CASE | DECISION | JUDGE

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
IN THE CASE OF  


SUBJECT:

George E. Smith, M.D., M.Ed.,

Petitioner,

DATE: March 25, 2002
-v -

 

The Inspector General

 

Docket No.C-01-680
Decision No. CR885
DECISION
...TO TOP

DECISION

This case is before me in review of the Inspector General's (I.G.) determination to exclude the Petitioner, George E. Smith, M.D., M.Ed. (Petitioner), from participation in Medicare, Medicaid, and all other federal health care programs until Petitioner's debt has been completely satisfied, pursuant to the authority set out in section 1128(b)(14) of the Social Security Act (Act). Because I believe that no material facts remain in dispute and that the I.G.'s action is correct as a matter of law, I affirm the I.G.'s determination.

By letter dated March 30, 2001 (notice letter), the I.G. of the United States Department of Health and Human Services (DHHS) notified Petitioner that he was to be excluded from Medicare, Medicaid, and all federal health care programs as a result of his failure to repay or otherwise discharge his indebtedness to the government incurred through a series of National Health Service Corps (NHSC) scholarships. The exclusion was to remain in effect until Petitioner had discharged his debt to the satisfaction of the Public Health Service (PHS). The I.G. relied on the terms of sections 1128(b)(14) and 1892 of the Act, 42 U.S.C. §§ 1320a-7(b)(14) and 1395ccc.

Petitioner timely sought review of the I.G.'s action by his letter of May 10, 2001. The sufficiency of Petitioner's hearing request has not been challenged, and no other jurisdictional issues have been raised or become apparent to me. On June 19, 2001, I held a telephone conference with the parties to discuss the issues presented by the case and the procedures best suited for addressing them. As a result, the parties were directed to submit briefs in support of their respective positions in the context of disposition by summary judgment, supplemented by exhibits in documentary form. Those briefs and exhibits are now before me, and in the absence of objection by either side, I admit I.G. Exhibits (I.G. Ex.) 1-34 and Petitioner's Exhibits (P. Ex.) 1-11 into evidence. I refer to the I.G.'s initial brief as "I.G. Br.," and to Petitioner's response brief as "P. Br." The I.G. also submitted a reply brief, to which I refer as "I.G. Reply Br."

Because the exhibits before me clearly establish all facts material to this litigation and leave no material facts in dispute, and because those material facts support the I.G.'s position as a matter of law, I enter summary judgment in favor of the I.G. and thereby sustain the determination to exclude Petitioner, George E. Smith, M.D., M.Ed., from all Medicare, Medicaid, and all other federal health care programs until such time as Petitioner has cured his default or otherwise discharged his obligations to the satisfaction of the PHS. 42 C.F.R. § 1001.1501(b). I shall set forth my reasons for doing so, together with the findings of fact and conclusions of law on which I rest my decision, below.

ISSUES

The legal issues before me in this case are limited to two. The first issue, however, is best understood if set out in two parts. The two issues are:

1. Whether the I.G. had a basis upon which to exclude Petitioner? By the explicit terms of section 1128(b)(14) of the Act, such a basis exists if Petitioner is "in default . . . of scholarship obligations or loans in connection with health professions education made or secured, in whole or in part, by the Secretary" and if "all reasonable steps" have been taken to secure repayment of Petitioner's obligations; and

2. Whether the length of the exclusion imposed against Petitioner by the I.G. is reasonable?

CONTROLLING STATUTES AND REGULATIONS

Exclusions from the Medicare and Medicaid programs, and from all other federal health care programs, based on a health care practitioner's default on NHSC obligations, are based on sections 1128(b)(14) and 1892 of the Act, 42 U.S.C. §§ 1320a-7(b) and

1395ccc. Section 1128(b)(14) of the Act confers its discretionary authority on the Secretary of DHHS in these terms:

(b) PERMISSIVE EXCLUSION. - The Secretary may exclude the following individuals and entities from participation in any Federal health care program (as defined in section 1128B(f)): . . .

(14) DEFAULT ON HEALTH EDUCATION LOAN OR SCHOLARSHIP OBLIGATIONS. - Any individual who the Secretary determines is in default on repayments of scholarship obligations or loans in connection with health professions education made or secured, in whole or in part, by the Secretary and with respect to whom the Secretary has taken all reasonable steps available to the Secretary to secure repayment of such obligations or loans . . .

The I.G. exercises this discretionary authority to exclude through a valid delegation of the Secretary's statutory authority. Neither the validity of that delegation of authority, nor the general applicability of these statutory provisions, is challenged by Petitioner in these proceedings.

The duration of an exclusion based on an individual's default on repayments of the scholarship obligations covered by section 1128(b)(14) of the Act is specified in mandatory terms at 42 C.F.R. § 1001.1501(b):

(b) Length of exclusion. The individual will be excluded until such time as PHS notifies the OIG [Office of Inspector General] that the default has been cured or the obligations have been resolved to the PHS's satisfaction. Upon such notice, the OIG will inform the individual of his or her right to request reinstatement.

The notice letter of March 30, 2001, also cites section 1892 of the Act, and references to section 1892 appear at several places in the I.G.'s briefing before me as an additional basis for Petitioner's exclusion. In general, section 1892(a)(3)(B) of the Act confers mandatory authority on the Secretary or his delegate to exclude a health care practitioner who "owes a past-due obligation to the United States" and who fails or refuses to establish certain payment offset arrangements specified in section 1892(a)(2) of the Act, or who fails or refuses to fulfill those payment arrangements. As will be seen, Petitioner was offered such an offset payment arrangement.

