SUBJECT:

Caroline Haggard Flores,

Petitioner,

The Inspector General

I. Background

On September 30, 1999, the I.G. notified Petitioner that she was being excluded from participating in Medicare and other federally funded health care programs for a period of 20 years based on Petitioner's conviction of a criminal offense as is described in section 1128(a)(1) of the Act. Petitioner requested a hearing and the case was assigned to me for a hearing and a decision.

On January 28, 2000, I held a pre-hearing conference at which the parties agreed that the case could be heard and decided based on their written submissions. Each side has submitted a brief. In addition, the I.G. submitted three proposed exhibits (I.G. Ex. 1 - I.G. Ex. 3). I admit into evidence I.G. Ex. 1 - I.G. Ex. 3.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. The I.G. was required to exclude Petitioner based on Petitioner's conviction of a criminal offense as is described in section 1128(a)(1) of the Act; and

2. A 20-year exclusion of Petitioner is unreasonable.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Finding) to support my decision in this case. I set forth each Finding below as a separately numbered heading. I discuss each Finding in detail.

1. Petitioner was convicted of a criminal offense that is related to the delivery of items or services under the Medicare program.

On June 8, 1998, the United States District Court for the Western District of Texas entered a Judgment against Petitioner based on two federal crimes. I.G. Ex. 3 at 1. Petitioner's guilty plea included a plea of guilty to Count Nine of an indictment, No. SA-96-CR-108(1), and Count One of an indictment, No. SA-97-CR-112(4) which had been issued against her previously in that court. Id.; see I.G. Ex. 1 at 8 - 9. Petitioner entered her plea pursuant to a plea agreement that she signed on November 5, 1997. I.G. Ex. 2.

Petitioner pled guilty to conspiring to defraud the United States Department of Health and Human Services of approximately $3,000,000. I.G. Ex. 1 at 8. In pleading guilty, Petitioner acknowledged filing false Medicare cost reports on behalf of an entity known as Communicare Home Health Care Agency, Inc. (CHHCA). Petitioner pled guilty to representing directly, and through the creation of backup documentation, that approximately $3,000,000 in reimbursable medical supplies had been billed and provided to CHHCA by a medical supplier known as Amex Medical, when, in truth, as Petitioner knew, such supplies had not been billed or supplied by Amex Medical. Id. at 6. Petitioner filed fraudulent cost reports for the years 1992, 1993, and 1994. Id. at 9. The conspiracy to which Petitioner pled guilty ran from on or about January 28, 1992 until on or about May 11, 1994. Id. at 5.

Petitioner's crime was a criminal offense that was related to the delivery of items or services under Medicare. Petitioner was convicted of conspiring to make false claims against the Medicare program. As a matter of law, the making of false claims against Medicare is a criminal offense within the meaning of section 1128(a)(1) of the Act that is related to the delivery of items or services under that program. See Greene v. Sullivan, 731 F. Supp. 835, 838 (E.D. Tenn. 1990).

2. The I.G. was mandated to exclude Petitioner for a period of at least five years pursuant to section 1128(a)(1) of the Act.

Section 1128(a)(1) of the Act mandates the I.G. to exclude any individual who is convicted of a criminal offense that is related to the delivery of an item or service under Medicare or a State Medicaid program. The minimum term of a mandatory exclusion is five years. Act, section 1128(c)(3)(B).

Here, Petitioner was convicted of criminal offenses that are related to the delivery of items or services under Medicare. Finding 1. The I.G. was, therefore, required to exclude Petitioner pursuant to section 1128(a)(1) of the Act for a term of at least five years.

Petitioner argues that, despite entering a plea of guilty to the crime of conspiring to defraud Medicare, she is not in fact guilty of that offense. Petitioner asserts that:

Petitioner has at all times maintained her innocence. It has always been her position that she did not commit the acts of which she was accused, but pled guilty in the District Court only to avoid the potential of a much harsher sentence which could have been imposed if convicted after a trial. Petitioner moved the Court to be allowed to withdraw her guilty plea soon after, but was denied. Petitioner has argued her innocence, and the incorrectness of the refusal to allow her to withdraw her plea, in the District Court and before the Fifth Circuit Court of Appeals.

Petitioner's response to I.G.'s brief at Paragraphs 2 - 21, pages 1 - 4.

