SUBJECT:

Natawadee Steinhouse, M.D.,

Petitioner,

The Inspector General

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Natawadee Steinhouse, M.D., from participating in Medicare and other federally funded health care programs for a period of 15 years. I do so because Petitioner was convicted of criminal offenses within the meaning of sections 1128(a)(1) and 1128(a)(3) of the Social Security Act (Act), and because evidence relating to aggravating and mitigating factors in Petitioner's case establishes that she is not trustworthy to provide care to beneficiaries and recipients of federally funded health care programs.

I. Background

Petitioner is a physician. On May 31, 2000 the I.G. notified Petitioner that she was being excluded from participating in Medicare and other federally funded health care programs for a minimum of 15 years. The I.G. told Petitioner that she was being excluded because she had been convicted of criminal offenses as are described in sections 1128(a)(1) and 1128(a)(3) of the Act.

Petitioner requested a hearing. The case was assigned to Administrative Law Judge Joseph Riotto for a hearing and a decision. Judge Riotto held a prehearing conference at which he ruled that the case would be heard based on the parties' written submissions. The I.G. filed a brief and proposed exhibits. At first, Petitioner did not file any response to the I.G.'s submission. The case was then reassigned to me due to Judge Riotto's illness. I directed inquiries to Petitioner in order to determine whether she intended to respond to the I.G.'s submission. On November 9, 2001, Petitioner wrote to me. She stated that she did not have any documentary evidence to submit in response to the I.G.'s submission in that she did "not wish to argue with the . . . [I.G.'s] decision to exclude me . . . ." However, Petitioner also stated that she was asking that I reinstate her after the minimum mandatory exclusion period of five years. I am accepting Petitioner's letter as a response to the I.G.'s brief, and I am denying the I.G.'s motion dated January 9, 2002 that I dismiss the case.

The I.G. filed exhibits with her brief which are identified as I.G. Ex. 1 - I.G. Ex. 4. Petitioner did not specifically identify as exhibits any of the documents that she filed in this case. However, she submitted documents which contain statements that are testimonial in nature and I am identifying as exhibits. These documents include: a letter dated January 28, 2000 that Petitioner sent to the Honorable John P. Fullam, Judge, United States District Court, Eastern District of Pennsylvania (P. Ex. 1); Petitioner's August 17, 2001 letter to me (P. Ex. 2); and, Petitioner's November 9, 2001 letter to me (P. Ex. 3). I am accepting I.G. Ex. 1 - I.G. Ex. 4 into evidence inasmuch as Petitioner did not oppose their admission. I am also accepting P. Ex. 1 - P. Ex. 3 into evidence. In doing so I note that P. Ex. 1 at 2 - 5 is the same document (the letter to Judge Fullam) which is reflected in I.G. Ex. 2 at 2 - 5.

II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. A basis exists to exclude Petitioner under sections 1128(a)(1) and/or 1128(a)(3) of the Act; and,

2. An exclusion of 15 years is unreasonable.

B. Findings of fact and conclusions of law

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

1. A basis exists to exclude Petitioner under both sections 1128(a)(1) and 1128(a)(3) of the Act.

On June 14, 1999 Petitioner pled guilty to Counts 1 and 11 of a criminal indictment that was issued against her in the United States District Court for the Eastern District of Pennsylvania. I.G. Ex. 3 at 1 - 12, 14; I.G. Ex. 4. She was convicted of two felonies: knowingly, intentionally, and unlawfully conducting an enterprise through a pattern of racketeering (Count 1); and, knowingly and unlawfully selling drug samples that were not intended for sale (Count 11). I.G. Ex. 3 at 2, 14.

In pleading guilty to Count 1, Petitioner admitted to engaging in conduct consisting of the following:

• generating fraudulent medical bills to be paid by private health insurers and government health care programs including Medicare;

• issuing prescriptions that were not medically justified for highly addictive and commonly abused controlled substances in exchange for the ability to submit reimbursement claims for medical services which either Petitioner had not provided or which were medically unnecessary; and,

• inflating and falsifying medical treatment records for patients purportedly injured in accidents and/or at work, and for elderly patients, in order to increase Petitioner's reimbursement for services and the patients' potential insurance payments and settlements.

