SUBJECT:

Mark A. Maher,

Petitioner,

The Inspector General

I. Background

On September 30, 1999, the I.G. notified Petitioner that he was being excluded pursuant to section 1128(a)(1) of the Act for a period of 20 years. Petitioner requested a hearing and the case was assigned to me for a hearing and a decision. I held a prehearing conference in which the parties agreed that the case could be heard and decided based on their written submissions. I established a schedule for the parties to file briefs and supporting exhibits. The parties complied with that schedule.

The I.G. submitted five exhibits (I.G. Ex. 1 - I. G. Ex. 5) with her brief. Petitioner submitted one exhibit as an attachment to his brief. Petitioner did not identify his exhibit. I am identifying it as P. Ex. 1. I admit into evidence I.G. Ex. 1 - I.G. Ex. 5 and P. Ex. 1.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are:

1. Whether the I.G. is authorized to exclude Petitioner pursuant to section 1128(a)(1) of the Act; and

2. Whether the 20-year exclusion that the I.G. imposed against Petitioner is unreasonable.

B. Findings of fact and conclusions of law

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

1. Petitioner was convicted of criminal offenses that are related to the delivery of items or services under the Massachusetts State Medicaid program.

Petitioner was charged with, and pled guilty to, two criminal offenses relating to delivery of items or services under the Massachusetts State Medicaid program. I.G. Ex. 3; I.G. Ex. 5. These offenses consisted of theft from the Massachusetts Division of Medical Assistance and knowingly and willfully making false statements in cost reports that were submitted to the Massachusetts Division of Health Care Policy for the purpose of obtaining payment for services. I.G. Ex. 3 at 2, 4.

The undisputed facts of this case are that Petitioner made fraudulent reimbursement claims to the Massachusetts State Medicaid program. Between 1989 and 1997, Petitioner served as treasurer and chief financial officer of two nursing facilities, the Arborway Manor Convalescent Home of Jamaica Plain, Massachusetts, and the Emery Retirement and Convalescent Home of West Medford, Massachusetts. I.G. Ex. 2 at 1. During this period, Petitioner, acting in his official capacity, submitted cost reports which fraudulently sought reimbursement from the Massachusetts State Medicaid program for personal expenses that he incurred. Id. These fraudulent expense claims included claims for landscaping and carpentry that was done on Petitioner's home, for personal American Express charges, for cellular phone billings, for liquor purchases, and for purchases of floral arrangements. Id. Additionally, Petitioner cashed thousands of dollars of checks that he made payable to "cash" and included the amounts of these checks as bogus expenses on cost reporting forms. Id. at 1 - 2.

As a matter of law, the making of false claims against a State Medicaid program 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. Greene v. Sullivan, 731 F. Supp. 835, 838 (E.D. Tenn. 1990). Therefore, Petitioner's crimes consisted of criminal offenses that were related to the delivery of items or services under the Massachusetts State Medicaid program.

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 the Massachusetts State Medicaid program. 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.

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 a 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 decisions 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 administrative law judge 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). The financial impact on the Massachusetts State Medicaid program of Petitioner's conduct exceeded $1,500. The criminal charges of which Petitioner was convicted do not state the financial impact of Petitioner's crimes. One of the two counts to which Petitioner pled guilty recites only that Petitioner stole money in an amount of more than $250. I.G. Ex. 3 at 2. The other count to which Petitioner pled guilty does not recite the financial impact of the crime. I.G. Ex. 3 at 4. However, there exists other evidence, which Petitioner does not dispute, which establishes that Petitioner defrauded the Massachusetts State Medicaid program of thousands of dollars. This consists of a news release from the Massachusetts Attorney General which described the nature and impact of Petitioner's crimes. I.G. Ex. 2. The Massachusetts Attorney General estimates that the impact of Petitioner's crimes on the Massachusetts State Medicaid program was $100,000. Id. at 1. Petitioner asserts that he repaid the entire amount of the funds that he obtained from his crimes. Petitioner's brief at 1. However, he does not deny that he defrauded the Massachusetts State Medicaid program of the amount of $100,000.

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 was charged with, and pled guilty to, criminal activity that spanned a period from January 1, 1989 to on or about October 31, 1997. I.G. Ex. 3 at 2, 4. Petitioner now asserts that the acts which were the basis for his conviction actually occurred between 1989 and 1992. Petitioner's brief at 1. According to Petitioner, he was audited only for that period and the period between 1993 and 1997 was never audited. Id. However, even if I accept Petitioner's assertions, he has admitted to criminal activity which spans a period of more than three years' duration.

