Laura Lynn Crain, DAB CR6515 (2024)

DECISION

Respondent, the Inspector General for the United States Department of Health and Human Services (the IG), excluded Petitioner, Laura Lynn Crain, from participation in Medicare, Medicaid, and all other federal health care programs for five years based on her conviction for a criminal offense related to the delivery of an item or service under the Medicare or a state health care program. Petitioner sought review. As explained below, I affirm the IG’s exclusion action.

I. Procedural History

By letter dated December 29, 2023, the IG notified Petitioner of her exclusion for five years from participation in Medicare, Medicaid, and all federal health care programs under section 1128(a)(1) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(1)). IG Exhibit (Ex.) 1. The IG explained she took this action based on Petitioner’s conviction in Arizona state court “of a criminal offense related to the delivery of an item or service under Medicare or a [s]tate health care program, including the performance of management or administrative services relating to the delivery of items or services, under any such program.” Id. at 1.

Petitioner timely requested a hearing before an administrative law judge (ALJ) in the Civil Remedies Division, resulting in my designation to hear and decide this case. I held

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a pre-hearing conference by telephone with the parties on March 5, 2024, the substance of which is set forth in my Order Summarizing Pre-hearing Conference and Setting Briefing Schedule (Summary Order) issued that same day. See 42 C.F.R. § 1005.6. Among other things, I directed the parties to file pre-hearing briefs articulating their respective arguments as well as identifying witnesses and exhibits in support thereof. Summary Order at 4.

The IG filed a brief (IG Br.) and six proposed exhibits (IG Exs. 1-6). Petitioner filed a response brief (P. Resp.), the short-form brief (P. Inf. Br.), and six proposed exhibits (P. Exs. 1-6). The IG filed a reply.

II. Admission of Exhibits and Decision on the Record

Neither party objected to the opposing party’s proposed exhibits. I therefore enter IG Exhibits 1 through 6 and P. Exhibits 1 through 6 into the record. Neither party believed an in-person hearing to be necessary. IG Br. at 6; P. Inf. Br. at 2. Accordingly, I decide this case on the parties’ briefs and the exhibits of record. Civ. Remedies Div. P. § 19(d).

III. Issue

Whether the IG had a basis to exclude Petitioner from participating in Medicare, Medicaid, and all other federal health care programs pursuant to 42 U.S.C. § 1320a-7(a)(1). See 42 C.F.R. § 1001.2007(a)(1).

If I affirm the basis for exclusion, I must affirm the five-year length of exclusion as that is the minimum exclusion period required by the Act for mandatory exclusions. 42 C.F.R. § 1001.102(a).

IV. Applicable Law

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) provides Petitioner with rights to an administrative hearing and judicial review of the final action of the Secretary of Health and Human Services (Secretary). The right to a hearing before an ALJ is set forth in 42 C.F.R. §§ 1001.2007(a) and 1005.2, and the rights of both the sanctioned party and the IG to participate in a hearing are specified by 42 C.F.R. § 1005.3.

The Secretary must exclude from participation in federal health care programs “[a]ny individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under subchapter XVIII of this chapter or under any State health care program.” 42 U.S.C. § 1320a-7(a)(1); see also 42 C.F.R. § 1001.101(a).

An individual is convicted of a criminal offense when: (1) a judgment of conviction has been entered against him or her in a federal, state, or local court whether an appeal is

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pending or the record of the conviction is expunged; (2) there is a finding of guilt by a court; (3) a plea of guilty or no contest is accepted by a court; or (4) the individual has entered into any arrangement or program where judgment of conviction is withheld. 42 U.S.C. § 1320a-7(i). The Act does not distinguish between misdemeanor and felony convictions. Id. An excluded party may not collaterally attack the conviction that provides the basis of the exclusion. 42 C.F.R. § 1001.2007(d).

Section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)) provides exclusion imposed under section 1128(a) of the Act (42 U.S.C. § 1320a-7(a)) shall be for a minimum period of five years. Exclusion is effective 20 days from the date of the notice of exclusion. 42 C.F.R. § 1001.2002(b). The period of exclusion may be extended based on the presence of specified aggravating factors. 42 C.F.R. § 1001.102(b). Mitigating factors are considered as a basis for reducing the period of exclusion only if aggravating factors justify an exclusion of longer than five years. 42 C.F.R. § 1001.102(c).

