SUBJECT:

Donald R. Hamlin and Burnside Pharmacy,

Petitioner,

DATE: February 8, 2002

The Inspector General

Docket No.C-01-444 and
C-01-470
Decision No. CR870

CONSOLIDATED DECISION

I affirm the determinations of the Inspector General (I.G.) to exclude Donald R. Hamlin and Burnside Pharmacy, Inc. (Petitioners), from participation in Medicare, Medicaid, and all other Federal health care programs for a period of 15 years. I find that the I.G.'s determinations have a proper basis and that 15-year exclusions are not unreasonable.

PROCEDURAL HISTORY

Petitioners were notified of their respective exclusions by separate letters dated December 29, 2000. The I.G. cited section 1128(a)(1) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)) as the basis for Petitioner Hamlin's exclusion. Petitioner, Burnside Pharmacy, was excluded pursuant to section 1128(b)(8) of the Act (42 U.S.C. § 1320a-7(b)) due to its association with Petitioner Hamlin.

Petitioners jointly appealed from the I.G.'s actions through their single counsel by letter dated February 22, 2001. In as much as Petitioner Burnside Pharmacy's fate shall be decided by the decision related to Petitioner Hamlin, a consolidated decision is also appropriate. Petitioners only cite as grounds for their appeals that the length of the exclusion of Petitioner Hamlin and the resulting exclusion of Petitioner Burnside Pharmacy, are unreasonably long.

On March 13, 2001, the cases were assigned to Administrative Law Judge (ALJ) Joseph Riotto for hearing and decision. The cases were subsequently reassigned to Chief ALJ Marion Silva on April 30, 2001. On August 14, 2001, Judge Silva conducted a prehearing telephone conference in these cases and established a briefing schedule. The substance of the conference is memorialized in an Order dated August 28, 2001. The cases of Petitioner Hamlin and Petitioner Burnside Pharmacy were reassigned to me by memoranda dated October 22, 2001 and October 25, 2001, respectively.

The I.G. filed a separate Brief in Support of Exclusion in each case with attached exhibits on September 14, 2001.⁽¹⁾ Petitioners filed their "Opposition" November 2, 2001. Petitioners submitted no exhibits for my consideration. The I.G. filed its reply brief on December 4, 2001. Judge Silva's Order of August 28, 2001, which established the briefing schedule, also established the presumption that absent objection, offered exhibits are both authentic and factually correct in content. The Order also established the presumption that uncontested or undisputed statements of fact in the pleadings are true. I find no objection by either Petitioner to the exhibits offered in these cases by the I.G., therefore I.G. exhibits 1 through 9 are admitted. Furthermore, I find no objections by either party to the factual assertions contained in the briefs of opposing parties and any or all assert facts may be accepted as true under the terms of the August 28, 2001 Order.⁽²⁾

The parties have identified no material issues of fact in dispute. Thus, I determine that summary judgment is appropriate and no hearing is necessary in this case for a full and fair disposition of the issues presented.

FINDINGS OF FACT

The following findings of fact are based upon the uncontested and undisputed assertions of fact in the parties pleadings and the exhibits admitted.

1. Petitioner, Donald R. Hamlin, was on the date of the I.G. action, a pharmacist licensed by the Commonwealth of Kentucky and authorized to participate in Medicare, Medicaid or other Federal health care programs.

2. Petitioner, Burnside Pharmacy, Inc., was on the date of the I.G. action, a pharmacy located in the Commonwealth of Kentucky and authorized to participate in Medicare, Medicaid or other Federal health care programs.

3. Petitioner Hamlin was, at the time of the I.G. action, an owner or principal stockholder of Petitioner Burnside Pharmacy.

4. Petitioner Hamlin was Petitioner Burnside Pharmacy's sole officer, its initial director and accomplished its incorporation according to the records of the Commonwealth of Kentucky.