My decision here does not address Petitioner's exclusion under section 1892(a)(3)(B) of the Act. I have two reasons for not doing so. First, because I sustain the exclusion based on section 1128(b)(14) of the Act, it is unnecessary to consider the application of section 1892(a)(3)(B). The more significant reason, however, is that a series of carefully-considered decisions on this point suggests that Administrative Law Judges (ALJs) are without authority to review exclusions based on section 1892 of the Act. Based on that line of decisions, I decline to do so here. Cynthia Iraci, D.C., DAB CR629 (1999); Yolanda Crespo Capo Fernandez, D.O., DAB CR606 (1999); George P. Bahadue, D.O., DAB CR575 (1999); Cynthia M. Ramkelawan, D.D.S., DAB CR415 (1996); and cases cited therein.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I find and conclude as follows:

1. Petitioner incurred a NHSC obligation when he received NHSC scholarship grants for his medical education during the academic years 1979-1980, 1980-1981, 1981-1982, and 1982-1983. I.G. Exs 1-4.

2. The monetary value of the scholarship grants awarded to Petitioner totaled approximately $74,000.00. I.G. Ex. 10; see I.G. Exs. 4, 11.

3. Upon completion of his medical school education, Petitioner did not enter a graduate training program approved for deferment by NHSC, and was therefore in default of his NHSC obligation. I.G. Ex. 8, at 1.

4. As provided by law, liquidated damages in cases of default on NHSC obligations are calculated at three times the amount of the grants or loans involved, plus interest, and for that reason the amount of Petitioner's debt included principal of $222,123.00 in 1984. I.G. Exs. 4, 8.

5. The Secretary made at least four efforts to collect Petitioner's debt between August 27, 1984 and November 1, 1985. I.G. Exs. 7-9.

6. The Secretary offered to forbear collection efforts and allow Petitioner to return to an approved training program and discharge his obligation through NHSC service on May 29, 1986 and March 4, 1987. I.G. Ex. 9.

7. At the request of the Secretary, the United States brought suit against Petitioner to collect the debt on or about June 23, 1987. I.G. Ex. 10.

8. Petitioner executed a Stipulation and Settlement Agreement in that action on or about October 14, 1987. In that Agreement, Petitioner conceded his default and admitted his debt in the sum of $456,748.29 plus interest, and agreed to maintain a three-year hospital residency in family practice medicine, followed by fulfillment of a four-year service obligation as a family practitioner at a high priority site determined by the NHSC, in return for the United States' agreement to forbear collection efforts on the judgment debt and the Secretary's agreement to allow him to discharge his NHSC obligation through service. I.G. Ex. 11.

9. On or about March 31, 1988, Petitioner breached the Stipulation and Settlement Agreement by leaving the residency program without permission and without notifying NHSC or other government official, thereby placing himself again in default of his NHSC obligation. I.G. Ex. 12.

10.On March 25, 1997 and May 15, 1997, the United States provided Petitioner with a detailed statement of the information, documents, and professional data he must provide in order to apply to be allowed to discharge his NHSC obligation through service. I.G. Exs. 13, 14.

11.Petitioner sought the discharge of his NHSC debt in a Chapter 7 bankruptcy proceeding, but was unsuccessful: the Bankruptcy Judge determined that Petitioner's debt was non-dischargeable on May 9, 2000. I.G. Ex. 24.

12.At the conclusion of the bankruptcy proceedings, the Secretary agreed to credit Petitioner with 1005 days of service toward his NHSC obligation of 1461 days, based on Petitioner's practice in Philadelphia, Pennsylvania, and to reduce the monetary calculation of that obligation pro rata from approximately $1,285,673.22 to approximately $401,277.88, plus interest. I.G. Exs 17, 18.

13.On or about June 2, 2000, the United States offered Petitioner another opportunity to discharge his NHSC obligation through service, but Petitioner did not respond. I.G. Ex. 25.

14.Beginning on or about October 20, 2000, and continuing until on or about December 21, 2000, the United States, acting on behalf of the Secretary, continued to offer Petitioner the opportunity to reach a repayment agreement, a Medicare offset agreement, or a forbearance agreement which would allow him to discharge his NHSC obligation through service, but Petitioner made no satisfactory response. I.G. Exs. 26-31.

15.By March 30, 2001, the Secretary had taken all reasonable steps available to secure repayment of Petitioner's NHSC obligation, as required by section 1128(b)(14) of the Act, 42 U.S.C. § 1320a-7(b). Findings and Conclusions 1-14, supra.

16.Because Petitioner was in default of his NHSC obligation on March 30, 2001, and because the Secretary had taken all reasonable steps available to secure repayment of Petitioner's obligation by March 30, 2001, on that date the I.G. had a basis to exclude Petitioner from Medicare, Medicaid, and all federal health care programs. Act, section 1128(b)(14); 42 U.S.C. § 1320a-7(b).

17.The term of exclusion imposed is prescribed by regulation and is therefore reasonable. 42 C.F.R. § 1001.1501(b).

