SUBJECT:

Freddie P. Novak, M.D.,

Petitioner,

The Inspector General

This case is before me pursuant to a request for hearing filed by the Petitioner on August 2, 1999. See 42 C. F. R. § 1001.2007.

By letter dated July 30, 1999, the Inspector General (I.G.) notified Petitioner that he was being excluded from participation in the Medicare, Medicaid, and all federal health care programs as defined in § 1128B(f) of the Act for a minimum period of 10 years. The I. G. informed Petitioner that the action was taken under § 1128(a)(4), due to his conviction of a criminal offense as defined in § 1128(i), related to the unlawful manufacturing, distribution, prescription, or dispensing of a controlled substance.

The parties agreed that this matter could be decided based on written arguments and documentary evidence, and that an evidentiary hearing was unnecessary. Each side has made written submissions in support of their respective contentions. The I.G. submitted eight proposed exhibits. These have been identified as I.G. Exs. 1-8. Petitioner proposed six exhibits. These have been identified as P. Exs. 1-6. None of the parties have offered the notice of exclusion sent to Petitioner by the I.G. on July 30, 1999. Consequently, I have entered that document into the record sua sponte as ALJ. Ex. 1.

Freddie P. Novak is a medical doctor who was convicted in the Multnomah County Circuit Court for the State of Oregon of a felony offense consisting of six counts of tampering with drug records, on January 13, 1997. I.G. Ex. 4; I.G. Ex. 5. Petitioner served a jail term of 45 days and was placed on probation for 24 months. I.G. Ex. 5 at 2. Although advised of his right to representation, Petitioner elected to appear in this proceeding on his own behalf.

The I.G. is represented in this case by the Office of Counsel to the Inspector General.

1. Whether the I.G. had a basis upon which to exclude Petitioner from participating in the Medicare, Medicaid, and all other federal health care programs.

2. Whether the 10-year exclusion imposed by the I.G. is unreasonable.

Section 1128(a)(4) of the Act requires the Secretary of Health and Human Services (Secretary) to exclude from participation in any federal health care program (as defined in § 1128B(f)), any individual convicted, under federal or State law, of a felony offense relating to the manufacture, distribution, prescription, or dispensing of a controlled substance. The exclusion under § 1128(a)(4) of the Act must be for a minimum period of five years. Act, § 1128(c)(3)(B). However, aggravating factors can serve as a basis for lengthening the period of exclusion. 42 C. F. R. § 1001.102(b).

Pursuant to 42 C. F. R. § 1001.2007, a person excluded under § 1128(a)(4) of the Act may file a request for hearing before an Administrative Law Judge.

Section 1128(b) of the Act authorizes the Secretary to exclude individuals from receiving payment for services that would otherwise be reimbursable under Medicare. Medicaid, or other federal health care programs.

The findings of fact and conclusions of law (FFCL) enumerated below are followed by a discussion of each finding.

FFCL 1. Petitioner, Freddie P. Novak, M.D., was convicted of a felony offense relating to the manufacture, distribution, prescription, or dispensing of a controlled substance within the meaning of § 1128(a)(4) of the Act.

Petitioner is a physician who was licensed to practice medicine in the State of Oregon. On November 29, 1996, he was indicted for tampering with drug records and possession of a controlled substance. I.G. Ex. 2. Petitioner pleaded guilty before the Circuit Court for the State of Oregon, County of Multnomah, to making a false prescription for Lorcet™, a controlled drug, and forging the signature of a physician. I.G. Ex. 5 at 1. This is a felony under Oregon Revised Statutes (Or. Rev. Stat.) § 167.212. Petitioner was incarcerated for a 45-day term and placed on probation for 24 months. I.G. Ex. 5 at 2.

It has been established, and Petitioner does not dispute, that he was convicted of a felony described in § 1128(b)(4) of the Act.

FFCL 2. The I.G. was justified in excluding Petitioner from participation in the Medicare, Medicaid, and all other federal health care programs. The exclusion in this case carries a minimum mandatory term of five years as set forth in § 1128(c)(3)(B) of the Act.

On July 30, 1999, the I.G. notified Petitioner that he was being excluded from participating in the Medicare, Medicaid, and all federal health care programs for a minimum period of 10 years. ALJ. Ex. 1. That action was taken under § 1128(a)(4) of the Act due to his conviction as defined in § 1128(i) of the Act. A conviction under § 1128(a)(4) of the Act carries a mandatory five-year exclusion as set forth in § 1128(c)(3)(B) of the Act:

Subject to subparagraph (G), in the case of an exclusion under subsection (a), the minimum period of exclusion shall not be less than five years . . .

