SUBJECT: Susan Malady, R.N.,

Petitioner,

The Inspector General

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Susan Malady, R.N., (Petitioner) appealed a November 6, 2001 decision by Administrative Law Judge Carolyn Cozad Hughes. Susan Malady, R.N., DAB CR835 (2001) (ALJ Decision). The ALJ Decision sustained the Inspector General's determination to exclude Petitioner from participating in Medicare, Medicaid, Maternal and Child Health Services Block Grant and Block Grants to States for Social Services programs⁽¹⁾ pursuant to section 1128(a)(3) of the Social Security Act (Act) for a 10-year period.

On appeal, Petitioner raised two arguments. Petitioner asserted that section 1128(a)(3) did not apply to the criminal offense for which she was convicted because the offense occurred prior to that statute's effective date. Petitioner also asserted that, even if section 1128(a)(3) did apply, its application in this case violated the United States Constitution.

Based on the analysis below, we sustain the ALJ Decision. In doing so, we affirm and adopt each of the FFCLs underlying the ALJ Decision.

I. Background

By letter dated May 31, 2001, the I.G. notified Petitioner that she was being excluded from participation in Medicare for a period of 10 years. The I.G. advised Petitioner that she was being excluded pursuant to section 1128(a)(3) of the Act as a result of her conviction in the Superior Court of New Jersey of a criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.

During the time period relevant to this case, Petitioner was a registered nurse practicing in New Jersey. I.G. Ex. 6. On May 24, 1999, Petitioner pled guilty, in the Superior Court of New Jersey, to one count of Theft By Deception in the Second Degree, a felony offense under New Jersey law.⁽²⁾ I.G. Ex. 4. The I.G. determined that Petitioner's conviction, based on the Superior Court of New Jersey's acceptance of her plea to this count of Theft by Deception, constituted a conviction under section 1128(a)(3) of the Act.

In her findings of fact and conclusions of law (FFCLs), the ALJ determined:

A. Petitioner was convicted of a felony relating to theft in connection with the delivery of a health care item or service, within the meaning of section 1128(a)(3) of the Act.

B. The I.G. is required to exclude Petitioner from participation in Medicare, Medicaid, and all federal health care programs.

C. A 10-year exclusion falls within a reasonable range.

1. Petitioner's crimes resulted in a loss to one or more entities of more than $1,500. 42 C.F.R. § 1001.102(b)(1).

2. Petitioner's crime that resulted in her conviction occurred over a period of more than one year. 42 C.F.R. § 1001.102(b)(2).

3. Petitioner received a sentence which included incarceration. 42 C.F.R. § 1001.102(b)(5).

4. Petitioner has been the subject of other adverse action by a State agency or board, and the adverse action is based on the same set of circumstances that serves as the basis for imposition of the exclusion. 42 C.F.R. § 1001.102(b)(9).

5. This case does not present any mitigating factors under 42 C.F.R. § 1001.102(c).

D. The imposition of an exclusion does not violate the United States Constitution.

E. The exclusion becomes effective 20 days from the date of the I.G.'s notice.

II. Petitioner's Exceptions

Petitioner challenged the ALJ's finding that she was convicted of a felony within the meaning of section 1128(a)(3). Petitioner argued that this statute did not apply to her because the criminal offense at issue occurred prior to August 26, 1996.

Petitioner also asserted that her exclusion under section 1128(a)(3) violated the double jeopardy clause of Article V of the United States Constitution and constituted cruel and unusual punishment in violation of the Article VIII of the Constitution.

Petitioner did not identify the specific FFCLs to which she excepted. Based on her arguments, we conclude that Petitioner excepted to FFCL A (that she was convicted of a felony relating to theft in connection with the delivery of a health care item or service, within the meaning of section 1128(a)(3) of the Act) and FFCL D (that imposition of the exclusion did not violate the United States Constitution.) We therefore affirm the remaining FFCLS without further discussion.

II. Relevant Legal Authority

Section 1128(a)(3) of the Act requires the Secretary of the Department of Health and Human Services (Secretary) to exclude from participation in any federal health care program (as defined in section 1128B(f) of the Act):

[a]ny individual or entity that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 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.

