Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
|IN THE CASE OF|
James Randall Benham,
|DATE: February 03, 2006|
- v -
The Inspector General.
| Docket No.C-05-373
Decision No. CR1405
I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, James Randall Benham from participating in Medicare, Medicaid, and all federal health care programs for a period of five years. I find that the I.G. is authorized to exclude Petitioner pursuant to Section 1128(a)(1) of the Social Security Act (Act), and the five-year exclusion imposed by the I.G. is the minimum mandatory period of exclusion under the Act. Act, section 1128(a)(1).
James Randall Benham (Petitioner) was General Counsel of Augustine Medical, Inc. (AMI). AMI manufactured and sold Warm-up Active Wound Therapy, a wound care therapy system. TriSpan Health Services (TriSpan), a Medicare fiscal intermediary, paid for Warm-up Active Wound Therapy under the Medicare guidelines. On or about June 27, 2000, Petitioner received a letter from TriSpan (June 27th TriSpan letter) indicating that Warm-up was considered "investigational." The June 27th TriSpan letter was not disclosed to Southern Medical Distributors (SMD), a durable medical equipment (DME) distributor set up as part of a government sting operation. P. Response at 2; I.G. Exhibit (Ex.) 5.
Petitioner was prosecuted by the United States and charged with knowingly and willfully aiding and abetting others in causing to be withheld from Southern Medical Distributors a material fact for use in determining rights to benefits and payments under a Federal health care program, that being the Medicare program, in violation of 42 U.S.C. § 1320a-7b(a)(2) and 18 U.S.C. § 2. Petitioner pleaded guilty to that charge. I.G. Exs. 3, 4. As part of the misdemeanor plea, Petitioner signed a stipulation of facts in which he agreed that TriSpan's determination, that Warm-Up was investigational, was material and that he knowingly and intentionally aided and abetted the offense. Petitioner was sentenced, on September 15, 2004, to a three-year period of probation, fined $100,000, and ordered to pay a special assessment of $25. I.G. Ex. 2.
The I.G. notified Petitioner by letter dated March 31, 2005 of his exclusion from participation in Medicare, Medicaid, and all federal health care programs for a mandatory five-year period pursuant to section 1128(a)(1) of the Act. The I.G. further advised Petitioner that the action taken was based upon Petitioner's conviction in the United States District Court for the District of Minnesota, of a criminal offense related to the delivery of an item or service under the Medicare program. I.G. Ex. 1; P. Ex. 4, at 4.
By letter dated May 31, 2005, Petitioner timely filed a request for review of the I.G.'s exclusion. In his request for hearing, Petitioner maintained that the I.G. erred in excluding him under the provisions of section 1128(a)(1) of the Act and, instead, should have exercised his discretion and excluded Petitioner under section 1128(b)(11). On July 20, 2005, I convened a telephone conference with counsel for the I.G. and Petitioner in this matter. (1)
During that conference call, I informed the parties that my jurisdiction was limited in this case to a determination as to whether the I.G. had the legal authority to exclude Petitioner and whether the period of exclusion was reasonable. Petitioner reiterated the argument set forth in his hearing request. With the concurrence of the parties, during the conference call, I established a briefing schedule for the parties to address Petitioner's argument as to whether an ALJ has the authority to determine if an exclusion should be implemented pursuant to the "mandatory" provision of the Act (section 1128(a)) as opposed to a "permissive" exclusion under section 1128(b) of the Act.
Thereafter, on August 19, 2005, the I.G. submitted an initial brief (I.G. Br.). Accompanying the brief, the I.G. filed five proposed exhibits (I.G. Exs. 1-5). In the initial brief, the I.G. argued the limited issue addressed during the prehearing conference and as outlined in my Order dated August 16, 2005. On September 22, 2005, Petitioner filed his response brief addressing the issues as discussed in the prehearing conference and as outlined in my Order memorializing the prehearing conference. (P. Response). Petitioner submitted two proposed exhibits (P. Exs. 1-2). However, as part of its response, Petitioner also argued that Petitioner's conviction did not affect the delivery of an item or service under a federal or state health care program and the case did not involve an overpayment by a federal or state health care program.
The I.G. filed a reply brief (I.G. Reply) on October 12, 2005, responding to the issues raised by Petitioner. The I.G. specifically argued that the I.G. had a legal basis to exclude Petitioner under section 1128(a)(1) and that Petitioner was convicted of an offense related to the delivery of items or service under Medicare.
Petitioner filed a motion for leave to file a sur-reply brief and sur-reply (P. Sur-Reply) on November 3, 2005. I granted Petitioner's motion for leave to file a sur-reply on November 28, 2005, and the sur-reply brief was accepted into the record. Neither party filed objections to the exhibits offered by the other party. I therefore admit I.G. Exs. 1-5 and P. Exs. 1-2 into evidence.
