SUBJECT:

Anicia Villafria, M.D., Ramon Villafria, M.D.,

and Villafria Family Practice,

Petitioner,

The Inspector General

DECISION

I grant the Inspector General's (I.G.'s) Motion for Summary Affirmance of the I.G.'s determination that Anicia Villafria, M.D., Ramon Villafria, M.D., and Villafria Family Practice (VFP), Petitioners, failed to comply with the terms of their October 2, 2003 Integrity Agreement (IA) by failing to have a Compliance Contact (CC) in place from April 27, 2005 through May 16, 2005. The I.G. has a contractual right to assess Stipulated Penalties in the amount of $5,000.

I. Background

By letter dated June 17, 2005, the I.G. notified Petitioners of its determination that they had failed to have a CC in place from April 27, 2005 through May 17, 2005 and, thereby, had breached Section III.A of the October 2, 2003 Integrity Agreement (IA). The I.G. notified Petitioners that it was exercising its contractual right to impose Stipulated Penalties of $5,000 against Petitioners.

By letter dated June 21, 2005, Petitioners requested a hearing. I convened a prehearing conference by telephone on September 29, 2005. During the conference, the parties agreed that this matter is properly before me and that it could be decided based on written submissions in lieu of an in-person hearing.

The I.G. submitted its brief along with five exhibits (I.G. Exs. 1 - 5). Petitioner submitted its brief along with three exhibits, marked Appellant's Exhibits 1 - 3, hereafter Petitioner's Exhibits 1 - 3 (P. Exs. 1 - 3). The I.G. submitted a brief in reply along with four additional exhibits (I.G. Exs. 6 - 9). Neither party objected to the exhibits submitted. I admit into evidence I.G. Exs. 1 - 9 and P. Exs. 1 - 3.

II. Applicable law

Settlement agreements are legal contracts and binding upon the parties that enter into such settlement agreements. In addition, public policy favors the enforcement of lawful settlement agreements. When the plain language of a written contract is unambiguous, the writing controls the interpretation of the contract. A trier of fact may not substitute his own judgment over the plain language of a written contract and may not consider extrinsic evidence of the parties' intentions.

The IA entered into by the parties provides, under Section X.E.1, that:

Upon the OIG's delivery to VFP of its Demand Letter or of its Exclusion letter, and as an agreed-upon contractual remedy for the resolution of disputes arising under this Agreement, VFP shall be afforded certain review rights comparable to the ones that are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion sought pursuant to this Agreement. Specifically, the OIG's determination to demand payment of Stipulated Penalties or to seek exclusion shall be subject to review by an HHS ALJ and, in the event of an appeal, the HHS Departmental Appeals Board ("DAB"), in a manner consistent with the provisions in 42 C.F.R. §§ 1005.2 - 1005.21 . . . .

I.G. Ex. 3, at 22.

Further, under Section X.E.2, of the IA, the only issues in a proceeding for Stipulated Penalties under the IA shall be: (a) whether VFP was in full and timely compliance with the obligations of this Agreement for which the OIG demands payment; and (b) the period of noncompliance. Id. Additionally, under Section X.E.2 of the IA, VFP shall have the burden of proving its full and timely compliance and the steps taken to cure the noncompliance, if any. Id.

III. Issues, findings of fact and conclusions of law

A. Issues

The issues are whether:

1. Petitioners are in full and timely compliance with the IA's requirement that a CC be in place throughout the term of the IA, and

2. the period of noncompliance, if any.

B. Findings of fact and conclusions of law

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

1. Petitioners failed to comply with their obligation under the IA to have a Compliance Contact in place from April 27, 2005 through May 16, 2005.

Petitioners are two physicians and their family practice located in Watseka, Illinois. I.G. Ex. 4. The Department of Justice, acting on behalf of the United States and the Office of the Inspector General (OIG), the State of Illinois, and the Illinois Department of Public Aid, alleged that between June 1, 1996 and December 31, 1999, Petitioners knowingly submitted false and inaccurate claims for reimbursement to federal health care programs in violation of the False Claims Act, 31 U.S.C. §§ 3729-3733, as amended; the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a; and the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812. I.G. Ex. 4, at 1 - 3. Under the statutory provisions for permissive exclusion from Medicare, Medicaid, or other federal health care programs, the OIG had certain administrative claims against Petitioners, based on these allegations. Id. at 3; 42 U.S.C. § 1320a-7(b). Petitioners were also possibly liable for certain civil claims. I.G. Ex. 4, at 2 - 3. On October 29, 2003, Petitioners entered into a settlement agreement in exchange for the OIG's agreement not to seek to exclude Petitioners from participation in the Medicare, Medicaid, or other federal health care programs. I.G. Ex. 3; I.G. Ex. 4, at 5. As part of the settlement agreement, on October 2, 2003, Petitioners entered into an IA with the OIG. The IA is incorporated by reference into the settlement agreement. I.G. Ex. 3, at 1. Petitioners were represented by counsel in negotiating the IA and the settlement agreement. Anicia Villafria and Ramon Villafria signed the IA and agreed to be bound by the terms of the IA in their individual capacities and on behalf of VFP.