I.G. Ex. 3 at 3, 8. She admitted that her unlawful activities spanned a period of approximately 10 years, beginning at some point in 1988 and continuing into 1998. Id. at 2 - 3. Petitioner also admitted that, during this period, she prescribed unlawfully more than 25,000 tablets and capsules of controlled prescription drugs. Id. at 3. She also admitted that more than $ 1 million in false medical bills were generated during this period. Id. In pleading guilty to Count 11, Petitioner admitted that she had knowingly and unlawfully traded, sold, and offered to trade and sell samples of certain specified drugs to a pharmacist. Id. at 14.

Petitioner's conviction of Count 1 is a conviction of criminal offenses as are described at sections 1128(a)(1) and 1128(a)(3) of the Act. Section 1128(a)(1) of the Act mandates the exclusion of any individual who is convicted of a criminal offense related to the delivery of an item or service under Medicare or a State health care program. Petitioner was convicted of such an offense in that an element of Count 1 was generating fraudulent bills for Medicare services. Section 1128(a)(3) mandates exclusion of any individual who is convicted of a felony consisting of fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service or with respect to government-operated health care programs other than Medicare or a State health care program. Petitioner was convicted of such an offense in that an element of Count 1 was committing fraud in connection with the delivery of health care items or services.

2. An exclusion of more than five years may be reasonable where the exclusion is authorized by section 1128(a)(1) or by section 1128(a)(3) of the Act if there are aggravating factors that are not offset by mitigating factors.

The minimum exclusion that must be imposed in any case in which an exclusion is mandated by either section 1128(a)(1) or 1128(a)(3) of the Act is five years. Act, section 1128(c)(3)(B). However, in some cases, exclusions of more than five years may be reasonable.

The Secretary of this Department has published regulations which govern the length of exclusions that are imposed pursuant to section 1128 of the Act. 42 C.F.R. Part 1001. The regulation which establishes criteria to govern the length of an exclusion that is imposed under either section 1128(a)(1) or section 1128(a)(3) is 42 C.F.R. § 1001.102. This regulation identifies "aggravating" factors which may be used, if present in a case, as a basis to lengthen an exclusion beyond the five-year minimum period and "mitigating" factors which may be used, if present in a case, to offset any aggravating factors that are established. 42 C.F.R. § 1001.102(b), (c).

The regulation makes it clear that only those factors that it identifies as either aggravating or mitigating may be considered to determine whether an exclusion of more than five years is reasonable in a case involving sections 1128(a)(1) or 1128(a)(3). The aggravating and mitigating factors operate as rules of evidence in such a case. Evidence which does not relate to an identified aggravating or mitigating factor is irrelevant to determining the length of an exclusion and may not be considered.

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

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

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

4. Four aggravating factors are present.

The evidence establishes the presence of four aggravating factors. These are as follows:

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

Petitioner caused financial losses to be incurred by several health care insurers. These losses amounted in the aggregate to more than $1,500. I find support for this conclusion in evidence establishing that Petitioner was sentenced to pay restitution of $655,204.93 to specific health insurers. I.G. Ex. 4 at 4.

b. The acts that resulted in Petitioner's conviction were committed over a period of a year or more (42 C.F.R. § 1001.102(b)(2)).

Petitioner engaged in criminal activity for a period of more than one year. She pled guilty to committing crimes during an approximately ten year period that began in 1988 and which continued into 1998. I.G. Ex. 3 at 2, 3.

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

Petitioner received a sentence of three years' imprisonment for her crimes. I.G. Ex. 4 at 2.

d. Petitioner was convicted of other offenses besides those which are the basis for her exclusion (42 C.F.R. § 1001.102(b)(9)).

The criminal offenses that are the basis for Petitioner's exclusion are described at Count 1 of the indictment against Petitioner. Petitioner also pled guilty to an additional criminal offense, which is described at Count 11 of that indictment. I.G. Ex. 3 at 14.

5. One mitigating factor is present.

In its judgment of conviction the United States District Court ordered that:

[Petitioner] serve her sentence in an institution which can adequately care for a person under treatment for Bipolar disorder, and provide the medications required.