DISCUSSION

As I have pointed out above, there are two issues before me in this case: first, whether there is a basis for the I.G.'s exclusion of Petitioner from Medicare, Medicaid, and all other federal health care programs; and second, whether the length of the exclusion imposed is reasonable. Resolution of the first issue depends on the answers to two very specific questions: is Petitioner in default of an obligation identified in section 1128(b)(14) of the Act, and if so, has the Secretary taken all reasonable steps to secure repayment of that obligation?

The answers to both questions may be found in the 23-year history of Petitioner's relationship with the NHSC. Although neither the material facts nor the chronology of that relationship is in dispute, it may be helpful if I set out the important features of that relationship here.

The History of Petitioner's Obligation to the NHSC.

In the late spring of 1979, Petitioner held a Master of Education degree from a university in New Jersey (P. Ex. 2, at 1) and had been accepted for matriculation at a medical school (I.G. Ex. 1, at 2) in Philadelphia, where he proposed to specialize in family medicine after his four-year course of study. His representations to the NHSC resulted in his being awarded a NHSC scholarship for the 1979-1980 academic year which included "tuition, an amount for all other reasonable educational expenses incurred by the student, and a monthly stipend for the 12-month period beginning with the first month of each school year . . . ." I.G. Ex. 2, at 1. Petitioner's NHSC scholarship was renewed for the 1980-1981, 1981-82, and 1982-1983 academic years. I.G. Exs. 3, 4. The total cash value of this four-year scholarship grant was later calculated at just over $74,000.00. I.G. Ex. 10, at 3; see I.G. Exs. 4, at 3; 11, at 2.

The terms of NHSC scholarships are relatively straightforward: for each year's scholarship, a recipient is obliged to provide one year of medical service in a community or location designated by the Secretary, usually one under-served by health care professionals, with a minimum obligation of two years. 42 U.S.C. §§ 254d, 254e, and 2541. A successfully-completed service obligation extinguishes the recipient's financial obligation completely.

Should a NHSC scholar seek to pursue graduate study following completion of medical school, the program allows a deferment of the service obligation, but only if the doctor-scholar enrolls in one of several designated specialties. One of those specialties is family medicine, of which the NHSC was "especially in need" in 1983. I.G. Exs. 5; 6, at 14. Others approved in 1983 for M.D. program graduates included internal medicine, pediatrics, general surgery, obstetrics-gynecology, emergency medicine, and psychiatry. Residencies or internships in anesthesiology were not approved for deferment.

Petitioner finished his medical school education and graduated in the spring of 1984 with honors, and was class president. P. Ex. 2. Rather than beginning his service obligation then or obtaining a deferment of that obligation through enrollment in an approved postgraduate training program, Petitioner chose to begin an internship in anesthesiology. Because such a program was not approved as deferring his service obligation, and because Petitioner did not then commence his service, Petitioner was then in default of his NHSC obligation. I.G. Ex. 8; P. Ex. 1, at 3-4.

The NHSC scholarship program provided for the contingency of a doctor-scholar's default: by terms of the scholarship agreements and federal regulations, defaulters were liable for liquidated damages equal to three times the scholarship amounts, plus interest calculated from the date the scholarship payments were disbursed. Petitioner admits here (P. Br., at 4) and has admitted elsewhere (I.G. Ex. 11, at 2) both his default and his liability for liquidated damages in the principal amount of $222,123.00 plus interest. That interest amounted to $120,756.45 in August 1984 (I.G. Ex. 8, at 4) and was admitted by Petitioner to have amounted to $234,625.29 by July 31, 1987. I.G. Ex. 11, at 2.

Details of Petitioner's internship are not abundant in this record, but it appears that he undertook that program in a West Virginia teaching hospital. P. Ex. 2. The Secretary's delegate wrote to Petitioner at that hospital at least four times between August 27, 1984 and November 1, 1985 reminding him of his debt and demanding payment. I.G. Exs. 7-9. Significantly, and although under no legal obligation to do so, the Secretary twice offered Petitioner the opportunity to propose a service commitment in satisfaction of part or all of his debt. I.G. Ex. 9, at 2-4. The I.G. undertook no efforts to exclude Petitioner from any of the federal health care programs, but instead continued to seek collection of his debt or discharge of his service obligation.

This record discloses no direct response from Petitioner to those letters, but two letters from the Secretary's delegate in 1986 and 1987 establish that the option of service as a means of Petitioner's satisfying his debt remained open. On May 29, 1986, the Secretary's delegate responded to a West Virginia attorney who had apparently written to the Secretary on behalf of Petitioner. I.G. Ex. 9, at 5-7. The attorney's May 2, 1986 letter had conveyed a proposal by which Petitioner would have received credit toward his service obligation for work already performed; this proposal was rejected, but the Secretary's delegate made it clear that service in approved circumstances was still an option for Petitioner, and provided the attorney a standard Forbearance Agreement by which such an arrangement could be effected. No response to that letter appears in the record before me. Nor does there appear a response to the same delegate's letter to Petitioner, at an address in McKeesport, Pennsylvania, on March 4, 1987. Id. at 8-9. The March 4 letter was prompted by a telephone inquiry from Petitioner himself, in which he requested another copy of the Forbearance Agreement. This letter conveyed to Petitioner the requested document and again offered the possibility that an approved term of service might eliminate some or all of Petitioner's default. I can find no response to the March 4, 1987 letter in the record.

