SUBJECT: Stacey R. Gale,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

The Inspector General (I.G.) appealed a decision by Administrative Law Judge (ALJ) Keith W. Sickendick dated March 1, 2004 sustaining in principle, but modifying in length, the I.G.'s proposed exclusion of Stacey R. Gale (Petitioner). Stacey R. Gale, DAB CR1147 (2004) (ALJ Decision). The ALJ Decision affirmed the I.G.'s determination that, under section 1128(c)(3)(B) of the Social Security Act (Act), Petitioner should be excluded from participation in all federal health care programs as defined in section 1128B(f) of the Act, including Medicare and Medicaid. However, based on his determination that the I.G. had failed to consider a mitigating factor, the ALJ reduced the period of Petitioner's exclusion from the 15 years initially proposed by the I.G. to 10 years.

The record for our decision includes the record before the ALJ and the I.G.'s brief on appeal from the ALJ Decision. Petitioner did not file a brief in response to the I.G.'s appeal. Based on the analysis below, we reinstate the original 15-year exclusion.

Background

The description of facts below is presented to provide a general framework for understanding the rest of our decision and is not intended to substitute for the ALJ's findings.

Petitioner was a licensed pharmacist in Florida and Georgia, authorized to participate in Medicare, Medicaid, and all federal health care programs. As pertinent here, Petitioner was the operator of a mail order pharmacy, servicing dialysis patients, in the State of Florida, for GAMBRO Healthcare, Inc. (Gambro). Petitioner was charged in Florida state court with one count of grand theft and one count of Medicaid fraud, during the period August 1, 1997 to September 30, 1998. Generally, the offenses of which Petitioner was convicted involved fraudulent prescriptions filed on behalf of patients receiving dialysis treatment from Gambro. Hearing Transcript (Tr.) at 247-248. Petitioner pled guilty on April 17, 2000, and was sentenced in accordance with her plea agreement to 15 years probation (subject to early termination when all monetary obligations of the sentence were satisfied), 364 days of incarceration, restitution of $273,188.04, payment of $25,969.27 for the costs of investigation to the Florida Medicaid Fraud Control Unit and court costs.

By letter dated October 31, 2000, the I.G. notified Petitioner that she was being excluded from participation in the Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f) of the Act for a period of 15 years. The I.G. informed Petitioner that the action was taken under section 1128(a)(1) of the Act, based on conviction of an offense related to the delivery of an item or service under Medicaid. Petitioner's period of exclusion consisted of the statutory minimum, five years, plus an additional ten years based on the presence of three aggravating factors. I.G. Ex. 1. The I.G. determined that the length of time over which Petitioner's criminal acts occurred, her incarceration and the amount of Medicare's financial loss constituted aggravating factors within the meaning of 42 C.F.R. § 1001.102(b).

Petitioner timely requested a hearing before an ALJ on the I.G.'s decision to exclude her. On February 24, 2003, the ALJ denied the I.G.'s motion for summary judgment, finding there existed material issues of fact related to whether or not the I.G. failed to consider a mitigating factor when determining the appropriate period of exclusion. ALJ Decision at 2. Specifically, Petitioner alleged that she had cooperated with an Investigator and Prosecutor for the State of Florida within the meaning of 42 C.F.R. § 1001.201(c)(3). This cooperation, Petitioner asserted, constituted a mitigating factor which the I.G. had failed to consider in setting the length of her exclusion. ALJ Decision at 12-15.

The ALJ conducted a hearing in this case on June 19, 2003. Petitioner was present at the hearing and represented by counsel. Counsel for the I.G. appeared by telephone. Petitioner called two witnesses, Stacey R. Gale and Dennis Gale. The I.G. presented the testimony of one witness, Brian D. Pugh, by telephone. Id. at 2.

