SUBJECT:

Keith Michael Everman, D.C.,

Petitioner,

The Inspector General

I decide that the Inspector General (I.G.) is authorized to exclude Keith Michael Everman, D.C. (Petitioner) from participating in Medicare, Medicaid, and all other federal health care programs, as defined in 1128B(f) of the Social Security Act (Act). I decide also to affirm the three-year exclusion imposed by the I.G.

I. Background

By letter dated September 28, 2001, the I.G. notified Petitioner that he was being excluded from participation in Medicare, Medicaid, and all federal health care programs for a minimum period of three years pursuant to section 1128(b)(1) of the Act, 42 U.S.C. § 1320a-7(b)(1). By letter dated November 27, 2001, Petitioner requested review of his three-year exclusion. I convened a telephone conference on March 28, 2002. Present during the conference were Edgar D. Bueno, representing the I.G, and Julie Bowman, representing Petitioner. During the telephone conference, I established a briefing schedule for the parties and I reserved ruling on the necessity of an in-person hearing.

Thereafter, on May 6, 2002, the I.G. filed The Inspector General's Brief in Support of Motion for Summary Affirmance (I.G. Br.). With its brief, the I.G. submitted six proposed exhibits (I.G. Exs. 1-6). On June 15, 2002, Petitioner filed Petitioner's Reply Brief in Opposition to the Inspector General's Brief in Support of Motion for Summary Affirmance (Pet. Br.). With its brief, Petitioner submitted 12 proposed exhibits (P. Ex. 1-12). On June 28, 2002, the I.G. filed The Inspector General's Response to Petitioner's Reply Brief (I.G. Rep. Br.) Neither party objected to the admission of the party-opponent's proposed exhibits. Therefore, all proposed exhibits are admitted in the record. ⁽¹⁾

Although the I.G. entitled her motion as one for "summary affirmance," it is, in essence a motion for judgment on the written record. In its reply, Petitioner did not ask for an in-person hearing nor suggest material facts that could only be ascertained through testimony. I find that a decision can be made on the briefs and submitted exhibits. I specifically find that an in-person hearing would not add any new material evidence important for my decision.

II. Legal Authority

Section 1128(b) of the Act authorizes the Secretary of Heath and Human Services to exclude certain individuals and entities from participating in the Medicare, Medicaid, and all other federal health care programs, as defined in section 1128B(f) of the Act. 42 U.S.C. § 1320a-7(b). Specifically, section 1128(b)(1)(A)(i) of the Act authorizes the exclusion of:

[a]ny individual or entity that has been convicted for an offense under Federal or State law, of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.

42 U.S.C. § 1320a-7(b)(1)(A)(i).

An exclusion imposed under this section of the permissive exclusion provisions (section 1128(b)(1) of the Act) will be for a period of three years unless specified aggravating or mitigating factors are present which could be used to lengthen or shorten the three-year period. Section 1128(c)(3)(D) of the Act; 42 C.F.R. § 1001.201(b)(1).

Whether an individual has been "convicted" for purposes of exclusion under section 1128(b)(1) of the Act is answered by the Act and the regulations. A conviction occurs when, inter alia, an individual's or entity's plea of guilty or nolo contendere has been accepted by a federal, state, or local court. Section 1128(i)(3) of the Act; 42 U.S.C. § 1320a-7(i)(3).

III. The Parties' Arguments

A. The I.G.'s Initial Arguments.

In her brief, the I.G. made the following arguments:

• Petitioner was convicted as conviction is defined in the Act.



• The applicable regulation calls for a three-year exclusion absent aggravating and mitigating factors.



• Given these circumstances, the proposed three-year exclusion is within a reasonable range.

  B. Petitioner's Arguments.

In his brief, the Petitioner made the following arguments:

• The Petitioner has a good record and is esteemed in his community and profession.



• His criminal charges resulted from his confusion regarding billing of services provided on aquatraction versus mechanical traction tables.



