SUBJECT: Keith Michael Everman, D.C.,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

On December 23, 2002, Keith Michael Everman, D.C., (Everman) appealed the decision of Administrative Law Judge (ALJ) Anne E. Blair upholding a three-year exclusion imposed on Everman by the Inspector General (I.G.). Keith Michael Everman, D.C., DAB CR948 (2002)(ALJ Decision). The I.G. imposed the permissive exclusion from participation in Medicare, Medicaid, and all other federal health care programs pursuant to section 1128(b)(1) of the Social Security Act (Act).

Legal Authority

The I.G. is authorized to exclude -

[a]ny individual or entity that has been convicted for an offense . . . under Federal or State law -

(A) of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct -

(i) in connection with the delivery of a health care item or service . . . .

Section 1128(b)(1)(A)(i) of the Act. An exclusion under this section of the Act will be for a period of three years unless specific aggravating or mitigating factors are present. Section 1128(c)(3)(D) of the Act; 42 C.F.R. § 1001.201(b)(1).

The I.G. has specified by regulation the aggravating and mitigating factors that may be considered to lengthen or shorten the three-year period of exclusion in the case of permissive exclusions for fraud-related convictions. 42 C.F.R. § 1001.201(b). Two of the listed factors are involved in the present case. The first treats as potentially aggravating the question of -

[w]hether the individual or entity was convicted of other offenses besides those which formed the basis for the exclusion, or has been the subject of any other adverse action by any Federal, State or local government agency or board, if 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. § 1001.201(b)(2)(vi)(emphasis added). The second treats as potentially mitigating a situation -

[w]hen the individual or entity was convicted of 3 or fewer offenses, and the entire amount of financial loss to a government program or to other individuals or entities due to the acts that resulted in the conviction and similar acts is less than $1,500.

42 C.F.R. § 1001.201(b)(3)(i). The petitioner bears the burden of proving any mitigating factors. Dr. Darren James, D.P.M., DAB No. 1828, at 4 (2002). ⁽¹⁾

The ALJ is barred by regulation from eliminating a permissive exclusion entirely once the I.G. has proven the legal predicate for imposing one, that is, the ALJ may not change the period of exclusion to zero. 42 C.F.R. § 1005.4(c)(6). The ALJ may review whether the evidence supports the existence of any of the alleged aggravating and mitigating factors and consider whether the period of exclusion imposed by the I.G. falls within a reasonable range of possible exclusions based on the three-year benchmark and the proven aggravating and mitigating factors. DAB No. 1828, at 4.

Our standard of review on a disputed conclusion of law is whether the ALJ decision is erroneous. 42 C.F.R. § 1005.21(h). 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. Id.

Factual and Procedural Background

The ALJ made the following Findings of Fact and Conclusions of Law (FFCLs):

1. In August of 2000, the Petitioner was a licensed chiropractor in the state of Michigan. P. Ex. 9.

2. At some point, Petitioner relocated to Mississippi. He sold his chiropractic practice. The chiropractor who had purchased his business had complained because he was not paid for charges the Petitioner had previously, and allegedly falsely, submitted for aqua therapy and/or aqua massage. Private litigation and criminal charges ensued. P. Ex. 7.

3. On May 22, 2000, in the 35th Judicial Circuit Court of Shiawassee County, Michigan, Petitioner pled nolo contendere to one misdemeanor count of "attempted healthcare fraud-false claim." P. Ex. 9. The conviction stemmed from allegations that Petitioner was involved in a scheme to defraud insurance companies in which he knowingly submitted false claims for services he did not provide. He had originally been charged with five counts of filing false claims in 1999 (two to Wausau Insurance Company and three to Blue Cross/Blue Shield). P. Ex. 6; P. Ex. 9.

4. As a sentence, Petitioner was placed on probation for a period of 24 months and was ordered to pay $2,756.10 in restitution, costs and fees. Of this total of $2,756.10, only $1,496.10 was for restitution, the remainder of $1,260 was for costs and fees. P. Ex. 9.

