Thelma Walley, DAB No. 1367 (1992)

Department of Health and Human Services


Appellate Division

In the Case of:    
Thelma Walley,                 
- v. -
The Inspector General.  

DATE: October 26, 1992
Docket No. C-409
Decision No. 1367


Thelma Walley, Petitioner, appealed the decision of Steven T. Kessel,
Administrative Law Judge (ALJ), upholding her five-year exclusion from
participation in Medicare and certain state health care programs.
Thelma Walley, DAB CR207, at 2 (1992) (ALJ Decision).  The Inspector
General (I.G.) had based the exclusion on section 1128(a)(1) of the
Social Security Act (42 U.S.C. . 1320a-7(a)(1)) and on Petitioner's plea
of nolo contendere to, and conviction of, two criminal misdemeanors
under Texas state law.  The ALJ found that the I.G. had established that
Petitioner had been convicted of a criminal offense and that her offense
was related to the delivery of an item or service under Medicare or a
state health program, as required by section 1128(a)(1). 1/  The ALJ
granted summary judgment for the I.G., finding that there was no genuine
issue of material fact.

For the reasons stated below, we remand this case to the ALJ for further
consideration of the issue of whether Petitioner's offense was, in fact,
related to the delivery of an item or service under Medicare or
Medicaid.  We affirm the ALJ Decision on all other matters.


The following facts are not in dispute.  Petitioner is a licensed
vocational nurse who was working at the Stanford Convalescent Center
(nursing facility) in Fort Worth, Texas on August 22, 1990. 2/  On
September 11, 1990, Petitioner was charged in a Texas court with two
counts of the criminal offense of unlawfully destroying tangible
property belonging to another.  The property identified in the two
counts was one tablet of the drug, Klonopin, belonging to nursing
facility patient Nancy Dayton and one tablet of Klonopin belonging to
patient Frances Moore, respectively.  On September 21, 1990, Petitioner
pled nolo contendere to both of the criminal charges which had been
filed against her, and a Texas court found Petitioner guilty of both of
the charges based on her nolo contendere pleas.

Petitioner has excepted specifically to the following findings of fact
and conclusions of law (FFCLs):

8.      On August 22, 1990, Nancy Dayton and Frances Moore were
receiving items or services which were reimbursed by the Texas Medicaid

9.      Petitioner was convicted of a criminal offense.

10.     Petitioner was convicted of a criminal offense related to the
delivery of an item or service under Medicaid, within the meaning of
section 1128(a)(1) of the Act.

12.     There are no disputed issues of material fact in this case and
summary disposition is appropriate.

14.     The exclusion imposed and directed against Petitioner by the
I.G. is mandated by law.

ALJ Decision at 3-4 (citations omitted).

Petitioner also alleged that her "due process rights" were violated
because the ALJ admitted affidavits which were not in existence at the
time Petitioner was excluded.  We note that Petitioner did not object to
FFCLs 1-7, 11 and 13, and we affirm these FFCLs without further


We have a limited role as the forum for administrative review of an
ALJ's decision in an exclusion case.  The standard of review on disputed
issues of fact is whether the ALJ Decision is supported by "substantial
evidence on the whole record."  The standard of review on disputed
issues of law is whether the ALJ Decision is "erroneous."  42 C.F.R. .
1005.21(h); Joyce Faye Hughey, DAB 1221, at 11 (1990); Lakshmi N. Murty
Achalla, DAB 1231, at 7 (1991).  Below we address both the general
issues raised by Petitioner on appeal and the particular objections
stated in Petitioner's exceptions to certain of the FFCLs.  Under the
applicable standard of review, we conclude that the granting of summary
judgment to the I.G. was erroneous because the I.G. had not met its
initial burden of showing that there was no genuine issue of material
fact as to whether Petitioner's offense related to the delivery of an
item or service under Medicare or Medicaid.  However, we affirm the
ALJ's finding in FFCL 9 that Petitioner was convicted of a criminal
offense.  We further conclude that the ALJ did not err in admitting
affidavits in support of Petitioner's exclusion which were not relied on
by the I.G. in initiating Petitioner's exclusion. 3/