On or about June 23, 1987, the United States brought suit against Petitioner in an effort to collect the debt (I.G. Ex. 10), which was alleged to have reached a sum well in excess of $400,000 by the time the action was commenced. Within four months a Stipulation and Settlement Agreement was entered, by which Petitioner acknowledged that he had breached his NHSC scholarship agreement, and admitted his resulting indebtedness to the United States in the sum of $456,748.29 with interest accruing at the daily rate of $111.06. I.G. Ex. 11. The Agreement went on, however, to establish a remarkable opportunity for Petitioner to satisfy his debt: the United States agreed to forbear execution on the judgment as long as Petitioner maintained his participation in a three-year residency program in family practice medicine at McKeesport Hospital, and agreed to allow Petitioner to completely satisfy the judgment by completing four years of service as a family practitioner thereafter. Id.

The Stipulation and Settlement Agreement was entered on October 14, 1987. On July 22, 1988, the Director of the Family Practice Residency Program at McKeesport Hospital notified NHSC administrators that Petitioner had left the program on March 31, 1988, after completing only seven months' training. I.G. Ex. 12. The explicit terms of the Stipulation and Settlement Agreement required Petitioner to notify NHSC authorities if he left the residency program before completing it, but he failed to do so. Petitioner concedes that his premature departure from the program constituted a breach of the Stipulation and Settlement Agreement and that he was again in default on his NHSC indebtedness. P. Br., at 4. The I.G. again undertook no efforts to exclude Petitioner after this second conceded default.

There is little detailed information in the record about the nine-year period following Petitioner's departure from McKeesport Hospital, but Petitioner represents that until 1991, and perhaps until November 1992 (P. Ex. 1, at 5), he experienced serious problems of drug and alcohol abuse. P. Ex. 1; P. Br., at 4-5, 9. I have no reason to doubt that Petitioner experienced such problems, but I note that he has also asserted that those problems began when he was 17 years old (P. Ex. 1, at 4, lines 18-24; P. Br., at 5), and were thus in existence during the time he successfully completed his undergraduate studies, obtained his M.Ed. degree, served as a high school guidance counselor, taught English in Colombia and the Dominican Republic, distinguished himself academically and socially in medical school (P. Ex. 2), and earned licensure as a Supervising Physician in Pennsylvania (P. Ex. 11, at 1).

It would appear that Petitioner completed a residency in family practice in a Florida teaching hospital in 1996, earned board certification in that specialty (P. Ex. 2, at 8), and joined a medical practice in Philadelphia soon after (P. Ex. 1, at 5). Petitioner's beginning salary at the practice was $110,000.00 per year, and it increased to $119,000.00 per year in 1999. I.G. Ex. 34. The record does not disclose whether that practice, or Petitioner individually, participated in any federal health care programs, but no efforts had been taken by the I.G. to exclude him from them.

In any case, there was little or no communication between government officials and Petitioner until early 1997, when correspondence began again on the subject of Petitioner's indebtedness and the possibility of some satisfaction of it. I.G. Exs. 13, 14; P. Ex. 1, at 5-6. The upshot of this correspondence was that on May 15, 1997, the United States Attorney for the Eastern District of Pennsylvania sent Petitioner a detailed statement of the information, documents, and professional data he must submit in order to complete his application to discharge his NHSC debt through service, and reminded him that until the information was submitted and some tangible repayment tendered, his application could not be approved. I.G. Ex. 14. By that time, the amount of Petitioner's indebtedness had exceeded $557,526.54. I.G. Exs. 13, at 1; 24, at 4. No response appears to have been made by Petitioner to this letter.

Instead, in 1999, Petitioner sought relief from his obligations to NHSC in United States bankruptcy court. The exact dates on which he filed his Chapter 7 petition and his adversary proceeding under 11 U.S.C. § 523(a)(8) do not appear in this record, but it is obvious that they were both pending and the subject of active litigation by mid-September 1999. I.G. Ex. 19. The United States resisted Petitioner's efforts to avoid his NHSC debts, but once again extended an offer to explore the possibility of his satisfying the NHSC obligation through service. I.G. Exs. 19-22. By February 14, 2000, those efforts seemed unlikely to succeed, chiefly as the result of Petitioner's failure to supply necessary information. I.G. Ex. 23. Meanwhile, the bankruptcy proceedings moved forward.

Petitioner's efforts were unsuccessful in absolute terms: on May 9, 2000, the Bankruptcy Judge granted summary judgment against Petitioner in the adversary proceeding he had commenced specifically to win the discharge of his self-confessed 1987 NHSC judgment debt and other health education-related debts. The Bankruptcy Judge reviewed the history I have set out above and determined that it was not unconscionable to refuse to excuse the debts. I.G. Exs. 15, 24. But after oral argument on the motion for summary judgment, and while the issue was pending sub judice, on May 9, 2000, the United States agreed to afford Petitioner credit towards his service obligation for the three years he had practiced with the Philadelphia medical group. By applying a pro rata formula to both principal and interest, and treating the Philadelphia practice as if it had been approved by NHSC, the United States credited Petitioner's debt with 1,005 days of service and thereby reduced the monetary amount of the judgment debt established in 1987 from $1,285,673.22 (as of April 25, 2000), to $401,277.88 (I.G. Ex. 17; see also I.G. Ex. 18) and the obligation in terms of days-of-service from 1,461 to 456 (I.G. Ex. 17). This concession had been the keystone of Petitioner's negotiating position during the bankruptcy litigation, but even after agreeing to it and after establishing the nondischargeability of Petitioner's NHSC debt, the United States for yet another time offered Petitioner the chance to serve rather than pay (I.G. Ex. 25), and took no action toward an exclusion.