5. No federal health care program suffered financial loss as a result of the acts for which Petitioner was convicted. P. Ex. 6.

6. Petitioner's license to practice chiropractic medicine in Michigan was suspended for one-year. The suspension stemmed from the same set of facts as his conviction. His Michigan license suspension has been completed and Petitioner is eligible for reinstatement of his license in Michigan. P. Ex. 9.

7. The factor of suspension by the State of Michigan Department of Consumer & Industry Services, is an aggravating factor in this case and should be given at least as much weight as the limited financial loss involved in the conviction, a mitigating factor.

8. Based on his conviction, the I.G. has a basis to exclude the Petitioner from Medicare, Medicaid, and all other federal health care programs.

9. Petitioner was "convicted" of a misdemeanor offense as conviction is defined in section 1128 of the Act.

10. Petitioner's conviction related to fraud or other financial misconduct in connection with the delivery of health care items or services within the meaning of section 1128(b)(1)(A)(i) of the Act.

11. Once the I.G. has decided to exclude a practitioner based on section 1128(b)(1) of the Act, and shows a basis for the exclusion, the ALJ does not have the authority to review the exercise of discretion by the I.G. in excluding the individual. In other words, the ALJ cannot eliminate this permissive exclusion altogether. 42 C.F.R. § 1005.4(c)(5).

1. An exclusion imposed under section 1128(b)(1) of the Act will be for a period of three years unless specified aggravating or mitigating factors are present which form the basis for lengthening or shortening the period of exclusion. 42 C.F.R. § 1001.201(b)(1).

2. While only the aggravating and mitigating factors listed in the regulations can be used as evidence to add or subtract from the three-year specified exclusion, no specific evidentiary weight has been assigned to each aggravating and mitigating factor.

3. CMS has shown the existence of one aggravating factor; that is, Petitioner was the subject of adverse action by another government agency or board that was based on the same set of circumstances that serves as the basis for the imposition of exclusion. 42 C.F.R. § 1001.201 (b)(2)(6).

4. Petitioner has shown the existence of one mitigating factor; that is, Petitioner was convicted of fewer than three offenses, and the entire amount of financial loss to other entities due to the acts that resulted in the conviction was less that $1,500. 42 C.F.R. § 1001.201 (b)(3)(i).

5. The three-year exclusion imposed by the I.G. is within a reasonable range, based on the aggravating and mitigating factors.

6. The I.G.'s exclusion of Petitioner for three years is reasonable.

7. A three-year exclusion is not cruel and unusual punishment as proscribed by the Eighth Amendment to the United States Constitution.

ALJ Decision at 4-6. The ALJ Decision was dated August 30, 2002 and was issued under a cover letter dated September 4, 2002. Everman represented that neither he nor his counsel actually received the ALJ Decision until November 22, 2002, after inquiring about it. The Presiding Board Member ruled, after receiving argument from both parties, that the appeal was timely. Ruling on Timeliness, March 12, 2003 (attached to this decision).

Issues

On appeal, Everman failed to identify the specific FFCLs to which he excepted as he was instructed to do in the cover letter accompanying the ALJ Decision. See P. Ex. 13, attached to Everman Notice of Appeal. We discern the following issues based on the arguments raised in his brief.

First, Everman argued that the decision to exclude him was "clearly unreasonable," given the facts of his case and the categories of factors to be considered by the I.G. in determining whether to impose a permissive exclusion. Everman Br. at 6-7, citing 57 Fed. Reg. 67,392 (Dec. 24, 1997). The ALJ concluded that the cited provisions were not applicable to derivative permissive exclusions under the section of the Act applied to Everman. ALJ Decision at 9. Before us, Everman contended that the ALJ erred in reaching this conclusion. Everman Br. at 8.

