Walter J. Mikolinski, Jr., DAB No. 1156 (1990)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

______________________________ In the Case of: ) ) Walter
J. Mikolinski, Jr., ) DATE: May 17, 1990 Petitioner, ) )
Docket No. C-83 - v. - )
Decision No. 1156 ) The Inspector General. )
______________________________)


FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE
DECISION

On August 8, 1989, Administrative Law Judge (ALJ) Steven T. Kessel
issued a decision concluding that the Inspector General (the I.G.) had
authority to exclude Petitioner from participation in the Medicare
program and to direct his exclusion from participation in State health
care programs pursuant to section 1128(b)(4)(A) of the Social Security
Act (the Act). 42 U.S.C. 1320a- 7(b)(4)(A). The ALJ found that
Petitioner's pharmacy license had been suspended by the Massachusetts
Board of Registration in Pharmacy (Pharmacy Board) for reasons bearing
on Petitioner's professional competence, professional performance, or
financial integrity. The ALJ did not, however, fully sustain the
exclusion imposed by the I.G.

The I.G. had imposed an exclusion which would remain in effect until
such time as Petitioner obtained a valid license to practice pharmacy in
the State of Massachusetts. The ALJ sustained the exclusion insofar as
it applies to Petitioner's program participation as a pharmacist, but
modified the exclusion insofar as it applies to Petitioner's
participation as a nursing home operator, administrator, or employee.
The ALJ found that Petitioner should be excluded from participating as a
nursing home operator, administrator, or employee for a two-year period.

The I.G. petitioned the ALJ to reopen and revise his decision. The ALJ
reopened the decision to consider the issues raised in the petition, but
declined to revise his decision. See Decision Not To Revise Reopened
Decision, dated November 2, 1989. The I.G. then requested review by
this Board pursuant to 42 C.F.R. 1001.128(c) and 42 C.F.R. 498, Subpart
E. Petitioner was given an opportunity to respond.

The primary issue on appeal is whether the ALJ erred as a matter of law
in setting a period of exclusion for Petitioner's program participation
as a nursing home operator different from the period of exclusion for
Petitioner's participation as a pharmacist. For the reasons stated
below, we conclude that the ALJ erred because his decision is
inconsistent with the plain language of the Act and implementing
regulations and is therefore unauthorized.

On the other hand, we reject the I.G.'s further argument that the
statute requires a minimum period of exclusion based on Petitioner
regaining a valid pharmacy license. Accordingly, we remand this case to
the ALJ to reconsider, consistent with the discussion below, the length
of the exclusion imposed by the I.G.


I. The ALJ's findings of fact and conclusions of law

The following findings of fact and conclusions of law by the ALJ are not
disputed on appeal, and we therefore affirm and adopt them for purposes
of our decision:

1. Petitioner is a registered pharmacist in the State of
Massachusetts.

2. On August 22, 1986, Petitioner was indicted in Massachusetts
State court for receiving stolen property in the form of pharmaceuticals
stolen from Massachusetts General Hospital.

3. On April 13, 1988, Petitioner pleaded guilty to receiving
stolen property.

4. In his guilty plea Petitioner admitted that he had paid cash to
employees of Massachusetts General Hospital to receive stolen
pharmaceuticals from them.

5. In his guilty plea Petitioner admitted that he regularly
received stolen pharmaceuticals.

6. Petitioner agreed to pay restitution to Massachusetts General
Hospital in the amount of $25,000.00.

7. As a consequence of his guilty plea, Petitioner received a
suspended prison sentence and was placed on probation for two years.

8. Petitioner was also sentenced to pay $15,000.00 as costs for
investigation of his case.

9. On September 20, 1988, the Pharmacy Board issued an Order to
Show Cause against Petitioner.

10. On September 26, 1988, the Pharmacy Board issued a Decision
and Order in Petitioner's case.

11. The Pharmacy Board found that Petitioner had violated a state
law by knowingly possessing, with intent to distribute, a Class E
Controlled Substance.

12. The Pharmacy Board found that Petitioner had conspired to
divert drugs from the Massachusetts General Hospital.

13. The Pharmacy Board found that Petitioner had not at all times
conducted his professional activities in conformity with federal, state,
and municipal laws, ordinances and regulations.

14. The Pharmacy Board found that its findings, as enumerated in
Findings 11-13, established that Petitioner had committed gross
misconduct in the practice of pharmacy.

15. The Pharmacy Board suspended Petitioner's pharmacy license for
a two-year period, effective beginning September 26, 1988.

16. The Pharmacy Board directed Petitioner to maintain his
continuing education requirements as a pharmacist during the suspension
period.

17. The Pharmacy Board conditioned reinstatement of Petitioner's
pharmacy licence on his taking a pharmacy law examination and passing
with a grade of no less than 75 percent.

