SUBJECT:

Jason Hollady, M.D., a/k/a Jason Lynn Hollady,

Petitioner,

The Inspector General

DECISION

I decide that the Inspector General (I.G.) was authorized to exclude Petitioner, Jason Hollady, M.D., a/k/a Jason Lynn Hollady, as a result of Petitioner's conviction of a criminal offense as is defined under section 1128(a)(3) of the Social Security Act (Act). I find the 10-year exclusion that the I.G. imposed in this case to be reasonable.

I. Background

On August 31, 2001, the I.G. notified Petitioner that she had determined to exclude him. The I.G. advised Petitioner that he was being excluded because of Petitioner's conviction of a criminal offense as is defined under section 1128(a)(3) of the Act. The I.G. asserted that there existed aggravating factors in Petitioner's case which justified imposing an exclusion for more than the five-year minimum that is mandated in cases of exclusion that involve section 1128(a)(3). The I.G. advised Petitioner that she had determined to exclude him for a period of 10 years.

Petitioner requested a hearing and the case was assigned to me for a hearing and a decision. I held a pre-hearing conference at which I afforded the parties the opportunity to submit their cases in writing in lieu of an in-person hearing. The I.G. filed a brief, a reply brief, and six proposed exhibits (I.G. Ex. 1 - I.G. Ex. 6). Petitioner filed a brief and no exhibits. Petitioner did not object to my receiving the I.G.'s proposed exhibits into evidence and, therefore, I am receiving them. Neither party advised me that it wanted to present testimony in person. Therefore, I am deciding this case based on their written submissions.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. A basis exists to exclude Petitioner pursuant to section 1128(a)(3) of the Act; and,

2. The 10-year exclusion that the I.G. determined to impose is unreasonable.

B. Findings of fact and conclusions of law

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding below as a separately numbered heading. I discuss each Finding in detail.

1. A basis exists to exclude Petitioner pursuant to section 1128(a)(3) of the Act.

I find that the I.G. is required to exclude Petitioner pursuant to section 1128(a)(3) because Petitioner was convicted under Michigan law, of a criminal offense occurring after August 21, 1996, in connection with the delivery of health care items or services.

Section 1128(a)(3) of the Act mandates the exclusion of an individual who:

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.

The Health Insurance Portability and Accountability Act was enacted on August 21, 1996. Therefore, section 1128(a)(3) applies to a conviction for any offense that took place after that date.

On May 24, 2000, a criminal information was filed against Petitioner in a Michigan State court charging him with multiple criminal offenses. I.G. Ex. 1. On January 16, 2001, a judgment was entered against Petitioner, convicting him of Counts 8 and 11 of the information. I.G. Ex. 2.

Counts 8 and 11 of the information charge that Petitioner submitted false reimbursement claims for medical services to Blue Cross/Blue Shield of Michigan, a health care insurer, knowing the claims to be false in that the alleged services were not provided. I.G. Ex. 1 at 4. The preamble paragraph to Counts 8 through 30 avers that Petitioner submitted the false claims "[o]n or about each of the following dates," apparently intending to say that Petitioner submitted false claims on or about the dates that are listed next to the specific subsequent counts. However, the specific subsequent counts show dates only under a heading entitled "date of alleged service." None of the counts - and, in particular, neither Counts 8 nor 11 - specifies when Petitioner submitted his claim for the allegedly false service, as opposed to the date on which the service was alleged to have been performed. For Count 8, the date of alleged service is August 25, 1995. For Count 11, the date of alleged service is June 11, 1997. Id.

It is not possible to ascertain when Petitioner submitted his claims for the false services that are documented at Counts 8 and 11. There is no evidence that Petitioner submitted his claim after August 21, 1996, for the false service that is documented at Count 8. Therefore, the preponderance of the evidence establishes only that Petitioner was convicted of a single count of filing a false claim after August 21, 1996, that being Count 11.

The offense that is described at Count 11 clearly is an offense within the meaning of section 1128(a)(3) of the Act. It is an offense that Petitioner committed "in connection with the delivery of a health care item or service" and it related to "fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct." Petitioner was convicted of a felony pursuant to the Michigan State criminal code. I.G. Ex. 1 at 4; I.G. Ex. 2. Therefore, the I.G. must exclude Petitioner based on his conviction of Count 11.

Petitioner argues that there is no basis to exclude him because there is no evidence that he committed his offense in connection with the delivery of a health care item or service pursuant to a program that is financed in whole or in part by an agency of the federal government or of a State government. Petitioner's brief at 2. Petitioner misreads section 1128(a)(3) of the Act. The section mandates exclusion of an individual who has been convicted of a crime against a federally or State-funded health care program or who has been convicted of a crime in connection with the delivery of a health care item or service. A conviction of a criminal offense falls within the purview of the section if it is at the felony level, is in connection with a health care item or service and, it relates to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct, whether or not it also is against a federally or State-funded health care program.