Next, Everman challenged the ALJ's conclusion that the weight of the aggravating factor proven by the I.G. was sufficient to cancel out any weight given to the one mitigating factor. Everman Br. at 10. In addition, Everman argued that the ALJ should have considered evidence of Everman's professional and community standing in evaluating the mitigating factor, given that the ALJ did take into account surrounding circumstances in giving greater weight to the suspension. Id.

Finally, Everman attacked his exclusion on constitutional grounds. Id. at 13. He contended that a three-year exclusion for a "minor violation" violated the Eighth Amendment prohibition on cruel and unusual punishment. Id. at 13-15.

1. The I.G.'s exercise of discretion to exclude Everman is not reviewable, once a legal basis for a permissive exclusion is established.

Everman conceded on appeal that the "facts fall within the Secretary's permissive exclusion authority," so Everman does not contest that the I.G. had a legal basis to impose a permissive exclusion in this case. Everman Br. at 8. Nevertheless, Everman argued that the "facts do not rise to the level of exclusion." Id.

Once the I.G.'s legal authority to impose an exclusion is established, as the ALJ correctly held, the ALJ (and on review, the Board) do not have the authority to decide that no exclusion should be applied. The regulations make this limitation clear in at least two ways. First, an excluded person may appeal -

only on the issues of whether:

(i) The basis for the imposition of the sanction exists, and

(ii) The length of the exclusion is unreasonable.

42 C.F.R. § 1001.2007(a)(1) (emphasis added). Second, the regulations directly restrict review of the I.G.'s decision to impose a permissive exclusion by stating that the ALJ does not have the authority, inter alia, to -

(5) Review the exercise of discretion by the [I.G.] to exclude an individual or entity under section 1128(b) of the Act . . . [or]

(6) Set a period of exclusion at zero, or reduce a period of exclusion to zero, in any case where the ALJ finds that an individual or entity committed an act described in section 1128(b) of the Act.

42 C.F.R. § 1005.4(c)(5) and (6). We conclude that the ALJ did not err in rejecting Everman's arguments that no exclusion should have been imposed despite the uncontested fact of a conviction to which section 1128(b)(1) of the Act applies.

In addition, we agree with the ALJ that the Federal Register notice on which Everman sought to rely to bolster the position that no exclusion was appropriate here does not apply to the basis for exclusion at issue in this case. ALJ Decision at 9. Before us, as he did before the ALJ, Everman contended that the I.G.'s discretion about whether to impose an exclusion on him was governed by four criteria set out at 62 Fed. Reg. 67,392 (Dec. 24, 1997). The summary of the cited notice states that -

[t]his notice sets forth the non-binding guidelines, to be used by the OIG in assessing whether to impose a permissive exclusion in accordance with section 1128(b)(7) of the Social Security Act.

Id. at 67,392. This introductory sentence makes two critical points undermining Everman's reliance on the notice. First, the guidelines relate only to permissive exclusions imposed under section 1128(b)(7) of the Act. Everman's exclusion, by contrast, arose under section 1128(b)(1) of the Act. As the ALJ pointed out, permissive exclusions under the latter section are derivative of criminal convictions relating to fraud and are governed by 42 C.F.R. § 1001.201(b), which sets a benchmark period of exclusion of three years and specifies limited factors to be considered in varying from that length. The notice relates only to non-derivative exclusions which require the I.G. to prove the factual underpinnings relating to fraud or kickbacks rather than relying on a previous criminal conviction. See Wesley J. Hammer, Four Star Health Care Systems, Inc., d/b/a Gold Star Ambulance, Advanced Life Support Systems, d/b/a Gold Star Ambulance, DAB No. 1693 (1999) (discussing distinctions between these two kinds of permissive exclusions). The implementing regulations for section 1128(b)(7) do not set a benchmark period. It is thus reasonable that the I.G. published policy guidelines elucidating how the decision is made to pursue an exclusion in the absence of a prior criminal conviction or other proceeding to trigger the I.G. to consider action. An examination of the guidelines themselves illustrates their inapplicability to derivative exclusions, since they suggest consideration of such factors as whether criminal charges were brought, which would be a prerequisite for any exclusion under section 1128(b)(1). 62 Fed. Reg. 67,392.