On November 13, 2003, the ALJ reopened the record for the production of additional evidence and other appropriate action. Order, November 13, 2003. The ALJ took this action based upon footnote five of the I.G.'s post-hearing brief which indicated that the I.G. had discovered additional documentation ⁽¹⁾ which might bear upon the case but which had not previously been disclosed or offered as evidence. The I.G. did not offer this extra-record material for the ALJ's review or indicate that a copy was provided to Petitioner. Thus, the ALJ could not determine whether or not the evidence was relevant. The I.G. referred to 42 C.F.R. § 1005.21(f), which gives an appellate panel of the DAB the authority to remand a case to the ALJ to take more evidence not originally offered at hearing, if certain grounds exist. The ALJ reasoned that the I.G.'s statement could be construed to indicate that the ALJ had similar authority to order the taking of more evidence or to indicate that, if he decided against the I.G. on that matter, the I.G. believed there would be grounds for remand. The ALJ elected to treat the footnote as a motion to reopen the record for the taking of additional evidence. The ALJ also cited, as grounds for granting the motion, the need to obtain information from Ms. Patricia Morgan regarding the disposition of any information she had obtained from Petitioner. The ALJ ordered the I.G. to produce the documents referred to in footnote five of the I.G.'s post-hearing brief. The ALJ also ordered the I.G. to obtain and produce an affidavit or declaration from Patricia Morgan that responded to specific questions listed in the order. ALJ Decision at 3-4 (citations omitted).

In response to the ALJ's Order of November 13, 2003, the I.G. offered I.G. Exhibits 10, 11, and 12. I.G. Exhibit 10 was a redacted copy of a July 6, 2000 email titled "Settlement Fact Sheet, GAMBRO." I.G. Exhibit 11 was a copy of the settlement agreement among the United States (through the Department of Justice, the I.G. for Health and Human Services, and the Department of Defense, TRICARE Management Activity) and GAMBRO Healthcare, Inc. and Dialysis Holdings Laboratory Services, Inc. I.G. Exhibit 12 was a declaration of the Director of Personnel Services for the Office of the Attorney General, State of Florida, which indicated that Patricia Morgan was formerly employed as a senior investigator in the Florida Medicaid Fraud Control Unit, but left on February 24, 2000. ALJ Decision at 4.

Petitioner objected to admission of I.G. Exhibits 10 and 12. By order dated December 16, 2003, the ALJ admitted I.G. Exhibits 10 and 11. In that order, the ALJ stated that the declaration, constituting I.G. Exhibit 12, was not responsive to his Order of November 13, 2003. Thus, the ALJ did not accept I.G. Exhibit 12 as evidence. Further, the ALJ ordered the I.G. to show cause why he should not impose a sanction against the I.G., pursuant to 42 C.F.R. § 1005.14(a)(1), for failure to provide the statement of Patricia Morgan responsive to the ALJ's Order of November 13, 2003. The I.G. responded to the ALJ's order to show cause on January 2, 2004. Petitioner filed a pleading requesting sanctions against the I.G. in January 9, 2004. Id.

ALJ Decision

The ALJ Decision was based on the following 15 Findings of Fact (Findings) and 14 Conclusions (Conclusions) of Law:

A. FINDINGS OF FACT ⁽²⁾

1. Petitioner, Stacey R. Gale, was a licensed pharmacist in Florida and Georgia, authorized to participate in Medicare, Medicaid, and all federal health care programs.

2. Petitioner was charged in the Florida state court with one count of grand theft and one count of Medicaid fraud, during the period August 1, 1997 to September 30, 1998.

3. Petitioner pled guilty on April 17, 2000, and was sentenced in accordance with her plea agreement to 15 years probation (subject to early termination when all monetary obligations of the sentence were satisfied), 364 days incarceration, restitution of $273,188.04, payment of $25,969.27 for the costs of investigation to the Florida Medicaid Fraud Control Unit, and court costs.

4. The I.G. notified Petitioner that she was being excluded pursuant to section 1128(a)(1) of the Act from participation in Medicare, Medicaid, and all federal health care programs by letter dated October 31, 2000.