The standard of proof is a preponderance of the evidence. 42 C.F.R. § 1001.2007(c). I have determined Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors, while the IG bears the burden on all other issues. 42 C.F.R. § 1005.15(c); Summary Order at 3-4.

V. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold and followed by pertinent findings of fact and analysis.

A. Petitioner’s request for hearing was timely, and I have jurisdiction.

Petitioner timely requested a hearing. I have jurisdiction to hear and decide this case. See 42 C.F.R. §§ 1001.2007(a)(1)-(2), 1005.2(a); see also 42 U.S.C. § 1320a-7(f)(1).

B. There is a basis for Petitioner’s exclusion pursuant to section 1128(a)(1) of the Act.

Section 1128(a)(1) of the Act requires exclusion from participation in Medicare, Medicaid, and all federal health care programs where an individual has been convicted, under federal or state law, of a criminal offense related to the delivery of an item or service under Medicare or any state health care program. 42 U.S.C. § 1320a-7(a)(1); 42 C.F.R. § 1001.101(a). The IG has established these elements by a preponderance of the evidence.

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1. Relevant facts

On December 23, 2019, an Arizona grand jury indicted Petitioner and 46 other individuals in a sprawling 150-count indictment that accused the group of numerous crimes related to the theft of at least $25,000 from numerous public and private health insurance companies by means of material misrepresentations made from May 2009 to October 2018. IG Ex. 2 at 1-11. The grand jury also accused Petitioner of helping an individual named Michael Ham conceal these ill-gotten gains when he performed cataract surgeries for various individuals during this time and received payment from Medicare or other health insurance companies.¹ Id. at 12-66.

On March 21, 2023, Petitioner pleaded guilty to Counts 1 and 6 of the indictment,² both amended to violations of Securing the Proceeds of an Offense, a “Class 6 undesignated offense.” IG Ex. 2 at 5-7, 11-12; IG Ex. 3 at 1-3. On April 7, 2023, the Superior Court of Yavapai County, Arizona (state court) accepted Petitioner’s guilty plea and entered judgment against her. IG Ex. 5. The state court characterized Petitioner’s offenses of conviction as misdemeanors³ and ordered her to pay $80 as a financial penalty. Id. at 1, 3. On October 17, 2023, the state court accepted Petitioner’s application to set aside her

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conviction pursuant to Ariz. Rev. Stat. § 13-905(K), vacated the judgment of guilt against her, and issued a Certificate of Second Chance. ⁴ IG Ex. 6.

2. Petitioner was convicted of a criminal offense within the meaning of the Act.

The Act provides an individual or entity is considered “convicted” when a judgment of conviction has been entered by a federal, state, or local court, or, relevant here, if a plea of guilty has been accepted by such a court. 42 U.S.C § 1320a-7(i)(1), (3). Here, the state court entered judgment of conviction based on Petitioner’s guilty plea. IG Ex. 5 at 1. Petitioner initially asserted she was not convicted within the meaning of the Act because the state court subsequently set aside her conviction. P. Req. for Hearing; see also IG Ex. 6. She now concedes she was convicted of a criminal offense within the meaning of section 1128(a)(1) of the Act. P. Inf. Br. at 1; P. Resp. at 2 (“The evidence presented by the IG clearly states I was convicted of a criminal offense, which is true.”).

Even if she had not, I cannot conclude Congress did not intend to reach convictions set aside under Arizona state law for reasons not pertaining to defects in the conviction itself or evidence of innocence. The Act broadly defines convictions to include those where a court subsequently “expunges” the judgment of conviction. 42 U.S.C. § 1320a-7(i)(1); 42 C.F.R. § 1001.2 (defining “convicted” to include judgments that are “expunged or otherwise removed”). Even though the state court issued an order “[v]acating the Judgment of Guilt and dismissing the charges,” IG Ex. 6, the relief granted under Arizona’s set-aside law is more akin to expungement.

