SUBJECT:

Ruth Ferguson,

Petitioner,

The Inspector General

I. Background

On December 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 period of 15 years. The I.G. advised Petitioner that she was basing her determination to exclude Petitioner on the fact that Petitioner had been convicted in the U.S. District Court (District Court), Eastern District of Arkansas, Western Division, 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 15 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 initially assigned to administrative law judge Marc R. Hillson for a hearing and a decision. On March 3, 2000, Judge Hillson conducted a conference call with the parties and the parties agreed that this case could be decided on written submissions of exhibits and briefs and that an in-person hearing was not necessary. On March 9, 2000, Judge Hillson issued and Order and Schedule (Order) setting out a briefing schedule for the case. The I.G. timely submitted her brief in support of summary judgment and proposed exhibits. The I.G. submitted five proposed exhibits. Petitioner did not object to the I.G.'s exhibits, so I am admitting into evidence I.G. Exs. 1 - 5. Petitioner did not submit a filing based on Judge Hillson's March 9, 2000 Order.

On May 3, 2000, this case was reassigned to me. Thus, on September 18, 2000, I issued an Order to Show Cause as to why Petitioner's case should not be dismissed for abandonment due to her failure to submit documents directed in the March 9th Order. Petitioner responded to my Order to Show Cause on September 26, 2000 by submitting a brief filed in the Eighth Circuit Court of Appeals, which I have identified as P. Ex. 1. Petitioner also submitted the decision from the Eight Circuit Court of Appeals, which I have identified as P. Ex. 2. The I.G. did not object to Petitioner's exhibits, so I am admitting into evidence P. Exs. 1 and 2.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are:

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

2. Whether an exclusion of 15 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.

• Petitioner, Ruth Ferguson, was a regional manager for American X-Rays, Inc. (American) with management responsibility for central and northeast Arkansas and Kansas and was American's director of operations for all regional managers and x-ray technicians. I.G. Ex. 5 at 2.



• American was a company that provided mobile x-ray services to residents residing in nursing homes throughout Arkansas, Oklahoma, Kansas, Colorado, Nebraska, Tennessee, North Carolina, and elsewhere. These nursing home residents were eligible to have the cost of mobile x-ray services paid for by publicly funded programs, such as Medicare, Part B. I.G. Ex. 5 at 2.
  

• The Medicare program, established by the Act, provides medical insurance benefits to individuals, generally 65 years and older, who are entitled to Social Security benefits. I.G. Ex. 5 at 2.



• Medicare Part B compensates providers who supply mobile x-ray services to one or more Medicare patients residing in a nursing home, by paying the provider's claims for a transportation or portage fee covering the cost of bringing the mobile x-ray equipment to the nursing home. I.G. Ex. 5 at 3.



• Medicare compensates a mobile x-ray provider for only one such portage fee for each nursing home visit regardless of how many patients are seen during the visit. When more than one patient is seen during a single trip to a nursing home, the provider of the x-ray services is required to prorate the single portage fee among the claims filed for each individual patient. I.G. Ex. 5 at 3.



• In May 1998, Petitioner was indicted in the District Court, for nine offenses: one count of conspiracy to defraud Medicare; seven counts of filing false claims; and one count of mail fraud, all offenses were committed when she was an employee of American. The Indictment also named three other co-defendants along with Petitioner; however, these three co-defendants were each charged separately and their offenses may or may not be similar to Petitioner's. I.G. Ex. 5.



• The Indictment contended that as part of the conspiracy to scheme and defraud for which Petitioner was indicted, American obtained monies from the Medicare program, to which it was not entitled, by submitting false and fraudulent claims for full transportation fees for each patient beneficiary seen by x-ray technicians of American, regardless of how many patients had been seen during the nursing home trip for which the claim was made. I.G. Ex. 5 at 5.



• It was further an object and part of the conspiracy and scheme to defraud that x-ray technicians employed by American would place either a "1" or leave blank the space provided on the service requisition form for each patient to record the number of patients seen during any one visit. I.G. Ex. 5 at 5.