5. The I.G. notified Petitioner that she would be excluded for 15 years (the statutory minimum of 5 years and an additional 10 years) based upon the presence of 3 aggravating factors.

6. The acts for which Petitioner was convicted resulted in financial loss to the government of $273,188.04 or more.

7. Petitioner's sentence included incarceration of 364 days.

8. The acts for which Petitioner was convicted occurred over a period of one year or more, from August 1997 through September 1998.

9. The I.G. admitted that she did not consider a mitigating factor when deciding upon the appropriate period of exclusion in this case.

10. Petitioner requested a hearing by letter dated August 6, 2002.

11. Petitioner gave information to Brian D. Pugh, then Chief Assistant for the Office of the Florida Statewide Prosecutor, and Patricia Morgan, an investigator with the Florida Medicaid Fraud Control Unit, regarding alleged acts which might constitute Medicaid fraud by Gambro Dialysis (Gambro) clinics.

12. Brian Pugh and Patricia Morgan obtained information from Petitioner as part of their investigation of her and for an additional investigation against Gambro.

13. Petitioner provided information to Brian Pugh and Patricia Morgan voluntarily to the extent that it was not pursuant to compulsory process.

14. Ms. Morgan, an investigator with the Florida Medicaid Fraud Control unit, is presumed to have acted in accordance with her regulatory duty and delivered information provided by Petitioner to federal officials for additional investigation.

15. There is no evidence that federal investigators, including the I.G., did not fulfill their regulatory duty and investigate the allegations of fraud against Gambro.

B. CONCLUSIONS OF LAW

1. Petitioner's request for hearing was timely filed and I have jurisdiction.

2. Petitioner was convicted within the meaning of section 1128(i) of the Act (42 U.S.C. § 1320a-7(i)).

3. The criminal offense of which Petitioner was convicted was related to the delivery of an item or service under the Medicaid program within the meaning of section 1128(a)(1) of the Act.

4. Petitioner's conviction of program-related crimes requires that she be excluded from participation in Medicare, Medicaid, and all federal health care programs for a minimum of five years. Act, sections 1128(a), 1128(c)(3)(B).

5. It is undisputed that there are three aggravating factors in this case.

6. Pursuant to the regulations of the Secretary of Health and Human Services (Secretary), Patricia Morgan had a duty to deliver information such as that provided by Petitioner, to appropriate federal investigators, specifically the I.G.

7. There is a presumption that Ms. Morgan, an investigator with the Florida Medicaid Fraud Control Unit, acted in accordance with her regulatory duty and delivered information provided by Petitioner to federal officials.

8. There is a presumption, or at a minimum I may infer, that the I.G. or other federal officials investigated allegations of fraud against a large Medicare/Medicaid provider, namely Gambro.

9. The I.G. has not produced evidence that the information provided by Petitioner was not used in an additional investigation against Gambro.

10. Petitioner has met her burden of persuasion to show the mitigating factor allowed by 42 C.F.R.
§ 1001.102(c)(3)(ii).

11. The I.G. abused her discretion by failing to consider the mitigating factor shown by Petitioner, and I must reassess the period of exclusion.

12. The 15-year exclusion proposed by the I.G. based on 3 aggravating factors and without consideration of the mitigating factor is unreasonable.

13. A ten-year exclusion is reasonable given the presence of three aggravating factors and one mitigating factor.

14. Pursuant to 42 C.F.R. § 1001.2002(b), Petitioner's exclusion was effective on November 20, 2000, 20 days after the date of the I.G.'s October 31, 2000 notice of exclusion.

ALJ Decision at 5-7.

The I.G.'s Exceptions

The I.G., either expressly or by implication, excepted to Findings of Fact 9, 11, 12, 14 and 15. The I.G. also excepted to Conclusions of Law 6-13.

In the absence of any exceptions to Findings of Fact 1-8 and 10, as well as Conclusions of Law 1-5 and 14, we affirm and adopt those findings and conclusions without further comment. Although the I.G. did not take exception to Finding of Fact 13, our resolution of the issues on appeal makes that finding unnecessary and we delete it.

