Lokesh S. Tantuwaya, DAB CR6529 (2024)

DECISION

The Inspector General (IG) of the United States Department of Health and Human Services excluded Dr. Lokesh S. Tantuwaya (Petitioner) from participation in Medicare, Medicaid, and all other federal health care programs for twelve years pursuant to section 1128(a)(3) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)).  The IG’s exclusion of Petitioner is the result of Petitioner’s conviction of one felony count of Conspiracy to Commit Offense or to Defraud United States in violation of 18 U.S.C. § 371.  Petitioner’s exclusion for the minimum period of five years is required by section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).  The IG proved the presence of three aggravating factors and is therefore permitted to extend the minimum exclusion period of five years, by an additional seven years, for a total minimum exclusion period of twelve years.  Petitioner did not prove the presence of any mitigating factors.  For the reasons stated below, I affirm the IG’s exclusion determination under section 1128(a)(3) and find the twelve-year duration of the exclusion is not unreasonable. 

I.     Background and Procedural History

On February 23, 2018, Petitioner was indicted in the United States District Court for the Central District of California (District Court) on thirteen counts of violations of federal

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law including Conspiracy to Commit Offense or to Defraud United States and the Anti-Kickback statute (AKS).  IG Ex. 4.  On September 1, 2022, Petitioner entered a guilty plea to one felony count of Conspiracy to Commit Offense or to Defraud United States in violation of 18 U.S.C. § 371.  IG Ex. 2.  The District Court Judge accepted Petitioner’s guilty plea and on December 9, 2022, he was sentenced to 60 months in prison and ordered to forfeit $3,300,000 in favor of the United States.  IG Exs. 3, 6. 

Petitioner pleaded guilty to Count I of the Indictment, which set forth that Petitioner is a neurosurgeon and received illegal kickback payments for referring patients to a hospital and its affiliated entities for spinal and other surgeries, magnetic resonance imaging, toxicology, durable medical equipment, and other services (“Kickback Tainted Surgeries and Services”).  IG Ex. 4 at 2, 7-8.  The health care items and services resulting from Petitioner’s illegal referrals were then billed to federal and state health care programs, e.g., the California Workers’ Compensation System, the California State Compensation Insurance Fund, and the Federal Employees’ Compensation Act.  Id. at 3-5, 7-9.  Between January 2010 and April 2013, approximately $38 million in health care claims were submitted for Kickback Tainted Surgeries and Services related to Petitioner’s illegal referrals, and Petitioner received at least $3.2 million from his criminal activity.  Id. at 11. 

By letter dated October 31, 2023, the IG excluded Petitioner under section 1128(a)(3) of the Act for twelve years because:  1) the criminal conduct occurred for a period greater than one year (42 C.F.R. § 1001.102(b)(2)); 2) Petitioner was sentenced to 60 months of incarceration (42 C.F.R. § 1001.102(b)(5)); and 3) Petitioner had a prior record of an administrative sanction because the California Board of Medicine placed Petitioner’s license on probation (42 C.F.R. § 1001.102(b)(6)).  IG Ex. 1. 

Petitioner filed a request for hearing (RFH) on December 20, 2023.  I conducted a prehearing telephone conference on January 23, 2024, the substance of which I memorialized in my Order issued January 24, 2024, including a schedule for submission of arguments and evidence by the parties.  Petitioner filed a Motion to Stay All Proceedings pending the disposition of his appeal at the United States Court of Appeals for the Ninth Circuit; I denied Petitioner’s Motion at the prehearing telephone conference.1  The IG submitted her prehearing exchange composed of a prehearing brief (IG Br.) and 8 exhibits (IG Exs. 1-8).  Petitioner submitted his prehearing exchange

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composed of a prehearing brief (P. Br.) and 4 exhibits (P. Exs. 1-4).2  The IG then submitted a reply brief (Reply).  

II.     Jurisdiction

Petitioner timely requested a hearing, and 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).  

III.     Issues

The Secretary of Health and Human Services (Secretary) has, by regulation, limited my scope of review to two issues:  Whether the IG has a basis for excluding Petitioner from participating in Medicare, Medicaid, and all other federal health care programs and, if so, whether the length of the exclusion imposed by the IG is unreasonable.  See 42 C.F.R. § 1001.2007(a)(1). 

Here, Petitioner does not contest the IG’s decision to exclude him from participation in federal health care programs under section 1128(a)(3) of the Act assuming his conviction is not overturned on appeal at the Ninth Circuit.  P. Br. at 3.  Petitioner argues instead that the IG failed to consider an applicable mitigating factor and that the 12-year period of exclusion should be reduced to a five-year period of exclusion.  P. Br. at 3-4.  