18. Petitioner did not appeal the Board's Order.

19. Petitioner is a stockholder in corporations which own and
operate nursing homes.

20. Petitioner's license to provide health care was revoked or
suspended by a State licensing authority for reasons bearing on his
professional competence, professional performance, or financial
integrity.

21. On December 9, 1988, the I.G. excluded Petitioner from
participating in Medicare and directed that he be excluded from
participating in Medicaid.

22. The Secretary of Health and Human Services (the Secretary)
delegated to the I.G. the authority to determine, impose, and direct
exclusions pursuant to section 1128 of the Social Security Act.

23. The I.G. had discretion to exclude Petitioner from
participating in Medicare and to direct his exclusion from participation
in Medicaid for all items or services for which he may have claimed
reimbursement pursuant to these programs.

24. The I.G.'s discretion to exclude Petitioner from participating
in Medicare and to direct his exclusion from participating in Medicaid
is not limited to his participation as a pharmacist.

ALJ Decision, pp. 3-5 (citations omitted).

At issue here are the ALJ's findings of fact and conclusions of law
(FFCL) with respect to the length of the exclusions imposed and directed
by the I.G. These were as follows:

25. The length of the exclusions imposed and directed by the I.G.
against Petitioner is reasonable insofar as it applies to Petitioner's
participation as a pharmacist in the Medicare and State health care
programs. 42 U.S.C. 1320a-7(b)(4)(A).

26. The length of the exclusions imposed and directed by the I.G.
against Petitioner is not reasonable insofar as it applies to
Petitioner's participation as a nursing home operator, administrator, or
employee. See 42 U.S.C. 1320a-7(b)(4)(A).

27. I have the authority to modify the terms of the exclusions
imposed and directed by the I.G. against Petitioner. 42 U.S.C. 405(b).

28. Two-year exclusions against Petitioner from participating in
Medicare and Medicaid as a nursing home operator, administrator, or
employee are reasonable in this case. See Finding 24; see 42 U.S.C.
1320a- (b)(4)(A).

As discussed below, we conclude that the ALJ erred in setting different
periods of exclusion to apply to different types of program services. 1/
We also discuss below the I.G.'s contentions on appeal that (1) the
ALJ's reasoning that the remedial nature of section 1128(b) requires
that an exclusion must be tailored so that each collateral or
consequential effect is independently capable of rational support is
contrary to the specific language of the Act; and (2) Petitioner's prior
and possible future involvement in health care as a nursing home
operator is irrelevant and immaterial to a determination of the minimum
period of an exclusion that reasonably may be imposed on the basis of
the suspension of Petitioner's license to practice pharmacy.


II. The ALJ erred in setting different time periods for applying the
exclusion to different types of services.

A. The ALJ's conclusions are inconsistent with the relevant
statutory provisions.

In the petition to reopen, the I.G. relied on the language of section
1862(e)(1) of the Act. That section provides:

No payment may be made under this title with respect to any item or
service (other than an emergency item or service) furnished--

(A) by an individual or entity during the period when such
individual or entity is excluded pursuant to section 1128 . . .
from participation in the program under this title; . . .

(Emphasis added.)

The I.G. argued that when an individual or entity is excluded pursuant
to section 1128 of the Act, section 1862(e)(1) operates to require that
that individual or entity be barred from reimbursement for any item or
service that he may provide to a program beneficiary. According to the
I.G., exclusion of Petitioner based on suspension of his pharmacy
license would, by law, require that he not be reimbursed for items or
services rendered as a nursing home operator, administrator, or
employee. The I.G. therefore asserted that section 1862(e)(1) prohibits
the Secretary from tailoring exclusions to apply to reimbursement for
specific items or services.

In rejecting the I.G.'s argument, the ALJ stated:

I disagree with the I.G.'s "all or nothing" reading of section
1862(e)(1). The plain language of section 1862(e)(1) is that it
bars reimbursement for items or services where reimbursement has
been excluded pursuant to section 1128. Thus, the law does nothing
more than direct the Secretary to adhere to the terms of exclusions
imposed pursuant to section 1128.

A broader reading of section 1862(e)(1) would be inconsistent with
the language and intent of section 1128. The exclusion law is
remedial and is intended to protect the integrity of federally
funded health care programs from parties who have demonstrated by
their actions that they cannot be trusted to deal with program
funds or to treat recipients and beneficiaries of those funds.
Exclusions imposed and directed pursuant to section 1128 must be
tailored to accomplish this remedial objective, in order to avoid
having a punitive effect which would be inconsistent with the
legislative intent. If section 1862(e)(1) were read as
categorically as is urged by the I.G., it would necessarily result
in exclusions that are not rationally related to the remedial
objectives of section 1128.