There is no record of a response from Petitioner to that offer, but it is clear that soon after the adverse decision in bankruptcy court and the Secretary's concession of credit for his service with the Philadelphia medical practice, Petitioner went to work part-time as a physician for an organization called Prison Health Services in Philadelphia. P. Ex. 8, at 3, 15. In this position he was paid at the hourly rate of $60.00 per hour, which if calculated on a full-time basis would equal an annual salary in excess of $100,000.00. In actuality, during Petitioner's 2000 tax year, he reported income of $40,560.00 at this employment (Id. at 4), and had earned $16,815.00 at it through the first six months of 2001. Id. at 3. During this time he paid $823.00 per month to lease a 2000 Mercedes-Benz 280C. Id. at 17; I.G. Ex. 24, at 25.

In late October 2000, DHHS officials began their penultimate collection efforts with a demand letter to Petitioner, warning him that in the absence of a repayment or offset agreement reached within 60 days, exclusion proceedings would be undertaken. This letter directly reminded Petitioner that an offset agreement contemplated by section 1892(a)(2) of the Act was available as an alternative. I.G. Ex. 26. A second notice was sent to Petitioner on November 20, 2000: this letter proffered a detailed memorandum setting out in detail the financial and professional information he must submit in support of any proposed repayment agreement and reminding him of the deadlines for doing so. I.G. Ex. 27. In response, on or about December 4, 2000, Petitioner offered to pay $150.00 per month "until the service component issue is resolved," but supplied none of the requisite information identified on November 20. I.G. Ex. 28. The United States responded immediately, insisting that the information must be submitted before Petitioner's monthly-payment offer could be evaluated, and reminding him that he had received service credit for his three years of practice in Philadelphia. I.G. Ex. 29. Petitioner submitted some, but not all, of the required information on or about December 20, 2000. I.G. Ex. 30.

The United States reviewed the incomplete information and, although the deadline had passed without a satisfactory repayment agreement, extended a final offer based on the information available to it: Petitioner might still avoid exclusion and might still be permitted to settle his obligation through NHSC service if he agreed to an interim monthly payment of $500.00 per month, made an immediate first payment in that amount, and submitted five specified items of information to allow NHSC authorities to evaluate a permanent amount for monthly payments. I.G. Ex 31. No response to this offer appears in the record before me, and on March 30, 2001, Petitioner was notified of his exclusion. I.G. Ex. 32.

Is Petitioner in default of his NHSC obligation?

The history reviewed above leaves little room for discussion, and no room whatsoever for doubt: Petitioner is now in default of his NHSC scholarship obligation, and has been in default since at least March 31, 1988, when he left the family practice residency in McKeesport, contrary to the terms of the October 14, 1987 Stipulation and Settlement Agreement. Petitioner does not contest this point, and concedes not only that his breach of the 1987 Agreement was a default, but admits that it was a default which occurred after he had been offered the opportunity to avoid the default through service:

At first blush, it cannot be denied that Dr. Smith applied for and received NHSC funds in order to help him complete his medical school education. It is also admitted that, after being sued by the Department of Justice, Dr. Smith entered into a settlement agreement ("Agreement") with the Government in October 1987, providing for a "principal" of $222,123 for the NHSC indebtedness, accumulated "interest" of $234,625.29, and accruing interest thereon.

Dr. Smith did not complete his service obligations under the Agreement, and was, therefore, in "default" on his indebtedness. The "opportunities" given Dr. Smith to satisfy his obligations through service, rather than payment, were extended to him during the period spanning February 26, 1985 and June 1987 . . . .

P. Br., at 4.

It will be recalled that more than a decade elapsed between Petitioner's 1988 departure from the McKeesport family practice residency and his commencement of bankruptcy proceedings in 1999, but the Memorandum and Order entered in those proceedings on May 9, 2000, make it very clear that no event between 1988 and 2000 operated to cure or otherwise remedy that default. I.G. Ex. 24. No action by Petitioner since entry of the bankruptcy court's Memorandum and Order has altered that condition of default in any way: none of the proffered repayment, offset, or service agreements has been executed, and no monetary payment has been made towards Petitioner's NHSC obligation. The only reduction of Petitioner's NHSC obligation has been the result of NHSC's and PHS's decision to credit him with three years' service in the Philadelphia practice, a decision which reduced the magnitude of his default by nearly sixty-nine percent. Petitioner is now in default of the remaining obligation, which stood at 456 days or $427,001.92, plus interest accruing at the rate of $90.70 per diem, on January 4, 2002. I.G. Ex. 18, at 3.

Have "all reasonable steps" been taken to secure repayment of Petitioner's obligation?