I.      The Substantive Law and Standards for Summary Judgment

Section 1128(a)(1) of the Social Security Act (Act) provides as follows:

 (a) MANDATORY EXCLUSION. -- The Secretary shall exclude the
 following individuals and entities from participation in
 [Medicare] and shall direct that the following individuals and
 entities be excluded from participation in [Medicaid]: (1)
   entity that has been convicted of a criminal offense related
   to the delivery of an item or service under [Medicare] or

Section 1128(c)(3)(B) provides that:

 In the case of an exclusion under subsection (a), the minimum
 period of exclusion shall not be less than five years . . . .

Therefore, for the I.G. to prove that exclusion was proper, the I.G.
would have to show that the following two material elements had been
met:  (1) that Petitioner was convicted of a criminal offense, and (2)
that the criminal offense was related to the delivery of an item or
service under Medicare or Medicaid.

Section 1128(f) provides that any individual or entity that is excluded
under section 1128 is entitled to reasonable notice and opportunity for
a hearing to the same extent as is provided in section 205(b) of the
Act.  Here, the ALJ affirmed Petitioner's exclusion on the I.G.'s motion
for summary judgment.  In addressing Petitioner's arguments that the ALJ
acted incorrectly in granting summary judgment, we consider the summary
judgment standards applicable to federal courts as valuable guidance on
when a Petitioner's right to a hearing may have been judicially or
administratively circumvented through the use of summary procedures. 4/

Under the Federal Rules of Civil Procedure, when a motion for summary
judgment is entered, the moving party bears the burden of informing the
decision-maker of the basis for its motion, together with evidence
demonstrating the absence of any genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 5/  Essentially,
this means that the moving party must put forth evidence, on each
material element of the substantive offense, which on its face shows
that the element has been met, and the evidence must not be subject to
conflicting interpretation.  The evidence must be viewed in the light
most favorable to the non-moving party.  Adickes v. Kress & Co., 398
U.S. 144, 157 (1969).  The courts are in entire agreement that the
moving party has the initial burden of showing the absence of any
genuine issue as to all the material facts which, under applicable
principles of substantive law, entitle that party to judgment as a
matter of law.  If the documents before the court fail to establish
clearly that there is no genuine issue as to any material fact, the
motion must be denied.  6-Pt.2 Moore's Federal Practice . 56.15[3]
(1988) (emphasis added).

On the other hand, the party opposing summary judgment does not have a
duty to present opposing evidence in all circumstances.  For example,
Rule 56(e) of the Federal Rules of Civil Procedure states that a defense
to a summary judgment motion is required only if the motion is
"supported as provided in this rule."  When the movant's documentary
evidence demonstrates on its face the existence of a genuine dispute of
material fact or when it fails to foreclose the possibility of a factual
dispute, the non-moving party does not have an obligation to provide
opposing evidentiary material and summary judgment should not be
granted.  See Adickes at 144; Wright, Miller & Kane, Federal Practice
and Procedure: Civil 2d, . 2727 (1983). 6/

 A.      The I.G. Met its Burden of Showing that Petitioner Was
 Convicted of a Criminal Offense Within the Meaning of Section

Petitioner objected to the ALJ's conclusion that she was convicted of a
criminal offense within the meaning of section 1128(i) of the Act (FFCL
9).  Petitioner did not explain her objection; however, we conclude that
the I.G. met its burden on this material element and, therefore, the
ALJ's conclusion in FFCL 9 was not erroneous.

Section 1128(i) of the Act defines when a person has been convicted for
purposes of an exclusion:

 [A]n individual or entity is considered to have been "convicted"
 of a criminal offense . . . (3) when a plea of guilty or nolo
 contendere by the individual or entity has been accepted by a
 Federal, state or local court; . . . .