ALJ's Decision Not To Revise Reopened Decision, p. 4. The ALJ erred in
concluding that section 1862(e)(1) does no more than bar reimbursement
for items or services "where reimbursement has been excluded pursuant to
section 1128." Section 1862(e)(1) refers to denial of payment for any
item or service furnished "during the period" when an individual or
entity is excluded pursuant to section 1128 "from participation in the
[Medicare] program."

This wording is inconsistent with the ALJ's approach of establishing
different time periods for applying an exclusion to different types of
services. Section 1862(e)(1) refers to an exclusion pursuant to section
1128 as being an exclusion from participation in the program in general,
not as exclusion from participating in the program in one or more
specified, limited capacities. Such an exclusion is for "the"
established period, and results in denial of payment for "any" item or
service. See also sections 1903(i)(2), 504(b)(6), and 2005(a)(9) of the
Act. If Congress had intended the Secretary to apply different
exclusion periods to different types of services, Congress would have
used different wording, such as denying reimbursement for items or
services covered by any exclusion pursuant to section 1128. Since the
statutory exclusion is an exclusion from participation in the program,
however, it results in denial of payment for any item or service. 2/

Moreover, even if the ALJ were correct about the limited effect of
section 1862, we would conclude that the ALJ erred in ignoring the plain
language of section 1128. As the I.G. argued, that section, read as a
whole, clearly contemplates that an exclusion be imposed on a program-
wide basis. Neither the ALJ nor Petitioner pointed to any language in
section 1128 to support the ALJ's conclusions, and we find nothing in
that section which evidences any intent on the part of Congress to
permit the Secretary to apply different periods of exclusion to
different types of items or services which may be provided under
Medicare or the State health care programs.

Section 1128 is headed: "EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES
FROM PARTICIPATION IN MEDICARE AND STATE HEALTH CARE PROGRAMS."
Subsection 1128(b), which sets out "permissive exclusions" such as an
exclusion based on licensure suspension, begins:

The Secretary may exclude the following individuals and entities
from participation in any program under title XVIII and may direct
that the following individuals and entities be excluded from
participation in any State health care program: . . . .

(Emphasis added.)

Section 1128(c), which is headed "NOTICE, EFFECTIVE DATE, AND PERIOD OF
EXCLUSION," provides:

(1) An exclusion under this section or under section 1128A shall
be effective at such time and upon such reasonable notice to the
public and to the individual or entity excluded as may be specified
in regulations consistent with paragraph (2).

(2)(A) Except as provided in subparagraph (B), such an exclusion
shall be effective with respect to services furnished to an
individual on or after the effective date of the exclusion.

* * * *

(3)(A) The Secretary shall specify, in the notice of exclusion
under paragraph (1) . . . the minimum period (or, in the case of an
exclusion of an individual under subsection (b)(12), the period) of
the exclusion.

(B) In the case of an exclusion under subsection (a), the
minimum period of exclusion shall be not less than five years,
except that, upon the request of a State, the Secretary may waive
the exclusion under subsection (a)(1) in the case of an individual
or entity that is the sole community physician or sole source of
essential specialized services in a community. . . .

(Emphasis added.)

The use of the singular throughout these provisions, to refer both to
the exclusion and to the period of exclusion, supports the I.G.'s
reading of the Act. The exclusion is effective with respect to
"services" provided after the effective date, with no distinction as to
the type of service. Moreover, where an individual is the sole source
of "essential specialized services in a community," the exclusion may be
waived. If Congress had anticipated an exclusion applying differently
to different types of services, it would have made more sense to provide
for waiver of the exclusion only as applied to those services found to
be "essential specialized services."

The I.G.'s position is also supported by the wording of subsection
1128(d), which provides:

(1) Subject to paragraph (3), the Secretary shall exercise the
authority under this section . . . in a manner that results in an
individual's or entity's exclusion from all the programs under
title XVIII and all the State health care programs in which the
individual or entity may otherwise participate.

(2) The Secretary shall promptly notify each appropriate State
agency . . .

* * *

(B) of the period . . . for which the State agency is directed
to exclude the individual or entity from participation in the State
health care program.

(3)(A) . . . the period of the exclusion under a State health care
program . . . shall be the same as any period of exclusion under
title XVIII.

(B)(i) The Secretary may waive an individual's or entity's
exclusion under a State health care program . . . .

(ii) A State health care program may provide for a period of
exclusion which is longer than the period of exclusion under title
XVIII.

Under this subsection, the exclusion is applied to specified programs,
not to specific items and services covered by those programs. Moreover,
"the" period of exclusion which the Secretary directs the State agency
to impose must be the same as "the" period of exclusion from Medicare
(although the State may itself provide for "a" longer period of
exclusion for its program). Since Medicaid or the other State health
care programs may cover items or services not covered by Medicare, the
ALJ's approach could give rise to a situation where a Medicare exclusion
could not readily be applied to State health care programs according to
the statutory directive in subsection 1128(d). 3/

Further support for the I.G.'s position is found in subsection 1128(g),
which provides the conditions under which an excluded individual or
entity may apply for termination of the exclusion (reinstatement). Like
the other provisions, this section uses the singular "the" to modify
both "exclusion" and "period of exclusion."

