SUBJECT:

Donald R. Kirks, M.D.,

Petitioner,

The Inspector General

DECISION

I conclude that Petitioner, Donald R. Kirks, M.D., is subject to a five-year minimum mandatory period of exclusion from participation in Medicare, Medicaid, and all other federally funded health care programs. Therefore, I affirm the Inspector General's (I.G.'s) determination.

BACKGROUND

By letter dated April 28, 2000, Donald R. Kirks, M.D., (Petitioner) was notified by the I.G., United States Department of Health and Human Services (HHS) that the I.G. had decided to exclude Petitioner for a period of five years from participation in Medicare, Medicaid, and all federally funded health care programs. The I.G. imposed this exclusion pursuant to section 1128(a)(3) of the Social Security Act (Act), 42 U.S.C. § 1320a-7(a)(3), based on Petitioner's conviction of a criminal offense or other financial misconduct in connection with the delivery of a health care item or service or any act or omission in a health care program operated or financed in whole or in part by any federal, State, or local government agency.

Petitioner filed a timely request for review of the I.G.'s action. The Petitioner initially requested an in-person hearing, but later both parties agreed that the case could be decided based on written arguments and documentary evidence, and that an in-person evidentiary hearing was unnecessary.

Because I have determined that there are no facts of significance genuinely in dispute, and that the only matters to be decided are the legal implications of the undisputed facts, I have decided the case on the basis of the parties ' written submissions.

The parties submitted written briefs and proposed exhibits. The I.G. filed five proposed exhibits. I have identified these exhibits as I.G. Exhibits (I.G. Exs.) 1-5. Petitioner filed 45 proposed exhibits (32 exhibits numbered 1-32 and 13 exhibits lettered A-M). I have identified these exhibits as Petitioner Exhibits (P. Exs.) 1-32 and P. Exs. A-M. The parties did not object to each other's proposed exhibits. I am admitting into evidence I.G. Exs. 1-5, P. Exs. 1-32, and P. Exs. A-M.

APPLICABLE LAW

Section 1128(a)(3) of the Act authorizes the Secretary of the HHS (Secretary) to exclude from participation in any federal health care program (as defined in section 1128B (f) of the Act):

[a]ny individual that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996, under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(3) of the Act shall be for a minimum period of not less than five years.

PETITIONER'S ARGUMENTS

Petitioner argues that the offense itself was not related to the delivery of a health care item or service and that the offense did not constitute an act or omission in a program operated by or financed in whole or in part by any federal, State, or local government. Further, Petitioner contends that his exclusion is not mandatory under the regulations. Finally, Petitioner argues that the judge in his criminal case concluded that his conviction was not related to the delivery of medical services, and that the judge's determination in that case is binding on the I.G. here.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding below as a separate numbered paragraph. I discuss my findings in the discussion section below.

1. Petitioner is a doctor and during the period of time relevant to this case was president of the Children's Hospital Radiology Foundation (Foundation). The Foundation, which is affiliated with Children's Hospital (Hospital) and Harvard Medical School, is a not-for-profit organization specializing in radiology treatment and care of children. I.G. Ex 2.

2. As an employee of the Foundation, Petitioner was authorized to use a charge card for the payment of travel expenses when traveling on business for the Foundation or when traveling on behalf of the Foundation at the invitation of a professional organization. I.G. Ex. 2.

3. Petitioner used the Foundation's charge card to charge travel and lodging expenses when traveling at the request of other organizations, and he would later submit vouchers for charged expenses to those organizations and keep the reimbursements that he received without reimbursing the Foundation. I.G. Ex. 2.

4. Petitioner used the Foundation's credit card for personal travel and expenses, and then directed Foundation employees to use Foundation monies to pay for those charged expenses. I.G. Ex. 2.

5. Petitioner purchased professional hockey tickets with Foundation funds, sold the tickets, and kept the proceeds for himself. I.G. Ex. 2.

6. On June 7, 1999, pursuant to a guilty plea, Petitioner was convicted in U.S. District Court for Massachusetts of one count of Embezzlement from Medical Practice, in violation of Title 18 U.S.C. § 669. I.G. Ex. 3.

7. Petitioner defrauded the Foundation of more than $72,000. I.G. Exs. 2, 5. (In a separate settlement agreement Petitioner was required to repay the Foundation in excess of $500,000 for improper payments he received.) I.G. Ex. 5; P. Ex. 29.

8. As a result of his conviction, Petitioner was sentenced to two years of probation and fined $10, 000. I.G. Exs. 4, 5.

9. On April 28, 2000, Petitioner was notified by the I.G. that he was being excluded from participation in the Medicare and Medicaid programs for a period of five years, pursuant to sections 1128(a)(3) and 1128(c)(3)(B) of the Act.

10. Under section 1128(a)(3) of the Act, the I.G. is authorized to exclude any individual or entity that has been convicted of a criminal offense occurring after August 21, 1996, consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program operated by or financed in whole or in part by any Federal, State or local government agency.

11. Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(3) of the Act shall be for a minimum period of not less than five years.

