SUBJECT:

David Yedidsion, M.D.,

Petitioner,

The Inspector General

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, David Yedidsion, M.D., from participating in Medicare, Medicaid, and all federally funded health care programs for a period of at least 20 years.

I. Background

Petitioner is a physician. On June 30, 1999, the I.G. notified Petitioner that she had determined to exclude Petitioner from participating in Medicare, Medicaid, and all federally funded health care programs for a minimum period of 20 years. The I.G. advised Petitioner that she was basing her determination to exclude Petitioner on her conclusion that Petitioner had been convicted of a criminal offense related to the delivery of an item or service under the Medicare program as is described at section 1128(a)(1) of the Social Security Act (Act). The I.G. advised Petitioner further that she was basing her determination to exclude Petitioner for at least 20 years on her conclusion that there existed aggravating factors in Petitioner's case which justified an exclusion of more than the minimum five-year period that is required by law in a case where an exclusion is imposed pursuant to section 1128(a)(1).

Petitioner requested a hearing and the case was assigned to me for a hearing and a decision. Each party advised me that an in-person hearing was unnecessary and that the case could be heard and decided based on their written submissions of exhibits and briefs. The parties then submitted briefs and proposed exhibits. The I.G. submitted 10 proposed exhibits which I am admitting into evidence as I.G. Ex. 1 - I.G. Ex. 10. Petitioner submitted seven proposed exhibits which I am admitting into evidence as P. Ex. 1 - P. Ex. 7. I gave the parties until August 22, 2000 to file reply briefs. The I.G. filed a reply brief and Petitioner did not.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. A basis exists to exclude Petitioner pursuant to section 1128(a)(1) of the Act; and,

2. An exclusion of 20 years 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 separately numbered heading.

1. Petitioner was convicted of a criminal offense related to the delivery of Medicare items or services thereby establishing a basis for excluding Petitioner pursuant to section 1128(a)(1) of the Act.

Section 1128(a)(1) of the Act mandates the exclusion of any individual who is convicted of a criminal offense related to the delivery of an item or service under Medicare or a federally funded health care program. As a matter of law, the crime of defrauding the Medicare program via the filing of a false claim for a fictitious service is a program-related crime within the meaning of section 1128(a)(1) of the Act. See Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); Alan J. Chernick, D.D.S., DAB CR434 (1996) at 5.

The evidence in this case unequivocally establishes that Petitioner was convicted of defrauding the Medicare program. Petitioner was convicted of filing numerous false claims for fictitious Medicare services. On February 4, 1998, a 20-count indictment was filed against Petitioner in the United States District Court for the Central District of California. I.G. Ex. 2. On November 9, 1998, Petitioner entered a plea of guilty to counts 1 - 10 of the indictment. I.G. Ex. 7.

Petitioner pled guilty to knowingly devising, executing, and carrying out a scheme to defraud and to obtain money from Medicare by means of materially false and fraudulent pretenses, representations, and promises. I.G. Ex. 2 at 2 - 3. Petitioner executed his scheme by causing false and fraudulent bills to be submitted to Transamerica Corporation, a private contractor that administered the Medicare program in Southern California on behalf of the United States Department of Health and Human Services. Id at 3.

In pleading guilty, Petitioner admitted to 10 separate instances in which he used the United States mails to perpetrate fraud against Medicare. I.G. Ex. 2 at 4 - 7. The practices to which Petitioner pled guilty as elements of his fraud included submitting reimbursement claims on behalf of persons who were: dead on the dates of the claimed services; residents of nursing homes and board and care facilities that had barred Petitioner from treating their residents on the dates of the claimed services; living in states or other areas that were remote from Petitioner on the dates of the claimed services; incarcerated in State correctional hospitals on the dates of the claimed services; and, already receiving necessary medical care at hospitals which had no affiliation with Petitioner on the dates of the claimed services. Id. at 3 - 4.

2. The I.G. is mandated to exclude Petitioner for a period of at least five years.

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. The minimum term of a mandatory exclusion is five years. Act, section 1128(c)(3)(B).

Here, Petitioner was convicted of criminal offenses related to the delivery of items or services under Medicare. Finding 1. The I.G. is, therefore, required to exclude Petitioner 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 regulations 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 it 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.

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 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 four aggravating factors.

The aggravating factors that the I.G. proved are as follows:

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

The acts which resulted in Petitioner's conviction resulted in losses to the Medicare program which exceeded $1,500. The 10 counts of the indictment to which Petitioner entered a guilty plea charged Petitioner with having received reimbursement from Medicare based on fraudulent claims in amounts which exceeded $100,000. I.G. Ex. 2 at 4 - 5. Petitioner was sentenced to pay restitution for his false claims in the amount of $311,000. I.G. Ex. 7 at 1.

b. The acts that resulted 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)).