B. The legislative history supports the I.G.'s reading of the Act.

Although we conclude that the Act itself clearly evidences congressional
intent to have one period of exclusion apply on a program-wide basis, we
also note that the legislative history of the 1987 amendments to section
1128 provides further evidence of this intent. 4/ In particular, in
discussing the permissive exclusions, the relevant Senate report states:

Although the Secretary would have discretion whether to initiate an
exclusion proceeding in any particular case, the bill makes it
clear that, if the Secretary found that an exclusion was warranted,
these authorities would have to be exercised in a manner that
resulted in the exclusion of the individual or entity from all of
the Medicare and State health programs for which the individual or
entity was otherwise eligible to participate. Thus, if the
provider were eligible to participate in Medicare, the Secretary
would exclude the provider from Medicare, even if the provider had
not been participating in Medicare, and would simultaneously direct
the States to exclude the provider from the State health programs
for the same period of time.

S.REP. No. 109, 100th Cong., 1st Sess. 6 (1987); see also H.R.REP. No.
85, 100th Cong., 1st Sess. 6 (1987).

Since Congress intended that the exclusion authority must be exercised
in a manner which (absent a basis for a statutory waiver) results in
exclusions from all health programs funded under the Act for the same
period of time, Congress surely did not intend that different periods of
exclusion apply to different types of services covered by the programs.

C. The ALJ's decision is inconsistent with implementing
regulations.

The I.G. also argued that the ALJ decision was inconsistent with the
Department regulations implementing section 1128. We agree.

Those regulations were promulgated prior to the 1987 amendments, when
section 1128 provided both for exclusions and suspensions. The 1987
amendments use the term "exclusion" to substitute for suspension, but
the legislative history indicates that the change was not substantive.
The regulations implemented both the exclusion and suspension
authorities, as follows:

"Exclusion" means that items or services furnished by a specified
practitioner, provider, or other supplier of services will not be
reimbursed under Medicare.

* * *

"Suspension" means that items or services furnished by a specified
party who has been convicted of a program related offense . . .
will not be reimbursed under Medicare or Medicaid.

42 C.F.R. 1001.2; 51 Fed. Reg. 34767 (September 30, 1986).

Under these regulations, the effect of an exclusion or suspension is the
denial of payment for items or services furnished by an excluded or
suspended individual. The regulations also provide for determining the
duration of the exclusion or suspension and for determining when an
individual may be "reinstated." See 42 C.F.R. 1001.114, 1001.125,
1001.130. Reinstatement may be requested after "the date" specified in
the notice of exclusion or suspension; if the OIG approves the request,
the OIG will give written notice of "the date when program participation
will resume." 42 C.F.R. 1001.130.

In sum, the implementing regulations read section 1128 together with
section 1862 (and the corresponding sections in other titles of the Act)
as requiring one period of exclusion, the effect of which is to deny
payment for items or services under the federally funded programs,
irrespective of the nature of the items or services. 5/ D. The
ALJ's approach would cause practical problems in the administration of
the exclusion authority.

The ALJ's approach to this matter causes practical problems as well.
The ALJ's decision provides for one minimum period of exclusion applied
to Petitioner's participation in Medicare and Medicaid as a pharmacist
and for another minimum period as applied to Petitioner's participation
as a nursing home operator, administrator, or employee, but is silent on
Petitioner's participation in other respects. The ALJ decision does not
address whether Petitioner could participate in the programs in any
other capacity, such as a supplier of medical devices. Yet, the
activities giving rise to Petitioner's loss of his pharmacist's license
(including conspiring to divert drugs from a hospital) would certainly
appear to make him untrustworthy as a supplier of medical devices or any
other item or service under the programs. 6/

Another practical difficulty with the ALJ's approach of considering
reasonableness of the length of exclusion as "applied" to various types
of participation in the programs, is that it potentially involves
consideration of all of the myriad ways in which an individual or entity
could participate, not only in Medicare or Medicaid, but also in the
other State health care programs covered by section 1128.
Administration of the exclusion in the form of denial of payments would
be more complicated if different time periods applied to payments for
different types of services. Also, the I.G. would potentially have to
consider reinstatement as applied to the various types of items or
services which could be provided under each of the programs, and this
could be very burdensome administratively. 7/

The ALJ erred in considering the purpose of section 1128 in isolation
without any regard for the effect of his consideration on the
administration of the programs as a whole. In our view, the ALJ's
approach is inconsistent with the general purposes of the Social
Security Act programs intended to be protected by section 1128 since it
would increase administrative costs for those programs without any
corresponding benefit to program beneficiaries.