IV.     Exhibits and Decision on the Record

Neither party objected to the other’s proposed exhibits.  I therefore admit IG Exs. 1-8 and P. Exs. 1-4 into evidence. 

Petitioner indicated in his prehearing exchange that he requests an oral hearing, but he did not propose any witnesses or anticipated testimony that would be offered at an oral hearing.  P. Br. at 5.  The IG argued that an oral hearing is unnecessary and that Petitioner failed to meet the requirements for an oral hearing as set forth in my Orders.  Reply at 6.  I agree with the IG, and therefore I am issuing a decision on the written record.  My Standing Order requires any party who would like an oral hearing for the presentation of live testimony to submit a proposed witness list as well as a summary of the expected testimony from each witness.  Standing Order at 3; see also January 24, 2024 Order Following Prehearing Conference at 2.  An in-person hearing would serve no purpose, and I therefore proceed to a decision based on the record before me.  See Civ. Remedies Div. P. § 19(d). 

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V.     Applicable Law

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

The Secretary shall exclude an individual from participation in Medicare, Medicaid, and all other federally funded health care programs if that individual:  

[H]as 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 . . . 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.  

42 U.S.C. § 1320a-7(a)(3); Act § 1128(a)(3).  The Secretary has promulgated regulations implementing this provision of the Act.  42 C.F.R. § 1001.101(c).  The Secretary has interpreted this statutory provision to include “the performance of management or administrative services relating to the delivery of such items or services” as sufficient to mandate exclusion.  42 C.F.R. § 1001.101(c)(1).  

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a) of the Act will be for a period of no fewer than five years.  Pursuant to 42 C.F.R. § 1001.102(b), an individual’s period of exclusion may be extended based on the presence of specified aggravating factors.  Only if the aggravating factors justify an exclusion of longer than five years, however, are mitigating factors considered as a basis for reducing the period of exclusion to no less 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).  Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors, and the IG bears the burden on all other issues.  42 C.F.R. § 1005.15(b), (c). 

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

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

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A. The IG established a basis for Petitioner’s exclusion pursuant to section 1128(a)(3) of the Act (42 U.S.C. § 1320a-7(a)(3)), and Petitioner does not contest the IG’s basis. 

1. Petitioner was convicted of a felony occurring after August 21, 1996. 

Petitioner does not dispute that “his conviction, if ultimately affirmed, gives rise to a mandatory five-year exclusion.”  P. Br. at 3.  On September 1, 2022, Petitioner was convicted of conspiracy in violation of 18 U.S.C. § 371.  IG Ex. 2.  I therefore find that Petitioner was convicted of a felony occurring after August 21, 1996. 

2. Petitioner was convicted of a felony relating to fraud and other financial misconduct that was committed in connection with the delivery of a health care item or service. 

a. Petitioner’s felony offense is related to fraud. 

Section 1128(a)(3) of the Act requires that the felony offense forming the basis for the exclusion relate to “fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.”  42 U.S.C. § 1320a-7(a)(3).  The payment and receipt of kickbacks is a form of financial misconduct.  See, e.g., Niranjana B. Parikh, M.D., et al., DAB No. 1334 at 4 (1992) (describing the financial harm to programs caused by kickbacks). 

In this case, Petitioner does not dispute that his conviction relates to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct.  P. Br. at 3.  Petitioner entered a guilty plea to Count One of the Indictment, which charged him with fraud and other financial misconduct, including bribery, money laundering, and violations of the AKS.  IG Ex. 4 at 7.  To conceal and disguise the illegal kickback payments for Kickback Tainted Surgeries and Services, the Indictment alleged that Petitioner entered “bogus contracts” including a neurosurgery directorship agreement, an option agreement to acquire his medical practice, and an aircraft lease agreement, that did not accurately describe the intent of the payments received.  Id. at 9-10.  Petitioner received at least $3.2 million for Kickback Tainted Surgeries and Services he performed or referred.  Id. at 12.  As such, I find that Petitioner’s felony conviction is related to fraud and financial misconduct. 

b. Petitioner’s felony offense was committed in connection with the delivery of a health care item or service. 

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For the IG to exclude Petitioner under section 1128(a)(3), the felony offense that was the basis of Petitioner’s conviction must have been committed “in connection with the delivery of a health care item or service.”  42 U.S.C. § 1320a-7(a)(3). 