When the Office of the I.G. imposes an exclusion pursuant to subpart B of part 1001 of 42 C. F. R., for the mandatory five-year period, the issue of the length of such exclusion is not considered. 42 C. F. R. § 1001.2007(a)(2). Aggravating factors that justify enlarging the exclusion period may be taken into account, but the five-year term may not be shortened. Petitioner admits that he was convicted of a felony offense relating to the manufacture, distribution, prescription, or dispensing of a controlled substance. Somehow, however, he suggests that no exclusion at all would be appropriate in his case. But neither the law nor regulation provides for such a window of opportunity. To be more precise, once it has been established that Petitioner was convicted of a felony under § 1128(a)(4) of the Act, I am without discretion to impose an exclusion less than the five-year mandatory minimum. The only issue remaining, therefore, is whether the 10-year exclusion imposed and directed against Petitioner is unreasonable.

FFCL 3. Petitioner's exclusion for a period of 10 years is within a reasonable range. The existence of aggravating factors justifies lengthening the period of exclusion as provided in 42 C. F. R. § 1001.102(b).

As stated in FFCL 2, an exclusion predicated on 42 C. F. R. § 1001.102, due to conviction of a felony offense relating to the manufacturing, distribution, prescription, or dispensing of a controlled substance, carries a mandatory exclusion of five years. Although this term may not be shortened, the I.G. has discretion to impose a longer period in appropriate circumstances. In Dr. Novak's case, the I.G. added five years to the statutory five-year minimum. Under the regulations, the authority of the administrative law judge is limited to reviewing whether the length of an exclusion is unreasonable. 42 C.F.R. § 1001.2007(a)(1)(ii). Therefore, if I find that the length of the exclusion imposed by the I.G. is within a reasonable range, I have no authority to modify it. See Joanne Fletcher Cash, DAB No. 1725 (2000). The aggravating factors that the I.G. may consider in lengthening the period of exclusion are found at 42 C. F. R. § 1001.102(b). In this case, the I.G. contends that a basis exists for enlarging the period of exclusion in view of three factors:

1. The sentence imposed by the court included incarceration.

2. The convicted individual has a prior criminal, civil or administrative sanction record.

3. The convicted individual has previously been convicted of a criminal offense involving the same or similar circumstances.

42 C. F. R § 1001.102(b)(5) provides for enlarging the period of exclusion if the sentence imposed by the court included incarceration. This factor is present inasmuch as the Circuit Court for the State of Oregon, County of Multnomah, sentenced Petitioner to a 45-day period of incarceration. P. Ex. 5 at 2.

The second aggravating factor requires a finding that the Petitioner had a prior criminal, civil or administrative sanction record. 42 C. F. R. § 1001.102(b)(6).

On November 19, 1996, the Board of Medical Examiners, State of Oregon (Medical Board) held a disciplinary hearing in the case of Freddie P. Novak to consider his fitness to practice medicine. The Medical Board concluded that Petitioner had a history of substance abuse, for which his license had been suspended on an emergency basis for habitual and excessive use of controlled substances on August 23, 1991. In January 1992, Petitioner surrendered his license in lieu of disciplinary proceedings, following a positive urine analysis during a routine drug screen in his
monitored treatment program. On May 18, 1995, Petitioner was granted a limited license to practice psychiatry in a residency program contingent upon compliance with the terms of a 10-year stipulated order of probation. In September, November, and December 1995, just a few months after issuance of that stipulated order, Petitioner obtained prescriptions for controlled substances through false pretenses, forgery, and theft. The Medical Board also found that Petitioner was arrested by Portland police for threatening the life of a physician, and threatening to kidnap the daughter of that physician if he testified against him regarding his illegal activities. Based on these findings, Petitioner's license to practice medicine in the State of Oregon was revoked by Order entered on January 24, 1997. I.G. Ex. 6. Thus, it is also evident from the documentary evidence that Petitioner has a prior administrative sanction record.

Finally, the evidence shows that Petitioner was convicted on May 20, 1996, of multiple felony counts of tampering with drug records. I.G. Ex. 4 at 1. This satisfies the requirement for an additional aggravating factor in that Petitioner has a prior criminal conviction involving the same or similar circumstances, as established in 42 C. F. R. § 1001.102(b)(8).

Petitioner suggests that he be given a less severe sanction (or none) rather than that imposed by the I.G. As grounds for his contention, he argues that:

1. He made no false claims for reimbursement from federal programs.

2. He did not manufacture, sell, or distribute controlled substances.

3. He did not commit fraud against the federal government.

4. His infraction was a function of unfortunate circumstances that "re-activated" his disease (chemical dependency).

In addressing the first three defenses raised by Petitioner, I must agree with counsel for the I. G. in that he was not charged with any of those violations. Thus, the I. G. does not have the onus of showing that Petitioner failed in regard to any of those areas. Moreover, there are other reasons for which the I.G. may exclude an individual, and which equally evince untrustworthiness to participate in federal health care programs. In the case before me, Petitioner was convicted of felonious tampering with drug records. That offense falls squarely within the purview of § 1128(a)(4) of the Act, specifically, that portion that addresses criminal offenses relating to the unlawful dispensing or prescription of controlled substances. The record is clear and Petitioner does not dispute that he obtained prescriptions for himself, and had controlled drugs dispensed to himself, through false pretenses and forgery. He is in no position now to deny that he entered a plea of guilty to such conduct.