The 10 counts of the indictment to which Petitioner pled guilty involve crimes that cover a period which began on or about July 12, 1993 and which continued through September 23, 1994. I.G. Ex. 2 at 4 - 5. That is a period of criminal activity which is more than a year's duration.

c. The sentence imposed against Petitioner for his guilty plea included a term of incarceration (42 C.F.R. § 1001.102(b)(5)).

Petitioner was sentenced to a term of 24-months' imprisonment as a consequence of his plea of guilty to the first 10 counts of the indictment. I.G. Ex. 7 at 1.

d. Petitioner was convicted of other offenses besides that which is the basis for his exclusion and was the subject of another adverse action that arises from the same circumstances that resulted in his conviction. (42 C.F.R. § 1001.102(b)(9)).

Petitioner was convicted of other crimes besides those which involve fraud against Medicare. On May 12, 1998, Petitioner was indicted in the United States District Court for the Central District of California on two counts of making false statements within the jurisdiction of a government agency. I.G. Ex. 3. Specifically, Petitioner was charged with submitting two false statements in connection with his application for a disaster loan from the Small Business Administration. Id. On November 9, 1998, Petitioner entered a plea of guilty to both counts of this indictment. I.G. Ex. 8.

The I.G. also asserts as a basis for establishing an aggravating factor under 42 C.F.R. § 1001.102(b)(9) that Petitioner settled a civil lawsuit brought against Petitioner by the United States government pursuant to the False Claims Act which was based on the fraud that resulted in Petitioner's conviction. I.G. Ex. 9. The I.G. argues that this lawsuit and the settlement comprise an "other adverse" action within the meaning of the regulation.

I have considered the question of whether the lawsuit and its settlement actually constitutes an "adverse" action within the meaning of the regulation. I conclude that, in the context of this case, they do. The regulation does not define the term "adverse action." However, it is apparent from the context of the regulation that the term means a civil, criminal, or administrative action taken against an individual or entity which produces an unfavorable result. Using that meaning, the action taken against Petitioner by the United States, consisting of the suit and the settlement agreement, plainly was "adverse." Here, Petitioner admitted his liability in the settlement agreement. His acceptance of the agreement effectively constituted an admission by him that he would have been found to be liable had the case been tried. Petitioner settled the lawsuit "[i]n order to avoid the delay, uncertainty, inconvenience and expense of protracted litigation . . . " I. G. Ex. 9 at 2. In doing so, he admitted to "everything admitted in the plea agreement and other proceedings" in the criminal cases that had been filed against him. Id.

The I.G. asserts additionally that Petitioner's license to practice medicine in California was revoked based on charges that were filed against him by the Medical Board of California. I.G. Exs. 4 and 10. The I.G. argues that these facts constitute an additional basis for finding the presence of an aggravating factor under 42 C.F.R. § 1001.102(b)(9) in that the license revocation action is an "other adverse action" against Petitioner which arises from the same set of circumstances - Petitioner's conviction of fraud involving Medicare - which serves as the basis for the imposition of an exclusion against Petitioner.

I am not relying on the evidence pertaining to Petitioner's license revocation as additional evidence of an aggravating factor. I do not do so because the I.G. did not give Petitioner adequate notice of her intent to rely on this evidence. I agree with the I.G. that the facts pertaining to Petitioner's license revocation could serve as an additional reason for finding an aggravating factor under 42 C.F.R. § 1001.102(b)(9). However, the I.G. concedes that she did not tell Petitioner in her notice of exclusion of her intent to rely on these facts as evidence of the presence of an aggravating factor. Nor did the I.G. seek at any time subsequent to sending the original notice of exclusion to Petitioner to amend her notice by alleging the license revocation as an additional ground for establishing an aggravating factor.

6. Petitioner failed to prove the presence of any mitigating factor.

Petitioner alleges the presence of a mitigating factor in this case. He asserts that the United States District Court judge who accepted his guilty plea to the charges of fraud involving Medicare determined that Petitioner had a mental, emotional, or physical condition before or during the commission of his crimes that reduced his culpability. Petitioner's opening brief at 14; 42 C.F.R. § 1001.102(c)(2).

I am not persuaded by this argument. Petitioner argued strenuously before the United Sates District Court trial judge that emotional problems and substance abuse diminished his capacity to make judgments and reduced his culpability for his crimes. P. Ex. 4. The sentencing judge recognized that Petitioner suffered from a substance abuse disorder and emotional problems. It may well be that Petitioner's substance abuse disorder and emotional problems motivated him to commit crimes. However, the evidence does not suggest that the judge concluded that Petitioner's culpability for his crimes was diminished by his substance abuse disorder or emotional problems. There is nothing in the sentencing order that states or indicates that the judge found Petitioner's culpability to have been reduced. I.G. Ex. 7. Petitioner has not introduced a transcript of Petitioner's sentencing hearing.