The ALJ based his conclusion that Petitioner was convicted within the
meaning of section 1128(i) on two factual findings.  First, the ALJ
found that Petitioner pled nolo contendere to two misdemeanor charges
involving the unlawful destruction of medication belonging to two
patients at the nursing home, Nancy Dayton and Frances Moore (FFCL 5).
Second, the ALJ found that the court accepted Petitioner's nolo
contendere pleas and entered verdicts of guilty on both charges (FFCL
6).  The I.G. introduced copies of the court's judgments on both counts,
which unambiguously support these two factual findings.  See I.G. Ex. 1,
Atts. 5 & 6.  Petitioner did not dispute the authenticity or accuracy of
these documents, nor did she introduce evidence contradicting their
assertions.  Petitioner relied solely on the allegation that her plea
was coerced. 7/  This allegation is insufficient to raise a genuine
issue of material fact on whether Petitioner was convicted of a criminal
offense for purposes of section 1128(a)(1).  Based on section
1128(i)(3), the court's acceptance of Petitioner's nolo contendere pleas
constitutes a conviction of a criminal offense.  Therefore, it was not
erroneous for the ALJ to conclude that Petitioner was convicted of a
criminal offense, and we affirm and adopt FFCL 9.

 B.      The I.G. Did Not Meet Its Burden of Showing There Was No
 Genuine Issue of Material Fact as to Whether Petitioner's
 Offense Related to the Delivery of an Item or Service Under

Petitioner argued that there was insufficient evidence as a matter of
law on which the ALJ could have found that patients Dayton and Moore
were receiving Medicaid-reimbursed items or services on August 22, 1990,
the date of Petitioner's offense (FFCL 8).  Petitioner argued there were
therefore insufficient facts and law to support the ALJ's conclusion
that Petitioner's offense related to the delivery of items or services
under Medicaid (FFCL 10) or that the exclusion was mandated by section
1128(a)(1) (FFCL 14).  Petitioner further argued that, because of these
insufficiencies, there were genuine issues of material fact remaining,
making summary judgment inappropriate (FFCL 12).

The Act does not define what constitutes "related to the delivery of an
item or service" under Medicare or Medicaid.  Nevertheless, the Board
has previously held that if there is a "common sense connection" between
an offense and the delivery of an item or service under Medicare or
Medicaid, then exclusion under section 1128(a)(1) is proper.  Boris
Lipovsky, M.D., DAB 1363 (1992); see also Jack W. Greene, DAB 1078
(1989), aff'd on other grounds, 713 F. Supp. 835 (E.D. Tenn. 1990)
(offense of billing Medicaid for brand-name drugs but dispensing
lower-cost generic drugs is related to the delivery of a Medicaid item
or service even though Petitioner argued that the offense related only
to the billing and not to the delivery of the item); DeWayne Franzen,
DAB 1165 (1990) (mislabeling of drugs dispensed to Medicaid patients is
related to the delivery of a Medicaid item or service); Napoleon S.
Maminta, M.D., DAB 1135 (1990) (offense of cashing a
Medicare-reimbursement check which was issued to another provider is
related to the delivery of a Medicare item or service).

Clearly, "related to" requires some nexus between the delivery of an
item or service under Medicare or Medicaid and the offense.  The I.G.
would not necessarily have to prove that the individual drugs themselves
were items reimbursed by Medicaid, although that would be one clear way
of satisfying the test.  The I.G. could also satisfy the test by showing
that the nursing facility services received by these patients on August
22, 1990, which would necessarily include the responsibility for the
administration and safekeeping of the drugs, were covered services
reimbursed by Medicaid. 8/

Petitioner argued that the evidence relied upon by the I.G. did not
establish that Medicaid reimbursed the drugs in question or the nursing
facility services for the day in question.  See generally Opposition to
Respondent's Second Renewed Motion for Summary Disposition and Brief in
Support of Opposition.  We agree with Petitioner that the evidence in
the record does not clearly establish that the nursing facility services
for these two patients on August 22, 1990 were reimbursed by Medicaid.
Nor does it show the drugs were reimbursed by Medicaid.