Furthermore, even if the notice were applicable to Everman's exclusion, it would neither serve to expand the limited list of possible mitigating factors set out in the regulations nor change the three-year benchmark from which to evaluate the length of the exclusion. By its own terms, the notice cannot be used, as Everman seeks to use it, as a source of an independent right to challenge the I.G.'s exercise of discretion in deciding to impose an exclusion in the first instance. Thus, the notice states:

While these revised exclusion criteria will now serve as internal agency guidelines for the OIG, these criteria may be subject to further modification at any time. They are not intended to limit or bind the OIG's discretionary authority to exclude individuals or entities that pose a risk to Medicare, Medicaid and other Federal health care programs or program beneficiaries. These criteria do not create any rights or privileges in favor of any party. In addition, these criteria do not supplant or modify in any way the OIG regulations, codified at 42 C.F.R. part 1001, governing program exclusions.

Id. at 67,393.

We find no error by the ALJ in declining to revisit the I.G.'s decision to exclude Everman or in rejecting the I.G. notice as irrelevant. We turn next to the reasonableness of the length of the exclusion imposed.

2. The ALJ's conclusion that a three-year exclusion was within a reasonable range, given the circumstances found, was supported by substantial evidence on the record.

Before us, Everman did not contest the ALJ's conclusion that two factors identified in the regulation as relevant to determining the length of an exclusion under section 1128(b)(1) had been shown to be present in this case. Nevertheless, Everman argued that the ALJ should have given greater weight to the mitigating factor and less to the aggravating one, and hence should have reduced the exclusion below the three-year benchmark. Everman Br. at 8-13. In particular, Everman highlighted that he was licensed in Mississippi, to which he had moved from Michigan, that he was head of the Mississippi Chiropractic Association and well-respected there, and that his Michigan suspension was for only one year. He pointed out that the period specified in the statute for an exclusion based on license revocation or suspension is to be not less than the period during which the license is revoked, suspended, or surrendered. Id. at 11, citing sections 1128(b)(4) and 1128(c)(3)(E) of the Act. He suggested, therefore, that the effect of the resultant aggravating factor should correspondingly be that the "weight of the aggravating factor is equal to or supports a one year exclusion." Id. at 11.

On the other hand, Everman posited that the mitigating factor was of more significance because the regulation credited three or fewer offenses whereas he had only one offense and he also met the criteria of causing damage less than $1,500. Id. at 12. Apparently, he reasoned that his conduct was significantly less severe than that permitted to qualify for some mitigation so that he should benefit from a greater degree of mitigation. He did not explain how he concluded that the magnitude of that benefit should exceed the one year aggravation so as to prevent the factors from "wash[ing] each other out" at the three-year benchmark. Id. at 13.

Everman acknowledged the ALJ's conclusion that she could not consider "professional or community standing nor rehabilitation" because none of those are among the four listed mitigating factors in the regulation. Id. at 13, citing ALJ Decision at 11. However, Everman pointed out that the ALJ went on to state that such facts "are, therefore, irrelevant to determining a reduction in the three (3) year benchmark exclusion." Id. Everman asserted that this position was inconsistent in that the ALJ did take account of additional negative factors beyond the bare existence of the aggravating factor. Id. Specifically, the ALJ stated:

In weighing the aggravating factor, I took into consideration the fact that Petitioner admitted to the State Chiropractic Board that his conduct evidenced lack of good moral character and evidenced fraud or deceit in obtaining or attempting to obtain third party reimbursement. Further, I considered that Petitioner had not notified the State Chiropractic Board of his conviction when he should have known his conviction might have some bearing on his state license. This suggests an interest in hiding his conviction. This type of untrustworthy behavior is the type of behavior from which the exclusion provisions attempt to protect health care programs and program beneficiaries.