5. On June 23, 2000 final judgment was entered in case number 00-CR-00096 by Judge Daniel Venters, 28^th Judicial Circuit, Pulaski Circuit Court Division 1, finding Petitioner Hamlin guilty pursuant to his pleas, of the felony offense of Assistance Program Fraud in excess of $10,000 by billing the Kentucky Medical Assistance Program for drugs not provided to Medicaid patients and by billing some drugs in unit dosages when in fact the drugs were not dispensed in unit dosages.

6. Petitioner Hamlin's sentence included the requirement to make restitution to the Commonwealth of Kentucky in the amount of $575,000 (the amount of loss to the program), and to serve 60 days in jail in addition to time served of roughly 30 days, with 3 years supervised probation. Petitioner Hamlin also paid $15,000 to cover the cost of the investigation of his misconduct.

7. By letters dated December 29, 2000, the I.G. advised Petitioners that they were being excluded from further participation in Medicare, Medicaid or other Federal health care programs for a period of 15 years, effective 20 days after the date of the letters.

8. The I.G.'s decision to exclude was based upon Petitioner Hamlin's conviction as described in Finding 5 and Petitioner Hamlin's association with Petitioner Burnside Pharmacy as described in Findings 3 and 4.

9. The I.G. found three aggravating factors existed that justified an extended period of exclusion in this case: (a) the financial loss to the government exceeded $1,500; (b) the acts for which Petitioner Hamlin was convicted occurred over the course of more than a year; (c) and the sentence imposed included incarceration.

CONCLUSIONS OF LAW

1. Summary judgment is appropriate in this case as there are no material facts in dispute.

2. Petitioner Hamlin's conviction was a criminal offense involving the delivery of a health care item or service under Medicare or a State health care program within the meaning of the Act, section 1128(a)(1) (42 U.S.C. 1320a-7(a)(1).

3. Petitioner Hamlin must be excluded from participation in any Federal health care program for a minimum period of five years pursuant to section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)) due to his conviction.

4. Petitioner Burnside Pharmacy may be excluded from participation in any Federal health care program pursuant to section 1128(b)(8)(A) of the Act (42 U.S.C. § 1320a-7(b)(8)(A)), for a period equivalent to that imposed upon Petitioner Hamlin (42 C.F.R. § 1001.10(b)) due to the conviction of Petitioner Hamlin and his ownership, control and/or management of Petitioner Burnside Pharmacy.

5. The I.G. may increase the term of exclusion based on a finding of any of the aggravating factors specified at 42 C.F.R. § 1001.102(b).

6. If the I.G. finds that any of the aggravating factors specified at 42 C.F.R. § 1001.102(b) justify a term of exclusion greater than the statutory minimum exclusion of five years, then the I.G. may consider the mitigating factors specified at 42 C.F.R. § 1001.102(c) to reduce the period of exclusion to no less than five years.

7. The range of exclusionary periods contemplated by the Act and the Secretary's regulations extend from a minimum of five years to permanent exclusion, in the case of a mandatory exclusion under section 1128(a). See Act, § 1128(c)(3)(B) and (G) (42 U.S.C. § 1230a-7(c)(3)(B) and (G); 42 C.F.R. §§ 1001.102(a) and (d).

8. Three aggravating factors have been established by the I.G. by a preponderance of evidence: (a) Petitioner Hamlin's criminal acts resulted in a loss to the government of $1500 or more; (b) the acts for which Petitioner Hamlin was convicted occurred over a period of one year or more; and (c) the sentence imposed by the court included a period of incarceration.

9. None of the mitigating factors specified at 42 C.F.R. § 1001.102(c) have been proven by Petitioners, who bear the burden to make such showing.

10. The 15-year exclusion (5 years mandatory and a 10 year extension) ordered by the I.G. is within a reasonable range and is not unreasonable.