• Petitioner pled to the charges and agreed to license suspension only to resolve the issues and move on.



• The Secretary has the discretion whether to exclude or not to exclude.



• The Secretary generally considers specified factors in determining whether to exclude individuals or entities.



• A mitigating factor exists that the I.G. failed to consider.



• Imposing a "benchmark" exclusion when a mitigating factor is present is unreasonable.

• A three-year exclusion given the facts in this case would be cruel and unusual punishment under the Eighth Amendment to the United States Constitution.
  

C. The I.G.'s Reply Arguments.

After Petitioner filed his responsive brief, the I.G. made the following arguments in her reply.

• With respect to permissive exclusions under 1128 (b)(1) of the Act, the [Administrative Law Judge (ALJ)] does not have the authority to reduce the exclusion period to zero.



• If Petitioner has shown a mitigating factor, it is reasonable to also consider the aggravating factor of Petitioner's chiropractic license suspension.



• The purpose behind program exclusion is to protect federally-funded health care programs and their beneficiaries from untrustworthy providers. Thus, Petitioner's exclusion does not constitute cruel and unusual punishment under the Eighth Amendment of the United States Constitution.

IV. Findings of Fact and Conclusions of Law

1. In August of 2000, the Petitioner was a licensed chiropractor in the state of Michigan. P. Ex. 9.

2. At some point, Petitioner relocated to Mississippi. He sold his chiropractic practice. The chiropractor who had purchased his business had complained because he was not paid for charges the Petitioner had previously, and allegedly falsely, submitted for aqua therapy and/or aqua massage. Private litigation and criminal charges ensued. P. Ex. 7.

3. On May 22, 2000, in the 35^th Judicial Circuit Court of Shiawassee County, Michigan, Petitioner pled nolo contendere to one misdemeanor count of "attempted healthcare fraud-false claim." P. Ex. 9. The conviction stemmed from allegations that Petitioner was involved in a scheme to defraud insurance companies in which he knowingly submitted false claims for services he did not provide. He had originally been charged with five counts of filing false claims in 1999 (two to Wausau Insurance Company and three to Blue Cross/Blue Shield). P. Ex. 6; P. Ex. 9.

4. As a sentence, Petitioner was placed on probation for a period of 24 months and was ordered to pay $2,756.10 in restitution, costs and fees. Of this total of $2,756.10, only $1,496.10 was for restitution, the remainder of $1,260 was for costs and fees. P. Ex. 9.

5. No federal health care program suffered financial loss as a result of the acts for which Petitioner was convicted. P. Ex. 6.

6. Petitioner's license to practice chiropractic medicine in Michigan was suspended for one-year. The suspension stemmed from the same set of facts as his conviction. His Michigan license suspension has been completed and Petitioner is eligible for reinstatement of his license in Michigan. P. Ex. 9.

7. The factor of suspension by the State of Michigan Department of Consumer & Industry Services, is an aggravating factor in this case and should be given at least as much weight as the limited financial loss involved in the conviction, a mitigating factor.

8. Based on his conviction, the I.G. has a basis to exclude the Petitioner from Medicare, Medicaid, and all other federal health care programs.

9. Petitioner was "convicted" of a misdemeanor offense as conviction is defined in section 1128 of the Act.

10. Petitioner's conviction related to fraud or other financial misconduct in connection with the delivery of health care items or services within the meaning of section 1128(b)(1)(A)(i) of the Act.

11. Once the I.G. has decided to exclude a practitioner based on section 1128(b)(1) of the Act, and shows a basis for the exclusion, the ALJ does not have the authority to review the exercise of discretion by the I.G. in excluding the individual. In other words, the ALJ cannot eliminate this permissive exclusion altogether. 42 C.F.R. § 1005.4(c)(5).

12. An exclusion imposed under section 1128(b)(1) of the Act will be for a period of three years unless specified aggravating or mitigating factors are present which form the basis for lengthening or shortening the period of exclusion. 42 C.F.R. § 1001.201(b)(1).