Petitioner also asserts that his substance abuse is the product of a disease entity recognized by the Diagnostic and Statistical Manual of Mental Disorders (DSM-IV) defined as "a maladaptive pattern of substance use."

Presumably, Petitioner is relying on 42 C. F. R. § 1001.102(c)(2), to argue that a mitigating factor exists based on a physical, mental, or emotional condition. To establish a mitigating factor under this section, a petitioner must show that the record in the criminal proceedings demonstrates that the court determined that the individual had a mental, emotional, or physical condition before or during the commission of the offense that reduced the individual's culpability. My analysis involves two considerations:

1. The determination of whether an existing condition was responsible for or contributed to the criminal conduct; and

2. The determination of whether the court record demonstrates that the condition reduced his culpability.

See Paul G. Klein, D.P.M., DAB CR317 (1994).

Even if I were to accept Petitioner's claim that he was afflicted with a maladaptive pattern of substance abuse as defined in the DSM-IV at the time of the offense, the sentencing documents made available to me contain no finding by the court that the mental condition reduced Petitioner's culpability. See I.G. Ex. 4 at 1.; I.G. Ex. 5 at 1.

It is noteworthy that, in the course of the license revocation proceedings before the Medical Board, the issue of Petitioner's mental health did not surface. Had the Board found that a mental impairment affected Petitioner's ability to practice medicine safely, such finding would have served as additional grounds for revocation of his license. Or. Rev. Stat. § 677.190.

An exclusion by the I.G. is not automatically lengthened because of the existence of an aggravating factor, nor is it necessarily shortened because of the presence of a mitigating factor. All pertinent factors must be weighed in light of the protected interest at stake. The exclusion imposed in these cases is not, as Petitioner suggests in his request for hearing, designed to punish him for being sick. The remedial sanctions imposed by the I.G. are sought both to deter conduct that jeopardizes the fiscal soundness of federal health care programs, and also to protect the beneficiaries of the program from untrustworthy individuals who would put the covered programs at risk.

It appears that Petitioner "protests too much" in his passionate plea for leniency rooted in his chemical dependency. He protests to the point of shedding clarity on his lack of true insight into his condition. In his written arguments filed on March 28, 2000, Petitioner asserts that he "was never a risk to covered programs and their beneficiaries." Although Petitioner was in a psychiatry residency program, he is unable to perceive the deleterious effect of his chemical dependency on his occupational and psychological functioning. That is why the Board concluded unequivocally that his continuation in medical practice constituted an immediate danger to the public. I.G. Ex. 6 at 6. Unfortunately, even at this juncture, Petitioner refers to his act of obtaining prescriptions for controlled substances through fraud as "unfortunate circumstances that reactivated his disease."

By ignoring the real and potential harm to federal programs in general, and the beneficiaries of those programs in particular, Petitioner is unable to meet the need to change his behavior pattern with a sense of urgency. Significantly, he refers to the criminal conduct that resulted in his conviction as a "finite time period, one episode if you will." In making this baseless statement, he ignores the long history narrated in the Board's revocation decision that makes reference to the suspension of his license on an emergency basis as long ago as August 1991, due to his habitual dependency.

The regulations prescribe the three mitigating factors which I may consider. I am not persuaded that Petitioner has met his burden as required by the regulations. See 42 C.F.R. § 1001.102(c)(2).

Petitioner has shown an urgency to regain his privilege to participate in federal health care programs, but has not come forward with a persuasive showing that he does not and will not in the foreseeable future, pose an undue risk to those programs. It should be mentioned here that a letter from Petitioner's treating physician dated October 26, 1999, reinforces my belief that it will take Petitioner more than just a few years to be fit for participation in federal health care programs. Dr. Lorraine Woskow had this to say regarding her treatment of Petitioner:

Despite the time and effort he has put forth while under my care, he suffers from chronic severe depression and chemical dependency. He has willingly and fully participated in counseling and psychiatric medication but continues to have symptoms due to these medical illnesses.

P. Ex. 6.

In view of the above, I find that the five-year additional exclusion imposed by the I.G. is not excessive, but rather falls within a reasonable range, and is a legitimate remedial remedy consistent with the purpose of § 1128 of the Act. That purpose is to protect federally funded programs and their beneficiaries from untrustworthy individuals.

Sections 1128(a)(4) and 1128(c)(3)(B) of the Act mandate that Petitioner be excluded from Medicare, Medicaid, and all other federal health care programs for a period of at least five years because he was convicted of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. The I.G. was also justified in enlarging the period of exclusion due to the existence of aggravating factors. The 10-year exclusion is therefore sustained.

Jose A. Anglada

Administrative Law Judge