A conviction is in connection with the delivery of a health care item or service when there is a “common-sense connection” between the offense and the delivery of a health care item or service.  Erik D. DeSimone, R.Ph., DAB No. 1932 at 5 (2004); see also Friedman v. Sebelius, 686 F.3d 813, 820 (D.C. Cir. 2012).  An individual does not need to be convicted of health care fraud for the conviction to be in connection with the delivery of health care items or services, the “connection is present when the offense occurs in the context of an individual’s participation in the chain of delivery of health care items or services.”  Kenneth M. Behr, DAB No. 1997 at 9 (2005).  

Petitioner’s referrals for Kickback Tainted Surgeries and Services in return for illegal kickback payments undoubtedly relate to the delivery of a health care item or service.  Petitioner also does not dispute this.  P. Br. at 3.  Petitioner’s actions resulting in his conviction have a clear connection to the delivery of a health care item or service, and therefore I find this element is also met. 

B. Petitioner must be excluded for a minimum of five years. 

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C. § 1320a-7(a)(3), he must be excluded for a minimum of five years.  42 U.S.C. § 1320a-7(c)(3)(B). 

C. The IG has established three aggravating factors which together permit the IG to lengthen the exclusion beyond the five-year statutory minimum. 

In relevant part, the following factors may be considered to be aggravating and a basis for lengthening the period of a mandatory exclusion under section 1128(a)(3): 

(2)  The acts that resulted in the conviction, or similar acts, were committed over a period of one year or more;

* * * *

(5)  The sentence imposed by the court included incarceration;

(6)  The convicted individual or entity has a prior criminal, civil or administrative sanction record;

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42 C.F.R. § 1001.102(b)(2), (5), (6).

The IG bears the burden of establishing aggravating factors.  42 C.F.R. § 1005.15(c).  The IG has met its burden with respect to the three aggravating factors which together permit the IG to lengthen the exclusion beyond the five-year statutory minimum, as discussed below. 

1. The IG established that the acts that resulted in Petitioner’s conviction were committed over a period of one year or more. 

Under 42 C.F.R. § 1001.102(b)(2), the IG may extend the length of an exclusion if “the acts that resulted in the conviction, or similar acts, were committed over a period of one year or more.” 

Petitioner’s guilty plea to Count I of the Indictment includes a factual basis that he performed the acts leading to his conviction between no later than January 2010 and continuing through at least May 2013 – a period of over three years.  IG Ex. 4 at 7. Petitioner does not dispute this fact, nor the application of this aggravating factor.  See generally P. Br.  Accordingly, the IG established a basis for application of the aggravating factor set forth at 42 C.F.R. § 1001.102(b)(2). 

2. The IG established that Petitioner’s sentence imposed by the District Court included incarceration.

Under 42 C.F.R. § 1001.102(b)(5), the IG may extend the length of an exclusion if “the sentence imposed by the court included incarceration.”  The District Court sentenced Petitioner to 60 months of incarceration.  IG Ex. 3 at 1.  Petitioner does not contest this fact, nor the application of this aggravating factor.  See generally P. Br.  Accordingly, the IG established a basis for application of the aggravating factor set forth at 42 C.F.R. § 1001.102(b)(5). 

3. The IG established that Petitioner has a prior criminal, civil or administrative sanction record. 

Under 42 C.F.R. § 1001.102(b)(6), the IG may extend the length of an exclusion if “the convicted individual or entity has a prior criminal, civil or administrative sanction record.”

The California Medical Board Stipulated Disciplinary Orders for Case No. 800-2016-021906 (“Medical Board Action 2016”) and Case No. 800-2017-033112 (“Medical Board Action 2017”) resulted in the revocation of Petitioner’s medical license and Petitioner being placed on probation.  IG Exs. 7-8.  Petitioner does not contest the occurrence of these administrative sanctions, nor the application of this aggravating

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factor.  See generally P. Br.  These administrative sanctions occurred prior to Petitioner’s exclusion.  Accordingly, the IG established a basis for application of the aggravating factor set forth at 42 C.F.R. § 1001.102(b)(6). 

4. There are no mitigating factors applicable in this case. 

If any of the aggravating factors authorized by 42 C.F.R. § 1001.102(b) that permit the IG to impose an exclusion of longer than five years apply, as they do in this case, then mitigating factors may be considered as a basis for reducing the period of exclusion to no less than five years.  42 C.F.R. § 1001.102(c).  The only authorized mitigating factors that I may consider are listed in 42 C.F.R. § 1001.102(c): 

(1) In the case of an exclusion under § 1001.101(a), whether the individual or entity was convicted of three or fewer misdemeanor offenses and the entire amount of financial loss (both actual loss and intended loss) to Medicare or any other Federal, State, or local governmental health care program due to the acts that resulted in the conviction, and similar acts, is less than $5,000;

(2) The record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional or physical condition before or during the commission of the offense that reduced the individual’s culpability; or

(3) The individual’s or entity’s cooperation with Federal or State officials resulted in –

(i) Others being convicted or excluded from Medicare, Medicaid and all other Federal health care programs,

(iI) Additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or

(iII) The imposition against anyone of a civil money penalty or assessment under part 1003 of this chapter.  