Any discussion of the reasonableness of the Secretary's collection efforts must begin with the recognition of this fundamental point: the intent of Congress in enacting section 1128(b)(14) of the Act was to provide the Secretary with a mechanism by which some leverage could be brought into play over individuals who default on government-funded health education loans. Thus, the exclusion mechanism is, inter alia, a debt collection device by which the Secretary, acting through the delegation of his authority to the I.G., can collect an NHSC debt or obligation in situations where voluntary persuasion has failed. The exclusion mechanism must not be regarded as a penalty or sanction: it is rather to be understood as remedial, not punitive. Jack W. Greene, DAB No. 1078 (1989), aff'd, Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn.1990); John Strausbaugh, R.Ph., DAB CR186 (1992); Bahadue, supra. Once Petitioner incurred his NHSC obligation, the Secretary and thus the I.G. acquired the right - and became obliged - to collect on it. Ramkelawan, D.D.S., supra; Mohammad H. Azarpira, D.D.S., DAB CR372 (1995); Charles K. Angelo, Jr., M.D., DAB CR290 (1993).

The term "all reasonable steps" has been uniformly construed to mean "all reasonable and legitimate means of debt collection." Iraci, D.C., supra; Bahadue, supra; Ramkelawan, supra. In a particularly clear statement of this principle, it has been held that "[i]n attempting to collect a debt, the Secretary must be 'reasonable' only in the sense that she should not insist on repayment arrangements which are palpably unfair." James F. Cleary, D.D.S., DAB CR252 (1993). The concept of reasonableness does not require, and may very well forbid, the Secretary's consideration of collection arrangements which cannot accomplish the goal of repayment or which are contrary to the public interest, and it does not require the Secretary to excuse defaulters because of their financial status. Capo Fernandez, D.O., supra; Rikantas (Rik) Majauskas, D.O., DAB CR441 (1996). In cases where a defaulter failed to provide information necessary to entering an agreement, failed to make an initial payment until after exclusion proceedings had been undertaken, and failed to offer payments sufficient even to offset the accruing interest on his obligation, the remedy of exclusion has been upheld as reasonable. Capo Fernandez, supra; Azarpira, supra. And as a matter of law, the Secretary has taken "all reasonable steps" to collect an NHSC debt when the debtor has been offered a Medicare offset arrangement pursuant to section 1892(a)(2) of the Act: although such an offset arrangement is not a necessary component of "all reasonable steps," it is a sufficient component and is conclusive proof that all reasonable steps have been taken. 42 C.F.R. § 1001.1501(a)(2); Capo Fernandez, supra; Angelo, supra.

By the time the I.G. invoked the exclusion remedy, Petitioner's conduct had demonstrated every one of the indicia of stubborn unwillingness to pay his NHSC debt:

The Secretary reasonably could infer, from Petitioner's conduct, that Petitioner was unlikely to repay his debt voluntarily. The Secretary provided Petitioner with many opportunities to repay his debt and to enter into a repayment agreement. Petitioner was offered the opportunity to enter into a Medicare and Medicaid reimbursement offset agreement prior to his exclusion. Petitioner did not avail himself of any of these opportunities for repayment. I conclude that the Secretary did that which was necessary to establish conclusively that all reasonable steps available were taken to collect Petitioner's . . . debt. 42 C.F.R. § 1001.1501(a)(2).

Azarpira, supra, at 8.

Petitioner had established a 16-year history of default and evasion even before the bankruptcy litigation, which history included his unapproved anesthesiology program in 1984 (I.G. Ex. 8; P. Ex 1, at 3-4), his refusal to answer repeated inquiries and offers from the Secretary between August 1984 and November 1985 (I.G. Exs. 7-9), his violation of the 1987 Stipulation and Settlement Agreement by his unauthorized and unexplained departure from the McKeesport residency in 1988 (I.G. Exs. 11, 12), and his failure to provide essential information necessary to entering an agreement when urged to do so in 1997 (I.G. Exs. 13, 14). During this 16-year period, Petitioner made no payments of any sort toward his NHSC debt, although he was employed as a medical doctor, health sciences professor, or researcher during most of that time (P. Exs. 2, at 1-3; 11), and was employed as a medical doctor at an annual salary of $110,000.00 in 1996, which increased to $119,00.00 per year in 1999. Following the failure of his effort to win discharge of his NHSC obligation through bankruptcy proceedings, his conduct did nothing to suggest that he might be more willing to meet his obligation to NHSC voluntarily: in spite of the Secretary's concession of credit for more than two-thirds of his obligation, he remained obdurate in refusing to supply information which would allow the Secretary to develop an offset agreement pursuant to section 1892(a)(2) of the Act, a repayment agreement, or a service agreement. I.G. Exs. 25-30. Petitioner's most explicit response to the Secretary's post-bankruptcy proposals was to offer a $150.00 monthly payment (I.G. Exs. 28, 29) at a time when interest on his debt accumulated at a rate of more than $2,700 per month (I.G. Ex. 18, at 3) and he was paying $823.00 each month to lease a Mercedes-Benz (P. Ex. 8, at 17).

It is impossible to identify anything "palpably unfair" in any of the Secretary's actions or proposals between 1984 and March 30, 2001. Each effort at collection, and each proposal extended to Petitioner, reflects a "reasonable and legitimate means of debt collection." The repeated offers of a service-based method of repayment, the commitment to forbear execution on the 1987 Judgment, the many extensions of an opportunity to establish a workable monetary repayment plan, the unilateral forgiveness of over two-thirds of Petitioner's debt in terms of days and dollars, the proposal of a Medicare offset agreement, and the extension of deadline after deadline, all bespeak the Secretary's efforts to employ "all reasonable means" to persuade Petitioner voluntarily to pay his NHSC debt. The Secretary was entirely justified in believing that those efforts would succeed no more in the future than they had in the past, and "all reasonable means" required no further efforts from him by March 30, 2001.