E. Applying different time periods for exclusion to different
types of services is not necessary in order to have an
exclusion rationally related to the purpose of the statute.

The ALJ described the purpose of section 1128 as follows:

The purpose of the exclusion law is to protect the Medicare and
Medicaid funds, and individual beneficiaries of those funds, from
individuals or entities who have been shown to be capable of either
financial misconduct or mistreating beneficiaries. A party's
propensity to engage in misconduct across the range of Medicare and
Medicaid programs can, in appropriate cases, be inferred by
evidence of this misconduct as to any one of those programs.
Congress, therefore, intended the Secretary (and his delegate, the
I.G.) to have discretion to fashion broad exclusions based on
demonstrated misconduct under any program.

ALJ Decision, p. 10.

The ALJ based this on the Senate report on the 1987 amendments. S.REP.
No. 109, 100th Cong., 1st Sess. 6-8 (1987).

While we agree with the ALJ generally as to the purposes of section
1128, the ALJ erred in concluding that applying an exclusion "across the
range of Medicare and Medicaid programs" is within the I.G.'s
discretion. Under the statute, the I.G. must apply any exclusion on a
program-wide basis in Medicare and direct exclusion from each of the
State health care programs, unless one of the bases for a waiver
applies.

While the purpose of a statutory provision is relevant in determining
legislative intent, consideration of the purpose cannot be used to
override the statutory language, particularly where the two can be
reconciled. 8/ We do not see a conflict between the statutory purpose
and the program-wide effect of an exclusion.

The ALJ reasoned that if section 1862 were read as the I.G. proposed,
"it would necessarily result in exclusions that are not rationally
related to the remedial objectives of section 1128." Decision Not To
Revise Reopened Decision, p. 1128. The ALJ did not specify how such
exclusions would necessarily result, but his reasoning appears related
to his analysis of this particular case. That analysis was essentially
as follows:

o The I.G. conditioned Petitioner's eligibility for reinstatement as a
participant in Medicare and Medicaid on his regaining his pharmacy
license in Massachusetts.

o The terms of Petitioner's license suspension conditioned restoration
of the license on Petitioner completing certain continuing education
courses and on his taking and passing a pharmacy law examination with
a grade of no less than 75 percent.

o Since there is no way to predict when, if at all, Petitioner might
fulfill these conditions, the exclusions the I.G. imposed and
directed are of indefinite duration.

o The continuing education and examination requirements have no
rational relationship to the issue of when Petitioner might become
trustworthy to operate nursing homes.

The ALJ noted that Petitioner might never satisfy the conditions for
regaining his license, even though he had overcome the lack of
trustworthiness arising from the activities based on which his license
had been suspended. As discussed below, we consider this to be a
legitimate factor to be considered in determining whether the I.G.
should have set the minimum period of exclusion to end only with
Petitioner regaining his license. The ALJ erred, however, in attempting
to avoid the seemingly harsh result about which he was concerned by
fashioning a remedy which is inconsistent with the plain language of the
Act. In our view, both the language and purpose of the Act can be given
effect through the simpler remedy of setting one definite period of
exclusion. 9/


In sum, we reverse the ALJ's conclusions of law numbered 25 through 28.
We conclude that the ALJ erred in setting different time periods for
applying the exclusion to different types of services. We now turn to
the question of whether the ALJ erred in not affirming the exclusion
imposed by the I.G. without considering its effect on Petitioner's
possible participation as a nursing home operator. III. The ALJ was
not required to affirm the I.G.'s exclusion without considering its
effect on Petitioner's participation other than as a pharmacist.

The I.G. also challenged the ALJ decision on the ground that
Petitioner's prior and possible future involvement as a nursing home
operator is irrelevant and immaterial here because (1) the basis for the
exclusion was the suspension of Petitioner's pharmacy license, not his
conduct as a nursing home operator; (2) Petitioner's conduct as a
nursing home operator does not constitute a mitigating circumstance in
regard to the suspension of his pharmacy license and is therefore not
applicable to any of the considerations relevant in determining the
period of exclusion; and (3) as a matter of law, Petitioner could not
become eligible for reinstatement prior to the elimination of the
suspension of his pharmacy license. The I.G. also contended that the
ALJ's conclusion that the remedial nature of section 1128(b) required
the result here was contrary to the specific language of the Act.
I.G.'s appeal brief, pp. 2-3. Based on these arguments, the I.G.
asserted that we should modify the ALJ's decision by restoring the terms
of the exclusion as originally imposed by the I.G., that is, to be
effective until Petitioner regains his Massachusetts pharmacy license.