The Health Insurance Portability and Accountability Act of 1996 was enacted on August 21, 1996.

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a)(3) of the Act shall be for a minimum period of not less than five years.

The mandatory minimum period of exclusion may be increased with the existence of certain aggravating factors that are not offset by certain mitigating factors. 42 C.F.R. § 1001.102.⁽³⁾

The Secretary has delegated to the Inspector General (I.G.) the authority to impose exclusions. 42 C.F.R. § 1001.401(a). So long as the amount of time chosen for the exclusion imposed on Petitioner by the I.G. is within a reasonable range, based on demonstrated criteria, the ALJ has no authority to change it. Joann Fletcher Cash, DAB No. 1725, at 7 (2000), citing 57 Fed. Reg. 3298, 3321 (1992).

Our standard of review on a disputed conclusion of law is whether the ALJ Decision is erroneous. Our standard of review on a disputed finding of fact is whether the ALJ Decision is supported by substantial evidence on the record as a whole. 42 C.F.R. § 1005.21(h).

Petitioner challenged the ALJ Decision on the grounds that section 1128(a)(3) did not apply to any of the criminal offenses of which she was convicted and that the application of section 1128(a)(3) violated the Constitution. Below we consider both of these arguments.

A. Petitioner was convicted of a felony relating to theft in connection with the delivery of a health care item or service, within the meaning of section 1128(a)(3) of the Act.

Petitioner argued that section 1128(a)(3) is not applicable in this case because that section applies only to an individual or entity "that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996", and the date of enactment was August 26, 1996.⁽⁴⁾ Petitioner asserted on appeal that -

[a]dmittedly, the actions involving the offenses were repetitive and traversed a span of time, however, they did not occur after August 21, 1996. Petitioner's employment was terminated on September 3, 1996. The actions which resulted in my eventual termination and conviction, however, ended before August 21, 1996, therefore, the instant case does not meet the criteria established.

P. Br. at 2.

While Petitioner is correct that the record shows that her felonious conduct underlying the offense began prior to August 21, 1996, the record also supports a finding that her conduct continued after that date. Specifically, Petitioner pled guilty to Count I of an indictment which stated that -

Susan Malady between on or about December 20, 1994, and on or about September 3, 1996, . . . purposely did obtain the property of another by deception in the amount of $75,000 or more; that is, the said Susan Malady, who at all relevant times hereto was Director of Nursing, did purposely obtain property in the amount of $75,000 or more from the Northwest Covenant Medical Center . . . by creating or reenforcing the false impressions on requests for check forms that expenses had been incurred by her, or that expenses were business-related, or that her supervisor had authorized her request for reimbursement . . . .

I.G. Ex. 3, at 2-3 (emphasis added.) For Count One alone, the Court sentenced Petitioner to be incarcerated for a period of five years, to make restitution to Northwest Covenant Medical Center in the amount of $97,400.00, and to pay a fine of $5,000. I.G. Ex. 4, at 1.

Therefore, we reject Petitioner's argument for the following reasons.

• Petitioner pled guilty to an offense which was described in the indictment as continuing to occur after August 26, 1996.
  
  
• In an exclusion proceeding based on a conviction described in the Act, "the basis for the underlying [conviction] is not reviewable and the individual or entity may not collaterally attack the underlying determination, either on substantive or procedural grounds, in this appeal." 42 C.F.R. § 1001.2007(d); see also Frank R. Pennington, DAB No. 1786 (2001). Therefore, Petitioner may not assert in this appeal that her criminal conduct did not occur within the dates described in the count to which she pled guilty. Such as assertion would constitute a collateral attack on the basis for the underlying conviction.
  
  
• The fact that the some, or even most, of the specific acts constituting the theft by deception occurred prior to August 26, 1996 does not affect the applicability of section 1128(a)(3). Congress intended to include all offenses occurring after August 26, 1996. A person should not escape the reach of section 1128(a)(3) simply because he or she began committing the same crime prior to the statute's effective date.⁽⁵⁾
  
  
• Finally, there is no evidence in the record that would support a finding that Petitioner's pattern of theft by deception had actually ceased prior to August 26, 1996. Petitioner's statement in her brief on appeal does not constitute such evidence.