The sentence that was imposed against Petitioner included, as conditions for his supervised release after serving a term of incarceration, that he: participate in outpatient substance abuse treatment and submit to drug and alcohol testing; and participate in a psychological/psychiatric counseling or treatment program. I.G. Ex. 7 at 1 - 2. But, these conditions for release do not evidence any diminution of Petitioner's culpability as a consequence of his substance abuse disorder or emotional problems. Rather, all that they suggest is that the substance abuse disorder and emotional problems were areas of concern to the trial judge that precluded an unconditional release of Petitioner at the completion of his incarceration.

7. An exclusion of at least 20 years is reasonable.

Although 42 C.F.R. § 1001.102 establishes the sole factors which may be considered in deciding whether an exclusion is reasonable, it does not prescribe the weight which is to be given to any 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, 42 C.F.R. § 1001.102 merely identifies the factors which may be used to lengthen an exclusion beyond the minimum period.

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 in the absence of any statement in the regulation as to how much weight must be given to an aggravating or mitigating factor. 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.

I have examined closely the evidence which relates to the aggravating factors that the I.G. established in this case. The evidence establishes Petitioner to be an extraordinarily untrustworthy individual. I find that an exclusion of at least 20 years is reasonable in this case because of the extremely high degree of untrustworthiness displayed by Petitioner.

The evidence in this case proves that, for a lengthy period, Petitioner committed numerous criminal acts to defraud the Medicare program. Petitioner made many false claims against the program. It is evident from both the indictment and Petitioner's guilty plea that Petitioner's crimes were not isolated or spur of the moment events. The criminal acts that Petitioner engaged in comprise a pattern of crimes committed over a lengthy period of time. Petitioner invented fictitious treatments and claims in order to extract money from Medicare. His criminal acts included filing claims for services that he never provided. I.G. Ex. 2 at 2. They included filing claims which inflated the value of the services that he provided. Id. They included filing claims on behalf of individuals who were dead at the time that Petitioner alleged to have provided treatments to these individuals. Id. They included filing claims on behalf of individuals who were in facilities that barred Petitioner from providing care. Id.

Petitioner's pattern of crimes extended to other areas beyond the Medicare program. Medicare was not the only government program defrauded by Petitioner. Additional evidence of Petitioner's lack of trustworthiness is evident from the fraud that Petitioner committed against the Small Business Administration.

The financial impact that Petitioner's crimes had on Medicare was substantial. The counts to which Petitioner pled guilty describe crimes which netted Petitioner more than $100,000. However, the evidence in this case - while it does not precisely establish the impact of Petitioner's crimes - shows that Petitioner stole a great deal more than $100,000 from the Medicare program. Petitioner was sentenced to pay restitution in the amount of $311,000. I.G. Ex. 7 at 1. He settled the False Claims Act lawsuit against him by agreeing to pay a total of $1,500,000. I recognize that the amount that Petitioner paid as settlement of the lawsuit may not reflect the actual damages that Petitioner's fraud caused the Medicare program. But, it certainly reflects an acknowledgment by Petitioner that the damages that Petitioner perpetrated through his fraud were large and that they exceeded $100,000.

Petitioner argues that an exclusion of 20 years is tantamount to a permanent exclusion given the length of the exclusion and Petitioner's age. He asserts that an essentially permanent exclusion is unreasonable because it is punitive. I agree that the effect of the exclusion in this case may be to preclude Petitioner permanently from participating in federally funded health care programs. However, I do not find the exclusion to be punitive and unreasonable given the level of untrustworthiness demonstrated by Petitioner. What concerns me particularly about this case is the pattern of crimes engaged in by Petitioner. Petitioner's crimes consisted of multiple criminal acts which he perpetrated many times over a lengthy period of time. I infer from the intensity and duration of Petitioner's criminal misconduct that Petitioner simply is an individual who cannot be trusted to deal with program funds.

Petitioner argues also that he has accepted responsibility for his wrongdoing. He asserts that he has expressed shame and remorse for his conduct. He argues that his assumption of responsibility is consistent with the conduct of one who can be trusted in the future even though he committed wrongdoing in the past.

I do not accept this argument for two reasons. First, remorse for misconduct and acceptance of responsibility are not among the mitigating factors that I may consider in deciding whether an exclusion is reasonable. See 42 C.F.R. § 1001.102(c). Petitioner's assertions are therefore irrelevant. Second, Petitioner's remorse may be heartfelt, but it does not satisfy me that he no longer manifests the propensity to engage in criminal conduct. The unrebutted evidence in this case shows that Petitioner manifests a mental condition which might motivate him to commit crimes. P. Ex. 4. There is no evidence that Petitioner has been cured of that condition and, therefore, there is nothing to suggest that he does not continue to manifest the propensity to commit crimes, notwithstanding his remorse.

Steven T. Kessel

Administrative Law Judge