DISCUSSION

A. APPLICABLE LAW

Petitioner's right to a hearing by an ALJ and judicial review of the final action of the Secretary is provided by section 1128(f) of the Act (42 U.S.C. § 1230a-7(f)). Petitioner's joint request for a hearing was timely filed and I do have jurisdiction. However, the Secretary has by regulation limited my scope of review to two issues: (1) whether there is a basis for the imposition of the sanction; and, (2) whether the length of the exclusion is unreasonable. 42 C.F.R. § 1001.2007(a)(1). The standard of proof is a preponderance of the evidence and there may be no collateral attack of the conviction which is the basis for the exclusion. 42 C.F.R. § 1001.2007(c) and (d). Pursuant to 42 C.F.R. § 1005.4(c)(5), I have no authority to review the I.G.'s discretionary decision to actually exclude Petitioner Burnside Pharmacy pursuant to section 1128(b) of the Act. Pursuant to 42 C.F.R. § 1001.1001(b) the length of exclusion of Petitioner Burnside Pharmacy is automatically the same length as that for Petitioner Hamlin.

Pursuant to section 1128(a)(1) of the Act, the Secretary may exclude from participation in the Medicare and Medicaid programs any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Title XVIII or under any State health care program. Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(1) of the Act shall be for a minimum period of five years, unless specified aggravating or mitigating factors are present which form the basis for lengthening or shortening the period of exclusion. See also 42 C.F.R. § 1001.102(a), (b), and (c). Only if the aggravating factors justify an exclusion of longer than five years, may mitigating factors be considered as a basis for reducing the period of exclusion to no less than five years. 42 C.F.R. §1001.102(c).

Section 1001.102(b) of 42 C.F.R. provides, in relevant part, that the following factors may be considered to be aggravating and a basis for lengthening the period of exclusion:

(1) [t]he acts resulting in the conviction, or similar acts, resulted in financial loss to a government program or to one or more other entities of $1500 or more. (The entire amount of financial loss to such programs or entities, including any amounts resulting from similar acts not adjudicated, will be considered regardless of whether full or partial restitution has been made); (2) [t]he acts that resulted in the conviction, or similar acts, were committed over a period of one year or more . . . (5) [t]he sentence imposed by the court included incarceration . . . .

Section 1001.102(c) of 42 C.F.R. provides that only if any of the aggravating factors justify a period of exclusion longer than five years, may mitigating factors be considered as a basis for reducing the period of the exclusion to no less than five years. The following factors may be considered as mitigating and a basis for reducing the period of exclusion:

(1) [t]he individual or entity was convicted of 3 or fewer misdemeanor offenses, and the entire amount of financial loss to Medicare and the State health care programs due to the acts that resulted in the conviction, and similar acts, is less than $1500; (2) [t]he record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional, or physical condition before or during the commission of the offense that reduced the individual's culpability; or (3) [t]he individual's or entity's cooperation with Federal or State officials resulted in - (i) [o]thers being convicted or excluded from Medicare, Medicaid, or all other Federal health care programs, (ii) [a]dditional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or (iii) [t]he imposition against anyone of a civil money penalty or assessment under part 1003 of this chapter.

Evidence which does not relate to an aggravating factor or a mitigating factor is irrelevant to determining the length of an exclusion. The burden is upon Petitioners to show the presence of mitigating factors. The I.G. bears the burden of proving the existence of aggravating factors. 42 C.F.R. § 1005.15; John (Juan) Urquijo, DAB No. 1735 (2000).

B. ISSUES

Whether there is an appropriate basis for the exclusion of Petitioner Hamlin.

Whether there is an appropriate basis for the exclusion of Petitioner Burnside Pharmacy.

Whether the length of exclusion imposed upon Petitioner Hamlin (and by default upon Petitioner Burnside Pharmacy) was unreasonable.