13. While only the aggravating and mitigating factors listed in the regulations can be used as evidence to add or subtract from the three-year specified exclusion, no specific evidentiary weight has been assigned to each aggravating and mitigating factor.

14. CMS has shown the existence of one aggravating factor; that is, Petitioner was the subject of adverse action by another government agency or board that was based on the same set of circumstances that serves as the basis for the imposition of exclusion. 42 C.F.R. § 1001.201 (b)(2)(6).

15. Petitioner has shown the existence of one mitigating factor; that is, Petitioner was convicted of fewer than three offenses, and the entire amount of financial loss to other entities due to the acts that resulted in the conviction was less that $1,500. 42 C.F.R. § 1001.201 (b)(3)(i).

16. The three-year exclusion imposed by the I.G. is within a reasonable range, based on the aggravating and mitigating factors.

17. The I.G.'s exclusion of Petitioner for three years is reasonable.

18. A three-year exclusion is not cruel and unusual punishment as proscribed by the Eighth Amendment to the United States Constitution.

V. Rationale

A. The Petitioner was convicted of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary, or other financial misconduct in connection with the delivery of a health care item or service.

The I.G. excluded Petitioner based on the following regulation, which provides that:

The OIG may exclude an individual or entity convicted under Federal or State law of -

A misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct -

(i) In connection with the delivery of any health care item or service, including the performance of management or administrative services relating to the delivery of such items or services . . .

42 C.F.R. § 1001.201 (a) (1).

The circumstances surrounding the charges to which Petitioner pled nolo contendere are somewhat less than clear in the record. Petitioner, however, did plead nolo contendere to having attempted to file a false claim to an insurance company at some time in 1999. I.G. Ex. 3. Viewing some of the statements in the record in the light most favorable to the Petitioner, the Petitioner was confused about how to file claims for certain types of aqua therapy. When the chiropractor to whom Petitioner had sold his practice did not receive payment on accounts receivable because of the incorrectly filed claims, the chiropractor turned the Petitioner into the authorities. Further, Petitioner seems to contend that, simply in order to resolve these matters and relocate to Mississippi, rather than contest the felony counts filed against him, he pled nolo contendere to one misdemeanor charge. Nonetheless, based on the clear provisions of the regulations, I must look only at the conviction itself and not consider what may have led to the conviction.

With regard to the appeal of exclusions, the regulations state:

When the exclusion is based on the existence of a conviction, a determination by another government agency or any other prior determination, the basis for the underlying determination is not reviewable and the individual or entity may not collaterally attack the underlying determination, either on substantive or procedural grounds, in this appeal (emphasis added).

42 C.F.R. § 1001.2007 (d).

The circumstances surrounding Petitioner's legal difficulties are not, therefore, relevant because the conviction cannot be collaterally attacked.

I did consider, however, whether in fact, Petitioner was convicted. The Act defines conviction in section 1128(i) as "when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court . . . ." Petitioner's plea of nolo contendere in May of 2000 to the misdemeanor criminal offense of "health care fraud, flse cl" was accepted by a judge of the state of Michigan. I.G. Ex. 3. Therefore, Petitioner was convicted as defined in the Act.

I next considered whether Petitioner's misdemeanor conviction was related to fraud, theft, embezzlement, breach of fiduciary responsibility, or financial misconduct, as required by section 1128 (b)(1)(A). The misdemeanor itself incorporates the word "fraud" and "false claim." In fact, Petitioner signed a "Consent Order" with respect to his Michigan license suspension in which he stipulated to the facts in an Administrative Complaint. The Administrative Complaint refers to Petitioner having been convicted of "fraud," and "fraud and deceit." P. Ex. 9. I, therefore, find that the misdemeanor to which Petitioner pled clearly related to fraud or financial misconduct. [ I.G. Ex. 3.