12. Petitioner's criminal conviction constitutes a conviction within the scope of section 1128(i)(3) of the Act.

13. Petitioner's conviction for Embezzlement from Medical Practice is related to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct within the scope of section 1128(a)(3) of the Act.

14. Petitioner's criminal conviction is connected to the delivery of a health care item or service within the meaning of section 1128(a)(3) of the Act.

15. Petitioner's offense was an act or omission in a health care program operated by or financed in whole or in part by a federal, State, or local government agency within the meaning of section 1128(a)(3) of the Act.

16. The I.G. is authorized to exclude Petitioner pursuant to section 1128(a)(3) of the Act.

17. A finding in a criminal case is not binding on the I.G. when that finding is contrary to the applicable statute that the I.G. is authorized to enforce.

DISCUSSION

Portions of section 1128 of the Act were amended by the enactment of the Health Insurance Portability and Accountability Act (HIPAA) of 1996, Public Law No. 104-131. One of those changes was the addition of section 1128(a)(3). Section 1128(a)(3) was essentially recodified from the old section 1128(b)(1), which existed prior to the passing of HIPAA, and the section was moved from the permissive exclusions to the mandatory exclusions. So that, currently, section 1128(a)(1) and section 1128(a)(3) are parallel provisions in that they use the same "related to the delivery of an item or service" language. However, section 1128(a)(3) goes beyond section 1128(a)(1) in that section 1128(a)(3) requires an exclusion when misconduct involves the delivery of a health care item or service or any act or omission in any health care program, not only when the item or service or act or omission is within the Medicare or Medicaid program. Thus, consideration of prior section 1128(b)(1) and section 1128(a)(1) cases are instructive when a section 1128(a)(3) exclusion is at issue.

Petitioner does not dispute that he was "convicted" of a criminal offense within the meaning of sections 1128(i) (1) and (2) of the Act. Petitioner's conviction was for one of the enumerated criminal offenses, i.e., embezzlement, and thus expressly covered by section 1128(a) (3). However, Petitioner argues that his conviction does not fall within section 1128(a)(3) of the Act because it is too attenuated and remote from actual health care delivery and that his financial wrongdoing was completely unrelated to the clinical care he provided.

The determination of whether Petitioner's conviction fits within section 1128(a) (3) requires an examination of: (1) the criminal offense for which Petitioner was convicted; and (2) the actions which formed the basis for the conviction. See Charles W. Wheeler and Joan K. Todd, DAB No.1123 (1990); Francis Craven, DAB CR143 (1991).

The regulations and case law indicate that there is no requirement that Petitioner's crime involve the direct or immediate manipulation of items or services. The regulations clearly contemplate that offenses involving administrative and management services may satisfy the statutory requirement. See 42 C.F.R. § 1001.201(a)(1). See also Sabina E. Acquah, DAB CR480 (1997). Indeed, in Frank Haney, DAB CR181 (1990), the administrative law judge found that even false entries in a hospital's accounting records are deemed to be "in connection with the delivery of a health care item or service."

Here, Petitioner stole money from a Foundation that provides treatment and care to patients. The Foundation is an organization in the business of providing health care items and services, and Petitioner embezzled money from the Foundation. These facts alone are sufficient to establish the necessary connection between Petitioner's criminal offense and the delivery of health care items or services.

Further, Petitioner argues that he did not defraud the federal government or any other state or local program. Petitioner contends that he did not take money that was intended for health care, and that the money came from departmental academic funds. Petitioner's arguments are unpersuasive for two reasons.

First, it is not necessary for the I.G. to prove that Petitioner's criminal offense is connected to the Medicare and Medicaid programs for an exclusion to be proper pursuant to section 1128(a)(3) of the Act because fraud of any type is sufficient to satisfy the statute. Indeed, Congress believed that the Medicaid and Medicare programs could best be protected by excluding those convicted of financial misconduct in delivering health care to patients not covered by government programs. See S. Rep. No. 109, 100th Cong., 1st Sess. 7. Congress believed that those who cheat private health care payors cannot be trusted to deal honestly with public health care payors. Therefore, it is irrelevant under section 1128(a)(3) whether or not a federal or state program suffered any pecuniary loss.

Next, Petitioner's criminal conduct affected the Foundation's ability to deliver health services by depriving the Foundation of funds. Criminal acts directed at a health care provider's administration or financial management will necessarily be indirect but, nevertheless, have an effect on the provision of care, thus meeting the requirements of the Act. Moreover, while I do not necessarily accept Petitioner's characterization of the origin of the embezzled funds, it is disingenuous of Petitioner to argue that it would not make a difference, since it is undisputed that the embezzled monies were Foundation funds and would, by the very nature of reducing available funds for the Foundation's use, affect the Foundation's overall operation.

Further, Petitioner argues that the Foundation does not receive federal or state funds, and that the Foundation is operated independently of the Hospital. Petitioner maintains that the Foundation and the Hospital are completely distinct corporations, with distinct programs and funding systems and, therefore, the Foundation is not financed in whole or in part by any federal, state, or local government agency. I disagree.