2. An exclusion of more than five years may be reasonable where the exclusion is authorized by section 1128(a)(3) of the Act and if there are aggravating factors that are not offset by mitigating factors.

The minimum exclusion that must be imposed in any case in which an exclusion is mandated by section 1128(a)(3) of the Act is five years. Act, section 1128(c)(3)(B). However, in some cases, exclusions of more than five years may be reasonable.

The Secretary of this Department has published regulations which govern the length of exclusions that are imposed pursuant to section 1128 of the Act. 42 C.F.R. Part 1001. The regulation which establishes criteria to govern the length of an exclusion that is imposed under section 1128(a)(3) of the Act is 42 C.F.R. § 1001.102. This regulation identifies "aggravating" factors which may be used, if present in a case, as a basis to lengthen an exclusion beyond the five-year minimum period and "mitigating" factors which may be used, if present in a case, to offset any aggravating factors that are established. 42 C.F.R. § 1001.102(b), (c).

The regulation makes it clear that only those factors that it identifies as either aggravating or mitigating may be considered to determine whether an exclusion of more than five years is reasonable in a case involving sections 1128(a)(1) through 1128(a)(4) of the Act. The aggravating and mitigating factors operate as rules of evidence in such a case. Evidence which does not relate to an identified aggravating or mitigating factor is irrelevant to determining the length of an exclusion and may not be considered.

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

An individual who is excluded has a right to a hearing before an administrative law judge. Such a hearing is conducted pursuant to section 205(b) of the Act. That section has been interpreted on numerous occasions to afford a party who is entitled to a hearing a de novo hearing and an independent decision by an administrative law judge.

That is not to suggest that the administrative law judge is free to ignore entirely the determination that is made by the I.G. The I.G. has expertise in making exclusion determinations and her determinations deserve to be respected. The I.G.'s determination should be sustained as reasonable if that determination falls within a reasonable range of possible exclusions given the evidence that is presented. However, the administrative law judge must evaluate independently the evidence relating to the aggravating and mitigating factors that are set forth in the regulations. The regulations do not assign specific weight to evidence which establishes the presence of an aggravating factor or a mitigating factor. It is up to the administrative law judge to assess such evidence independently and to assign the appropriate weight to it. If the administrative law judge concludes, based on his or her independent and de novo evaluation of the evidence, that the exclusion imposed by the I.G. departs significantly from that which the administrative law judge decides is reasonable, then he or she may modify the length of the exclusion to assure that the exclusion falls within a reasonable range of exclusions.

4. The I.G. proved the presence of two aggravating factors.

The I.G. alleged that there are three aggravating factors present in this case. I find that the I.G. established the presence of two of them and failed to establish the presence of a third aggravating factor.

The three aggravating factors that the I.G. contends are present are that: Petitioner's conviction, or similar acts, resulted in financial loss to a government program or one or more entities of $1,500 or more; Petitioner's criminal conduct, or similar conduct, transpired over a period of more than one year; and, Petitioner was sentenced to a period of incarceration for his crimes. I.G. Notice dated August 31, 2001; 42 C.F.R. §§ 1001.102(b)(1), (2), (5). As I discuss below, I find that the I.G. established the first and third of these aggravating factors but failed to prove the presence of the second alleged aggravating factor.

I note that the evidence suggests the presence of a fourth aggravating factor, namely, that Petitioner was suspended from the practice of medicine in Michigan as a consequence of his crimes. See I.G. Ex. 4; 42 C.F.R. § 1001.102(b)(9). However, the I.G. has not alleged the presence of this fourth aggravating factor and, therefore, I make no findings as to whether it is present.

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

The court which sentenced Petitioner for his crimes ordered, as one element of Petitioner's sentence, that he pay restitution to Blue Cross/Blue Shield of Michigan in the amount of $347,463. I.G. Ex. 3 at 1. There is no explanation in the record of how the court arrived at this sum and, as I discuss below, at Finding 6, Petitioner vigorously disputes that it measures accurately the extent of his unlawful conduct or related acts. However, it is reasonable to conclude that, in arriving at that sum, the sentencing court found that Petitioner had engaged in unlawful activities which caused Blue Cross/Blue Shield of Michigan to incur a substantial financial loss. It is reasonable also to conclude from the size of the restitution amount that the amount of damage caused by Petitioner exceeded the threshold level of $1,500.

b. The I.G. failed to prove that the acts that resulted in Petitioner's conviction, or similar acts, were committed over a period of one year or more (see 42 C.F.R. § 1001.102(b)(2)).

The I.G. contends that Petitioner committed his crimes over a period of more than one year, thereby establishing the presence of an aggravating factor. There is, however, no credible evidence to support this allegation. Petitioner pled guilty to two counts involving separate acts of filing false health care claims. As I discuss above, at Finding 1, it is not clear from the information when the false claims were filed by Petitioner because the information provides only the alleged dates of service and not the dates when the claims for these alleged services were filed. Therefore, it is not possible to say from the face of the information that Petitioner perpetrated his crimes over any specified period of time.

