Petitioner raised in his separate submission. Id.

I note that Petitioner's submission is addressed to the State Education Department/University of the State of New York, Office of Legal Services/Regents Review Committee. Petitioner's brief, however, cites to the instant case in its heading, and refers to this proceeding throughout. Additionally, Petitioner attached a second cover letter to his submission, which clearly lists the DAB as recipient. I have neither considered this document nor received it into evidence. The submission shall, however, be retained in the record of this matter.

3. The District Court ordered Petitioner to make restitution in the amount of $392,803 to private insurers and Medicare. I.G. Ex. 3, at 6. Of that restitution amount, the District Court ordered Petitioner to pay $292,803 to Medicare.

4. Paragraph 19 of the criminal indictment incorporates paragraphs 1-9 of such indictment by reference.

5. The District Court judge stated that "[N]otwithstanding all of the testimony, I find it extremely difficult to quantify what portion of defendant's criminal conduct may be attributable to diminished capacity. Ultimately, I have not been persuaded by the proof that criminal schemes of the duration and magnitude engaged in by the defendant, involving elaborate planning and activity and often repetitive conduct over a protracted period of time, can, at least to any substantial extent, be causally related to the type of mental affliction that was established at the hearing." I.G. Ex. 4, at 9.

 

 

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