The next question is whether Petitioner's fraud was in connection with the delivery of any health care item or service. Again, the misdemeanor itself refers to "health care fraud." I.G. Ex. 3. And the facts in the Administrative Complaint filed against Petitioner, to which Petitioner stipulated, refer to "attempting to obtain fees related to the practice of a health profession," and "fraud or deceit in obtaining or attempting to obtain third party reimbursement." P. Ex. 9. Accordingly, I find that Petitioner's fraud was in connection with the delivery of a health care item or service.

Because the I.G. has shown that Petitioner was convicted of a misdemeanor offense as related to fraud in connection with the delivery of health care items or services, the I.G. has established a basis for permissive exclusion under section 1128 (b)(1)(A)(i) of the Act.

B. The ALJ is limited to determining whether the length of the proposed exclusion is reasonable; and, the ALJ cannot determine that the I.G. must eliminate the exclusion altogether.

Section 1128(b) of the Act includes the provisions for what has been termed "permissive" exclusions. The regulations, in setting forth the authority of the ALJ in appeals of exclusions, states the following:

[the] ALJ does not have the authority to . . .[s]et a period of exclusion at zero, or reduce a period of exclusion to zero, in any case where the ALJ finds that an individual or entity committed an act described in section 1128(b) of the Act, . . . .

42 C.F.R. § 1005.4 (c)(6).

I conclude from the regulations, therefore, that since I have found Petitioner was convicted of; that is, committed, an act described in section 1128(b), I cannot decide, contrary to Petitioner's argument, that the Petitioner is to have no period of exclusion. See also, 42 C.F.R. § 1001.2007 (a)(1) which provides that an excluded person may file a request for hearing before an ALJ only on the issues of whether "[t]he basis for the imposition of the sanction exists, and . . . . [t]he length of the exclusion is unreasonable." (emphasis added). I simply cannot determine that no period of exclusion should be imposed once the I.G. has proven that Petitioner has committed an act described in section 1128(b) of the Act and the I.G. has decided to impose a permissive exclusion.

In his brief, Petitioner cites 62 FR 67392, Dec. 24, 1997 as being criteria the I.G. is to consider when deciding whether to impose a permissive exclusion. Pet. Br. at 4-7; P. Ex. 12. Indeed, these are guidelines issued by June Gibbs Brown, the I.G. in 1997. The guidelines, however, are for implementation of permissive exclusion authority under section 1128(b)(7) of the Act, not a permissive exclusion under section 1128 (b)(1), the section at issue in this case. The implementing regulations for these two sections describing permissive exclusion are very different. Section 1001.201(a) of 42 C.F.R. (implementing section 1128 (b)(1) of the Act) specifies the exclusion "will be for a period of 3 year, unless the aggravating or mitigating factors listed elsewhere in the section exist. By regulation, only the listed mitigating factors can shorten the period of exclusion. 42 C.F.R. § 1001.201 (b)(3). By contrast, 42 C.F.R. § 1001.901, the implementing regulations for section 1128(b)(7) of the Act, set forth much more open-ended criteria for determining the length of an exclusion.

In another case, Robert Alan Spriggs, R.P.T., DAB CR718 (2000), the Petitioner had also argued that the Secretary has the authority not to seek exclusion in the first instance, to waive exclusion, or terminate exclusion early where the Secretary has reasonable assurances that the type of action which formed the basis for the original exclusion has not recurred and will not recur. The ALJ in that case called section 1128(b)(7) a "non-derivative" exclusion that differs from a "derivative" exclusion. Section 1128 (b)(1) of the Act depends on a conviction as the basis of the exclusion, as opposed to a section 1128 (b)(7) exclusion for which the I.G. must make a prima facie showing that the acts forming the basis of the exclusion were actually committed. Moreover, the ALJ in Robert Alan Spriggs, R.P.T. also explained that the implementing regulations for section 1128 (b)(7), as opposed to section 1128 (b)(1) that is at issue here, do not contain a benchmark period of exclusion and do not specify aggravating and mitigating factors which are the exclusive factors that must be applied in lengthening or shortening the exclusion.