• In the Indictment, Petitioner was named as having instructed American technicians on January 1, 1994 to skip sequence numbers when filling out the service requisition forms for patients seen at the same location, and on May 1, 1994 Petitioner instructed an x-ray technician to always put a "1" in the equipment transport or "number of patients seen per visit" space on the service requisition form. I.G. Ex. 5 at 8, 9.

• Petitioner was tried and convicted in the District Court, by a jury, for each count of the Indictment in which she was named. Judgment was entered on September 24, 1999. I.G. Ex. 2.



• The District Court sentenced Petitioner to 37 months of imprisonment; three years of supervised release following incarceration; a $500 assessment; and joint and several liability for restitution in the amount of $71,006 with co-defendant Michael Falkner. The District Court held co-defendant Michael Falkner liable for the entire amount of the loss, which the parties stipulated to be $596,643. I.G. Ex. 2.



• On December 30, 1999, the I.G. excluded Petitioner from participation in the Medicare, Medicaid, and all federal health care programs pursuant to section 1128(a)(1) of the Act for a period of 15 years. I.G. Ex. 1.



• Petitioner appealed her conviction to the U.S. Court of Appeals for the Eighth Circuit. On July 31, 2000, the U.S. Court of Appeals for the Eight Circuit affirmed the judgment of the District Court against Petitioner in all respects. P. Ex. 2.



• 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.



• The I.G. is mandated to exclude Petitioner for a period of at least five years. Act, section 1128(c)(3)(B).



• 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.



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



• The I.G. proved the presence of three aggravating factors: (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); (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); and the sentence imposed against Petitioner for her guilty plea included a term of incarceration. 42 C.F.R. § 1001.102(b)(5).

• Petitioner failed to prove the presence of any mitigating factors.



• An exclusion of at least 15 years is reasonable.
  

III. Discussion

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, Petitioner and her co-defendants' crime of defrauding the Medicare program via the claiming of a portage or transportation fee on each of the beneficiary's reimbursement claim forms, when American should have claimed only one prorated portage fee per facility visited 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, at 5 (1996).

The evidence in this case unequivocally establishes that Petitioner was convicted of defrauding the Medicare program. Findings 6 - 11.

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.

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.

An administrative law judge is not 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, an administrative law judge must evaluate independently the evidence relating to the aggravating and mitigating factors that are set forth in the regulations. If an administrative law judge concludes, based on an 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 an administrative law judge may modify the length of the exclusion to assure that the exclusion falls within a reasonable range of exclusions.

An exclusion that is imposed pursuant to section 1128(a)(1) of the Act must be for a minimum period of at least five years. Act, section 1128(c)(3)(B). In this case, the I.G. determined to exclude Petitioner for a period of 15 years based on her finding that there exist three aggravating factors as described in 42 C.F.R. § 1001.102(b).

In determining whether the length of an exclusion is reasonable, it is the responsibility of the administrative law judge 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 that may be considered in determining the length of an exclusion. I find that the I.G. proved the presence of three aggravating factors: (1) the acts resulting in Petitioner's conviction or similar acts, caused financial loss of $1500 or more to a governmental program or to one or more entities. 42 C.F.R. § 1001.102(b)(1); (2) the acts that resulted in Petitioner's conviction, or similar acts, were committed by Petitioner over a period of one year of more. 42 C.F.R. § 1001.102(b)(2); and (3) the sentence imposed against Petitioner for her guilty plea included a term of incarceration. 42 C.F.R. § 1001.102(b)(5).

First, the acts which resulted in Petitioner's conviction resulted in losses to the Medicare program which exceeded $1500. Petitioner, along with co-defendant Michael Falkner, was held jointly and severally liable for $71,006 of the total financial loss to the Medicare program. I.G. Ex. 3 at 2. The District Court held.

[c]onsidering their financial circumstances as well as the way in which defendants structured and carried out their criminal scheme, the Court intends to hold defendant Falkner liable for the entire amount of the loss, which the parties have stipulated to be $596,643.

I.G. Ex. 3 at 2.