A review of the operating procedures and transactions between the Foundation and the Hospital reveal that the Foundation does in fact receive federal funds. The Foundation's Financial Statements and Independent Auditors' Report (audit report) for the year ended June 30, 1996, provides, in relevant part:

[t]he statement of principles and procedures between the Foundation and the Hospital provides that the Radiologist-in Chief at the Children's Hospital shall be the president of the Foundation. All members of the Foundation must have medical staff appointments in the Department of Radiology at the Hospital and be full-time members of the faculty at Harvard Medical School.

The Hospital bills in its name for all professional services rendered by the Foundation based on the Children's Hospital Department of radiology fee schedule. The Hospital pays the Foundation a percentage of the professional fees equal to the Hospital's annual revenue collection percentage, less a charge for the Hospital's billing services equal to five percent (5%) of the professional fees. Total income earned by the Foundation amounted to $7,098,654. Billing service fees were $499,939.

P. Ex. 26 at 12; see also P. Ex. 23 at 2.

Not only is the Hospital a billing service for the Foundation, but it is clear from the audit report submitted by Petitioner that the Foundation is an integral component of the Hospital's infrastructure.⁽¹⁾ All members of the Foundation staff must have medical staff appointments at the Hospital and the Hospital bills, in the Hospital's name, for all professional services rendered by the Foundation based on the Hospital's fee schedule. Thereafter, when the Hospital receives the payments for the rendered services, the Hospital pays the Foundation a percentage of the collected fees. Petitioner has never argued that the Hospital does not bill for and receive Medicare and Medicaid payments.⁽²⁾ Consequently, I find that an interrelated relationship exists between the Hospital and the Foundation so that federal and state funds received by the Hospital are also tantamount to being received by the Foundation. Therefore, I find that the Foundation is financed in whole or in part by a federal, state, or local government agency.

Additionally, Petitioner argues that exclusion is not mandatory because: (1) the I.G. should have used its discretionary authority to reduce the period of the exclusion; (2) section 1128(a)(3), closely mirrors the former section 1128(b)(1), therefore the discretionary exclusion authority is applicable; (3) the I.G. should have considered numerous mitigating factors in deciding to exclude petitioner.

Prior to the enactment of HIPAA on August 21, 1996, section 1320a-7(b)(1) (section 1128(b)(1)) provided for permissive exclusion for those convicted of nonprogram related crimes. However, when Congress enacted HIPAA it made the provisions governing nonprogram related criminal offenses more stringent by moving such offenses to the mandatory exclusion subsection of 1128(a). Thus, under section 1128(a)(3) the exclusion must be mandatory. Moreover, section 1128(c)(3)(B) provides that:

[i]n the case of an exclusion under subsection (a), the minimum period of exclusion shall be not less than five years . . .

Neither the I.G. nor an administrative law judge has the authority to reduce the five-year minimum exclusion mandated by sections 1128(a)(3) and 1128(c)(3) of the Act.⁽³⁾

Finally, Petitioner argues that the judge in his criminal case determined that his conviction was not related to the delivery of medical services. The presiding United States District Judge in the criminal case stated on the record that, "[t]he conduct for which the defendant stands convicted is not related to the delivery of medical services." P. Ex. F. Petitioner argues that this statement on the record by the judge in the criminal case amounts to a finding of fact and is therefore binding on an administrative law judge. I disagree.

The Act requires a de novo review of the appeal. Section 205(b) of the Act. I am required to make findings of fact and conclusions of law based on the record before me. In addition, I am bound by all applicable statutory and regulatory authority. Thus, I am not obligated to accept as fact the criminal court judge's statement.⁽⁴⁾ Similarly, the assigned Assistant United States Attorney's stipulation that Petitioner's conduct was not related to the delivery of a health care item or service, is also not binding for the same reasons as stated above.⁽⁵⁾

CONCLUSION

Sections 1128(a)(3) and 1128(c)(3)(B) mandate that Petitioner be excluded from Medicare and Medicaid for a period of at least five years because he has been convicted of a criminal offense in connection with the delivery of a health care item or service with or respect to an act or omission in a health care program operated by or financed in whole or in part by any federal, state, or local government agency. Therefore, the five-year exclusion is sustained.

Marion T. Silva

Chief Administrative Law Judge

1. While it is not necessary to determine the exact relationship between the Hospital and the Foundation, except to determine that one exists, it would be reasonable to conclude that an employer/employee relationship exists between them and that what is attributable to the Hospital as the employer is therefore attributable to the Foundation as an employee.

2. Since the evidence shows that the Hospital is a tax-exempt, publicly supported charitable and educational institution, Petitioner could not make such an argument. See P. Ex. 23 at 1.

3. Petitioner asserts, among other things, an extraordinary lifetime record of service, commitment to pediatric radiology, and expressed genuine remorse as mitigating factors. Regardless of any of the factors cited by Petitioner, I am without authority to reduce the mandatory minimum exclusion.

4. Since this decision is adverse to Petitioner, if he decides to ultimately appeal the case to the federal courts, I would of course be bound by the federal judicial review authority.

5. Moreover, I note that these statements were made at the request of Petitioner's attorney in that case. P. Ex. F. Such request by Petitioner's attorney suggests to me, at the very least, that he was aware of the statutory consequences of a health care related offense and was attempting to avoid them for his client.