I am not persuaded by Petitioner's argument. The I.G.'s authority to exclude Petitioner pursuant to section 1128(a)(1) of the Act derives from Petitioner's conviction of a program-related offense. Here, Petitioner undeniably was convicted of such an offense. Had a court permitted Petitioner to withdraw her guilty plea then the operative facts of this case would be much different. But, as is evident from Petitioner's response, that has not happened.

3. The I.G. is authorized to impose an exclusion for more than five years, pursuant to section 1128(a)(1) of the Act, in a case where there are aggravating factors that are not offset by mitigating factors.

The Secretary has published regulations which govern the length of exclusions that are imposed pursuant to section 1128 of the Act. 42 C.F.R. Part 1001. The regulation which establishes criteria to govern the length of exclusions that are imposed pursuant to section 1128(a)(1) is 42 C.F.R. § 1001.102. This regulation identifies "aggravating" factors which may be used, if present in a case, as a basis to lengthen an exclusion beyond the five year minimum period and "mitigating" factors which may be used, if present in a case, to offset any aggravating factors that are established.

The regulation makes clear that only those factors that it identifies as either aggravating or mitigating may be considered to determine whether an exclusion of more than five years is reasonable in a case involving section 1128(a)(1) of the Act. The aggravating and mitigating factors thus operate as rules of evidence in such a case. Evidence which does not relate to an identified aggravating or mitigating factor is irrelevant to determining the length of an exclusion and may not be considered.

The regulation does not, however, prescribe the weight which is to be given to any aggravating or mitigating factor. The regulation contains no formula prescribing any exclusion length beyond the five year minimum period based on the presence of aggravating factors or absence of mitigating factors. Rather, the regulation merely identifies the factors which may be used to lengthen an exclusion beyond the minimum period.

The factors which are identified in 42 C.F.R. § 1001.102 may not be applied arbitrarily to lengthen an exclusion beyond the five year minimum. The regulation establishes the criteria which may be considered in determining whether or not to lengthen an exclusion. But, in the absence of any statement in the regulation as to how much weight must be given to an aggravating or mitigating factor, one must look to the purpose of the Act in order to determine what is the reasonable length of an exclusion where aggravating or mitigating factors are present.

Section 1128 of the Act is a remedial statute. Its purpose is not to punish the excluded individual but to protect federally funded health care programs and the beneficiaries and recipients of program funds from an individual whose conduct establishes him or her not to be trustworthy. In assessing the length of any exclusion that is imposed under section 1128, the ultimate issue that must be addressed is: how long of an exclusion is reasonably necessary to protect programs, beneficiaries, and recipients from an untrustworthy individual?

The I.G. may not arbitrarily exclude an individual for any period of more than five years simply because aggravating factors exist in a given case. The I.G. must weigh the evidence that pertains to aggravating and mitigating factors in order to establish the degree of untrustworthiness that is manifested by the excluded individual. An exclusion that is not based on what the evidence which relates to aggravating and mitigating factors shows about the trustworthiness of the excluded individual may be arbitrary and unreasonably punitive.

4. An excluded individual has a right to a de novo hearing.

Any individual who is excluded pursuant to section 1128 of the Act has a right to a hearing before an administrative law judge. Such a hearing is conducted pursuant to section 205(b) of the Act. That section has been interpreted on numerous occasions to require a de novo hearing and an independent decision by the administrative law judge.

That is not to suggest that the administrative law judge is free to ignore entirely the determination that is made by the I.G. The I.G. has expertise in making exclusion determinations and her determinations deserve to be respected. The I.G.'s exclusion determination should be sustained as reasonable if that determination falls within a reasonable range of possible exclusions. However, the administrative law judge must evaluate independently the evidence relating to the aggravating and mitigating factors that are set forth in the regulations. If the administrative law judge concludes, based on his or her independent and de novo evaluation of the evidence, that the exclusion imposed by the I.G. departs significantly from that which the I.G. decides is reasonable, then the administrative law judge may modify the length of the exclusion to assure that the exclusion falls within a reasonable range of exclusions.