Our standard of review of an ALJ decision involving the I.G.'s determination to impose an exclusion is set by regulation. We review to determine whether the decision is erroneous as to a disputed issue of law and whether the decision is supported by substantial evidence in the record as a whole as to any disputed issues of fact. 42 C.F.R. § 1005.21(h).

The minimum length of a mandatory exclusion imposed pursuant to 42 C.F.R. § 1001.101 is five years. 42 C.F.R. § 1001.102(a). The regulation at 42 C.F.R. § 1001.102(b) enumerates numerous aggravating factors that may be considered and applied as a basis for lengthening an exclusion. Mitigating factors are established by regulation at 42 C.F.R. § 1001.102(c). As the ALJ noted in his discussion of the interrelationship between aggravating and mitigating factors -

[o]nly if the aggravating factors justify an exclusion of longer than five years, may mitigating factors 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 following factors may be considered as mitigating and a basis for reducing the period of exclusion:

(1) [t]he individual or entity was convicted of three or fewer misdemeanor offenses, and the entire amount of financial loss . . . to Medicare or any other Federal, State . . . health care program due to the acts that resulted in the conviction, and similar acts, is less than $1,500;

(2) [t]he 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) [t]he individual's or entity's cooperation with Federal or State officials resulted in -

(i) [o]thers being convicted or excluded from Medicare, Medicaid, and all other Federal health care programs,

(ii) [a]dditional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or

(iii) [t]he imposition against anyone of a civil money penalty or assessment under part 1003 of this chapter.

42 C.F.R. §1001.102(c)(1)-(3).

Evidence which does not relate to an aggravating factor or a mitigating factor is irrelevant to determining the length of an exclusion. The burden is upon a petitioner to show the presence of mitigating factors. 42 C.F.R. § 1005.15. . . .

ALJ Decision at 8-9 (citation omitted).

Before the ALJ, Petitioner did not dispute the presence of the three aggravating factors alleged by the I.G. Petitioner's sole argument was that the I.G. failed to consider any mitigating factors in calculating the length of Petitioner's exclusion. Tr. at 6; see also Tr. at 7-8.

As noted above, the ALJ concluded that Petitioner had the burden to show the presence of any mitigating factor. ALJ Decision at 9. That conclusion is not the subject of any exception before us, and indeed is fully consistent with the exclusion regulations and applicable Board precedent. 42 C.F.R. § 1005.15(b)(1); Arthur C. Haspel, D.P.M., DAB No. 1929, at 5 (2004); see also Dr. Darren James, D.P.M., DAB No. 1828, at 7-8 (2002). Thus, it is Petitioner's responsibility to locate and present evidence to substantiate the existence of any alleged mitigating factor in her case. In alleging the existence of the factor at 42 C.F.R. §1001.102(c)(3)(ii), Petitioner must demonstrate that she cooperated with a state or federal official and that this cooperation resulted in "[a]dditional cases being investigated." As is apparent from the foregoing, the I.G. does not have the responsibility to prove the non-existence of the mitigating factor under the regulation. For example, the I.G. does not have the responsibility to substantiate under the regulation that even though Petitioner may have cooperated with a state or federal official, that cooperation did not result in additional cases being investigated. It is entirely Petitioner's burden to demonstrate that her cooperation with a state or federal official resulted in additional cases being investigated.

On appeal, the I.G. argued that the ALJ had erroneously concluded that Petitioner had met her burden to establish the existence of this mitigating factor and that the ALJ's Findings and Conclusions concerning this mitigating factor contained errors of law and were not supported by substantial evidence in the record as a whole.

I. The ALJ erred in concluding that Petitioner's cooperation with state officials was sufficient to establish the existence of the mitigating factor in 42 C.F.R. § 1001.102(c)(3)(ii) since Petitioner failed to demonstrate that her cooperation resulted in a new case being investigated.

