Ravitej B. Reddy, CR6482 (2024)

DECISION

The Inspector General (IG) of the United States Department of Health and Human Services excluded Petitioner, Ravitej B. Reddy, from participation in Medicare, Medicaid, and all other federal health care programs based on his conviction of a criminal offense that was related to the delivery of a health care item or service under Medicare.  For the reasons discussed below, I conclude that the IG has a basis for excluding Petitioner because he has federal convictions for conspiracy to pay and receive kickbacks and offering and paying kickbacks in connection with a federal health care program, with the victim of his crime being the Medicare program.  The IG has proven three aggravating factors, and no mitigating factors are present.  A 64-year exclusion, effective January 18, 2024, is not unreasonable.

I.   Background

In a letter dated December 29, 2023, the IG excluded Petitioner from participation in Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f) of the Social Security Act (Act) (42 U.S.C. § 1320a-7b(f)) for a minimum period of 64 years, effective 20 days from the date of the letter.  IG Ex. 1 at 1.  The IG explained the following bases for excluding Petitioner:

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The OIG is imposing this exclusion under section 1128(a)(1) of the Act, due to your conviction (as defined in section 1128(i) of the Act), in the United States District Court for the Western District of Pennsylvania, of a criminal offense related to the delivery of an item or service under Medicare or a State health care program, including the performance of management or administrative services relating to the delivery of items or services under any such program.

IG Ex. 1 at 1.  The IG informed Petitioner that the exclusion was for “a minimum period of 64 years.”  IG Ex. 1 at 1; see 42 U.S.C. § 1320a-7(c)(3)(B).  The IG extended the exclusion period from the statutory minimum of five years to 64 years based on the presence of the following three aggravating factors:  1.) The acts resulting in the conviction, or similar acts, caused, or were intended to cause, a financial loss to a government program or to one or more entities of $50,000 or more, with approximately $77,328,300 in court-ordered restitution; 2.) The acts that resulted in the conviction, or similar acts, were committed over a period of one year or more, from “about October 2017 to about April 2019”; and 3.) The sentence imposed by the court included incarceration, specifically, “18 months of incarceration.”  IG Ex. 1 at 1; 42 C.F.R. § 1001.102(b).  The IG did not cite any mitigating factors.  IG Ex. 1; see 42 C.F.R. § 1001.102(c).

Petitioner filed a timely request for an administrative law judge (ALJ) hearing on February 13, 2024.  Thereafter, the Civil Remedies Division issued my standing pre‑hearing order.  On February 29, 2024, I presided over a telephonic pre-hearing conference and issued an order summarizing the conference.

The IG, through counsel, filed a brief and seven proposed exhibits (IG Exs. 1-7).  Petitioner, through counsel, filed a brief (P. Br.) and two proposed exhibits (P. Exs. 1-2).  The IG then filed a reply.  Upon the IG’s filing of her reply on May 13, 2024, the record closed.  Standing Pre-Hearing Order § 17 (“Unless a hearing is required for cross-examination of a witness or witnesses, the record will be closed and the case will be ready for a decision after all the deadlines have passed. . . . I will issue a decision within 60 days of the date the record closes.”); see also Standing Pre-Hearing Order § 16 (explaining that cases are decided without a live hearing unless a party has requested an opportunity to cross-examine a witness).

On May 22, 2024, nine days after the IG filed her reply, Petitioner belatedly filed three new proposed evidentiary exhibits (P. Exs. 3, 4, 5).  The evidentiary record remains closed, and I do not admit these proposed exhibits.

At the February 29, 2024 pre-hearing conference, I explained that the parties are required to file pre-hearing exchanges.  See February 29, 2024 Order.  I explained that I had

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“established a submission schedule,” and that by May 1, 2024, Petitioner “must submit his prehearing exchange, including his brief.”  Likewise, section 9 of my standing pre-hearing order explained that “[a]t the pre-hearing conference, I will provide a schedule for the parties to file their pre-hearing exchanges,” and that “[a]t a minimum, a pre-hearing exchange must include a brief; if the party files any supporting exhibits, it must include a list of all proposed exhibits and a properly marked copy of each proposed exhibit.”  Section 10 of my standing pre-hearing order further explained, “A pre-hearing brief should contain any arguments that a party intends to make,” and “[i]f an argument relies upon a particular exhibit, the party’s brief should provide a pinpoint citation to the exhibit and page number.”  I also discussed that after Petitioner filed his pre-hearing exchange, the IG could object to Petitioner’s proposed exhibits.  See February 29, 2024 Order; Standing Pre-Hearing Order § 13.