ALJ Decision at 11.

Everman misreads the ALJ Decision. In section C.2 of her Rationale, the ALJ addressed the question of how many mitigating factors had been proven. ⁽²⁾ There, in the language quoted above, she rejected Everman's efforts to present other circumstances as additional mitigating factors. The language used by the ALJ in that section may have been overbroad in describing the circumstances as irrelevant. Id. at 13. Facts that do not constitute mitigating facts are potentially relevant if, but only if, they are connected with a listed mitigating or aggravating factor in a manner bearing on the appropriate weight to be given that factor.

However, any ambiguity was cured in the next section of the ALJ Decision. In section C.3 of the her Rationale, the ALJ made very clear her understanding that the regulations restrict the factors to be considered but do not restrict the weight to be assigned to proven factors and that the surrounding circumstances are relevant to that exercise. Thus, the ALJ wrote:

While the regulations direct what factors can be used in lengthening or shortening the period of exclusion, the regulations do not set forth the evidentiary value of the factors. The decision-maker is free to consider the circumstances of each factor and weigh the value of each. It is the quality of the circumstances whether aggravating or mitigating that should be dispositive in analyzing these factors. Barry D. Garfinkel, M.D., DAB No. 1572 (1996). The mitigating factors, however, must be more important or significant than the aggravating factors to support a finding that the benchmark proposed by the I.G. is beyond the reasonable range. Id. at 11.

ALJ Decision at 11.

Furthermore, the ALJ applied this understanding in evaluating the circumstances surrounding the mitigating factor as well as the aggravating factor. Thus, she explained:

In weighing the mitigating factor present in this case, I considered that, while Petitioner was convicted of only one offense, his restitution amount was just under the $1500 amount specified for mitigation. I decided, therefore, that the aggravating factor must be considered at least equal to the mitigating factor in resolving the length of exclusion.

ALJ Decision at 12. It is evident from a careful reading of the ALJ Decision as a whole that she did not refuse to consider evidence of relevant facts that related to the mitigating factor while taking account only of facts surrounding the aggravating factor, as Everman implied. Instead, she properly restricted her consideration to the single mitigating factor, rejecting Everman's attempts to cast other matters not listed in the regulation as independently mitigating. At the same time, she correctly evaluated the surrounding circumstances in making her assessment of how much weight to accord to the two competing factors. Everman's real quarrel is with the ALJ's resulting conclusion that the aggravating factor was at least serious enough, given all the circumstances, that the circumstances relating to the mitigating factor did not so outweigh it as to make a benchmark exclusion unreasonable. The I.G. had not sought to exceed the benchmark of three years despite having proven an aggravating factor, so the mitigating factor had already been given some effect in avoiding any additional time. Thus, the ALJ's rationale that the mitigating factor would have to more than outweigh the aggravating factor in order to reduce the period of exclusion even further was well-founded. We find nothing in Everman's arguments to us that would justify our disturbing the conclusion reached by the ALJ that the exclusion was within a reasonable range.

Everman's reliance on the statutory provisions that apply to an exclusion based on license revocation is misplaced. In the context of an exclusion under section 1128(b)(1)(A)(i) resulting from a conviction, the effect of the license action is to raise further concerns about a petitioner's trustworthiness (beyond that evidenced by the conviction alone) based on the licensing board's evaluation of the underlying facts. This is different from a situation where the licensing action is the only basis for an exclusion. While some of the circumstances mentioned by Everman might be read to reduce the negative inference from the Michigan licensing action, overall we agree with the ALJ that Everman's failure to report his conviction reinforces the negative weight. Even if Everman moved to another state where he continues to hold a license, he had continuing legal obligations in Michigan. Moreover, Everman offered no evidence that Mississippi licensing authorities knew of his conviction, the license suspension in Michigan, or the surrounding circumstances.