II. CONTROLLING STATUTES AND REGULATIONS
Section 1128(a)(1) of the Act requires the Secretary of Health and Human Services (Secretary) to exclude from participation in Medicare, Medicaid, and all other federal health care programs, any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under the Medicare or Medicaid programs. 42 U.S.C. § 1320a-7(a)(1).
An exclusion imposed under section 1128(a)(1) must be for a period of at least five years. Act, section 1128(c)(3)(B); 42 U.S.C. § 1320a-7(c)(3)(B). Pursuant to 42 C.F.R. § 1001.102(b), no exclusion pursuant to section 1128(a)(1) may be for less than five years.
An individual is "convicted" of a criminal offense within the meaning of section 1128(i) of the Act -
Act, section 1128(i); 42 U.S.C. § 1320a-7(i).
42 C.F.R. § 1001.2007(a)(1)(i) grants an ALJ the authority to address whether a legal basis for the imposition of an I.G. sanction exists.
III. FINDINGS OF FACT AND CONCLUSIONS OF LAW
The legal issue before me in this case is:
I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding in italics below as a separate heading. I discuss each Finding in detail.
Summary disposition is appropriate where there are either no disputed issues of material fact and the only questions that must be decided involve application of law to the undisputed facts, or the moving party must prevail as a matter of law even if all disputed facts are resolved in favor of the party against whom the motion is made. A party opposing summary disposition must allege facts which, if true, would refute the facts relied upon by the moving party. See Fed. R. Civ. P. 56(c).
Petitioner argues in its motion for leave to file a sur-reply that the purpose for the sur-reply was to correct a material factual error. Petitioner argues that failing to disclose the letter in issue in this case would not and could not have resulted in the delivery of items or services under Medicare because SMD was, in reality, part of the Government's sting operation and there was no chance that the Medicare program would pay for DME items provided by Petitioner. While Petitioner frames the issue as a material factual error, Petitioner is in reality making a legal argument that, because of the status of SMD as part of the Government sting operation, no claim could have been filed with the Medicare program. Therefore, according to Petitioner, Petitioner's conviction does not relate to an item or service under the Medicare program. The I.G. does not dispute that SMD was part of the Government's sting operation, nor does he dispute that no claim was submitted to Medicare in this case. Because I view Petitioner's argument as a legal rather than a factual issue requiring an in person hearing, I find the only issue that exists in this matter may be resolved as a question of law.
An exclusion under section 1128(a)(1) of the Act requires that two elements be shown: (1) that the individual or entity has been convicted of a criminal offense as defined at section 1128(i) of the Act; and (2) that the criminal offense be related to the delivery of an item or service under title XVIII or under any state health care program. The I.G. bears the burden of persuasion to prove, by a preponderance of the evidence, that both elements have been met. 42 C.F.R. §§ 1005.15(b)(1), (d).
The first element has been met. Petitioner does not dispute that, on June 29, 2004, he pleaded guilty to one count of a misdemeanor information which charged that he:
P. Ex. 2, at 6-13; I.G. Ex. 3. A judgment of conviction was imposed on September 8, 2004, which sentenced Petitioner to three years probation, ordered to pay a fine in the amount of $100,000, and assessed a $25 special assessment. Petitioner concedes that he was convicted within the meaning of section 1128(i) of the Act. Id. at 4. Therefore, I find that Petitioner was convicted within the meaning of section 1128(i) of the Act.
Petitioner asserts that there is no common sense connection or "nexus" between the criminal offense to which he pleaded guilty and an item or service under the Medicare program. First, Petitioner contends that the company to which the June 27th TriSpan letter allegedly should have been forwarded, SMD, was a corporate entity created by a governmental agency as party of a sting operation. P. Response at 2; P. Sur-Reply at 2. Petitioner suggests that, even if the June 27th TriSpan letter had been sent to SMD, there was no possibility of a delivery of an item or service, or a distribution of Medicare funds. Specifically, Petitioner asserts that "[SMD] never delivered the DME to any Medicare beneficiary. Because [SMD] was part of a government operation, there was no chance that the Medicare program would pay for the DME provided by AMI." P. Sur-Reply at 2. Petitioner continues by addressing the argument raised for the first time by the I.G. in his reply brief; that a nexus exists because "Petitioner's conviction involved acts that could have resulted in the delivery of items under Medicare." I.G. Reply at 5. If the I.G.'s argument is given any significant weight, Petitioner concludes, then Petitioner's exclusion under section 1128(a)(1) cannot be supported. Petitioner concludes that, based upon the I.G.'s contention, "it was impossible for the conduct underlying [Petitioner's] conviction to have resulted, directly or indirectly, in the delivery of an item under Medicare or the expenditure of Medicare funds. P. Sur-Reply at 2.