Petitioner’s May 22, 2024 submission consists of the following three new documents from the docket of his criminal case, all of which were available at the time he filed his pre-hearing exchange:  P. Ex. 3 (Defendant’s July 31, 2023 Sentencing Memorandum); P. Ex. 4 (Defendant’s August 4, 2023 Motion for Downward Departure); P. Ex. 5 (August 15, 2023 minute order granting downward departure as set forth in the record); see IG Ex. 7 (record of sentencing hearing).  At the time Petitioner filed his pre-hearing exchange, he was aware that he had the burden to prove any mitigating factors, yet he chose not to “produce documentation further supporting his assertions” until well after his pre-hearing exchange deadline.  See Petitioner’s May 22, 2024 Motion to Amend Exhibit List; Standing Pre-Hearing Order § 7 (“Petitioner will bear the burden of proving any affirmative defenses or mitigating factors listed in 42 C.F.R. § 1001.102(c).”).  I decline to reopen the closed evidentiary record.¹  See Standing Pre-Hearing Order § 12 (“I also may refuse to receive an exhibit or exhibits into evidence that are not filed in accordance with the requirements of this order.”).

In the absence of any evidentiary objections, I admit IG Exs. 1-7 and P. Exs. 1-2 into the evidentiary record.  Neither party has submitted the written testimony of any witnesses, nor has a party provided notice that it is unable to provide the written direct testimony of an essential witness.  See Standing Pre-Hearing Order § 14.  An in-person hearing for the purpose of cross-examination of witnesses is therefore unnecessary.  See Standing Pre-Hearing Order §§ 15, 16.  This matter is ready for a decision on the merits of the written record.

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II.   Issues

Whether there is a basis for exclusion, and, if so, whether the length of the exclusion that the IG has imposed is unreasonable.  42 C.F.R. § 1001.2007(a)(1).

III.   Jurisdiction

I have jurisdiction to adjudicate this case.  42 U.S.C. § 1320a-7(f)(1); 42 C.F.R. § 1005.2.

IV.   Findings of Fact, Conclusions of Law, and Analysis²

1. Petitioner does not dispute that he was convicted of a program-related crime, in that his criminal offense related to the delivery of a health care item or service under the Medicare program, which subjects him to a mandatory exclusion from all federal health care programs for a minimum period of five years.

Section 1128(a)(1) requires a mandatory exclusion from all federal health care programs under certain conditions.³  Section 1128(a)(1) states:

(a) Mandatory Exclusion.—The Secretary shall exclude the following individuals and entities from participation in any Federal health care program (as defined in section 1128B(f)): 

(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.

42 U.S.C. § 1320a-7.

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Petitioner concedes that he was convicted of a criminal offense for purposes of the Act that mandates exclusion from all federal health care programs for a minimum period of five years.  See P. Br. at 1 (Petitioner’s statement that he “does not contest that he is subject to a mandatory exclusion of five years.”).

On November 26, 2019, the United States Attorney for the Western District of Pennsylvania filed a four-count information charging that Petitioner, who owned an independent clinical laboratory, was involved in a conspiracy to pay and receive kickbacks (Counts 1-3) and offered and paid kickbacks (Count 4).  With respect to Count 4, the information charged that Petitioner offered and paid the kickbacks between “in and around October 2017 and in and around April 2019.”  IG Ex. 4 at 27.  Petitioner, with the benefit of counsel, entered a guilty plea to all four counts on January 10, 2020.  IG Ex. 6.

