SUBJECT:

Lorna Fay Gardner,

Petitioner,

            - v -

The Inspector General

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Petitioner, Lorna Fay Gardner, appealed the February 23, 2000 decision of Administrative Law Judge (ALJ) Joseph K. Riotto granting judgment on the record. Lorna Fay Gardner, DAB CR648 (2000) (ALJ Decision). The ALJ concluded that the Inspector General (I.G.) properly imposed a five-year mandatory exclusion because Petitioner was convicted of a criminal offense related to the delivery of an item or service under the Medicare program. Petitioner contended that, because her conviction was for a misdemeanor rather than a felony, the ALJ erred in concluding that the mandatory exclusion provision of section 1128(a)(1) of the Social Security Act (the Act) was applicable. For the reasons discussed below, we conclude that Petitioner's contentions are without merit, and we therefore affirm the ALJ Decision.

The following summarizes the ALJ's Findings of Fact and Conclusions of Law (FFCLs) to which Petitioner has not excepted and which we affirm and adopt, FFCLs 1 through 9 and 11.

Petitioner operated a medical claims processing company, MedProc/RAS-Medical Claims Processing Service (MedProc), during the period relevant to this case. Petitioner pled guilty on February 10, 1999, in the United States District Court for the Northern District of Texas to making false statements in Medicare claims in violation of 42 U.S.C. § 1320a-7b(a)(1)(ii) (section 1128B(a)(1)(ii) of the Act). The District Court accepted Petitioner's plea and sentenced her to two years' probation and ordered her to pay a special assessment in the amount of $25.

On June 30, 1999, the I.G. notified Petitioner that she was being excluded from Medicare, Medicaid, and all federal health care programs for a period of five years pursuant to section 1128(a)(1) of the Act.⁽¹⁾ The I.G. asserted, and Petitioner did not dispute, that her guilty plea, the acceptance of such plea by the District Court, and the entry of judgment of conviction against Petitioner by the District Court constitute a "conviction" within the meaning of sections 1128(i)(1) and (i)(3) of the Act, and that her conviction is related to the delivery of a health care item or service under Medicare within the meaning of section 1128(a)(1) of the Act.

Petitioner sought review of the I.G.'s action before the ALJ. The record before the ALJ shows that the I.G. moved for, and Petitioner consented to, disposition without an in-person hearing. Once briefing was completed, the ALJ upheld the exclusion, stating that he rejected Petitioner's contention that because her offense constituted a misdemeanor, she was entitled to the more lenient permissive exclusion provisions of section 1128(b) of the Act. Citing Jack W. Greene, DAB No. 1078 (1989), aff'd sub nom. Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990), the ALJ held that once a person has been convicted of a program-related offense, exclusion is mandatory, and the I.G. has no discretion to impose a permissive exclusion in such cases. ALJ Decision at 5. This appeal followed.

Relevant Statutory Provisions

The sections of the Act cited by Petitioner provide:

(a) MANDATORY EXCLUSION.--The Secretary shall exclude the following individuals and entities from participation in any Federal health care program . . .

(1) Conviction of program-related crimes.--Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII or under any State health care program.

* * *

(3) FELONY CONVICTION RELATING TO HEALTH CARE FRAUD.--Any individual or entity that has been convicted for an offense which occurred after . . . [August 21, 1996], 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 (other than those specifically described in paragraph (1)) 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.

(b) PERMISSIVE EXCLUSION.--The Secretary may exclude the following individuals from participation in any Federal health care program . . .

(1) CONVICTION RELATING TO FRAUD.--Any individual or entity that has been convicted for an offense which occurred after the date of enactment of the Health Insurance Portability and Accountability Act of 1996, under Federal or State law--

(A) of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct--

(i) in connection with the delivery of a health care item or service, or

(ii) with respect to any act or omission in a health care program (other than those specifically described in subsection (a)(1)) operated by or financed in whole or in part by any Federal, State, or local government agency . . .

Section 1128 of the Act (emphasis added).

Conclusion

Based on the preceding analysis, we uphold the proposed five-year mandatory exclusion. In so doing, we affirm and adopt FFCLs 10 and 12, and uphold the ALJ's decision in its entirety.

As before the ALJ, Petitioner's contentions raise only an issue of law: which provision of section 1128 applies to Petitioner's conviction? The Board's standard of review on appeal of an issue of law is whether the ALJ decision is erroneous. 42 C.F.R. § 1005.21(h); Tanya A. Chuoke, R.N., DAB No. 1721 (2000).

Petitioner excepts to the following two FFCLs:

10. Once an individual has been convicted of a program-related criminal offense under section 1128(a)(1) of the Act, exclusion is mandatory under section 1128(c)(3)(B) of the Act.

12. The I.G. properly excluded Petitioner, pursuant to section 1128(a)(1) of the Act, for a period of five years, as required by the minimum mandatory exclusion provision of section 1128(c)(3)(B) of the Act.