Among other documents, the I.G. introduced two payment statements and
two affidavits in support of the exclusion.  The payment statements, one
for each patient, are computer print-outs covering a two-year period
which contain lines showing what appear to be dollar amounts for
consecutive time periods of several months each.  See I.G. Ex. 3, Att.
8.  Neither of these payment statements indicates that the statement is
for Medicaid reimbursement.  Although the statements do seem to indicate
by code that Dayton and Moore became Medicaid- eligible on a date prior
to the period at issue, the statements do not clearly indicate whether
the individuals retained their eligibility for the entire two-year
period covered by the statements.  In particular, the payments for
Dayton were inexplicably "0" for the period November 29, 1990 through
August 13, 1991.  We do not know whether that means that she was not in
the nursing facility during that time period, whether she became
ineligible for Medicaid, or whether she no longer qualified for nursing
facility services.  While the statements indicate that payments were
made for services for the multiple month periods encompassing August 22,
1990 for both patients, the statements do not conclusively show the
nature of services being reimbursed or whether the payments covered
services on each day (and in particular, August 22, 1990) during that
period.  It is questionable to assume that the statements indicate
reimbursement for each day during the various time periods identified by
the statements when the average daily payment fluctuates from period to
period.  The statements lack information, such as a per diem rate, which
might aid in verifying whether the payments covered services for each
day of the period.  Moreover, there is nothing in the statements or the
accompanying affidavits to clarify the meaning of the various codes used
in the statements.

The I.G. argued that the ALJ correctly found that these payment
statements were business records kept in the ordinary course of business
by the Texas Department of Human Services, used to determine Medicaid
recipients' eligibility and Medicaid payment history.  I.G. Br. at 9.
While it may be true that they contain accurate data routinely
generated, it was erroneous for the ALJ to rely on the payment
statements without clearer evidence of what the data indicate.  The I.G.
provided no corroborative evidence from state program officials
specializing in Medicaid reimbursement nor did the I.G. provide excerpts
from program manuals or other sources explaining the codes.

In addition to the payment statements, the record contains affidavits of
Sharon Thompson, Supervisor of the Sanctions Unit at the Texas
Department of Human Services (I.G. Ex. 2), and of William Hughes,
Program Analyst in the Office of Inspector General, Region VI (I.G. Ex.
3).  Neither of the affidavits attempts to explain how the figures were
calculated or what they cover.  Instead, the affidavits indicate what is
already apparent from the face of the statements:  that Medicaid
allegedly paid a certain sum of money for services to patients Dayton
and Moore for a multi-month time period which includes the date of the
incidents.  The affidavit of Thompson makes conclusory statements that
Dayton's and Moore's stays at the facility were "Medicaid stays."  Such
conclusory statements are insufficient in light of the lack of clarity
in the payment statements themselves.  Moreover, neither of the affiants
works specifically in the area of Medicaid eligibility or reimbursement;
rather, both were involved in the investigation and initiation of this
exclusion. 9/

For these reasons, we do not believe that the I.G. met its initial
burden of showing that there was no genuine issue of material fact on
this element of the offense.  The granting of summary judgment was based
on unclear documentation which was subject to differing interpretations,
and on affidavits which state conclusory opinions.  The evidence, viewed
in Petitioner's favor, is insufficient to show whether the payment
statements were in fact Medicaid statements, whether they proved that
patients Dayton and Moore were receiving covered nursing facility
services reimbursed by Medicaid on August 22, 1990 (or whether the
destroyed drugs had been reimbursed by Medicaid) and, thus, whether the
offenses were related to the delivery of an item or service under

Accordingly, we find that it was erroneous for the ALJ to enter summary
judgment for the I.G., particularly in light of Petitioner's well-taken
objections to the evidence, and we remand the matter to the ALJ for
further consideration of whether Petitioner's offense is related to the
delivery of an item or service under Medicare or Medicaid.  The ALJ may
provide the I.G. with one more opportunity to demonstrate whether
summary judgment is appropriate or the ALJ may convene a hearing in this

II.     The Affidavits as Evidence

Petitioner argued that the ALJ violated her due process rights in
permitting the I.G. to submit certain documentation in support of the
exclusion, which was obtained by the I.G. after it determined to exclude
Petitioner and which did not exist or was not relied on by the I.G. at
the time the exclusion was initiated.  Specifically, Petitioner objected
to the affidavits submitted with the Medicaid payment statements.
Petitioner's Br. at 3.