At an August 14, 2023 sentencing hearing, the presiding District Judge, who imposed a sentence below the advisory Sentencing Guidelines range, summarized that Petitioner and his co-conspirators “employed Medicare marketers, co-conspirator marketers, to recruit Medicare beneficiaries to provide cheek swabs to be used in cancer genomic and pharmacogenetic testing,” and that Petitioner “paid kickbacks to the marketers in exchange for these samples.”  IG Ex. 7 at 44.  The District Judge explained that Petitioner billed Medicare for the tests, attempted to conceal the illegal kickbacks, and “submitted false information to Medicare with respect to billing.”  IG Ex. 7 at 45.  Addressing Counts 2 and 3, the District Judge explained that the conspiracies were similar, but involved a different laboratory.  IG Ex. 7 at 45.  With respect to Count 4, the District Judge described a “separate scheme . . . to pay kickbacks to marketers in return for samples of a variety of tests.”  IG Ex. 7 at 45.  At the sentencing hearing, the District Judge imposed judgment that included an 18-month term of imprisonment.  IG Ex. 2 at 2.  The judgment includes an order that Petitioner pay $77,328,319.82 in restitution to the Centers for Medicare & Medicaid Services (CMS), with a lump sum payment of $10,000,400 due not later than September 28, 2023.  IG Ex. 2 at 6, 8; see 18 U.S.C. § 3553(a)(7) (restitution is provided to the victims of an offense).

Pursuant to section 1128(i)(3) of the Act, an individual is considered to have been convicted of a criminal offense “when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court.”  42 U.S.C. § 1320a-7(i)(3).  Petitioner pleaded guilty to the three counts of conspiracy to pay and receive kickbacks and one count of offering and paying kickbacks in connection with a federal health care program.  IG Exs. 2 at 1; 6.

Congress, through enactment of the Act, determined that an individual who has been convicted of a criminal offense related to the delivery of an item or service under Medicare or a state health care program must be excluded from federal health care programs for no less than five years, and it afforded neither the IG nor an ALJ the discretion to impose an exclusion of a shorter duration.  42 U.S.C. § 1320a-7(c)(3)(B).  I

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cannot shorten the length of the exclusion to a period of less than five years because I do not have authority to “find invalid or refuse to follow Federal statutes or regulations.”  42 C.F.R. § 1005.4(c)(1).  Petitioner has criminal convictions for conspiracy to pay and receive kickbacks and for offering and paying kickbacks, and the criminal conduct involved laboratory testing that was reimbursed by the Medicare program.  Petitioner’s offenses therefore relate to the delivery of a health care item or service under the Medicare program, and exclusion is mandated for a minimum period of five years based on section 1128(a)(1).

2. A 64-year minimum exclusion is not unreasonable based on the presence of three aggravating factors and no mitigating factors.

The Act requires a minimum exclusion period of five years when the exclusion is mandated under section 1320a-7(a).  42 U.S.C. § 1320a-7(c)(3)(B).  In this case, exclusion is required under section 1320a-7(a)(1), and therefore Petitioner must be excluded for a minimum of five years.  The IG has the discretion to impose an exclusion longer than the minimum period when aggravating factors are present.  See 42 C.F.R. § 1001.102.  The IG increased the minimum exclusion period from five years to 64 years based on the presence of three aggravating factors.  IG Ex. 1 at 1.  The IG bears the burden of persuasion with respect to aggravating factors, and Petitioner bears the burden of persuasion with respect to mitigating factors.  42 C.F.R. § 1005.15(c).

Petitioner does not dispute the presence of three aggravating factors.  Nor does Petitioner specifically dispute that a lengthening of the minimum period of exclusion is reasonable based on the IG’s consideration of three specific aggravating factors.  Rather, Petitioner broadly argues, without reliance on any of the enumerated factors, that the length of the exclusion is “extreme.”  P. Br. at 11.  Petitioner largely bases this argument on his belief that the IG failed to consider mitigating factors.  P. Br.  As I explain below, a 64-year exclusion is not unreasonable based on the presence of three aggravating, and no mitigating, factors.