As applied here, section 1001.102(c)(3)(ii) requires that the individual's cooperation with Federal or State officials "resulted in . . . [a]dditional cases being investigated or reports being issued." The I.G. argued on appeal that, based on its plain meaning as well as the legislative history, this provision requires that the individual's cooperation with federal or state officials be validated by having a law enforcement official actually open a new case for investigation (or by having an official actually issue a report). Thus, the I.G. argued that an individual's cooperation with officials would be insufficient to establish this mitigating factor if a law enforcement official ultimately failed to open a new case or to issue a report after receiving any information in cooperation by the individual.

The I.G.'s position is supported by the plain meaning of the regulation. The regulation specifies that the cooperation must "result in" additional cases being "investigated" or reports being "issued." If the regulation had intended that the act of cooperating with a state or federal official, by itself, would suffice to establish the mitigating factor, the regulation would merely have required cooperation and nothing more. Instead, the regulation requires that the cooperation result in one of two specified forms of validation: additional cases being investigated or reports being issued. It is apparent for this same reason that the mere receipt and evaluation of the information provided during the "cooperation" cannot itself be viewed as the "investigation" of an additional case. The cooperation must result in something more -- it must result in the initiation of the investigation of additional cases or the issuance of reports. It is also important to note that the regulation does not authorize the I.G. to independently evaluate the evidence of cooperation through the eyes of a "reasonable" federal or state investigator or prosecutor and decide whether that official should have carried out an investigation relating to additional cases when the official chose not to do so. Rather, the regulation requires an individual to demonstrate that a law enforcement official actually exercised his or her discretion and began an investigation or issued a report as a result of the individual's cooperation. The purpose of this aspect of the rule is obvious. The rule is not designed to reward individuals who may have provided evasive, speculative, unfounded or even spurious information that proved to be so useless that the government official was unable even to open a new case for investigation. Rather, the regulation is designed to authorize mitigation for significant or valuable cooperation that yielded positive results for the state or federal government in the form of a new case actually being opened for investigation or a report actually being issued.

Further, this interpretation of the meaning and purpose of the regulation is fully supported by the regulatory history. The preamble to the final rule noted as follows:

While we expect this mitigating factor to be taken into consideration only in those situations where the law enforcement agency validated the person's information by opening up a case investigation or by issuing a report, we nevertheless believe that the inclusion of this additional factor will afford the OIG greater flexibility in identifying and addressing issues related to program waste, fraud and abuse.

63 Fed. Reg. 46,676 at 46,681 (September 2, 1998).

In adopting this position, the Department specifically rejected a commenter's concern --

. . . that the value of some information may not be determined until much later, and . . . [the recommendation that] credit should also be given to individuals and entities that cooperate and provide information that is not immediately validated by the commencement of a new case or report issuance since preliminary investigations may require a significant amount of time before a case is opened or a report prepared.

Id.

The regulations addressing the length of an exclusion at 42 C.F.R. § 1001.201 were created to implement the Medicare and Medicaid Patient and Program Protection Act of 1987 (Public Law 100-93) ⁽³⁾. The preamble to these regulations demonstrates that this Department has long held the interpretation of what constitutes a mitigating factor asserted here by the I.G. In response to comments suggesting that cooperation itself should be considered mitigating, regardless of whether another individual or entity was sanctioned, the Secretary noted:

As a practical matter, . . . [w]e believe, however, that only significant cooperation should be considered mitigating, and the imposition of a sanction as a result of cooperation establishes that the cooperation was significant. We believe that the significance of cooperation is more properly evaluated by those in a position to utilize the information, rather than by an ALJ. . . .