There is no merit to Petitioner's due process argument.  Petitioner's
main objection appears to be that since the I.G. had not relied on the
affidavits as such in imposing the exclusion, the exclusion is now
somehow improper.  However, the I.G.'s lack of reliance on these
particular documents (as opposed to other forms of evidence) is not
critical.  If the facts existed to support the exclusion, then the
exclusion was proper.  Even though the form and extent of evidence
actually submitted in a disputed proceeding differs from that relied
upon initially by the I.G., that factor does not violate due process as
along as Petitioner had an opportunity to rebut the evidence ultimately
presented.  Therefore, if Petitioner was in fact convicted of a
Medicaid-related offense, exclusion would have been proper despite the
I.G.'s lack of reliance on these affidavits as such when the exclusion
was initially imposed..                       CONCLUSION

For the reasons stated above, we affirm FFCL 9 and find that Petitioner
was convicted of a criminal offense within the meaning of section
1128(i)(3).  We also find that Petitioner's due process rights were not
violated by the ALJ's reliance on affidavits or other documents not in
existence at the time the I.G. excluded her.  We remand the case to the
ALJ on the narrow issue of whether Petitioner's offense was, in fact,
related to the delivery of an item or service under Medicare or


     Judith A. Ballard


     Cecilia Sparks Ford


     Donald F. Garrett Presiding
     Board Member

1.  "State health care program" is defined in section 1128(h) of the Act
and includes the Medicaid program under Title XIX of the Act.  Unless
the context indicates otherwise, we use the term "Medicaid" here to
refer to all programs listed in section 1128(h).

2.  Petitioner was actually employed at the time relevant to her
conviction by Care Team Nursing Service.  Care Team Nursing Service
apparently is an agency which assigns nurses to medical facilities on a
temporary basis.  See I.G. Ex. 1, Att. 2.

3.  Petitioner objected to the ALJ Decision on the ground that the ALJ
analyzed the I.G.'s arguments in the I.G.'s initial motion for summary
judgment "as compared with" what was said in subsequent renewed motions
for summary judgment.  Petitioner Br. at 3.  However, it is clear from
reading the ALJ Decision that the ALJ also addressed each of the
arguments contained in the I.G.'s brief supporting the second renewed
motion for summary judgment, the brief on which the granted motion was
based.  Since the ALJ did not issue a written opinion denying the I.G.'s
initial motion for summary judgment, the ALJ chose to explain why the
previous motions were insufficient as a matter of law in his decision
granting summary judgment.  The reasoning of the ALJ is not faulty
simply because the ALJ addressed arguments raised in the I.G.'s initial
motion for summary judgment.

4.  Where a party is entitled to a hearing "on the record" under the
Administrative Procedure Act (APA), the party is entitled to "present
his case or defense by oral or documentary evidence, to submit rebuttal
evidence, and to conduct such cross examination as may be required for a
full and true disclosure of the facts."  5 U.S.C. . 556(d) (emphasis
added).  This section is designed to guarantee a right to a hearing in
certain types of administrative proceedings where important personal or
property rights are at stake.  Courts have applied the hearing standards
of the APA to determinations under section 205(b) of the Social Security
Act.  Richardson v. Perales, 402 U.S. 389, 409 (1971); Dotson v.
Schweiker, 719 F.2d 80, 82 (4th Cir. 1983).

 The right to an in-person hearing under the APA has never been
 absolute.  The courts have noted that the right to
 cross-examination is required only where it is necessary to
 obtain full disclosure.  See, e.g., Cellular Mobile Systems of
 Pennsylvania, Inc. v. F.C.C., 782 F.2d 182 (D.C.Cir. 1985);
 Solis v. Schweiker, 719 F.2d 301 (9th Cir. 1983).  As stated by
 the court,

 [C]ross-examination is appropriately denied if the party fails
 to "point to any specific weakness in the proof which might have
 been explored or developed more fully by that technique than by
 the procedures adopted by the [Federal Power] Commission," or
 fails specifically to "suggest what questions were necessary" to
 explore the general issues to be examined, or fails to explain
 why written submissions, including rebuttal material, were
 ineffectual.  Absent such a showing, no prejudice has been

Cellular Mobile, 782 F.2d at 198, citing American Public Gas Association
v. Federal Power Commission, 498 F.2d 718, 723 (D.C.Cir. 1974).