Everman cited three Board decisions for the proposition that "imposing the benchmark exclusion is unreasonable where mitigating factors are more important or significant than the aggravating factor or where such aggravating factors are lacking." Everman Br. at 9, citing Hassan M. Ibrahim, M.D., DAB No. 1617 (1997); Louis Mathews, DAB No. 1574 (1996), on remand, DAB CR452 (1997); and Barry Garfinkel, M.D., DAB No. 1572 (1996). Even had Everman correctly represented the facts and holdings of the decisions cited (which in numerous respects he did not), the proposition for which he cited them does not avail Everman. The ALJ held essentially the same thing, as noted above. The ALJ also found, however, that an aggravating factor was present and that the mitigating factor was not more important or significant in the present case.

We conclude that the ALJ Decision was supported by substantial evidence on the record, and made no legal error, in deciding that the three-year exclusion fell within a reasonable range.

3. Review of Everman's constitutional challenge to the imposition of the benchmark exclusion as "cruel and unusual" or disproportionate is not within the scope of our authority.

Everman quoted the Eighth Amendment to the United States Constitution that: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishment inflicted." Everman Br. at 14. While acknowledging that "Eighth Amendment jurisprudence has not been applied to administrative penalties to date," Everman reasoned that his exclusion was nevertheless barred as cruel and unusual. He contended that its purpose was not remedial action but "punishment," which could "only be explained as also serving retributive or deterrent purposes." Id. at 15, quoting United States v. Mackby, 261 F.3d 821 (9^th Cir. 2002).

The regulations governing this matter expressly preclude the ALJ (and hence the Board in its review of the ALJ Decision) from finding "invalid or refusing to follow Federal statutes or regulations or secretarial delegations of authority." 42 C.F.R. § 1005.4(c)(1). The benchmark three-year exclusion period and the limited list of factors that may be considered as bases to vary from that benchmark are governed by federal regulations which are applicable here. As laid out above, the ALJ did not err in interpreting and applying those regulations. Hence, Everman's arguments amount to a direct attack on the constitutionality of those regulations which we have no authority to resolve.

In any case, as the ALJ noted, the underlying constitutional question raised by Everman is well-settled. Courts have repeatedly held, as has the Board, that the exclusion provisions are intended to and do serve primarily remedial goals, such as protecting the Medicare program and its beneficiaries from those who have demonstrated themselves capable of health care fraud and abuse. See ALJ Decision at 12, and cases cited therein.

In addition, Everman suggested that his exclusion was disproportionate by comparison to the exclusion imposed in Mathews. In Mathews, the I.G. imposed the same three-year period of exclusion on a physician's assistant convicted of issuing a prescription without medical purpose. Everman argued that, by contrast, he had "provided treatment that was beneficial to the patient . . . and medically necessary." Everman Br. at 15. Everman contended that such unequal treatment was fundamentally unfair.

As to the factual premise of this argument, Everman pointed to no record evidence that supported his self-serving characterization. Legally, the Mathews case does nothing to undercut the reasonableness of the length of Everman's exclusion. In Mathews, neither aggravating nor mitigating factors were found to be present, and hence the benchmark exclusion period was imposed. In Everman's case, the aggravating and mitigating factors cancel each other out with the same result.

We find no basis in Everman's arguments which would justify our modifying the length of exclusion upheld by the ALJ.

Conclusion

For reasons explained above, we affirm the exclusion determined by the ALJ.

Donald F. Garrett

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

1. In DAB No. 1828, the Board quoted the ALJ's decision setting out this burden of proof. The Board disagreed with the ALJ about whether Dr. James had proven additional information relevant to a mitigating factor, but did not disagree about the allocation of the burden of proof as to mitigating factors.

2. In section C.1 of her Rationale, the ALJ similarly discussed her finding that the I.G. had proven one aggravating factor.