The first aggravating factor is that the acts resulting in Petitioner’s conviction, or similar acts, caused or were intended to cause, financial loss to a government agency, program or other entity of $50,000 or more, as evidenced by the sentencing order requiring that Petitioner pay $77,328,319.82 in restitution to CMS.  IG Ex. 2 at 6; see IG Ex. 5 at 3 (reporting that Petitioner’s criminal conduct involved the Medicare program).  The Departmental Appeals Board (DAB) has recognized that “restitution is a measure of program loss.”  Hussein Awada, M.D., DAB No. 2788 at 7 (2017).  The amount of loss is extraordinary and exceeds more than 1,500 times the $50,000 threshold for application of this aggravating factor.  IG Ex. 2 at 6; 42 C.F.R. § 1001.102(b).  The DAB has explained that when program loss is substantially higher than the threshold amount, this factor may be considered “an ‘exceptional aggravating factor’ to be accorded significant weight.”  Laura Leyva, DAB No. 2704 at 10 (2016).  While there are a number of enumerated

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aggravating factors, an exceptional aggravating factor signals that the petitioner’s conduct was egregious enough to cause losses well beyond the minimum regulatory threshold.  Petitioner does not dispute that he was ordered to pay more than $77 million in restitution, nor does he argue that the IG misapplied this aggravating factor to lengthen the exclusion.  The IG had a reasonable basis to lengthen the exclusion based on this exceptional aggravating factor.  42 C.F.R. § 1001.102(b)(1).

The second aggravating factor is that the acts resulting in Petitioner’s conviction, or similar acts, were committed over a period of one year or more.  42 C.F.R. § 1001.102(b)(2); see IG Ex. 4 (indictment charging that Petitioner offered and paid kickbacks between “in and around October 2017 and in and around April 2019.”).  IG Ex. 4 at 27.  The IG properly considered the length of the acts underlying Petitioner’s conviction to be an aggravating factor.  42 C.F.R. § 1001.102(b)(2).

The third aggravating factor is that the sentence imposed included incarceration, specifically 18 months of incarceration.  IG Ex. 2 at 2; see 42 C.F.R. § 1001.102(b)(5).  Because Petitioner had been sentenced to incarceration, the IG had a reasonable basis to lengthen the exclusion.  42 C.F.R. § 1001.102(b)(5).

Evidence of aggravation may be offset by evidence of mitigation if it relates to one of the factors set forth at 42 C.F.R. § 1001.102(c).  I cannot consider evidence of mitigation unless it offsets the lengthening of a period of exclusion due to one or more of the enumerated aggravating factors listed in 42 C.F.R. § 1001.102(b).  42 C.F.R. § 1001.102(c).  As relevant here, and pursuant to 42 C.F.R. § 1001.102(c)(3), Petitioner may demonstrate mitigation if his cooperation resulted in others being convicted or excluded from Medicare, Medicaid and all other federal health care programs; resulted in additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses; or resulted in a civil money penalty or assessment pursuant to 42 C.F.R. part 1003.  Although Petitioner argues that the IG failed to consider mitigating factors, he has not identified a factor that warrants mitigation of an exclusion pursuant to 42 C.F.R. § 1001.102(c).

Petitioner claims he extensively cooperated with the government, yet he did not submit any evidence that his cooperation resulted in other convictions or exclusions, in additional cases being investigated or reports issued by law enforcement, or in a civil money penalty or assessment.  P. Br.; see 42 C.F.R. § 1001.102(c)(3).  Despite having the burden to present evidence of mitigating factors, as required by 42 C.F.R. § 1001.102(c)(3), Petitioner offered vague claims that he cooperated with the government, to include proffering with prosecutors in multiple districts and providing 18,099 documents (61,144 pages) to the Department of Justice.  P. Br. at 7-8.  However, Petitioner has not provided any evidence that his cooperation resulted in any of the outcomes listed in 42 C.F.R. § 1001.102(c)(3).  While not dispositive, I note that despite an apparently lenient sentence well below the advisory Sentencing Guidelines range that

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followed the testimony of four witnesses on behalf of Petitioner at the sentencing hearing, the 55-page sentencing transcript lacks reference to any of the claimed law enforcement cooperation with any of the type of outcomes referenced in 42 C.F.R. § 1001.102(c)(3).  See IG Ex. 7.  I also observe that at the sentencing hearing, the United States neither requested a downward departure from the Sentencing Guidelines nor urged the District Court to factor cooperation into its sentencing determination.  See IG Ex. 7 at 38 (“THE COURT:  Any Argument?  [GOVERNMENT COUNSEL]:  I rest on my papers asking for a lengthy term of imprisonment based on the seriousness of the offense.”).