5.  Celotex is widely known as the case in which the Supreme Court
clarified the federal summary judgment rule (Fed.R.Civ.P. 56, codified
in Title 28 of the U.S. Code) and held that a non-moving party to a
summary judgment motion may not defeat the motion by simply relying on
his pleadings but must put forth affidavits or other documentation
supporting his position.  However, Celotex involved a situation where,
unlike here, the non-moving party had the burden of proof at trial.  The
Court made it clear that, in this situation, the non-moving party had to
put forth its evidence on every essential element of its case:

 [T]he plain language of Rule 56(c) mandates the entry of summary
 judgment, after adequate time for discovery and upon motion,
 against a party who fails to make a showing sufficient to
 establish the existence of an element essential to that party's
 case, and on which that party will bear the burden of proof at
 trial.  In such a situation, there can be no "genuine issue as
 to any material fact," since a complete failure of proof
 concerning an essential element of the non-moving party's case
 necessarily renders all other facts immaterial.  The moving
 party is "entitled to judgment as a matter of law" because the
 non-moving party has failed to make a sufficient showing on an
 essential element of her case with respect to which she has the
 burden of proof.

Celotex at 322-23.

6.  In the leading Supreme Court case on this principle, the Court noted
that it would have been preferable for the non-moving party to have
submitted contradictory evidence rather than simply relying on the
defects in the movant's evidence:

 It has always been perilous for the opposing party neither to
 proffer any countering evidentiary materials nor file [an]
 affidavit . . . . Yet the party moving for summary judgment has
 the burden to show that he is entitled to judgment under
 established principles; and if he does not discharge that burden
 then he is not entitled to judgment.  No defense to an
 insufficient showing is required.

Adickes at 161.  In this case, it would have been preferable for
Petitioner to either seek production of documents from the state or the
nursing facility showing whether Dayton and Moore were receiving
Medicaid items or services on August 22, 1990, or to have filed an
affidavit stating why she could not ascertain the facts on this material

7.  In her brief opposing the I.G.'s first motion for summary judgment,
Petitioner argued that she was not convicted within the meaning of
section 1128(i) because she relied on alleged false representations of
certain Medicaid investigators that no further action would be taken
against her if she pled nolo contendere to the misdemeanor charges.
Therefore, she argued, her conviction was not valid for purposes of an
exclusion since it was "coerced" by those who were "closely linked" to
the I.G.  However, this is not the proper forum in which to make a
collateral attack on the conviction.  Janet Wallace, DAB 1326 (1992).
Under section 1128(a)(1), it is the fact of the conviction which
requires an exclusion, so the circumstances surrounding the plea are

8.  These are two suggested ways in which the I.G. could show that
Petitioner's conviction was related to the delivery of an item or
service under Medicaid.  We do not mean to imply that these are the only
ways in which the I.G. might attempt to establish this relationship

 We note that, under sections 1905(a)(4)(A) and (a)(12) of the
 Act, and 42 C.F.R. .. 440.40 and 440.120, nursing facility
 services and prescribed drugs can be items or services covered
 by Medicaid.  See also 42 C.F.R. Part 442 (1989).

9.  Petitioner here argued that the affidavits were not reliable because
they are incompetent and constitutes hearsay.  Petitioner Br. at 2.
Hearsay has been found to be admissible and to constitute substantial
evidence in administrative proceedings under the Social Security Act in
some circumstances.  Richardson v. Perales, 402 U.S. 389, 410.  However,
the Court in Perales emphasized the fact that the claimant had
voluntarily relinquished his right to subpoena and cross-examine
declarants.  Perales at