The I.G. asserts that Petitioner's conviction did "involve acts that could have resulted in the delivery of items under Medicare" even if no items were actually provided or claims filed. I.G. Reply at 5. Further, the I.G. contends that "[t]he possibility that others might submit claims to Medicare based on Petitioner's withholding of a material document provides the necessary nexus required by section 1128(a)(1) of the Act." Id.
Although Petitioner's argument raises an interesting question regarding the specific facts of this case, and the interpretation and application of what is related to a delivery of an item or service under federal health care programs, I am bound by the regulations and statutory provision which dictate this area of law.
The language which describes the relationship between an offense and an item or service in a health care program is spelled out in Berton Siegel, D.O., DAB No. 1467 (1994). In Siegel, the Board determined that there had to be some nexus or common sense connection between the petitioner's offense and the delivery of an item or service under a covered program. The Board opined that:
Id. at 5; see also, Thelma Walley, DAB No. 1367 (1992).
The Act does not define the term "nexus" with any degree of clarity. But, as was elucidated by ALJ Kessel in Jeffrey Knute Connell, DAB CR1271 (2005), "a crime that affects the performance of Medicare or a State Medicaid program - by affecting, either potentially or in fact, the quality of items or services that the program delivers, or the monies spent for the delivery of items or services - relates to the delivery of Medicare or Medicaid items or services." Based upon Judge Kessel's definition of the term "nexus," one with which I concur, it is clear that the facts in the instant case demonstrate a common sense connection (nexus) between the crime Petitioner pleaded guilty to and a delivery of item or service under Medicare. Petitioner concedes that he "pleaded guilty to a misdemeanor and accepted responsibility for aiding and abetting others in deciding not to forward the TriSpan letter to Southern Medical Distributors, a distributor of DME. . . ." P. Response at 2-3. However, Petitioner argues that in spite of his plea and conviction, it would have been virtually impossible for his failure to disclose the June 27th TriSpan letter to SMD to result in the delivery of an item or service under Medicare. P. Sur-Reply at 2. According to Petitioner, in essence, SMD was a "dummy" corporation created by the government as a part of a sting operation. P. Response at 3. Petitioner states that, even had the June 27th TriSpan letter been sent to SMD, there couldn't have been any inducement of SMD which might have resulted in the submission of a fraudulent Medicare claim.
Petitioner's argument, although interesting, is without merit. The regulations are concise. Petitioner pleaded to a charge of "withholding a material fact for use in determining rights to benefits and payments under a Federal health care program." I.G. Ex. 2, at 1 (emphasis added). The specific sections of the United States Code to which Petitioner pleaded guilty provide:
42 U.S.C. §§ 1320a-7b(a)(2), (a)(ii).
Petitioner also executed a sworn Stipulation of Facts which substantiates the charges pleaded to by Petitioner. P. Ex. 2, at 12-13. Convictions under 42 U.S.C. § 1320a-7b(a), with respect to Medicare, are deemed to be program-related within the meaning of section 1128(a)(1) of the Act. Therefore, the criminal information, judgment of conviction, and relevant statutes establish the Petitioner was convicted of an offense that provides a basis for exclusion under section 1128(a)(1) of the Act. See Lorna Fay Gardner, DAB No. 1733 (2000).
Petitioner maintains that the I.G. erred in excluding him under the provisions of section 1128(a)(1) and instead should have exercised his discretion and excluded Petitioner under section 1128(b)(11). Petitioner requests that I change Petitioner's exclusion from mandatory to permissive and impose a penalty consistent with prior section 1128(b)(11) decisions.
The I.G. contends that the regulations provide that, if a party is convicted of a program-related crime, the Secretary is mandated to exclude that party from program participation pursuant to section 1128(a)(1) of the Act. I.G. Br. at 4-5. The I.G. also asserts that Petitioner was convicted of a program-related crime and, thus, Petitioner's exclusion is mandatory under section 1128(a)(1). I.G. Reply at 1-2.
The I.G. additionally contends that Petitioner's exclusion under 1128(a)(1) has a legal basis and, therefore the exclusion must be upheld. Id. at 3. Petitioner was convicted of "withholding a document material to the determination regarding whether the right to benefits or payment for Petitioner's product existed under Medicare." Id. at 4; I.G. Ex. 3. Thus, the I.G. concludes, the conviction serves as the legal basis for Petitioner's exclusion under section 1128(a)(1) of the Act. Id.