Although Petitioner concedes the fact of his default, it is his vigorously-argued position that other facts provide a basis for what can best be understood as equitable relief from the exclusion, and for mandatory relief compelling the I.G. to "waive a significant portion of the accumulating interest" (P. Br., at 17) and to "enter into a reasonable repayment program permitting Dr. Smith to maintain a suitable lifestyle in his community." Id. Those arguments and those forms of relief are well beyond my jurisdiction, see Iraci, supra and Ramkelawan, supra; but one element of Petitioner's argument may benefit from close examination.

The foundation of Petitioner's appeal to equity and fairness is his history of, and recovery from, alcohol abuse. It is instructive to examine his position in the language he chooses to frame it:

Critically therefore, it is respectfully argued that Dr. Smith was impaired and unable to deal with his professional and indebtedness responsibilities during his long period of substance abuse, but once rehabilitated, acted with great perseverance, determination and responsibility to get himself back on track and place himself in a position to address his NHSC indebtedness in a reasonable manner. This included his becoming qualified to provide the services needed to give him credit toward and in satisfaction of his complete indebtedness.

P. Br., at 6.

* * * *

His substance abuse is well-documented and prevented Dr. Smith from acting responsibly either as a physician or a debtor on student loans until 1993. Thereafter, he diligently completed a qualified residency and became board certified. He also provided service that qualified for credit against his obligations - this service spanning the period up thru September 19, 1999.

P. Br., at 9.

Whether Petitioner began his recovery in 1991 (P. Ex. 1, at 2, line 15), in 1992 (P. Ex. 1, at 5) or 1993 (P. Br., at 9), this record provides no support for the suggestion that, upon his recovery, Petitioner began to behave responsibly regarding his NHSC debt. Instead, the record conclusively demonstrates his effort to evade that responsibility. I.G. Exs. 13, 14, 21-23. But even more striking is the effect of the Secretary's concession of credit to Petitioner: in extending that concession during the late spring of 2000, the Secretary gave Petitioner the "fresh start" he claims is due him here. In practical effect, the Secretary's concession of credit (I.G. Ex. 17) erased most of the consequences of Petitioner's default that could colorably be attributed to his substance abuse. The fact of his default remains, and the remaining consequences have accrued during Petitioner's period of recovery. If he is heard to say that he must be excused for lapses of judgment prior to his recovery, then he must also explain why his behavior toward his NHSC obligation remains unchanged after that recovery.

Petitioner notes that the statutory basis of the exclusion is characterized as a "permissive exclusion," and emphasizes that section 1128(b)(14) of the Act provides that the "Secretary may exclude" individuals in default of NHSC obligations. P. Br., at 8. He then argues that the I.G.'s discretion has been exercised improperly, and perhaps vindictively in retaliation for Petitioner's efforts to obtain discharge in bankruptcy. P. Br., at 10-12. If I were authorized to address the merits of Petitioner's argument, I would reject it as contrary to the evidence before me. But once I have found that there is a nexus of fact and law by which Petitioner became liable to exclusion, I am without jurisdiction to evaluate the propriety of the I.G.'s exercise of discretion in determining to proceed to imposition of the exclusion. Wayne E. Imber, M.D., DAB CR661 (2000), aff'd, DAB No. 1740 (2000); see also 42 C.F.R. § 1005.4(c). Insofar as Petitioner's position relies on an attack on the timing or chronology of the I.G.'s determination to exclude, I note that the I.G. is invested with discretion as to when to undertake an exclusion, and I lack authority to review his exercise of discretion in that sphere. Laurence Wynn, M.D., DAB CR344 (1994).

Petitioner asserts that the I.G.'s position is "an abuse of power, confiscatory, punitive and discriminatory . . . arbitrary and capricious, at best, and overwhelmingly oppressive in its preclusive sweep." P. Br., at 12. As I have noted earlier, the nature of the exclusion remedy has been explicitly held to be remedial, not punitive, and the underlying basis of Petitioner's obligation - the provision for liquidated damages, the calculation of interest, the sufficiency of the 1987 Judgment, and the non-dischargeability of the debt without consideration of its substantial reduction based on the service credit - were all addressed in careful and measured fashion by the Bankruptcy Judge, who simply refused Petitioner's invitation to hold their collection unconscionable. I.G. Ex. 24. In fact, the Bankruptcy Judge addressed and rejected most of Petitioner's present arguments when he wrote (I.G. Ex. 24, at 24-25):

The appropriate focus, then, is whether a chapter 7 debtor demonstrates that it would be "shockingly unfair, harsh, unjust or outrageous" to hold him legally responsible to repay this obligation after bankruptcy. See Matthews v. Pineo, 19 F.3d [121] at 124. If the debts are fixed by valid prepetition judgments, the issue of unconscionability does not encompass the amount or validity of the debt itself. See generally Matthews v. Pineo.