C. ANALYSIS

In this case, ALJ Silva made clear in her August 28, 2001 Order, that absent objection, offered exhibits are presumed to be both authentic and factually correct in content. The Order also established the presumption that uncontested or undisputed statements of fact in the pleadings are true. I find no objection by Petitioners to the exhibits offered in these cases by the I.G. Furthermore, I find no objections by either party to the factual assertions contained in the briefs of opposing parties and any or all asserted facts may be accepted as true under the terms of the August 28, 2001 Order. Because I find no inconsistencies in the facts alleged by the parties and no specific factual disputes have been identified by the parties, I conclude there are no disputed issues of material facts. The issues may thus be decided by application of the law to the undisputed facts and summary judgment is appropriate.

2. There was an appropriate basis for the exclusion of Petitioner Hamlin.

Petitioners do not contend that Petitioner Hamlin's conviction was not an appropriate basis for the exclusion of Petitioner Hamlin. My review of the exhibits and pleadings satisfies me that Petitioner Hamlin was convicted of fraud by improper billings amounting to at least $575,000. The fraud was perpetrated upon the Commonwealth of Kentucky and its State health care program. Thus, section 1128(a)(1) of the Act requires that Petitioner Hamlin be excluded from participation in any Federal health care program for a minimum period of five years.

3. There was an appropriate basis for the exclusion of Petitioner Burnside Pharmacy.⁽³⁾

Petitioner Burnside Pharmacy has not contended that Petitioner Hamlin's conviction was not an appropriate basis for exclusion of Petitioner Burnside Pharmacy based on Petitioner Hamlin's association with the pharmacy. Petitioner Burnside Pharmacy has not challenged the conclusion of the I.G. that Petitioner Hamlin owned, controlled or managed it. Petitioner Burnside pharmacy has not alleged that the I.G. abused her discretion by ordering its exclusion from Federal health care programs. My review of the exhibits satisfies me that Petitioner Hamlin incorporated Petitioner Burnside Pharmacy, maintained an ownership and controlling interest in the pharmacy, and managed the pharmacy. Thus, the pharmacy was subject to a permissive exclusion under section 1128(b)(8) of the Act due to the conviction of Petitioner Hamlin.

4. The 15-year exclusion of Petitioners waswithin a reasonable range and not unreasonable.

The only issue truly joined on this appeal is whether the 15-year exclusion was unreasonable. Petitioners argue that 15 years is unreasonably long, without indicating what period of exclusion might be reasonable. Petitioners argue that when determining what is reasonable, I should consider that Petitioner Hamlin made restitution of $575,000 and paid an additional $15, 000 for the cost of the investigation of his fraud. Petitioners also argue that I should consider that only a brief period of incarceration was ordered in this case -- 60 days in addition to the 30 days time served. Finally, Petitioners argue that I should consider that in other cases involving more egregious conduct, the I.G. ordered shorter periods of exclusion. The I.G. argues, of course, that the regulations accord the I.G. discretion and that the 15-year exclusion is within the reasonable range in this case.

I note that the regulations strictly limit my jurisdiction in cases such as this. I may decide whether or not the I.G. had a proper basis for the exclusion of Petitioner Hamlin but not Petitioner Burnside Pharmacy. I may decide whether the period of exclusion for Petitioner Hamlin was "unreasonable" but the period of exclusion for Petitioner Burnside pharmacy is fixed by regulation. The Departmental Appeals Board (DAB) has made clear that the role of the ALJ in cases such as this is to conduct a "de novo" review as to the facts related to the basis for the exclusion and the facts related to the existence of aggravating and mitigating factors identified at 42 C.F.R. § 1001.102. See Joann Fletcher Cash, DAB No. 1725 (2000), fn. 6, and cases cited therein. The regulation specifies that I must determine whether the length of exclusion imposed is "unreasonable" (42 C.F.R. § 1001.207(a)(1)). The DAB has explained that in determining whether a period of exclusion is "unreasonable," I am to consider whether such period falls "within a reasonable range." Cash, fn. 6. The DAB cautions that whether I think the period of exclusion too long or too short is not the issue. I am not to substitute my judgment for that of the I.G. and may only change the period of exclusion in limited circumstances.