Therefore, we conclude that the ALJ properly found that Petitioner was convicted of a felony relating to theft in connection with the delivery of a health care item or service, within the meaning of section 1128(a)(3) of the Act and affirm FFCL A.

B. The imposition of an exclusion does not violate the United States Constitution.

Petitioner argued that the statute is unconstitutional in that it violates Articles V and VIII of the United States Constitution. She stated that not only has she been punished as sentenced, but she will be stigmatized and possibly lose employment opportunities and social supports and suffer emotionally. P. Br. before the ALJ at 2.

As the ALJ stated, an ALJ has no authority to declare a federal statute unconstitutional. ALJ Decision at 6. Neither does the Board. Nevertheless, as the ALJ correctly noted, it has been repeatedly held that exclusions imposed by the I.G. are civil sanctions and are remedial in nature and not punitive and criminal. They therefore do not violate the double jeopardy clause or the prohibition against cruel and unusual punishments. Manocchio v. Kusserow, 961 F.2d 1539 (11^th Cir. 1992); Greene v. Sullivan, 731 F.Supp. 838 (E.D. Tenn. 1990); Cash, DAB No. 1725; Douglas Schram, R. Ph., DAB No. 1382 (1992); and Janet Wallace, L.P.N., DAB No. 1326 (1992). Further, the double jeopardy clause is not applicable where the "punishments" are imposed by two different sovereigns such as a state and then the federal government. Abbate v. United States, 359 U.S. 187 (1959); Schram, DAB No. 1372.

The purpose of section 1128 is to protect federal health care programs and the programs' beneficiaries and recipients from untrustworthy providers. A provider that has been convicted of a crime described in section 1128(a) is presumed by Congress to be untrustworthy and a threat to federal health care programs and their beneficiaries and recipients. The record shows that Petitioner has proven herself to be an untrustworthy individual and therefore Petitioner's exclusion comports with the remedial purpose of the Act. We affirm FFCL D.

IV. Conclusion

Based on the analysis above, we affirm all FFCLS and uphold the ALJ Decision excluding Petitioner from participation in the Medicare, Medicaid, Maternal and Child Health Services Block Grant and Block Grants to States for Social Services programs for a 10-year period.

Judith A. Ballard

Donald F. Garrett

Marc R. Hillson
Presiding Board Member

1. Hereafter, we refer to these programs generally as "Medicare."

2. Petitioner also pled guilty to one count of falsifying records on June 9, 1995 and to one count of forgery on August 3, 1995. Additionally she was charged with but did not plead to two other counts of falsifying records (one of which was alleged to have occurred after August 21, 1996), and three additional counts of forgery (all of which were alleged to have occurred prior to August 21, 1996).

3. In determining that an exclusion of 10 years was within a reasonable range, the ALJ relied on four of the aggravating factors set forth in 42 C.F.R. § 1001.102. Petitioner did not offer any arguments as to why these factors should not be applied in this case, and we therefore do not review the ALJ's application of the factors.

4. Before the ALJ, Petitioner referred in passing to the effective date of section 1128(a)(3) in the portion of her brief captioned "Statement of Law" rather than in the portion captioned "Argument" which set forth her arguments. P. Br. before the ALJ at 2. In the response brief, the I.G. did not address the question of the effective date. On appeal, Petitioner and the I.G. both directly addressed the effective date. The I.G. did not object to Petitioner's raising this issue on appeal.

5. We note that prior to August 21, 1996, the Petitioner's offenses were grounds for a permissive exclusion from Medicare under section 1128(b) (1987). Also, the aggravating factors relied on by the ALJ in reviewing the reasonableness of the length of the exclusion had been promulgated by the Secretary prior to the commission of these crimes. Therefore, Petitioner had constructive notice prior to August 21, 1996 that such conduct could result in an exclusion from Medicare and notice of the factors which would be considered in determining the length of an exclusion.