Furthermore, the counts to which Petitioner pled guilty address separate, isolated acts. The I.G. has not offered any evidence to show that these crimes were part of an ongoing scheme by Petitioner to defraud health care insurers extending over any period of time. It is true that the information alleges that Petitioner committed numerous crimes which transpired over a relatively lengthy period of time. But, Petitioner did not plead guilty to these allegations and the I.G. has offered no evidence to substantiate them.

I would not find that Petitioner committed his crimes over a period of a year or more even had I found that the "service dates" in the information corresponded to the dates when Petitioner filed false claims. I do not find that conviction of two isolated counts of filing false claims separated by a period of time that exceeds one year in length is proof that Petitioner committed crimes or related acts "over a period of one year or more." The aggravating factor identified by the regulation is a period of ongoing criminal activity over a time frame of one year or more. Isolated acts, which happen to be separated by a period of a year or more, do not on their face establish a period of ongoing criminal activity. The I.G. might have established such a period in this case had she adduced evidence to prove that Petitioner had committed the additional crimes that are alleged in the information. But, the I.G. offered no such proof.

c. The I.G. proved that Petitioner's sentence for his crimes included a period of incarceration (42 C.F.R. § 1001.102(b)(5)).

Petitioner's sentence for his crimes included a period of incarceration consisting of nine months' imprisonment. I.G. Ex. 3 at 2.

5. Petitioner did not allege or prove the presence of any mitigating factors.

Petitioner did not allege or prove the presence of any mitigating factors in this case. Petitioner's brief at 8; See 42 C.F.R. § 1001.102(c).

6. A 10-year exclusion is reasonable.

I find that a 10-year exclusion of Petitioner is reasonable because the evidence that relates to the two aggravating factors proven by the I.G. shows a degree of untrustworthiness that supports an exclusion of that length.

As I discuss above, there are two aggravating factors in this case. One of them is that Petitioner caused Blue Cross/Blue Shield of Michigan to suffer damages in excess of $1,500. The other is that Petitioner was sentenced to a term of imprisonment.

The I.G. argues that Petitioner caused Blue Cross and Blue Shield of Michigan to suffer losses totaling $347,463. I.G. Brief, at 10 - 11. She bases her argument entirely on the restitution amount that Petitioner was ordered to pay. I am not persuaded that the restitution amount in this case establishes the precise losses that were sustained by Blue Cross/Blue Shield of Michigan. There is no evidence in the record of this case that would establish how the sentencing court determined the restitution amount. Therefore, I do not hold that Petitioner caused Blue Cross/Blue Shield of Michigan to sustain losses of $347,463.

On the other hand, the restitution ordered by the court is prima facie evidence that Petitioner caused Blue Cross/Blue Shield of Michigan to sustain very substantial losses. It is reasonable to infer that the court would not have ordered restitution of so large an amount unless it concluded that Petitioner's crimes and related conduct had a very substantial adverse impact on that health care insurer. I infer from the restitution amount ordered by the court that Petitioner's crimes and related conduct caused substantial financial losses to be sustained by Blue Cross/Blue Shield of Michigan even though there is nothing in the record as to precisely how large those losses were.

In his brief, Petitioner asserts that the restitution amount was based on a flawed audit of his practice that was made by Blue Cross/Blue Shield of Michigan which he is challenging in judicial proceedings. Petitioner's brief, at 4 - 5. But, Petitioner has introduced no evidence in this case that would show that the audit - if indeed one was conducted - was flawed or produced inaccurate results. I note, moreover, that Petitioner signed the order of probation which included the order that he pay restitution in the amount of $347,463. I.G. Ex. 3 at 2. Petitioner thus agreed to comply with the restitution order and accepted the restitution amount at a time when it was in his interest to do so.

The other evidence of aggravation relates to Petitioner's sentence of nine months' incarceration for his crimes. I find this relatively lengthy sentence to be evidence that Petitioner's crimes were significant. Petitioner asserts - without offering evidence to support his assertion - that he was allowed to treat patients during business hours during the period of his incarceration. Even assuming that assertion to be true, Petitioner nevertheless received substantial jail time for his crimes and that is strong evidence of their seriousness.

The purpose of any exclusion imposed pursuant to section 1128 of the Act is to protect federally-funded health care programs and their beneficiaries and recipients from an individual whose conduct establishes that he or she is untrustworthy. Here, there is ample evidence that Petitioner is a highly untrustworthy individual. He committed felonies which had a substantial financial impact on Blue Cross/Blue Shield of Michigan. His crimes were adjudged to be so severe as to merit a significant term of imprisonment. I find that the 10-year exclusion that the I.G. imposed is reasonable in light of the evidence showing that Petitioner is highly untrustworthy.

Steven T. Kessel

Administrative Law Judge