SUBJECT:

Michael Patrick Fryman,

Petitioner,

The Inspector General.

Docket No.C-04-405
Decision No. CR1261

DECISION

Michael Patrick Fryman (Petitioner) appeals the decision of the Inspector General (I.G.), made pursuant to section 1128(a)(3) of the Social Security Act (Act), to exclude him from participation in Medicare, Medicaid, and all federal health care programs for a period of five years. For the reasons discussed below, I find that the I.G. is authorized to exclude Petitioner. The five-year exclusion is the mandatory minimum period as a matter of law.

I. Background

By letter dated May 28, 2004, the I.G. notified Petitioner that he would be excluded from program participation for five years. On June 15, 2004, Petitioner filed a timely request for review, and the matter has been assigned to me for resolution. The parties agree that this matter should proceed on their written submissions and that an in-person hearing is not necessary. Order (September 2, 2004) at 1; I.G. Brief (I.G. Br.) at 2.

The parties have submitted their briefs. Attached to the I.G.'s brief are I.G. Exhibits (I.G. Exs.) 1 - 4. Petitioner submitted a brief in opposition to the I.G.'s motion (P. Br.). The I.G. submitted a reply brief (I.G. Reply). There being no objections, I.G. Exs. 1 - 4 are admitted into evidence.

II. Issue

The sole issue before me is whether the I.G. had a basis upon which to exclude Petitioner from participation in the Medicare, Medicaid, and all federal health care programs. This depends on whether the offenses for which he was convicted were "in connection with the delivery of a health care item or service."

The length of the period of exclusion is not an issue because the I.G. imposed the statutory minimum.

III. Discussion

I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding below, in italics, as a separate numbered or lettered heading.

A. Petitioner was convicted of a felony relating to fraud in connection with the delivery of a health care item, within the meaning of section 1128(a)(3) of the Act.

The parties agree that Petitioner worked as an account and district manager for a Minneapolis company called University Hospital Services. I.G. Ex. 4; I.G. Br. at 3; P. Br. at 1 - 2. He apparently assisted Peggy A. Bisig in a scheme to defraud her employer, a company called Cancer Care Center, Inc. (Cancer Care). Cancer Care provides outpatient chemotherapy treatment. Besides working at Cancer Care, Ms. Bisig was the principal operator of Home Pharm-Assist, Inc., a company that delivers pharmaceutical supplies to patients. Because of Cancer Care's conflict-of-interest policies, Ms. Bisig's company was not allowed to sell its products to Cancer Care. With Petitioner's assistance, she nevertheless arranged to sell Home Pharm-Assist's supplies to Cancer Care by deceiving Cancer Care into thinking that the supplies came from Petitioner's company, University Hospital Services. Petitioner received $15,386.88 for his part in the deception. I.G. Ex. 2; I.G. Br. at 2.

For his part in the scheme, Petitioner was charged with one count of mail fraud, 18 U.S.C. § 1341. I.G. Ex. 2. On January 16, 2003, he pled guilty to the felony charge, admitting that he knowingly participated in a scheme to defraud. I.G. Ex. 3. On October 17, 2003, judgment was entered against him in the United States District Court for the Southern District of Indiana. I.G. Ex. 1.

Thereafter, the I.G. imposed his exclusion under section 1128(a)(3) of the Act.

1. Where an individual has been convicted of a felony relating to fraud in connection with the delivery of a health care item or service, the statute does not require any connection between the fraud and a government program.

Petitioner first argues that he should not be excluded because his crime bore no relationship to any government-funded or operated health care program. However, the statute does not require such relationship. Section 1128(a)(3) of the Act authorizes the Secretary of Health and Human Services (Secretary) to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act):

[a]ny individual or entity that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996 ⁽¹⁾, under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program . . . operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

That the statutory language "operated by or financed in whole or in part by any Federal, State, or local government agency" modifies the object that directly precedes it - "health care program" - is obvious. Petitioner argues that this language ("in a health care program . . . operated by or financed in whole or in part by any Federal, State, or local agency") also modifies the earlier object - "health care item or service." Because his crime unquestionably did not involve a government-operated or financed health care program, he reasons, it does not fall within the exclusion provisions.

Petitioner misreads the statute. As the Departmental Appeals Board has ruled, section 1128(a)(3) is written in the disjunctive and covers two different categories of felonies relating to "fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct."

Thus, section 1128(a)(3) covers as a first category, any individual convicted of one of the listed felonies "in connection with the delivery of a health care item or service" (see 42 C.F.R. § 1001.101(c)(1)), and it covers, as a second category, any individual convicted of a listed felony with respect to any act or omission in a health care program operated by or financed in whole or in part by any Federal, State, or local government. See 42 C.F.R. § 1001.101(c)(2).

Erik D. DeSimone, R. Ph., DAB No. 1932, at 4 (2004).

I am bound by the regulations implementing this statutory provision. Those regulations leave no doubt that connection to a government program is not required to sustain exclusion under section 1128(a)(3).

[T]he delivery of a health care item or service includes the provision of any item or service to an individual to meet his or her physical, mental, or emotional needs or well-being, whether or not reimbursed under Medicare, Medicaid or any Federal health care program.

42 C.F.R. § 1001.101(b) (emphasis added). Moreover, the regulations echo the statutory language and, by setting forth each category in a separate subparagraph, separated by the conjunction or, resolve any ambiguity as to whether or not the two phrases should be read in the disjunctive:

The OIG will exclude any individual or entity that -

* * *

(c) Has been convicted, under Federal or State law, of a felony that occurred after August 21, 1996, relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct-

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

(2) With respect to any act or omission in a health care program (other than Medicare and a State health care program) operated by, or financed in whole or in part, by any Federal, State or local government agency;

42 C.F.R. § 1001.101(c) (emphasis added). Thus, I need not find any connection to a government program in order to sustain an exclusion under section 1128(a)(3).

2. Petitioner's fraud was "in connection with" the delivery of a health care item.

Petitioner points out that he did not supply Cancer Care or any other health care program, that he did not bill a health care program, nor receive payments from any health care program. Indeed, he argues, nothing suggests that his actions "affected a health care program in any way" (P. Br. at 5), so his conviction was not "in connection with the delivery of a health care item or service." I disagree.

The statute does not require a direct connection between the offense and the delivery of a health care item or service, but it requires a "common sense analysis" of whether the offense had a connection with the delivery of a health care item or service. DeSimone, at 4. Services that are purely managerial or administrative may be considered "in connection with" the delivery of a health care item or service. 42 C.F.R. § 1001.101(c)(1). Here, although Petitioner did not himself deliver health care items to Cancer Care, his participation made possible Home Pharm-Assist's fraudulent delivery of health care items to Cancer Care. I find these facts sufficient to establish a "common sense connection" between Petitioner's fraud and the delivery of a health care item.

B. The statute mandates a five-year mandatory minimum exclusion, and mitigating factors may not be considered to reduce that period of exclusion.

An exclusion under section 1128(a)(3) 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:

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

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).

IV. Conclusion

For these reasons, I conclude that the I.G. properly excluded Petitioner from participation in Medicare, Medicaid, and all other federal health care programs, and I sustain the five-year exclusion.

Carolyn Cozad Hughes

Administrative Law Judge

1. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 was enacted on August 21, 1996.