The period of compliance obligations assumed by the Petitioners under the IA was for five years from the date the IA went into effect in October, 2003. I.G. Ex. 3. Section III.A of the IA provides that:

If neither Anicia Villafria, M.D. nor Ramon Villafria, M.D. is the Compliance Contact, then within 45 days of the execution of this Agreement, VFP shall designate a person to be the Compliance Contact for the purposes of developing and implementing policies, procedures and practices designated to ensure compliance with the obligations herein and with Federal health care program requirements. In addition, the Compliance Contact is responsible for responding to questions and concerns from Covered Persons and the OIG regarding compliance with the Agreement obligations. The name and phone number of the Compliance Contact shall be included in the Implementation Report. In the event a new Compliance Contact is appointed during the term of this agreement, VFP shall notify the OIG, in writing, within 15 days of such a change.

Based on a letter dated May 17, 2005 from Thomas J. Pliura, currently counsel for all the Petitioners, the OIG determined that Adele Kraay had served as Compliance Contact for Petitioners. I.G. Ex. 5. The May 17, 2005 letter stated, "[a]s you know, the practice previously appointed Adele Kraay as the compliance contact. Ms. Kraay has been terminated . . . Ms. Kraay was terminated on April 27." I.G. Ex. 5. Further, the May 17, 2005 letter stated that, "the practice saw no reason under the prior Integrity Agreement to notify the OIG of a new compliance contact because the practice has since ceased operations. There is no perceived current need for a compliance contact." Id. Additionally, the May 17, 2005 letter stated that, "[h]owever, given the Notice of Intent to Exclude, it is our intention to appoint another compliance contact so that there is no technical violation of the agreement . . . Anicia Villafria, M.D., and Ramon Villafria, M.D., formerly doing business as Villafria Family Practice, hereby appoint Scott Hendren as Compliance Contact for the practice." Id.

Based on the May 17, 2005 letter, the I.G. determined that the position of CC was vacant from April 27, 2005 (the day Adele Kraay was terminated) until May 17, 2005 (the date of the letter notifying the OIG that Scott Hendren was appointed CC). The I.G. determined that there was a breach of Section III.A of the IA and thereafter sent its June 17, 2005 notice to Petitioners.

Petitioners argue that they were in full compliance with the IA at all times. Petitioners argue that Anicia Villafria and Ramon Villafria were continuously the officially designated compliance contacts for themselves and for VFP until Scott Hendren was officially appointed on May 17, 2005. I.G. Ex. 5. Further, Petitioners argue that they had allowed Adele Kraay to interact with the OIG regarding the compliance obligation in the IA for the sake of convenience since she had day to day responsibility for billing. P. Br. at 3. Petitioners argue that Adele Kraay was nothing more than an informally designated CC. Alternatively, Petitioners argue that when Ms. Kraay was terminated on April 27, 2005, the position of CC was not vacant because Mr. Thomas Pliura, on February 25, 2005, became the primary point of contact between the OIG and Petitioners. P. Br. at 4. According to Petitioners, as of February 25, 2005, Thomas Pliura replaced Adele Kraay as the informally designated CC. Further, by April 27, 2005 the practice had ceased ongoing clinical operations. Id. Although, Petitioners felt that there was no need for a formal designation of a CC by April 27, 2005, Petitioners formally named Scott Hendren as CC on May 17, 2005. I.G. Ex. 5. Petitioners' arguments, although very creative, are also unconvincing. Petitioners failed to satisfy their burden of proving that they were in full and timely compliance with the IA's requirement that a CC be in place throughout the term of the IA.

Until April 27, 2005, the evidence proves that Adele Kraay was Petitioner's CC. Petitioners admit that Ms. Kraay was the CC in Thomas Pliura's May 17, 2005 letter. Mr. Pliura's May 17, 2005 letter to the OIG states, "[a]s you know, the practice had previously appointed Adel Kraay as the compliance contact." I.G. Ex. 5. Further, in a correspondence from Petitioners referencing the IA obligations to Ms. Heimer of the OIG dated April 7, 2005, in which the OIG was notified that VFP closed on March 31, 2005, Petitioners stated that :

2. Dr. Ramon Villafria and Dr. Anicia Villafria have entered into an individual contract agreement with Women's Doc (WD), starting April 1, 2005. Contracts enclosed. A notice of Integrity Agreement was furnished to WD. Verification of the notification is enclosed.

. . .

7. Adele Kraay will remain Dr. Ramon Villafria & Dr. Anicia Villafria [sic] Compliance Officer and will continue working with the same compliance program with WD that she has already in place. See Dr. Ramon Villafria & Dr. Anicia Villafria contract agreement with WD.