Petitioner argues that his conviction is not related to the delivery of an item or services under the Medicare program as delineated under section 1128(a) of the Act. Petitioner contends that the facts of this case support an exclusion pursuant to section 1128(b) of the Act. P. Response at 1-2. Petitioner asserts that his conviction could be the basis of a permissive exclusion under section 1128(b)(1)(A)(i) of the Act, because the plea was for a misdemeanor and not a felony. Petitioner argues that the misdemeanor portion of the United States Code under which he pleaded guilty does not mention a "provision of items or services under federal health care programs," and therefore "falls outside the legal requirements for the imposition of a mandatory exclusion." P. Response at 6.
Petitioner contends that the I.G.'s interpretation of section 1128(a)(1) is overly broad and does not take into consideration both elements of the regulation and "should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant. . . ." P. Response at 7 (citing Hibbs v. Winn, 124 S.Ct. 2276, 2286 (2004) (quoting 2A N. Singer, Statutes and Statutory Construction § 46.06, pp. 181-86 (rev. 6th ed. 2000)).
Petitioner goes on to aver that the conduct for which he pleaded guilty is covered under section 1128(b)(11) of the Act which provides for the exclusion of -
See P. Response at 7. Petitioner argues that, in not giving full consideration to the "related to delivery of items or services" language of section 1128(a)(1), and excluding Petitioner under the mandatory provision, makes section 1128(b)(11) of the Act meaningless. Id. at 8. Petitioner concludes by opining that a better reading of the provisions of both sections 1128(a)(1) and 1128(b)(11) would be to apply section 1128(a)(1) to felony convictions under section 1128B(a)(2)(i) and section 1128(b)(11) to misdemeanor convictions under section 1128B(a)(2)(ii). Id.
Section 1128(a)(1) of the Act requires the Secretary to exclude from participation in any federal health care program, as defined in section 1128B(f) of the Act, any individual convicted of a criminal offense relating to the delivery of a health care item or service. The statute is unambiguous as to the discretionary nature of the provision - the exclusion is mandatory.
Section 1128(b) of the Act is indeed permissive, and it does apply to certain misdemeanor offenses. However, numerous ALJ and appellate decisions of the Departmental Appeals Board have determined that, in matters where a conviction triggers both the mandatory (section 1128(a)) and permissive (section 1128(b)) exclusion provisions, the Secretary does not have discretion as to which provision to impose. The Secretary is required to implement the mandatory exclusion. See, e.g., Touradj Farhadi, M.D., DAB CR1072 (2003); Boris Lipovsky, M.D., DAB No. 1363 (1992); Kenneth M. Behr, DAB No. 1997 (2005). An appellate panel of the Departmental Appeals Board (the Board), in its rejection of the petitioner's argument in Lorna Fay Gardner, DAB No. 1733 (2000), explained that:
Id. at 6.
The crux of Petitioner's argument rests on his contention that he does not meet the requirements relating to the delivery of an item or service under Medicare. I have already concluded that Petitioner was convicted of a program-related crime. Therefore, based upon the circumstances before me, Petitioner's argument is not convincing. On its face, Petitioner's exclusion falls under both the mandatory and permissive exclusion provisions. Thus, for the reasons previously addressed, in such instances the I.G. must exclude a party in accordance with the mandatory exclusion provision.
An exclusion under section 1128(a)(1) of the Act must be for a minimum mandatory period of five years, as set forth in section 1128(c)(3)(B) of the Act:
When the I.G. imposes an exclusion for the mandatory five-year period, the reasonableness of the length of the exclusion is not an issue. 42 C.F.R. § 1001.2007(a)(2). Aggravating factors that justify lengthening the exclusion period may be taken into consideration, but the five-year period of exclusion will not be shortened. Petitioner was convicted of a criminal offense related to the delivery of an item or service under Medicare. As a result of Petitioner's program-related conviction, the I.G. was required to exclude him for at least five years.
Sections 1128(a)(1) and 1128(c)(3)(B) of the Act mandate that Petitioner be excluded from Medicare, Medicaid, and all federal health care programs, for a minimum mandatory period of five years because of his conviction of a criminal offense related to the delivery of an item or service under Medicare. I therefore conclude that the I.G. properly excluded Petitioner from program participation, and I uphold the five-year exclusion.
Alfonso J. Montano
Administrative Law Judge
1. Counsel for Petitioner in the present case also represents the petitioner in a related case, Scott D. Augustine v. the Inspector General, Docket No. C-05-374. The issues addressed during the conference call related to both Petitioner in this case as well as Petitioner in the Augustine case.