Accordingly, I find that the criteria the Petitioner submitted and made arguments therefrom are inapplicable to the case at hand and are not relevant for determining the length of exclusion in Petitioner's case. To determine the reasonableness of the Petitioner's exclusion, I must begin with three years, as set forth in the regulations, and use the aggravating factors and mitigating factors also set forth. 42 C.F.R. § 1001.201. Moreover, I cannot reduce the period of exclusion to zero. 42 C.F.R. § 1005.4 (c)(6).

C. The imposed exclusion of three years is reasonable, given the aggravating and mitigating factors present in this case.

1. The I.G. has shown the presence of one aggravating factor.

On August 31, 2000, the State of Michigan, Department of Consumer & Industry Services, Bureau of Health Services, Board of Chiropractic, Disciplinary Subcommittee (State Chiropractic Board) issued an Administrative Complaint (Complaint) against Petitioner. The Complaint referred particularly to the Petitioner's nolo contendere plea to one misdemeanor count of attempted healthcare fraud which is the subject of the exclusion at issue. The Complaint alleged that Petitioner failed to notify the State Chiropractic Board within 30 days of his conviction, as is required. The Complaint also alleged that Petitioner's conviction evidenced lack of good moral character and evidenced fraud or deceit in obtaining or attempting to obtain third party reimbursement. On November 17, 2000, the Petitioner signed a stipulation that the facts alleged in the Complaint were true. As a result, by consent order, Petitioner's licence was suspended for one year. P. Ex. 9.

The exact language of the applicable aggravating factor set forth in the regulations is as follows:

[w]hether the individual or entity was convicted of other offenses besides those which formed the basis for the exclusion, or has been the subject of any other adverse action by any Federal, State or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion. (emphasis added).

42 C.F.R. § 1001.201 (b)(2)(vi).

While one might argue that the exact basis for the State Chiropractic Board's suspension of Petitioner's license was his failure to report, in fact, the basis was that he was convicted of one misdemeanor count of attempted healthcare fraud, the same set of circumstances that served as the basis for imposition of the exclusion. Had he not been convicted, he would not have had his license suspended.

Accordingly, I find the I.G. has shown the existence of one aggravating factor that may be used to lengthen the three-year benchmark exclusion.

2. The Petitioner has shown the existence of one of the possible mitigating factors for shortening the period of exclusion.

The implementing regulations for section 1128(b)(1) list four possible mitigating factors. One of them provides that a basis for reducing the period of exclusion exists:

[w]hen the individual or entity was convicted of 3 or fewer offenses, and the entire amount of financial loss to a government program or to other individuals or entities due to the acts that resulted in the conviction and similar acts is less than $1,500.

42 C.F.R. § 1001.201(b)(3)(i).

Petitioner was convicted of only one count of a misdemeanor offense. The I.G. has shown no other offenses. Therefore, Petitioner was convicted of 3 or fewer offenses. Additionally, as part of his sentence, Petitioner was required to make restitution in the amount of $1496.10. I.G. Ex. 3. The applicable case law supports using the amount of restitution included as part of sentencing as the amount of loss suffered by a health care program or individual or entity as a result of an excluded person's acts. Steven Alonzo Henry, M.D., DAB CR638 (2000).

Petitioner submitted affidavits from himself and professional colleagues attesting to his contributions to the community and his profession. The implementing regulations for section 1128(b)(1), however, literally circumscribe to four enumerated factors (by the inclusion of the word "only") the mitigating factors that can be considered for reducing the three-year period of exclusion. 42 C.F.R. §§ 1001.201(b)(3)(i)-(iv). Neither one's professional or community standing nor rehabilitation are included as one of the four mitigating factors. They are, therefore, irrelevant to determining a reduction in the three-year benchmark exclusion.