Below, we first discuss why we reject the I.G.'s contentions to the
effect that the ALJ was required under the statute to make the exclusion
effective until Petitioner regains his license. We then discuss why we
reject the I.G.'s position that the ALJ should not consider Petitioner's
possible program participation as a nursing home operator in determining
the length of the exclusion. 10/

A. The Act does not require the minimum period of exclusion
imposed by the I.G.

Although the I.G. had suggested in oral argument before the ALJ that a
two-year minimum period of exclusion might be appropriate here (Tr., p.
57), the I.G. took the position on appeal that the Board should modify
the ALJ's decision to provide that the exclusion would be effective
until Petitioner regained a valid pharmacy license. The I.G. based this
argument on section 1128(g)(2). Under that section, the Secretary may
terminate an exclusion if--

the Secretary determines, on the basis of the conduct of the
applicant which occurred after the date of the notice of exclusion
or which was unknown to the Secretary at the time of the exclusion,
that--

(A) there is no basis under subsection (a) or (b) or section
1128A(a) for a continuation of the exclusion, and

(B) there are reasonable assurances that the types of actions
which formed the basis for the original exclusion have not recurred
and will not recur.

The I.G. argued:

During the duration of the suspension of the petitioner's pharmacy
license, it appears that the petitioner could not satisfy the
condition prerequisite to reinstatement set forth at 1128(g)(2)(A),
that "there is no basis under subsection (a) or (b) [of section
1128] or section 1128A(a) for a continuation of the exclusion," as
the basis for petitioner's exclusion under 1128(b)(4) (i.e. the
suspension of his pharmacy license) would still be present.

I.G.'s appeal brief, p. 11. Thus, the I.G. argued, the minimum period
of exclusion imposed by the I.G. coincides with the shortest period
within which Petitioner could become eligible for reinstatement under
section 1128(g).

We reject this argument because it is inconsistent with the statutory
language and with the I.G.'s position taken elsewhere. 11/

The I.G.'s argument here ignores the wording of section 1128(g)(2) that
the Secretary's determination that there is a continuing basis for
exclusion must be based on conduct of the applicant for reinstatement
which occurred after the notice of exclusion or was unknown to the
Secretary at the time of the exclusion. Petitioner's possible failure
to regain his license would not neces- sarily provide a continuing basis
for exclusion. Failure to regain a license is not the same as
suspension of a license. Also, the reasons Petitioner may fail to
regain his license might not be related to his professional competence,
professional performance, or financial integrity. See section
1128(b)(4)(A). Instead, as the ALJ pointed out, Petitioner may simply
decide not to regain his pharmacy license because he prefers to devote
his time to his nursing home business.

The I.G.'s argument on this point also is inconsistent with the I.G.'s
position, discussed below, that the ALJ should have considered certain
factors listed in the I.G.'s current regulation in determining the
length of the exclusion. Those factors would all be irrelevant if the
statute required excluding Petitioner until he regains a valid pharmacy
license in Massachusetts.

Finally, we note that, while the I.G.'s notice of proposed rulemaking to
implement the 1987 amendments proposes to make the minimum period of
exclusion coterminus with license suspension where that is the basis for
exclusion, the notice does not take the position that section 1128(g)(2)
requires this result. 12/ Of course, the I.G. may have policy reasons
for proposing to make an exclusion coterminus with license suspension,
and the ALJ should consider those reasons if the I.G. provides them on
remand (which the I.G. did not do here). Until the policy is adopted in
a final rule, however, the ALJ is not bound to set a minimum period of
exclusion based on Petitioner regaining a valid pharmacy license in
Massachusetts.

In sum, we reject the I.G.'s request that we restore the exclusion
imposed by the I.G. because that period was required by section
1128(g)(2). Instead, we remand to the ALJ to consider what is the
appropriate length of an exclusion, given our conclusions above. In
doing so, the ALJ may properly consider Petitioner's possible program
participation as a nursing home operator, as we explain next.

B. Petitioner's potential participation other than as a
pharmacist is relevant in determining the length of an
exclusion.

We note at the outset that the I.G.'s position that Petitioner's
possible participation as a nursing home operator is wholly irrelevant
is inconsistent with the I.G.'s position that an exclusion affects all
types of participation in the program. The nature of the exclusion as
an exclusion from participation in the program as a whole is necessarily
relevant to any determination of the length of the exclusion which
should be imposed. The mere fact that the basis for exclusion is
suspension of Petitioner's pharmacy license does not mean that the
program-wide effect of an exclusion can be ignored.

The I.G. took the position, however, that, pending the promulgation of
final rules implementing subsection (b) of section 1128, the regulatory
provisions at 42 C.F.R. 1001.125 apply "on an interim basis (to the
extent that they are not inconsistent with said subsection (b)." I.G.'s
appeal brief, p. 8. Section 1001.125(b) provides that, in setting the
earliest date on which an individual excluded on the basis of a
program-related crime may seek reinstatement (i.e., the minimum period
of an exclusion), the I.G. will consider a number of listed factors.
See also 42 C.F.R. 1001.114.