I.G. Ex. 6, at 2. Therefore, Petitioners have admitted that Adele Kraay was appointed the CC. Additionally, Ms. Kraay performed the duties of the CC. Petitioners admit in their brief that Ms. Kraay responded to the OIG's questions and concerns regarding compliance with the IA. P. Br. at 3. Ms. Kraay served as point of contact for the Independent Review Organization (I.G. Ex. 7), point of contact with the OIG (I.G. Ex. 7), and instructor and coordinator for employee training on the subject of policies, procedures, and practices to ensure compliance with the obligations of the IA and federal health care program requirements. I.G. Exs. 8, 9.

Petitioners provide no evidence that either Dr. Ramon Villafria or Anicia Villafria served as CC other than baldly saying so. Without any evidence to support this assertion, I find such a statement to be self serving and to carry little weight. Alternatively, Petitioners argue that Thomas Pliura became the CC on February 25, 2005. P. Br. at 4. On February 25, 2005, Thomas Pliura notified the OIG that he was counsel for Anicia Villafria. P. Ex. 2. The February 25, 2005 letter from Thomas Pliura to Ms. Heigy, OIG, starts off by referencing, "[r]e: Anicia Villafria, M.D. Integrity Agreement" and the first sentence of that letter states, "[a]s you know, I represent Anicia Villafria, M.D." P. Ex. 2. Petitioners claim that this letter is evidence that Thomas Pliura was the primary point of contact for Petitioners on all issues pertaining to compliance with the IA and that Mr. Pliura was the individual that was informally appointed as the CC. P. Br at 4. Petitioners argument is meritless. Petitioners have not provided evidence to show that Thomas Pliura was ever referred to as the CC. The February 25, 2005 letter does not formally appoint Mr. Pliura as CC. The February 25, 2005 letter only shows that Mr. Pluira functioned as counsel to one of the Petitioners, Anicia Villafria, M.D., but not to Ramon Villafria nor to VFP, which was still in operation in February of 2005. Other than representing Anicia Villafria, Mr. Pliura did not function as a CC. He did not, as required of a CC, develop or implement policies, procedures or practices designed to ensure compliance with the obligations of the IA. Petitioners argument is further undercut by the fact that after February 25, 2005, Mr. Pliura, in his May 17, 2005 letter, refers to Adele Kraay as the CC. I.G. Ex. 5. Also after February 25, 2005, Petitioners refer to Adele Kraay as the CC in their April 7, 2005 communication with the OIG. I.G. Ex. 6. Additionally, the appointment of Scott Hendren on May 17, 2005, would have been unnecessary had Mr. Pliura been the CC. I.G. Ex. 5. The evidence shows that Mr. Pliura represented only one of the Petitioners and was not an informally appointed CC.

The record establishes that Adele Kraay was the CC. I.G. Exs. 5, 6. The record also established that Ms. Kraay was terminated on April 27, 2005. I.G. Ex. 5. Lastly, the record establishes that Petitioners did not appoint a new CC until Scott Hendren was appointed on May 17, 2005. Id. The May 17, 2005 letter stated that, "the practice saw no reason under the prior Integrity Agreement to notify the OIG of a new compliance contact because the practice has since ceased operations. There is no perceived current need for a compliance contact." Id. Additionally, the May 17, 2005 letter stated that, "[h]owever, given the Notice of Intent to Exclude, it is our intention to appoint another compliance contact so that there is no technical violation of the agreement. . . . Anicia Villafria, M.D., and Ramon Villafria, M.D., formerly doing business as Villafria Family Practice, hereby appoint Scott Hendren as Compliance Contact for the practice." Id. Therefore, between April 27, 2005, the day Ms. Kraay was terminated, and May 16, 2005, the day before Mr. Hendren was formally appointed CC, the position of CC was vacant. Although the OIG determined that the position of CC was vacant on May 17, 2005, I find that as of May 17, 2005, Mr. Hendren was occupying the position of CC and therefore the position of CC was only vacant until and including May 16, 2005. Failure to have a CC in place from April 27, 2005 through May 16, 2005 is a breach of Section III.A of the IA. Petitioners have failed to satisfy their burden of proving full and timely compliance with Section III.A of the IA.

2. The OIG is authorized under the IA to impose Stipulated Penalies.

Under Section X.A.1 of the IA, a Stipulated Penalty of $1,000 per day shall be imposed against Petitioners for each day that a CC is not in place as required by Section III.A. I.G. Ex. 3, at 18. Consequently, the OIG has a right to assess Stipulated Penalties of $1,000 per day for each of the days that Petitioners did not have a CC in place from April 27, 2005 through May 16, 2005. However, the OIG has chosen to impose Stipulated Penalties only in the amount of $5,000 and is authorized to do so under the IA.

IV. Conclusion

For the reasons set out above, the I.G.'s Motion for Summary Affirmance should be, and it is, granted. The I.G.'s imposition of Stipulated Penalties in the amount of $5,000 is sustained.

Alfonso J. Montano

Administrative Law Judge