57 Fed. Reg. 3,298 at 3,315 (January 29, 1992).

In considering whether Petitioner had met her burden to show the existence of the mitigating factor in section 1001.102(c)(3)(ii), the ALJ relied upon the Petitioner's cooperation with two individuals, particularly during a meeting on October 12, 1998 which was transcribed. (The transcription was offered as Petitioner Exhibit 1.) Specifically, the ALJ found that Petitioner gave information to Brian D. Pugh, then Chief Assistant for the Office of the Florida Statewide Prosecutor, and Patricia Morgan, an investigator with the Florida Medicaid Fraud Control Unit, regarding alleged acts which might constitute Medicaid fraud by Gambro (Finding 11). The I.G. argued on appeal that the ALJ committed errors of both fact and law in concluding that cooperation with either of these individuals was sufficient to establish the mitigating factor. The I.G. argued that there was no demonstration by Petitioner in either case that the cooperation was validated by the opening of new cases for investigation. We agree.

A. Petitioner failed to demonstrate that her cooperation with Brian D. Pugh led to the opening of any new case for investigation as required by 42 C.F.R. 1001.102(c)(3)(ii).

The ALJ concluded in his findings of fact that Brian Pugh obtained information from Petitioner as part of his investigation of her and for an additional investigation of Gambro (Finding 12) and that Petitioner provided the information voluntarily to the extent that it was not pursuant to compulsory process (Finding 13). The ALJ analyzed Petitioner's cooperation with Brian Pugh as follows in his decision as a basis for concluding that Petitioner had established the mitigating factor through this cooperation:

Petitioner gave Mr. Pugh . . . information regarding business practices of Gambro related to mail order pharmacy services. Mr. Pugh admitted that at least one of his purposes for the interview of the Gales was to obtain information to pursue criminal charges against Gambro at the state level. Thus, it is clear that the information provided by the Gales, voluntarily to the extent it was not pursuant to compulsory process, was used for the purpose of a state investigation of an additional case against Gambro, even though ultimately the investigation against Gambro was dropped. The regulatory requirement of 42 C.F.R. 1001.102(c)(3)(ii) is that the cooperation in question led to additional cases being investigated; it does not require that such investigation prove to be well-founded or result in any remedy or punishment.

ALJ Decision at 18.

The ALJ committed errors of law and fact in reaching these findings and conclusions. As we discussed above, the regulation requires the individual to demonstrate that his or her cooperation with state or federal officials was validated by the opening of other cases for investigation. Here, the record establishes that Petitioner met with Mr. Pugh and that Mr. Pugh had as one purpose of the interview the desire to obtain information about Gambro to pursue criminal charges against it. (Of course, Mr. Pugh also had the desire to obtain information about Petitioner's own potentially criminal practices. Tr. at 251.) The hearing testimony from Mr. Pugh unequivocally demonstrates, however, that the information Petitioner provided to Mr. Pugh did not lead him to take any further investigative action against Gambro and that he in fact closed out his investigation after receiving the information. Tr. at 252-253. ⁽⁴⁾ Thus, we conclude that the ALJ's finding that Petitioner established the mitigating factor on the basis of her cooperation with Mr. Pugh is not supported by substantial evidence on the record as a whole. To the contrary, the record demonstrates unequivocally that Mr. Pugh took no further action to open a new case against Gambro for investigation after he met with Petitioner. (Although the ALJ repeatedly also referred to information provided by Petitioner's husband during the same interview with Mr. Pugh, that information is completely irrelevant for purposes of determining whether there was a mitigating factor as to Petitioner.) Further, we conclude that to the extent the ALJ concluded that no further investigative steps to validate the information were required by the regulation, he committed an error of law. As we discussed above, the regulation requires that the cooperation be validated by the "investigation" of new cases, which requires a law enforcement official to actually open a new case for investigation after receiving information during the cooperation by the individual. Although the ALJ is correct in stating that the subsequent investigation does not have to prove that the information was well-founded or to result in any remedy or punishment, it does at a minimum have to provide the official with a sufficient basis in his or her discretion to take further steps to begin an investigation of a new case. Here, the evidence of record demonstrates conclusively that Mr. Pugh decided not to take any further steps to begin (or continue) an investigation against Gambro after receiving the information Petitioner provided. Thus, the record demonstrates that Petitioner's information was simply not validated in the manner the regulation required. To the extent that the ALJ concluded to the contrary, his decision was erroneous and not supported by substantial evidence.