The I.G. said that the only listed factor which might apply here is
whether there were any mitigating circumstances. The I.G. further
reasoned that since Petitioner's activities as a nursing home operator
did not have any bearing on the conduct leading to the suspension of
Petitioner's pharmacy license, they could not be a mitigating
circumstance in regard to the exclusion at issue.

This reasoning does not undercut our point above that the effect of an
exclusion on Petitioner's participation in the program as a whole cannot
be disregarded in determining the length of an exclusion.

We note, moreover, that the ALJ viewed his role as considering the
"reasonableness" of the length of the exclusion imposed. The I.G. did
not directly challenge this, either below or on appeal. Yet, the I.G.'s
argument appears to imply that the ALJ's role would be limited by the
regulations to determining whether the I.G. properly considered any
mitigating circumstances in setting the minimum period of exclusion.
This issue was not addressed by the ALJ, and we do not consider it
appropriate to resolve here. 13/

Therefore, the ALJ should address on remand the issue of whether the
scope of the ALJ's review of the length of the exclusion imposed is
limited by the regulation as the I.G. suggested on appeal or whether the
ALJ may, in the absence of regulations specifically implementing
subsection 1128(b), review the length of an exclusion based on a general
reasonableness standard.

Conclusion

We affirm and adopt the ALJ's findings of fact and conclusions of law
numbers 1 through 24. We reverse the ALJ's findings of fact and
conclusions of law numbers 25 through 28. We modify the decision to add
the following conclusions:

25. Congress intended that the Secretary apply one period of
exclusion to an individual's or entity's participation in Medicare (and
direct the States to apply the same period to State health care
programs), and that the effect of the exclusion generally would be
denial of reimbursement under those programs for any item or service
furnished by the excluded individual or entity during that period.

26. Subsection 1128(g)(2) of the Act does not require that an
exclusion based on license suspension under subsection 1128(b)(4)(A) be
effective until the excluded individual regains a valid license.

We remand the case to the ALJ to reconsider the length of the exclusion
imposed on Petitioner, consistent with the analysis provided above.


_____________________________ Cecilia Sparks
Ford


_____________________________ Theodore J.
Roumel U.S. Public Health Service


_____________________________ Judith A.
Ballard Presiding Panel Member

1. On appeal, the I.G. described the ALJ conclusion which the I.G. was
challenging as a conclusion that Petitioner "may participate in the
Medicare and State health programs as a nursing home operator,
administrator or employee during a period when the petitioner is
excluded from participation in those programs under section 1128 of the
Social Security Act." I.G.'s appeal brief, p. 2. To a certain extent,
this is a misstatement of the ALJ's conclusions. The ALJ's conclusions
addressed the period of exclusion "as applied" to Petitioner's
participation as a pharmacist or as a nursing home operator,
administrator, or employee, but did not address whether Petitioner could
participate in the programs in any other capacity.

2. Apparently, the ALJ viewed the word "program" as referring to a
type of service. See Transcript of June 6, 1988 hearing (Tr.), p. 24;
ALJ Decision, p. 10. The relevant provisions generally refer to the
program under title XVIII as meaning the entire Medicare program.
Although several provisions refer to "programs" or "any program" under
title XVIII, a careful reading of the Act indicates that this refers to
the fact that there are two parts to title XVIII, which together
constitute the Medicare program. Part A establishes an "insurance
program" for the aged and disabled, covering inpatient hospital
services, extended care services, home health services, and hospice
care. Section 1811 of the Act. Part B establishes a "supplementary
medical insurance program," covering a variety of medical and other
health services. Sections 1831 and 1832 of the Act.

3. The term "State health care program" is defined in subsection
1128(h) to mean--

(1) a State plan approved under title XIX
[Medicaid],

(2) any program receiving funds under title V
[Maternal and Child Health] . . . , or

(3) any program receiving funds under title
XX [Social Services] . . . .

Section 1905(a) of the Act defines "medical assistance" which may be
funded by Medicaid to include numerous types of services. Under title
XX, the states may cover social services which promote the goals of
title XX. See section 2001 of the Act.

4. Section 1128(b)(4), the permissive exclusion authority at issue
here, was added by the Medicare and Medicaid Patient and Program
Protection Act of 1987, Public Law No. 100-93, section 2.

5. The ALJ relied on section 205(b) of the Act, 42 U.S.C. 405(b), for
his conclusion that he had the authority to modify the "terms" of the
exclusions imposed and directed by the I.G. against Petitioner, and
could therefore specify different lengths of time for applying the
exclusion to different types of items or services. The I.G. argued
below that section 205(b) authorized the ALJ to modify the length of an
exclusion imposed by the I.G. The I.G. further noted that the
delegation of authority to the ALJ in civil remedies cases (including
exclusion cases) includes the authority "to determine the civil remedies
to be imposed." See 53 Fed. Reg. 25544 (July 7, 1988).