Petitioner claims he “was the first to plea and cooperate,” and “[h]is cooperation and plea set an example for others who eventually followed in [his] footsteps, resulting in more guilty pleas and information for the Government.”  P. Br. at 8.  Absent evidence of the types of outcomes specified in 42 C.F.R. § 1001.102(c)(3), Petitioner has not identified evidence of mitigation as contemplated by the regulation.

Petitioner also claims that he placed his laboratory in trust (apparently divesting himself so that the laboratory could remain enrolled in the Medicare program), which enabled the laboratory to perform COVID-19 testing, offer free testing to first responders and police officers, and perform COVID-19 testing at skilled nursing facilities.  P. Br. at 8-9.  While the sentencing judge took these facts into account when he imposed a sentence of imprisonment well below the advisory Sentencing Guidelines range, I am not empowered to apply a non-enumerated mitigating factor.  IG Ex. 7 at 40.  (“I think actually all of which we’ve heard today; [Petitioner’s] use of his business, MHS [Labs], to carry on large quantities of COVID PCR tests during the early days of the pandemic, his deep community ties, his expression of remorse, his family responsibilities and ties.”).

Petitioner argues that the Office of Personnel Management agreed to reduce his proposed debarment from the Federal Employees Health Benefit Program to five years.  P. Br. at 9-10.  Because reducing the length of a proposed debarment is not an enumerated mitigating factor, I cannot reduce the length of an exclusion based on this action.  42 C.F.R. § 1001.102(c).

Petitioner also argues he has made a substantial payment of restitution of more than $9 million.  P. Br. at 10.  Compliance with the terms of a judgment of conviction is not an enumerated basis to reduce the length of an exclusion.  42 C.F.R. § 1001.102(c).

Petitioner also alleges a due process violation, in that he claims that neither he nor his counsel received the notice of intent to exclude.  P. Br. at 10-11; see IG Ex. 3.  Although Petitioner argues that the notice was not mailed to his counsel (P. Br. at 11), Petitioner has not cited any evidence that the IG was aware that he was represented by counsel in the exclusion matter.  And although Petitioner argues the notice of intent to exclude was mailed to an incorrect address, he did not submit evidence supporting his assertion that the IG mailed the notice to an incorrect address.  See IG Ex. 3 at 1, 2 (indicating that the

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notice had been mailed to two separate addresses in Pittsburgh and Monroeville, Pennsylvania).  Moreover, even when Petitioner had the opportunity to present evidence with his request for hearing and pre-hearing exchange, he did not submit evidence establishing the presence of an enumerated mitigating factor.  42 C.F.R. § 1001.102(c).

The DAB has explained than an ALJ is “obliged to determine whether [an] exclusion [falls] ‘within a reasonable range’ given the evidence . . . concerning the relevant aggravating and mitigating factors.”  Andrew Louis Barrett, DAB No. 2887 at 7 (2018).  Petitioner complains that the IG cited to representative cases involving exclusions in the 20-year range of exclusion.  Frankly, the approximately $77.3 million loss here is so extraordinary that it is difficult to find a comparable exclusion upheld by the DAB that accounts for such an enormous loss along with other aggravating factors.  Further, Petitioner has not explained why shorter-duration exclusions for criminal conduct involving far less loss are not persuasive.  See IG Br. at 6, referencing Juan de Leon, Jr., DAB No. 2533 at 5 (2013) (20-year exclusion imposed for loss of $750,000 (150 times the then-threshold of $5,000), a similar length of criminal conduct, and a more significant term of incarceration, but with a 20 percent reduction based on the application of a mitigating factor); Craig Richard Wilder, DAB No. 2416 at 9 (2011) (establishing an 18-year exclusion based on three aggravating factors including financial loss of over $4 million, criminal conduct over two years, and other convictions, as well as one mitigating factor of government cooperation).  The instant loss of more than $77 million is exponentially larger than the losses in involved in de Leon, Jr. and Wilder, even when recognizing a decade’s worth of inflation, and a much lengthier period of exclusion is not unreasonable based on Petitioner’s significant role in the loss of more than $77 million from the Medicare program.⁴