Despite a thorough search of prior DAB decisions and Federal precedent, I have found no clear statement of what constitutes the "reasonable range" referred to by the DAB. I do note that the 15-year exclusion ordered in this case is close to the maximum ordered in any DAB or ALJ decisions I located. However, I also note that there are many approved 15-year exclusions. My review of the statute and regulations shows that the range of possible exclusions provided for in the case of mandatory exclusions range from the minimum of 5 years to a maximum of permanent exclusion. 42 U.S.C. § 1320a-7(c)(3)(B) and (G), 42 C.F.R. § 1001.102(a) and (d). This is the only range I have found specified in the law and it seems to be "reasonable."

My reading of 42 C.F.R. § 1001.102 is that with a mandatory exclusion under section 1128(a) of the Act, there is an automatic exclusion of five years. Pursuant to 42 C.F.R. § 1001.102(d) one prior conviction for conduct that would cause mandatory exclusion under section 1128(a) of the Act, increases the minimum period of exclusion to 10 years and two prior convictions automatically causes permanent exclusion.

The five-year and ten-year minimum exclusions may only be extended if the I.G. can point to evidence that one or more of the aggravating factors specified at 42 C.F.R. § 1001.102(b) are present. The regulations do not limit the additional period of exclusion the I.G. may impose based upon the presence of aggravating factors. The regulations also do not specify how much of an extension is warranted by the existence of an aggravating factor. The DAB has indicated that it is not the number of aggravating factors that is determinative rather, it is the quality of the circumstances, whether aggravating or mitigating, which is controlling in analyzing these factors. Barry D. Garfinkel, M.D., DAB No. 1572 (1996).

Section 1001.102 of 42 C.F.R. provides that when aggravating factors justify an exclusion of more than the mandatory minimum period, then the I.G. may consider any of the three specified mitigating factors if they are shown to exist. In Urquijo, the DAB suggested that the I.G.'s failure to consider a mitigating factor amounts to an abuse of discretion. The DAB also made clear in Urquijo that: if the I.G. considers an aggravating factor to extend the period of exclusion and that factor is not later shown to exist on appeal; or if the I.G. fails to consider a mitigating factor that is shown to exist, then the ALJ may make a decision as to the appropriate extension of the period of exclusion beyond the minimum.

Thus, my determination of whether or not the exclusionary period in this case is unreasonable hinges upon on three-points: (1) whether the period of exclusion is within the reasonable range; (2) whether the I.G. has shown the existence of aggravating factors; and, (3) whether the Petitioners have shown that there are mitigating factors that the I.G. failed to consider.

The 15-year exclusion ordered in this case is more than the minimum 5-year exclusion, but less than permanent exclusion. The 15-year exclusion is within the range recognized by the regulations, and it is reasonable.

The presence of three aggravating factors has never been disputed in this case. See Petitioners Opposition, p. 3. The three aggravating factors are: (1) the acts for which Petitioner Hamlin was convicted resulted in a loss of $1500 or more; (2) the acts occurred over a period of a year or more; and (3) the sentence imposed included incarceration. These three factors are among the aggravating factors the I.G. is permitted to consider under 42 C.F.R. § 1001.102(b). Considering the admissions of the parties in their pleadings and the exhibits admitted, a preponderance of the evidence supports finding that each of the three aggravating factors exist in this case. The existence of the three aggravating factors justifies extending the period of exclusion beyond the minimum.