Moreover, the debtor could have satisfied these obligations years ago. He could have provided, and in fact still can provide, the four years of medical service in full satisfaction of the NHSC obligation, thereby reducing to zero his obligation on that debt . . . The debtor cannot be heard to complain that the debts have grown too large - and that a denial of a discharge of those obligations would be unconscionable - when he has allowed the debts to increase in amount over the years. See In re Rice, 78 F.3d at 1150 ("the current substantial amount of the debt was largely Rice's own doing . . . This factor weighs particularly strongly against discharge in this case").

Nor is an ALJ empowered to entertain a collateral attack on the obligation: it has been established by the 1987 Judgment, and is thus beyond review in this forum. Capo Fernandez, supra; Paul R. Scollo, D.P.M., DAB No. 1498 (1994); Ernest Valle, DAB CR309 (1994); Peter J. Edmonson, DAB No. 1330 (1992).

Petitioner suggests that the exclusion will "deprive Dr. Smith of a reasonable means by which he could maintain any level of livelihood befitting his profession . . . ." P. Br., at 13. This suggestion is best answered by examining matters of fact as well as matters of law. First, it is to be recalled that Petitioner is still licensed to practice medicine in Pennsylvania as a board-certified specialist in family medicine. P. Ex. 2, at 7-8. He holds valid credentials as a supervising physician authorized to employ and oversee two physician assistants (P. Ex. 11, at 1), and his legal authority to prescribe medications, including controlled substances, if renewed, remains unimpaired (P. Ex. 2, at 9). Less than a year ago he was actively practicing medicine in the state where he is licensed, working part-time at a salary equivalent to an annual income of over $120,000.00, and paying nearly $10,000.00 a year to lease a Mercedes-Benz. P. Ex. 8, at 3, 4, 15, 17. The exclusion here at issue is not from the practice of medicine, nor even from the practice of medicine in any locality or State. The only effect of the exclusion is to bar Petitioner from participation in Medicare, Medicaid, and other federal health care programs. And if Petitioner's argument is that such an exclusion amounts to a deprivation of his livelihood, then that argument is simply irrelevant to these proceedings. Tracey Gates, R.N., DAB CR708 (2000); Farhad Mohebban, M.D., DAB CR686 (2000); Carlos Rivera-Cruz, DAB CR677 (2000); Arlene Elizabeth Hunter, DAB CR505 (1997).

Petitioner argues that his conduct since the institution of exclusion proceedings, and the I.G.'s determination to go forward with those proceedings, combine to expose an attitude of harshness and unreasonableness on the I.G.'s part (P. Br., at 8), and invites my examination of his efforts to negotiate a settlement of this matter (P. Exs. 8-10). Although I have admitted those exhibits into the record, I have done so for the purpose of establishing with finality that they are fundamentally irrelevant. 42 C.F.R. § 1005.17(f). By no reading, whether limited or broad, do they create a colorable issue that I have the authority to address or decide.

Nor is the relief sought by Petitioner within my power to grant, even assuming arguendo that the arguments on which it is based were sound. Whether the NHSC obligation is waived in whole or in part is a matter committed to the discretion of the Secretary and delegated to the Health Resources and Services Administration. 42 U.S.C. § 254o(d)(2). Procedures which, significantly in the context of this record, require the submission of detailed documentation are set out in 42 C.F.R. § 62.12(b)(1). Neither the I.G. nor an ALJ possesses the authority to direct or compel any waiver of an NHSC obligation whatsoever. 42 C.F.R. § 1005.4(c).

Since the record before me demonstrates that Petitioner was in default of his NHSC obligation, and that the Secretary has taken "all reasonable steps" to secure repayment prior to invoking the exclusion remedy, I find and conclude that the I.G. had a basis to exclude Petitioner pursuant to section 1128(b)(14) of the Act.

Is the term of exclusion reasonable?

My inquiry into the term of exclusion imposed here is a very limited one: I may ask only whether the term of exclusion imposed is consonant with the regulatory standard established for such situations. 42 C.F.R. § 1505.4(c)(1). In this case the notice letter (I.G. Ex. 32) employs the language "[t]hese exclusions . . . will remain in effect until your debt has been completely satisfied." The regulatory standard is different, and that difference has been pointed out by ALJs several times, as I shall explain below.

The language of 42 C.F.R. § 1001.1501(b) provides that exclusions shall last "until such time as PHS notifies the OIG that the default has been cured or the obligations have been resolved to the PHS's satisfaction." While there may be little practical difference between the language of the notice letter and the regulation, there is a variance, and that variance has been explicitly called to the I.G.'s attention in Iraci, supra; Bahadue, supra; and Ramkelawan, supra. Here, as in those cases, the I.G.'s position as enunciated in the briefing is that the term of exclusion is based on PHS's satisfaction. I.G. Br., at 19; I.G. Reply Br., at 3, 5, 14. Here, as in those cases, I am satisfied that the I.G.'s position as thus clarified is in conformity with the terms of the regulation. I find and conclude that the term of exclusion is reasonable, and I sustain it.

CONCLUSION

For the reasons set forth above, I grant summary judgment in favor of the I.G. and sustain the I.G.'s exclusion of Petitioner from participation in Medicare, Medicaid, and all other federal health care programs pursuant to section 1128(b)(14) of the Act, 42 U.S.C. § 1320a-7(b)(14), until such time as his default on his NHSC obligation has been cured or the obligations thereon have been resolved to the PHS's satisfaction, in accordance with 42 C.F.R. § 1001.1501(b).

JUDGE
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Richard J. Smith

Administrative Law Judge

 

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