Accordingly, I find the Petitioner has shown the existence of one and only one mitigating factor.

3. I find that the one aggravating factor and one mitigating factor are of relatively equal weight and cancel each other, leaving the three-year benchmark period of exclusion as reasonable under the circumstances.

While the regulations direct what factors can be used in lengthening or shortening the period of exclusion, the regulations do not set forth the evidentiary value of the factors. The decision-maker is free to consider the circumstances of each factor and weigh the value of each. It is the quality of the circumstances whether aggravating or mitigating that should be dispositive in analyzing these factors. Barry D. Garfinkel, M.D., DAB No. 1572 (1996). The mitigating factors, however, must be more important or significant than the aggravating factors to support a finding that the benchmark proposed by the I.G. is beyond the reasonable range. Id. at 11.

In weighing the aggravating factor, I took into consideration the fact that Petitioner admitted to the State Chiropractic Board that his conduct evidenced lack of good moral character and evidenced fraud or deceit in obtaining or attempting to obtain third party reimbursement. Further, I considered that Petitioner had not notified the State Chiropractic Board of his conviction when he should have known his conviction might have some bearing on his state license. This suggests an interest in hiding his conviction. This type of untrustworthy behavior is the type of behavior from which the exclusion provisions attempt to protect health care programs and program beneficiaries.

In weighing the mitigating factor present in this case, I considered that, while Petitioner was convicted of only one offense, his restitution amount was just under the $1500 amount specified for mitigation. I decided, therefore, that the aggravating factor must be considered at least equal to the mitigating factor in resolving the length of exclusion.

Accordingly, the aggravating and mitigating factors present herein cancel out, leaving the three-year benchmark period of exclusion, which I find to be within a reasonable range based on all the circumstances in this case.

D. A three-year exclusion in this case does not constitute cruel and unusual punishment.

Administrative Law Judges at the Departmental Appeals Board (Board) and the Board, itself, have found that the ALJs who have authority to decide exclusion cases do not have the authority to rule on the constitutionality of federal statutes or the I.G.'s actions. Roberta A. Miller, DAB No. 367 (1995). Nonetheless, the Board has noted that the exclusion provisions do not violate the prohibition against cruel and unusual punishment. Susan Malady, R.N., DAB No. 1816 (2002).

As the I.G. pointed out in its reply brief, and as confirmed by the legislative history of the exclusion provisions and the relevant federal case law, the primary goal of the legislation is to protect present and future Medicare beneficiaries from the abusers of the program. Susan Malady, R.N., DAB No. 1816 (2002). Arguments that the exclusion provisions are anything but remedial have been deemed without merit. Manocchio v. Sullivan, 961 F.2d 1539 (11^th Cir. 1992); Greene v. Sullivan, 731 F. Supp. 838 (E.D.Tenn 1990). Program exclusion is designed to protect health care programs and their beneficiaries. While the exclusions do carry the "sting of punishment," the exclusion provisions are not punishment. When an exclusion is within a reasonable range, it is by definition not punishment but remedial and does not run afoul of the Eighth amendment. Therefore, because I find the I.G.'s imposition of a three-year exclusion to be reasonable, the Eighth Amendment ban on cruel and unusual punishment is not applicable to this case.

VI. Conclusion

For all the foregoing reasons, and after consideration of both parties' submitted evidence and arguments, I find that the I.G. has a basis to impose an exclusion against Petitioner and that the three-year exclusion so imposed is reasonable.

Anne E. Blair

Administrative Law Judge

1. Several of Petitioner's proposed exhibits are of questionable relevance. For example, P. Ex. 12 contains the I.G.'s guidelines for determining the length of permissive exclusions under § 1128 (b)(7) of the Act. As explained in section V below, these guidelines are inapplicable to the permissive exclusion at issue herein; that is, an exclusion pursuant to § 1128 (b)(1) of the Act. Nonetheless, for record reference purposes, I have admitted all proposed exhibits into the record.