B. Petitioner failed to demonstrate that her cooperation with Patricia Morgan led to the opening of any new case for investigation as required by 42 C.F.R. § 1001.102(c)(3)(ii).

The ALJ also concluded in his Findings of Fact that Patricia Morgan obtained information from Petitioner as part of her investigation of Petitioner and for an additional investigation of Gambro (Finding 12) and that Petitioner provided the information voluntarily to the extent that it was not pursuant to compulsory process (Finding 13). Neither Petitioner nor the I.G. subpoenaed Patricia Morgan to appear at the hearing on Petitioner's exclusion. In response to the ALJ's Order (November 13, 2003), the I.G. attempted to locate Patricia Morgan and found out she had left employment as an investigator for the Medicaid Fraud Control Unit on February 24, 2000. The record fails to substantiate what, if any, efforts Petitioner took to locate her or her successors in the unit. The ALJ, nevertheless, concluded that pursuant to 42 C.F.R. § 1007.11(e), Patricia Morgan had a duty to deliver information such as that which she obtained from Petitioner to the HHS I.G. (Conclusion 6) and that Patricia Morgan "is presumed to have acted in accordance with her regulatory duty (Finding 14) and to have delivered the information (Conclusion 7). The ALJ also concluded that there is a "presumption" or "at a minimum" he may "infer" that "the I.G. or other federal officials investigated allegations of fraud against a large Medicare/Medicaid provider, namely Gambro" (Conclusion 8). Finally, the ALJ concluded that "[t]here is no evidence that federal investigators, including the I.G., did not fulfill their regulatory duty and investigate the allegations of fraud against Gambro" (Finding 15).

The I.G. argued on appeal that the ALJ erred in finding that Petitioner met her burden to demonstrate the existence of the mitigating factor described in 42 C.F.R. 1001.102(c)(3)(ii) on the basis of her alleged cooperation with Patricia Morgan. Although Petitioner presented information to Patricia Morgan as well as Brian Pugh, on October 12, 1998 and on other occasions, Petitioner failed to present any evidence whatsoever that this information caused either of these individuals' offices to open an investigation of Gambro. Petitioner failed to subpoena either Patricia Morgan or her successor at the Medicaid Fraud Control Unit to present testimony at the administrative hearing on the issue of whether the information provided by Petitioner caused anyone in the unit or any other state or federal official to open an investigation on Gambro. In the absence of any testimony from Patricia Morgan or her successor pertaining to any investigative results from Petitioner's cooperation (or from state or federal officials who may have received this information from Morgan or her successor), there is a absolutely no evidence in the record that an investigation of a new case was opened as a result of information provided by Petitioner to Patricia Morgan. As the ALJ found, Petitioner admitted that she did not know if any of the information she provided was used for any purpose. ALJ Decision at 13, citing Tr. at 115-17. Moreover, the ALJ failed to find any nexus between the information Petitioner allegedly provided and the settlement agreements admitted into the record of this appeal involving the provision of laboratory services by Gambro. As the ALJ noted with respect to one of the agreements (I.G. Ex. 9): "Petitioner was in the mail order pharmacy business and provided some information to Ms. Morgan related to ordering and billing practices of Gambro related to pharmacy services, not laboratory services." ALJ Decision at 17. Subsequently, the ALJ stated -- "there is no indication on the face of the settlement that it was in any respect connected with information provided by Petitioner." Id. at 18.