The longest exclusion upheld by the DAB that I am aware of is a 60-year exclusion in Sushil Aniruddh Sheth, M.D., DAB No. 2491 (2012).  In Sheth, the loss involved less than $12.4 million, with three other aggravating factors, including six years of criminal conduct, 60 months of incarceration, and action by medical licensing boards.  Sheth, M.D., DAB No. 2491 at 3.  Even taking into account more than a decade’s worth of inflation, a $12.4 million loss pales in comparison to the instant loss of approximately $77.3 million. 

The DAB has upheld other multi-decade exclusions when losses have extended into the millions, albeit with none of those exclusions involving a loss close to the instant case’s

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more than $77 million.  See Zahid Imran, DAB No. 2680 (2016) (48-year exclusion upheld with program loss of at least $23,817,779, lengthy duration of criminal conduct, significant incarceration, and other adverse actions); Yolanda Hamilton, DAB No. 3061 (2022) (35-year exclusion upheld with program loss of $9.5 million, more than three-year length of conduct, 60 months of incarceration, and another adverse action); Salman Ali, DPT and Roohi Ali, DPT, DAB No. 3048 (2021) (20-year exclusion for Salman Ali that was based on a loss of $12,089,078.28, lengthy criminal conduct, 32 months of incarceration, and one mitigating factor (cooperation with law enforcement)); but see Eugene Goldman, M.D., a/k/a Yevgeniy Goldman, M.D.,DAB No. 2635 at 8 (2015) (stating that determining the period of exclusion is case-specific and based on an evaluation of the aggravating and mitigating factors in the case); Paul D. Goldenheim, M.D., et al., DAB No. 2268 at 29 (2009) (stating that comparisons with other cases are not controlling and are of “limited utility”).

The IG has the burden to prove the existence of the three aggravating factors, and it has.  42 C.F.R. § 1005.15(c).  I conclude that the imposition of a minimum period of exclusion for 64 years is not unreasonable.  42 C.F.R. § 1001.2007(a).  The IG has demonstrated the existence of three aggravating factors, to include the loss of more than $77 million, and Petitioner has not demonstrated the presence of any mitigating factors.

3. The effective date of Petitioner’s exclusion is January 18, 2024.

The effective date of the exclusion, January 18, 2024, is 20 days after the date of the IG’s December 29, 2023 letter and is established by regulation.  See 42 C.F.R. § 1001.2002(b).  I am bound by that regulation.  42 C.F.R. § 1005.4(c)(1).

V.   Conclusion

For the foregoing reasons, a 64-year exclusion from participation in Medicare, Medicaid, and all other federal health care programs, effective January 18, 2024, is not unreasonable.

Endnotes

¹  Inasmuch as Petitioner’s new evidentiary exhibits do not establish that any claimed cooperation with law enforcement resulted in any of the outcomes required for application of 42 C.F.R. § 1001.102(c) as a mitigating factor (e.g., a criminal conviction), these documents are otherwise irrelevant and immaterial.  See 42 C.F.R. § 1005.17(c).

²  My findings of fact and conclusions of law are set forth in italics and bold font.

³  While there are slight differences in the wording of Section 1128 of the Act and its codification at 42 U.S.C. § 1320a-7, the two authorities are substantively identical and I refer to them interchangeably.  I further note that the Secretary of the Department of Health and Human Services has delegated to the IG the authority “to suspend or exclude certain health care practitioners and providers of health care services from participation in these programs.”  48 Fed. Reg. 21,662 (May 13, 1983); see also 42 C.F.R. § 1005.1.

⁴  Estimates of inflation can be found via the Bureau of Labor Statistics.  https://data.bls.gov/cgi-bin/cpicalc.pl (last visited May 29, 2024).  For example, $10,000 in 2013 has approximately $13,615 in buying power today.  I do not reference this figure as a definitive statement of the value of $750,000 in today’s dollars, but rather to recognize that $750,000 is not necessarily an equivalent loss today, a factor that I have weighed in Petitioner’s favor.