First, the intent under Arizona’s set-aside law is to permit a state court to restore certain civil liberties to an individual convicted of a subset of non-dangerous misdemeanor offenses if that individual has fulfilled the conditions of their sentence and the court finds several other factors weigh in the applicant’s favor. Ariz. Rev. Stat. § 13-905(A), (B), (K), (M), (P). By contrast, true vacation of a conviction occurs only if a court makes factual or legal determinations that call into question a convicted individual’s guilt or the propriety of their conviction. Compare Ariz. Rev. Stat. Rules Crim. Proc., Rule 24.2 (requiring Arizona courts to vacate a judgment of conviction if the court did not have jurisdiction, newly discovered material facts came to light, or the conviction was obtained in violation of the U.S. or Arizona constitutions), with Ariz. Rev. Stat. Rules Crim. Proc.,

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Rule 29 (permitting courts to set aside misdemeanor convictions within the parameters set forth at Ariz. Rev. Stat. § 13-905).

Second, Arizona did not intend to afford convicted individuals like Petitioner who obtained relief under the set-aside provision to argue in other contexts that they were never convicted in the first place. Ariz. Rev. Stat. § 13-905(E)(1) (providing a conviction set aside under this provision nevertheless “may be . . . [u]sed as a conviction if the conviction would be admissible had it not been set aside.” In other words, the state court did not return Petitioner to the state of innocence she enjoyed prior to her conviction. It instead restored some but not all civil liberties to her after she completed the terms of her sentence and met other statutory criteria for eligibility. For these reasons, I conclude Petitioner was convicted of a criminal offense within the meaning of the Act.

3. Petitioner’s criminal offense is related to the delivery of an item or service under Medicare or a state health care program within the meaning of section 1128(a)(1) of the Act.

The Act requires an individual’s exclusion from participation in federal health care programs if convicted of an offense related to the delivery of an item or service under Medicare or a state health care program. See 42 U.S.C. § 1320a-7(a)(1). Petitioner argues her conviction does not so relate because she pleaded guilty to lesser charges not described in the indictment against her. P. Inf. Br. at 2; P. Resp. at 1-2.

Petitioner’s belief that her exclusion can only be based on the charges to which she pleaded is erroneous. Petitioner’s offense of conviction need only be “related to” the delivery of an item or service under Medicare or a state health care program. The term “related to” simply means that there must be a nexus or common sense connection. See Friedman v. Sebelius, 686 F.3d 813, 820 (D.C. Cir. 2012) (describing the phrase “related to” in another part of section 1320a-7 as “deliberately expansive words,” “the ordinary meaning of [which] is a broad one,” and one that is not subject to “crabbed and formalistic interpretation.”) (internal quotation marks omitted); see also Quayum v. U.S. Dep’t of Health & Human Servs., 34 F. Supp. 2d 141, 143 (E.D.N.Y. 1998). In determining the relatedness of an offense, I am not bound to the elements of the charged offense, as Petitioner believes. Berton Siegel, D.O., DAB No. 1467 at 4 (1994) (“[i]t is not the labeling of the offense under the state statute which determines whether the offense is program-related”). Instead, I examine the nature of the offense, which properly includes the “facts upon which the conviction was predicated.” Id.

Here, Petitioner pleaded guilty to two counts of “Securing the Proceeds of an Offense.” IG Ex. 2 at 5-7, 11-12; IG Ex. 3 at 1-3. But these counts did not occur in a vacuum. They are amended versions of Counts 1 and 6 from the indictment against Petitioner, which accused her of engaging in a conspiracy to “promote or aid the commission” of

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numerous offenses, among them theft from several public and private health insurers by means of material misrepresentations. IG Ex. 2 at 5-6, 11-12.

Petitioner cannot reasonably argue there is no relationship between the initial charges against her and the charges to which she pleaded to resolve her criminal case. The state of Arizona charged Petitioner with numerous crimes describing her role in stealing from health care insurers, including the Medicare program and Arizona’s Medicaid program. Id. at 11-66. It also accused her of assisting in the submission of false claims to the Medicare program and Arizona’s Medicaid program by Michael Ham related to cataract surgeries he performed on numerous individuals as part of a money laundering scheme. Id. Petitioner pleaded guilty to modified versions of the counts accusing her of conspiracy and theft to resolve these charges against her. IG Ex. 2 at 5-7, 11-12; IG Ex. 3 at 1-3. There is no dispute the modified charges are related to the conduct set forth in the original versions of those charges.