I.G. Ex. 4 at 2. The I.G. avers that this establishes the presence of a mitigating factor as is described at 42 C.F.R. § 1001.102(c)(2). Under this section a mitigating factor is present if:

The record in the criminal proceedings, including sentencing documents, 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 [excluded] individual's culpability.

Id. It is, in fact, difficult to ascertain from the statement in the judgment of conviction whether the United States District Court determined that Petitioner's culpability was reduced by her bipolar disorder during the commission of her crimes. Petitioner has not offered any evidence which supports that conclusion. However, for the purposes of this decision, I find that the Court's statement establishes a mitigating factor under 42 C.F.R. § 1001.102(c)(2).

6. An exclusion of 15 years is not unreasonable in light of the evidence that pertains to aggravating and mitigating factors.

In many cases a 15-year exclusion is tantamount to a permanent exclusion from participation in federally funded health care programs. An exclusion of such a length is unreasonable absent evidence that the excluded individual is highly untrustworthy.

Such evidence is present here and, consequently, I find an exclusion of 15 years to be reasonable in this case. The evidence which relates to aggravating factors is proof that Petitioner is capable of persistent and extraordinarily damaging criminal activity. Petitioner engaged in systematic fraud against health insurers, including Medicare, for approximately ten years. Her crimes involved innumerable fraudulent acts. These acts included filing fraudulent reimbursement claims and issuing unnecessary prescriptions for highly addictive controlled substances in order to facilitate the fraudulent billing scheme. Petitioner caused health insurers to suffer massive damages. Although the restitution amount of $655,204.93 that Petitioner was ordered to pay may not equate precisely to the losses that she caused insurers to experience, it is evidence that she caused these insurers to suffer very substantial losses. The gravity of Petitioner's crimes is also made evident by the lengthy prison sentence that Petitioner received.

The evidence of a mitigating factor does nothing in this case to detract from the evidence which shows Petitioner to be highly untrustworthy. I accept that Petitioner's culpability may have been reduced by her bipolar disorder. However, it is equally reasonable - and not inconsistent with a finding of reduced culpability - to infer that Petitioner's bipolar disorder may have motivated her to commit crimes. Petitioner may have been impelled by her illness to commit crimes even if her culpability for those crimes is diminished somewhat by her illness. There is no evidence in this case that her illness is presently under control.

It unnecessary for me to speculate whether Petitioner's bipolar disorder would motivate her to commit more crimes in the future if she were not excluded. It is enough to conclude that Petitioner has not shown how her illness - or treatment that she may have received for it - has made her more trustworthy.

I have looked closely at the exhibits submitted by Petitioner as P. Ex. 1 - P. Ex. 3. They do not provide any basis for me to assume that Petitioner is more trustworthy than is indicated by the evidence that I have cited.

Petitioner's principal explanation for her conduct is stated in the document that is in evidence as P. Ex. 1 at 2 - 5 and I.G. Ex. 2 at 2 - 5. It is, by its very nature, not a particularly credible document. It consists of a letter written by Petitioner to the United States District Court judge who sentenced her as an attempt to get her sentence reduced or mitigated. The generally self-serving nature of the exhibit is apparent.

Moreover, the specific assertions that Petitioner makes in that document are not persuasive. Petitioner asserts that she did not intend to commit fraud. P. Ex. 1 at 2; I.G. Ex. 2 at 2. According to Petitioner, the acts that were the basis for her conviction were not acts of fraud but were "a result of unorganization and lack of supervision of staff." Id. I find this assertion to be unpersuasive. It is not credible in light of the events that were the basis for Petitioner's conviction. I do not doubt that an overworked provider might, in an isolated incident, overlook a mistake by her staff thereby producing an inaccurate reimbursement claim. But, here, Petitioner, made false claims systematically over a period of about ten years. Furthermore, it is not within reason to envision any responsible provider issuing a large number of unnecessary prescriptions for highly addictive controlled substances as a consequence of "unorganization and lack of supervision of staff."

Petitioner also disputes acts that she believes were the basis for the indictment against her. For example, Petitioner argues that she was entrapped into selling drug samples to a pharmacist. P. Ex. 1 at 4; I.G. Ex. 2 at 4. It was this sale that, apparently, may have been the basis for Count 11 of the indictment. I find this assertion not to be persuasive because of its self-serving nature.

Steven T. Kessel

Administrative Law Judge