The total financial impact that Petitioner's crimes had on Medicare was substantial. The I.G. gave Petitioner notice that she planned on using the entire amount of financial loss attributable to the acts that resulted in Petitioner's conviction. I.G. Ex. 1; I.G. Brief in Support of Summary Disposition (I.G. Br.), at 7, fn.1. Specifically, in determining the length of Petition's exclusion, the I.G. contends that the amount of $596,643 was the amount of financial loss to the Medicare program and this "evidence was given due consideration in calculating an appropriate period of exclusion." I.G. Br. at 9. Moreover, the I.G. cites 42 C.F.R. § 1001.102(b)(1) for authority to consider the entire amount of loss. This section specifically states that "the entire amount of financial loss to such programs . . . will be considered regardless of whether full or partial restitution has been made." I.G. Br. at 8. Although, the I.G. does admit that this particular regulation does not contemplate joint and several liability orders of restitution, the I.G. is not precluded from considering the total financial loss as an aggravating factor. The I.G. is authorized to consider the entire amount of financial loss to lengthen the period of exclusion where the financial loss is more than $1500. Here, the amount of financial loss to the Medicare program was $596,643. I.G. Ex. 1. This evidence was given due consideration by the I.G. in calculating an appropriate period of exclusion.

I find that a fair estimate of the amount of damages caused by Petitioner may be found in the restitution that Petitioner was sentenced to pay. Tarvinder Singh, D.D.S., DAB CR697 (2000); Gilbert Ross, DAB CR478 (1997); see also Steven Alonso Henry, M.D., DAB CR638 (2000). As established by the fact that Petitioner was found to be jointly and severally liable for restitution in the amount of $71,006 with co-defendant Michael Falkner, Petitioner's criminal acts resulted in substantial loss to the Medicare program. I.G. Ex. 2. I note that the losses in Petitioner's case were multiple times the regulatory minimum. Moreover, I find that the financial impact that Petitioner's crimes had on Medicare was substantial. Petitioner stipulated that the entire loss to the Medicare program caused by the fraudulent acts of Petitioner and the other co-conspirators amounted to at least $596,643. Finding 11. I recognize that the amount that Petitioner paid of $71,006 as jointly and severally liable may not reflect the actual total damages that Petitioner's fraud caused the Medicare program. But, her portion certainly reflects an acknowledgment by Petitioner that the damages that Petitioner perpetrated through her fraud were large and that they exceeded $7l,006 and that the total loss to Medicare amounted to $596,643. The I.G. contends that the amount of $596,643 was the amount of financial loss to the Medicare program and this "evidence was given due consideration in calculating an appropriate period of exclusion." I.G. Br. at 9.

Second, the fraudulent schemes committed by Petitioner that resulted in the conviction, or similar acts, were committed over a period of one year or more. The Indictment charged Petitioner with criminal acts that occurred from July 8, 1992 through May 13, 1998. I.G. Ex. 5 at 4. Petitioner was found guilty of devising and executing a scheme to defraud the Medicare program from approximately July 8, 1992 through May 13, 1998. I.G. Ex. 5. Petitioner's fraudulent activities occurred over a period in excess of five years.

Third, the sentence imposed by the District Court included incarceration. The District Court sentenced Petitioner to 37 months of imprisonment. I.G. Ex. 2 at 2. Moreover, on release from prison, Petitioner was subject to supervised release for a term of three years. I find that Petitioner's period of incarceration was substantial.

Although 42 C.F.R. § 1001.102 establishes the sole factors which I may consider 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 whether an exclusion is reasonable 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 15 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 conviction 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. Her criminal acts included filing claims for services that she never provided. I.G. Ex. 2 at 2.

Moreover, in the final analysis, the precise amount of money that Petitioner helped to steal from Medicare is not so important as is the fact that she helped to steal a large sum of money over more than a five-year period. Petitioner is a highly untrustworthy individual whether she stole $71,006 or $596,643.

Petitioner argues that an exclusion of 15 years is too long. 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 she 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 federal program funds.

Conclusion

I find that the I.G. was authorized to exclude Petitioner pursuant to section 1128(a)(1) of the Act. I find that a 15-year exclusion is not unreasonable.

Marion T. Silva

Chief Administrative Law Judge