The existence of the aggravating factors, also triggers the requirement to consider any mitigating factors under 42 C.F.R. § 1001.102(c). However, the regulation is clear that only the three listed mitigating factors may be considered. As quoted above, none of those mitigating factors are present in this case. Instead, Petitioners argue in mitigation in this case that Petitioner made restitution and paid the cost of investigation. However, 42 C.F.R. § 1001.102(b)(1) specifically provides that restitution may not be considered when considering the aggravating factor of a loss of $1,500 or more. Further, restitution is not a mitigating factor listed under 42 C.F.R. § 1001.102(c). Petitioners also argue that I should consider that the period of incarceration ordered in this case was brief. However, the aggravating factor under the regulation is that incarceration was ordered, length is not the issue under 42 C.F.R. § 1001.102(b)(5). The brevity of the incarceration is also not a mitigating factor under 42 C.F.R. § 1001.102(c).

Finally, Petitioners argue that lesser periods of exclusion were ordered in other cases on more egregious facts. However, Petitioners cite no authority for why I should consider this argument. They are correct that in the cases they cite more aggravating factors existed but shorter exclusions were ordered than in these cases. Petitioners cannot allege, however, that there are no DAB or ALJ decisions where there are only three aggravating factors found with a 15-year exclusion ordered. Indeed, in Cash the DAB found the same three aggravating factors existed that Petitioners concede exist here, and the DAB affirmed the ALJ's conclusion that the 15-year exclusion was not unreasonable. Further, the DAB has indicated it is the nature or quality of the aggravating factors and not their number that is controlling. Here, the total loss was $575,000, a very significant amount. The fraudulent activity of Petitioner Hamlin occurred over two years, more than double the period considered as an aggravating factor under the regulation. Although the period of incarceration served by Petitioner Hamlin was only approximately 90 days, the State judge also imposed three years of supervised probation. I also note that Petitioner Hamlin agreed to a plea agreement that provided for the Commonwealth of Kentucky to recommend a sentence of 10 years, a significant sentence reflecting the gravity of his offenses. Considering the quality of the aggravating factors in this case, the 15-year exclusion is certainly not unreasonable.

The aggravating factors exist and their quality is not inconsistent with the period of exclusion ordered by the I.G. in Petitioner Hamlin's case and, consequently, in Petitioner Burnside pharmacy's case. The only remaining factor to consider is whether Petitioners have proven any mitigating factors that the I.G. failed to consider. Petitioners concede that Petitioner Hamlin was convicted of a felony with a loss to the government of $1,500 or more. There is no evidence that the State judge found any evidence of diminished mental, emotional, or physical condition that limited Petitioner Hamlin's culpability. There is no evidence that Petitioner Hamlin cooperated with Federal or State authorities with the effect specified by the regulation. Therefore, I conclude that none of the mitigating factors specified by 42 C.F.R. § 1001.102(c) exist to justify reduction of the 15-year exclusion ordered by the I.G.

CONCLUSION

For the foregoing reasons, the 15-year exclusions of Petitioners are affirmed.

Keith W. Sickendick

Administrative Law Judge

1. The I.G. offered Exhibits (Exs.) 1 through 7 in C-01-444 and Exs. 1 through 6 in C-01-470. Exhibits 1 through 4 are the same in both cases. It was not specified before briefing that the cases would be heard and decided in a consolidated manner, albeit under separate case numbers. However, Petitioners filed joint submissions throughout this proceeding, and the I.G. has not objected. I find that it is judicially efficient to handle these cases in a consolidated manner. While, the I.G.'s election to file separate exhibits for each case was not improper, it is easier to handle one set of exhibits. Therefore, I strike one set of the I.G.'s Exs. 1-4 and consider these exhibits entered in both cases. In addition, I renumber Exs. 5 and 6 filed in C-01-470 as I.G. Exs. 8 and 9 and refer to I.G. Exs. "1 through 9" in the text.

2. There appears to be no inconsistency in the facts asserted by the parties, which is consistent with my conclusion that there are no issues of material fact in dispute.

3. Pursuant to 42 C.F.R. § 1005.4(c)(5), I have no authority to review the I.G.'s decision to actually exclude Petitioner Burnside Pharmacy pursuant to section 1128(b) of the Act. My review extends only to the issue of whether or not the association between Petitioners existed.