5. The I.G. proved the presence of three aggravating factors.

The I.G. proved the presence of three aggravating factors in this case. These are as follows:

1. The acts resulting in Petitioner's conviction, or similar acts, resulted in financial loss to a government program of $1,500 or more. 42 C.F.R. § 1001.102(b)(1). Petitioner was convicted of conspiring to defraud the Medicare program of approximately $3,000,000. I.G. Ex. 1 at 8. She was sentenced to pay restitution in the amount of $3,646,109, an amount which Petitioner agreed was appropriate. I.G. Ex. 2 at 2; I.G. Ex. 3 at 6. Petitioner's guilty plea coupled with her agreement to pay restitution is compelling evidence that her crimes caused a loss to Medicare of more than $1,500.

2. The acts resulting in Petitioner's conviction, or similar acts, were committed over a period of one year or more. 42 C.F.R. § 1001.102(b)(2). Petitioner pled guilty to filing false cost reports over a period that began on January 13, 1993 and which continued through May 11, 1994. I.G. Ex. 1 at 9. This criminal activity spanned a period of more than one year.

3. The sentence imposed against Petitioner for her crimes included a period of incarceration. 42 C.F.R. § 1001.102(b)(5). Petitioner was sentenced to 36 months' imprisonment as a consequence of her conviction. I.G. Ex. 3 at 2.

Petitioner now asserts that she is innocent of the crime to which she pled guilty. In effect she argues that she did not engage in the conduct which is the basis for her conviction.

There is an issue of fact here which is not relevant to deciding whether the I.G. has the authority to exclude an individual pursuant to section 1128(a)(1) based on a conviction of that individual for a program-related offense. As I discuss above, at Finding 2, the I.G.'s authority to exclude pursuant to section 1128(a)(1) derives from an individual's conviction of a program-related offense. Thus, where an individual pleads guilty to such an offense, the truth of the facts alleged in the charge to which the individual pleads guilty is not relevant to deciding the issue of the I.G.'s authority to impose an exclusion.

By contrast, the existence of aggravating factors is based on the underlying facts. Some of the aggravating factors that are described at 42 C.F.R. § 1001.102(b) do not derive from a conviction but are based on the facts of a case. It is relevant, for purposes of establishing the presence or absence of aggravating factors, to determine whether alleged aggravating factors are supported by the evidence.

However, it is reasonable to presume that, where a person pleads guilty to a criminal charge, the facts are as they are alleged in that charge. Where allegations of aggravating factors are based on the facts which underlie a criminal charge to which a party has pled guilty, that party has, at the least, a very heavy burden to offer affirmative evidence to support that party's assertions of innocence.

Here, Petitioner merely denies her guilt without offering any evidence to rebut the allegations in the criminal charge to which she pled guilty. I find Petitioner's bare and unsupported denial to be unpersuasive. Moreover, Petitioner's present denial of guilt is undercut by the fact that she admittedly pled guilty when it was in her self-interest to do so.

6. Petitioner did not prove the presence of any mitigating factor.

Petitioner has not offered any evidence which relates to any of the mitigating factors that are described at 42 C.F.R. § 1001.102(c). Petitioner's assertion that, in the discussions that resulted in her plea of guilty, she was led to believe that she would receive only a five year exclusion - assuming that assertion to be true - does not relate to or describe any of the recognized mitigating factors.

7. An exclusion of 20 years is reasonable.

A 20-year exclusion is tantamount to a permanent exclusion. In order to justify imposing an exclusion of such length the evidence in a case must show that the excluded individual is extremely untrustworthy and is unlikely ever to become trustworthy.

I find such evidence to be present here. The I.G.'s exclusion determination is reasonable.

Petitioner engaged in concerted criminal activity over a period of more than a year. Her crimes cannot be ascribed to ignorance of the law's requirements or to inadvertence. Three times in a one-year period Petitioner consciously and willfully generated false documents in order to defraud the Medicare program. She committed fraud on a massive scale. She stole approximately $3,000,000 from the Medicare program. Such willful criminal activity on the grand scale that Petitioner perpetrated establishes Petitioner to be a manifestly untrustworthy individual.

Petitioner's principal argument in opposing the 20-year exclusion consists of her assertion, which I discuss above, at Finding 5, that she would not have pled guilty to the criminal charge that was filed against her but for her understanding that she would receive only a five-year exclusion. As I discuss above, Petitioner's belief that she would be excluded for only five years is not a mitigating factor. Moreover, her assertion does not in any respect derogate from the evidence which shows Petitioner to be manifestly untrustworthy.

Steven T. Kessel