3. The sentence imposed against Petitioner for his crimes included a period of incarceration. 42 C.F.R. § 1001.102(b)(5). The sentence that was imposed against Petitioner included a one-year period of home confinement. I.G. Ex. 5 at 2. This sentence constitutes a sentence of "incarceration" within the plain meaning of the regulation. Although Petitioner was not imprisoned, his freedom of movement was restrained substantially.

The I.G. alleges the presence of a fourth aggravating factor. According to the I.G., Petitioner has a prior criminal, civil, or administrative sanction record as is described by 42 C.F.R. § 1001.102(b)(6). The I.G. relies on a civil settlement agreement that Petitioner and two other individuals entered into with the Massachusetts Attorney General's office as proof of this alleged aggravating factor. I.G. Ex. 4. According to the I.G., the settlement agreement embodies an "administrative sanction" against Petitioner.

The settlement agreement appears to be a comprehensive agreement between Petitioner and other named individuals and entities and the Massachusetts Attorney General to resolve civil fraud claims by the Massachusetts State Medicaid program. The agreement provides for the payment of a cash settlement. I.G. Ex. 4 at 3. It also contains a disclaimer in which the non-government parties to the agreement assert that they are not admitting to violation of any laws, regulations, or rules of the Massachusetts State Medicaid program. Id.

The language in the settlement agreement on which the I.G. relies as proof of a fourth aggravating factor consists of a statement in which the non-government parties to the agreement:

agree that from and after the date of the execution of this Settlement Agreement to voluntarily and permanently withdraw as providers of Medicaid services and to never own or operate any nursing home, rest home or long term care facility in the Commonwealth of Massachusetts.

I.G. Ex. 4 at 3 - 4. The I.G. argues that this language memorializes an administrative sanction.

I disagree with the I.G.'s argument. The language of 42 C.F.R. § 1001.102(b)(6) is unambiguous. An aggravating factor exists where there exists a prior record of an administrative sanction being imposed against an excluded individual. The regulation plainly requires, as a prerequisite for finding an aggravating factor, that some adverse State action be taken against that individual.

No such action occurred here. The meaning of the settlement agreement is plain. Petitioner and the other non-government parties to the agreement voluntarily agreed to withdraw permanently from participation in the Massachusetts State Medicaid program. Petitioner did not admit to any liability and was not found liable for any wrongdoing, as an element of the settlement agreement. No sanction was imposed against Petitioner.

I might have ruled differently had the I.G. offered proof that an administrative sanction proceeding was initiated against Petitioner by the State of Massachusetts or by an arm of the State and that Petitioner had settled that action as a means of avoiding an adverse finding. A statutory basis would exist under sections 1128(b)(4) and (5) of the Act to exclude individuals who settle State administrative proceedings by surrendering their licenses to provide health care. In those situations, the settlement agreements clearly are efforts to resolve sanction proceedings. But, in this case, the I.G. offered no evidence that a sanction proceeding was ever implemented against Petitioner. In the absence of evidence showing that Petitioner signed the settlement agreement in the face of formal sanction proceedings, Petitioner's agreement not to participate in the Massachusetts State Medicaid program is simply a voluntary action by Petitioner and not a sanction.

The settlement agreement itself is not evidence of such an action. It recites only that Petitioner and other non-government parties entered into the settlement agreement "to resolve the issues identified in the Attorney General's investigation in a fair and equitable manner and to avoid the delay, burdens and uncertainty of further proceedings." I.G. Ex. 4 at 2 - 3. There is no statement in the agreement that State sanction proceedings had either been initiated against Petitioner or that their initiation was being contemplated. The phrase "further proceedings" is so broad as to encompass many types of proceedings, including civil litigation that is not a sanction proceeding.

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

Petitioner makes a number of arguments to support his contention that mitigating factors exist in this case. Petitioner argues that he should be given credit for having made restitution. Petitioner's brief at 1. He argues additionally that he did not use the proceeds of checks that he cashed for his personal benefit. Id. at 2. He asserts that his criminal conduct was intended to keep the two nursing homes that he was involved with in business. Id. He asserts that he should be accorded the same leniency as he argues was accorded by the I.G. to other parties who committed allegedly similar offense to those of which Petitioner was convicted. Id. Finally, Petitioner asserts that he is remorseful for his conduct. Id.

None of the arguments made by Petitioner describe mitigating factors that I may consider. See 42 C.F.R. § 1001.102(c)(1) - (3). For this reason they are irrelevant to the issue of whether the exclusion that the I.G. imposed against Petitioner is unreasonable.