The original charges contained in Counts 1 and 6 reflect conduct clearly intended to fall within the meaning of section 1128(a)(1) of the Act. IG Ex. 2 at 5-7, 11-12. Theft from the Medicare program and Arizona’s Medicaid program by means of material misrepresentations made in claims submitted to those programs is axiomatically related to the delivery of an item or service in health care. Travers v. Shalala, 20 F.3d 993, 998 (9th Cir. 1994) (filing improper claims with the Medicaid program is “a program‑related offense” and “such financial misconduct is exactly what Congress sought to discourage” through imposing exclusions.); see also Siegel, DAB No. 1467 at 6-7 (a criminal offense resulting in financial loss to a State Medicaid program was “related to” the delivery of items or services under that program because it resulted “in less funds being available to pay for covered services” delivered to Medicaid patients). I therefore conclude Petitioner’s offense of conviction was related to the delivery of an item or service under Medicare or a state health care program.

C. Petitioner must be excluded for a minimum of five years; the period of exclusion is therefore reasonable as a matter of law.

Because I have concluded a basis exists to exclude Petitioner under 42 U.S.C. § 1320a-7(a)(1), she must be excluded for a minimum period of five years. 42 U.S.C. § 1320a-7(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2). Neither I nor the IG have the discretion to impose a lesser period of exclusion.

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VI. Conclusion

For the foregoing reasons, I affirm the IG’s exclusion action. Petitioner is excluded from participation in Medicare, Medicaid, and all federal health care programs for five years pursuant to section 1128(a)(1) of the Act (42 U.S.C. § 1320a-7(a)(1)). Her exclusion is effective 20 days from the date of the notice of exclusion issued to her by the IG.

Endnotes

¹ The IG states “Petitioner was employed by a physician, Michael Lee Ham, and participated in an illegal scheme regarding knowingly obtaining items or services from Federal and State health care programs for cataract surgeries at Kokopelli Eye Care, PC, by material misrepresentations.” IG Br. at 2 (citing I.G. Ex. 2 at 11-12). But the pages of the indictment cited by the IG do not identify Michael Ham as a physician, or Kokopelli Eye Care, presumably his practice. Given the lack of narrative context in the indictment, or indeed any of the IG’s exhibits, IG counsel’s instinct to describe the nature and circumstances of Petitioner’s offense of conviction is correct. However, that explanation should have derived from the evidence of record. I cannot consider facts not in evidence. The IG’s burden to show Petitioner was convicted of a criminal offense requiring exclusion under the Act will, on occasion, require more effort than proffering the same exhibits in every case and expecting me to infer the necessary quantum of evidence to affirm the IG’s exclusion action.

² Prior to amendment, Count 1 accused Petitioner and others of engaging in a conspiracy from May 2009 to October 2018 to “promote or aid the commission” of numerous offenses including fraudulent schemes and artifices, theft, illegal control of an enterprise, illegally conducting an enterprise, participating in a criminal syndicate, assisting a criminal syndicate, and money laundering. IG Ex. 2 at 5-6. Count 6 accused Petitioner and others of theft during the same time period by “knowingly obtain[ing] services or property” of various private and public health insurers “of a value of $25,000 or more, by means of material misrepresentations, with the intent to deprive [those insurers] of such services or property[.]” Id. at 11-12.

³ Where the offense is non-dangerous, Arizona permits judges to treat class 6 offenses as misdemeanors or defer the determination of whether to treat the offense as a felony or misdemeanor pending the termination of probation. Ariz. Rev. Stat. § 13-604, available at https://www.azleg.gov/ars/13/00604.htm.

⁴ With exceptions not relevant here, Arizona law permits those convicted of a criminal offense who have met the conditions of the imposed sentence apply to have their conviction set aside. Ariz. Rev. Stat. § 13-905(A), (P), available at https://www.azleg.gov/ars/13/00905.htm. The court assesses the application by considering several factors including the nature of the offense, the applicant’s prior criminal history and age, victim input, compliance with probation, and other relevant factors. Id. at § 13-905(B). For misdemeanor convictions, granting the application requires the court to issue a certificate of second chance, which has the effect of restoring certain civil liberties, such as the ability to obtain an occupational license that a conviction would otherwise bar. Id. at §§ 13-905(K), (M).