Petitioner argues that the mitigating factor at 42 C.F.R. § 1001.102(c)(2) applies due to Petitioner’s mental health condition, and the IG failed to consider this factor when determining the 12-year exclusionary period.  P. Br. at 3-4.  Petitioner further argues that

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application of this mitigating factor should properly reduce the exclusionary period to five years.  P. Br. at 4-5.  In response, the IG argues that the evidence does not support application of this mitigating factor.  Reply at 2-5.  Petitioner has the burden of proving any mitigating factors and affirmative defenses.  42 C.F.R. § 1005.15(c); Standing Prehearing Order ¶ 5.  

Application of 42 C.F.R. § 1001.102(c)(2) requires the following:  that the record in the criminal proceedings shows the court determined (1) Petitioner had a mental, emotional, or physical condition that was present before or during the commission of the underlying offense and (2) that the condition reduced petitioner's culpability.  42 C.F.R. § 1001.102(c)(2); see Begum v. Hargan, No. 16 CV 9624, 2017 WL 5624388 at *6 (N.D. Ill. Nov. 21, 2017).

Petitioner contests that his statements regarding his mental health in his own Sentencing Position at the District Court proceeding3 in conjunction with the District Court recommending the Bureau of Prisons conduct a mental health evaluation4 suffice for me to conclude that the District Court determined Petitioner had a mental condition.  P. Br. at 4.  Without more, I cannot conclude that the District Court determined Petitioner had a mental, emotional, or physical condition, but only that the District Court thought Petitioner might have such a condition.  Regardless, even if I were to find this evidence sufficient to meet the first prong, Petitioner would not be able to meet his burden with respect to the second prong as he has not provided any evidence that the District Court determined any such condition reduced Petitioner’s culpability.  To the contrary, the District Court sentenced Petitioner to 60 months of incarceration, which is the maximum period of incarceration for Petitioner’s conviction.  IG Ex. 3 at 1; P. Ex. 3 at 4 (“statutory maximum sentence of 60 months”). 

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The evidence in the record does not meet Petitioner’s burden, and I find that the mitigating factor at 42 C.F.R. § 1001.102(c)(2) does not apply.  Accordingly, Petitioner has not established any of the mitigating factors currently recognized under the law for reducing the period of exclusion. 

D. Given the specific facts pertaining to the applicable aggravating factors, a twelve-year exclusion period is not unreasonable. 

The role of the ALJ in exclusion cases is to conduct a de novo review of the facts related to the basis for the exclusion and the existence of aggravating and mitigating factors identified at 42 C.F.R. § 1001.102 and to determine whether the period of exclusion imposed by the IG falls within a reasonable range.  42 C.F.R. § 1001.2007(a)(1)(ii); Craig Richard Wilder, DAB No. 2416 at 8 (2011); Joann Fletcher Cash, DAB No. 1725 at 17 n.6 (2000). 

While the IG is not compelled to extend the length of exclusion for any period beyond five years in the presence of aggravating factors, it may choose to exercise its discretion to do so.  42 C.F.R. § 1001.102(b) (“Any of the following factors may be considered to be aggravating and a basis for lengthening the period of exclusion.”).  An ALJ must uphold the IG’s determination as to the length of exclusion unless it is unreasonable, and an ALJ has no authority to change the amount of time chosen by the IG if it is within a reasonable range.  42 C.F.R. § 1001.2007(a)(1)(ii); 57 Fed. Reg. 3298, 3321 (Jan. 29, 1992). 

The IG has established three aggravating factors, which Petitioner does not dispute, and Petitioner has established no mitigating factors.  Furthermore, Petitioner does not dispute the weight the IG assigned to the aggravating factors in determining the length of the exclusion period.  Petitioner used his status as a neurosurgeon to refer patients for Kickback Tainted Surgeries and Services – calling into question his medical judgment and the medical necessity of these surgeries and services – for his own financial enrichment for over three years.  In light of the facts supporting the three aggravating factors and no mitigating factors, I therefore conclude that the IG’s assessment of a twelve-year exclusionary period is not unreasonable.

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VII.     Conclusion

I affirm the IG’s determination to exclude Petitioner for twelve years from participating in Medicare, Medicaid, and all other federal healthcare programs pursuant to 42 U.S.C. § 1320a-7(a)(3), and I find that the length of the exclusion imposed by the IG is not unreasonable.