7. A 20-year exclusion is unreasonable.

I have looked closely at the evidence of aggravation presented by the I.G. I find that it does not support a 20-year exclusion.

An exclusion of the length advocated by the I.G. is tantamount to a permanent exclusion from participation in federally funded health care programs. In effect, when an exclusion of 20 years is imposed, the I.G. is saying that the excluded individual is so untrustworthy that the individual will never be trusted again to participate in a federally funded health care program. Given that, it is apparent that an exclusion of 20 years should be reserved for those individuals who manifest the highest degree of untrustworthiness.

Evidence of such a high degree of untrustworthiness is not present in this case. To begin with, the I.G. failed to establish one of the aggravating factors which are the basis for the I.G.'s 20-year exclusion determination. There are three - and not four - aggravating factors present in this case.

Second, the evidence which relates to the aggravating factors that the I.G. did establish is not persuasive evidence that Petitioner is so untrustworthy as to merit an exclusion of 20 years. It is true, as the I.G. asserts, that Petitioner was incarcerated. But, the incarceration in this case consisted of house arrest. And, the terms of Petitioner's house arrest enabled Petitioner to be out of his home during working hours. Petitioner's confinement to his home was limited to the hours of from 7:30 p.m. to 7:00 a.m. each day. I.G. Ex. 5 at 2. During the remaining hours Petitioner presumably was free to work or to attend to personal matters. Such a limited term of incarceration does not suggest that the sentencing court found Petitioner to be highly untrustworthy.

It is also true that Petitioner paid restitution totaling $100,000. I.G. Ex. 2. I infer from that amount that Petitioner's crimes caused substantial losses to be sustained by the Massachusetts State Medicaid program. However, it is unclear from the evidence offered by the I.G. whether Petitioner's crimes caused actual losses to be sustained by the program in the amount of $100,000 or whether the restitution amount was an amount simply agreed on as part of the settlement of Petitioner's criminal case. The exhibit that the I.G. relies on to support her assertions is a copy of a news release. I.G. Ex. 2. The court record in Petitioner's case does not mention that restitution was ordered nor does it contain any finding by the court as to the amount of loss caused by Petitioner. See I.G. Ex. 5. Thus, while I am confident in concluding that Petitioner's crimes caused the Massachusetts Medicaid program to sustain a substantial loss I cannot find from the evidence offered by the I.G. that the actual loss sustained by the program was $100,000 or even an amount in the vicinity of $100,000.

I do agree with the I.G. that the evidence establishes that Petitioner perpetrated his crimes over a period of several years. In other cases I have found that persistent criminal conduct by an individual is a substantial aggravating factor and I do so here as well.

On balance, I conclude that the exclusion of 20 years determined by the I.G. in this case does not fall within a reasonable range of exclusions for the conduct that is at issue. The evidence of aggravation does not show Petitioner to be so untrustworthy as to necessitate an exclusion of 20 years.

Moreover, the exclusion imposed here does not fall into a reasonable range of exclusions for the type of conduct that is at issue in this case. I take notice of the fact that, over the years I have seen many exclusion cases where the evidence of aggravation is far more impressive than is the case here. In many of those cases, the length of the exclusion determined by the I.G. was for a substantially shorter period than the 20-year exclusion that the I.G. determined to impose in this case. For example, the case of William D. Neese, M.D., DAB CR467 (1997), also involved an exclusion imposed pursuant to section 1128(a)(1) Act. In that case, the Petitioner had defrauded a State Medicaid program for a period of two years. The amount of his fraud approximated $600,000. He was sentenced to two concurrent terms of imprisonment for a period of 18 months. In the Neese case, the I.G. determined to impose an exclusion of 10 years. Plainly, the degree of untrustworthiness manifested by the petitioner in Neese, based on the aggravating factors established in that case, was greater than that demonstrated by the Petitioner here. Yet, the I.G. imposed an exclusion of only one-half the duration of the exclusion that is imposed in this case.

8. A 10-year exclusion is reasonable.

I conclude that an exclusion of 10 years is reasonable in light of the evidence in this case. A term of 10 years takes into account the fact that Petitioner engaged in sustained criminal activity over an extended period of time. It also takes into account the fact that his crimes caused the Massachusetts State Medicaid program to sustain a substantial - albeit indeterminate - loss. Furthermore, the term takes into account my conclusion that Petitioner's criminal activity is significantly less egregious than the I.G. depicts it to be. Finally, it is in line with other exclusions that have been imposed for similar conduct and, therefore, falls within a reasonable range of exclusions for such conduct.

Steven T. Kessel

Administrative Law Judge