Petitioner contended that the ALJ improperly interpreted the mandatory exclusion provision of section 1128(a)(1), which she characterizes as a "catchall" provision for all general program crimes, to apply to her misdemeanor offense. Petitioner argued that since section 1128(a)(3) refers to felony offenses, and section 1128(b)(1) refers to misdemeanor convictions, the more specific permissive provision (section 1128(b)) should be a limitation on the general mandatory provision (section 1128(a)). Petitioner contended that it is clear from the language of the Act that Congress intended that misdemeanor offenses would be covered by section 1128(b). In addition, Petitioner contended that the structure of section 1128(a) and its subparts is inconsistent with the ALJ's conclusion that, if an offense arguably falls within the scope of both mandatory and permissive exclusions, the I.G. may not consider imposing the permissive exclusion. Petitioner also contended that her case is distinguishable from Jack W. Greene because she is making a different argument than the petitioner made in that case -- rather than trying to qualify for the lesser minimum permissive exclusion period of section 1128(b)(1) by arguing that her offense is not one "related to the delivery of an item or service" as used in the mandatory exclusion provision at section 1128(a)(1), she is arguing that the correct interpretation of the statute is that misdemeanor offenses are always subject to the less severe permissive exclusion provisions.

We reject Petitioner's contention that the statutory provisions should be interpreted such that any individual or entity convicted of a misdemeanor is subject to the permissive, rather than the mandatory, exclusion provisions. Petitioner would have us ignore the undisputed fact that the offense for which she was convicted, making false statements in Medicare claims under 42 U.S.C. § 1320a-7b(a)(1)(ii), was a criminal offense related to the delivery of an item or service under Medicare (Title XVIII of the Act). The statute as enacted by Congress draws a distinction between felony and misdemeanor offenses only for fraud committed in connection with the delivery of a health care item or service in a health program other than Medicare or State health care programs. See sections 1128(a)(3) and 1128(b)(1)(A). Section 1128(a)(1), which pertains to criminal offenses related to the delivery of an item or service under such programs, does not draw a distinction by degree of offense. Consequently, the plain language of the statute is inconsistent with Petitioner's proposed interpretation. The ALJ's FFCL 12 determining that Petitioner was properly excluded pursuant to section 1128(a)(1) of the Act was not erroneous.

In addition, we reject Petitioner's assertion that "it would not be reasonable to believe that Congress intended the misdemeanor offenses covered under the Permissive Exclusion of 42 U.S.C. 1320a-7(b); also should be covered by the Mandatory Exclusion of 42 U.S.C. 1320a-7(a)." Petitioner's Appeal Brief at 3. The legislative history of these provisions demonstrates that Congress intentionally drew a distinction between program-related and nonprogram-related offenses. Prior to the enactment of the Health Insurance Portability and Accountability Act of 1996, Public Law No. 104-131, on August 21, 1996, section 1320a-7(a)(1) (section 1128(a)(1)) provided for mandatory exclusion only for those convicted of program-related crimes -- those related to the delivery of an item or service under Medicare or other State health care programs -- or offenses relating to patient abuse, with nonprogram-related criminal offenses all falling under the permissive exclusion provision of section 1320a-7(b)(1) (section 1128(b)(1)). 42 U.S.C. 1320a-7(b)(1) (1995). In reviewing the structure and organization of these provisions, the district court in Greene v. Sullivan stated:

The language of the statute itself as well as its legislative history indicate that the dichotomy was not intended to be between financial crimes and crimes in the delivery of services (such as direct patient abuse) but between program-related crimes and other relevant crimes which did not defraud the program itself (such as fraud on insurance companies).

731 F.Supp. at 838. When it enacted Public Law No. 104-131, Congress preserved this dichotomy between program-related and nonprogram-related criminal offenses, but it made the provisions governing nonprogram-related criminal offenses more stringent by moving felony convictions for such offenses to the mandatory exclusion subsection. The distinction Congress created between felonies and misdemeanors applied only to nonprogram-related offenses. Since Congress so clearly distinguished between criminal offenses based on whether they were related to Medicare or other State health care programs, we reject Petitioner's contention that the more specific reference to misdemeanor offenses relating to other health care programs should control over the general reference to program-related criminal offenses of all degrees as requiring mandatory exclusion under section 1128(a)(1). To the contrary, Congress' actions indicate that it understood that the term "criminal offenses" as it appeared in both versions of the exclusion provisions, referred to criminal offenses of all degrees unless otherwise specified. We therefore affirm the ALJ's conclusion in FFCL 10 that once an individual has been found to have been convicted of a criminal offense relating to delivery of a health care item or service to Medicare, section 1128(a)(1) of the Act makes program exclusion mandatory.

Finally, although we understand that Petitioner's argument is different from that of the excluded party in Greene, we conclude that the ALJ's reliance on the Board's decision in that case is not erroneous. The result sought in Greene was the same as that sought by Petitioner here -- construction of the statute to permit application of the less stringent permissive exclusion provision to an individual whose conviction for a program-related crime also met the definition of a conviction for a nonprogram-related crime. As we indicate above, the distinction drawn by the Greene court continued in effect even after the amendment of the provisions in 1996, and program-related crimes continued to be subject to mandatory exclusion. The addition of nonprogram-related felonies to the mandatory exclusion provision does not alter that court's holding that the I.G. was bound to impose a mandatory exclusion once it concluded that a conviction was covered by the mandatory provision.

Judith A. Ballard

Marc R. Hillson

M. Terry Johnson
Presiding Board Member

1. Section 1128B(f) defines "Federal health care program" as -

(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5, United States Code); or

(2) any State health care program, as defined in section 1128(h).

Section 1128(h) defines "State health care program" as Medicaid, the Maternal and Child Health Services Block Grant, Block Grants to States for Social Services, and the State Children's Health Insurance Program.