As the I.G. pointed out, however, the authority delegated to the ALJ is
"limited by the parameters of the authority given by Congress to the
Secretary." I.G.'s supplemental brief, p. 4. In our view, what the ALJ
did went beyond modifying the minimum period of the exclusion imposed by
the I.G. and, in effect, fundamentally changed the concept of
"exclusion" to mean something different from what Congress intended.

6. Indeed, Petitioner's major argument in response to the I.G.'s
position was that the I.G. had an under- standing of the effect of the
ALJ decision different from Petitioner's. Petitioner's own reading of
the decision was confusing. Petitioner said that the exclusion was for
a period of two years. Yet, Petitioner said that his understanding was
that he could apply for termination of the exclusion with respect to
participation as a nursing home operator after two years, but could
apply for termination of the exclusion with respect to participation as
a pharmacist only after regaining his license.

7. The committee reports on the 1987 amendments recognized that
requests for reinstatement could be burdensome on the Secretary. The
reports state:

The Committee intends that the Secretary set
forth in regulation the frequency with which
applications for reinstatement can be made in
order to preclude unduly repetitious
submissions.

H.R.REP. No. 85, 100th Cong., 1st Sess., Part 1, 12 (1987); S.REP. No.
109, 100th Cong., 1st Sess. 13 (1987).

8. One court has said that, if "the operative sections [of an Act] are
clear and unambiguous," language setting forth the purpose of the
legislation is "neither essential nor controlling in the construction of
the Act." Hughes Tool Company v. Meier, 486 F.2d 593, 596 (10th Cir.
1973); see generally Singer, Sutherland on Statutory Construction,
sections 20.12 and 47.04.

9. Petitioner could not in any event participate as a pharmacist in
Massachusetts until he met the conditions for regaining his pharmacy
license. See Tr., p. 48. While Congress wished to protect the programs
from individuals losing their licenses in one state who simply moved to
another state to practice (S.REP. No. 109 at 7), it appears to us that
this goal could be met by a time- limited exclusion.

10. We address these issues here because they are raised as a basis
for the I.G.'s contentions of error related to the legal conclusions
reached by the ALJ, and because we would not consider it necessary to
remand the case to the ALJ if we agreed with the I.G.'s argument that
the Act mandated the exclusion the I.G. had imposed. Since we conclude
that that exclusion is not mandated, however, we remand to the ALJ to
reconsider the length of the exclusion; that determination may involve
new factual issues, as well as legal issues concerning the standard to
be applied, which have not previously been considered by the ALJ.

11. The I.G.'s argument also assumes that the suspension of
Petitioner's license would still be present until Petitioner regains a
valid license. The factual finding made by the ALJ was that the
Pharmacy Board suspended Petitioner's pharmacy license for a two-year
period. FFCL No. 15. While the Pharmacy Board also set conditions for
reinstatement of the license, it is not clear that the suspension per se
would continue beyond the two-year period.

Moreover, it is not the suspension alone that provides a basis for
exclusion; rather, the suspension is a basis because it was "for reasons
related to [Petitioner's] professional competence, professional
performance, or financial integrity." Section 1128(b)(4)(A). The
specific reasons here related to particular activities of Petitioner as
found by the Pharmacy Board, including conspiring to divert drugs from a
hospital and knowingly possessing, with intent to distribute, a Class E
controlled substance. FFCL 11 and 12. It is unclear whether the
conditions the Pharmacy Board placed on Petitioner regaining his license
are related to these activities, or simply conditions which the Pharmacy
Board would place on anyone seeking to regain a pharmacy license in
Massachusetts.

12. The preamble to the proposed rule states:

The regulations propose that a person who has
lost his or her license or who has surrendered
it, would be excluded for a period at least as
long as that set by the State licensing
agency. If surrender, suspension or
revocation is for an indefinite period, the
OIG would not entertain a request for
reinstatement . . . until such time as the
person obtains a valid license from the State
where the license was lost.

55 Fed. Reg. 12205 at 12208 (April 2, 1990).

13. We note, however, that the House committee report on the 1987
amendments states:

In the case of all exclusions other than those
under 1128(a) [the mandatory exclusions] and
1128(b)(12) [for failure to grant the
Secretary immediate access], the Committee
intends that, in setting the period of
exclusion, the Secretary will take into
consideration such factors as the seriousness
of the offense, the impact of both the offense
and the exclusion on beneficiaries, and any
mitigating circumstances, such as the
availability of alternate providers of needed
health care services.

H.R.REP. No. 85, 100th Cong., 1st Sess., Part 1, 12