In spite of the complete absence of evidence to demonstrate that the investigation of a new case resulted, the ALJ relied upon a regulation pertaining to the functions of Medicaid Fraud Control Units to "infer" that Patricia Morgan had delivered the information she received from Petitioner to unnamed federal officials and then applied a separate "presumption" or "inference" that these officials had investigated Gambro based on Petitioner's information. We agree with the I.G. that the ALJ's findings and conclusions are contrary to the plain meaning and purpose of section 1001.102(c)(3)(ii), which requires evidence of new cases being investigated (or reports being issued) in order to demonstrate that there has been a validation of the information provided in cooperation. We also agree with the I.G. that the ALJ misconstrued the responsibilities and functions of the Medicaid Fraud Control Units as specified in 42 C.F.R. § 1007.11(e).

The regulation at 42 C.F.R. § 1007.11(e) merely requires the unit to "make available" to federal investigators the information in its possession concerning Medicaid fraud. It does not affirmatively require the unit to deliver or refer this information to federal investigators in every instance regardless of the quality of the information. More importantly, however, even if the regulation required the unit to deliver or refer all of the information it received to federal officials, there is no legal authority cited by the ALJ which would require the federal officials receiving this information to open a case investigation in every instance even when the receiving official in his or her discretion had decided that the information did not merit further investigation. Simply receiving and digesting information delivered from a Medicaid Fraud Control Unit is not the same as actually opening a new case for investigation. The federal investigator or prosecutor must determine that the information has sufficient merit and usefulness that a new case should be opened and further investigative actions taken. Thus, we conclude that the inferences the ALJ drew from the regulation were not reasonable ones. Nor was it reasonable to presume under the circumstances here that, if federal officials received the information, this would have resulted in the opening of an additional investigation. The record demonstrates that the sole state prosecutor who had received the information and evaluated its usefulness (Brian Pugh) decided that the information did not merit the opening of an additional case for investigation. The ALJ nowhere found that Brian Pugh lacked credibility as a witness. At the time of his testimony, Mr. Pugh had become Assistant U.S. Attorney for the District of Nevada. Tr. 246.

Accordingly, we conclude that the ALJ erred in concluding that Petitioner had met her burden to demonstrate the existence of this mitigating factor based on her cooperation with Patricia Morgan.

C. The ALJ erroneously shifted the burden of proof from Petitioner to the I.G.

The I.G. also argued on appeal that by applying the inferences and presumptions discussed in the prior section of this decision, the ALJ impermissibly shifted the burden of proof on this mitigating factor from Petitioner to the I.G. Thus, the I.G. argued that the ALJ effectively required the I.G. to demonstrate that Petitioner's cooperation did not result in new cases being investigated or risk an affirmative finding that new cases had been investigated based entirely on inferences or presumptions arising from Petitioner's alleged acts of cooperation. We agree with the I.G. that the ALJ's application of this mitigating factor did impermissibly shift the burden of proof. We concluded above that the ALJ's inferences and presumptions were unreasonable and resulted in the ALJ viewing Petitioner as having established the requirements of section 1001.102(c)(3)(ii) without Petitioner having provided any probative evidence whatsoever that Petitioner's cooperation resulted in new cases being investigated. To the extent that the I.G. disagreed that such inferences or presumptions could be used to demonstrate the existence of this requirement, the I.G.'s only recourse would be to locate evidence to demonstrate affirmatively that Petitioner had not met the requirement. The ALJ effectively ordered the I.G. to make this demonstration when he ordered the I.G. to locate and obtain an affidavit or declaration from Patricia Morgan regarding the disposition of any information she obtained from Petitioner. Based on this order, it thus fell upon the I.G. to attempt to contact an official to whom Petitioner had provided information and verify whether that information had resulted in new cases being investigated.

Clearly, in spite of the ALJ's express conclusion that Petitioner had the burden to demonstrate mitigating factors, the ALJ Decision and the ALJ's Order in particular erroneously undercut the effect of the burden by requiring the I.G. to develop Petitioner's supporting evidence. There are compelling reasons in support of placing the burden on the individual being excluded, however. That individual, not the I.G., has the personal knowledge of the full extent of the cooperation that took place, including the substance of the information and evidence provided, the names and positions of officials who received the information, the dates and times of the contacts, and the content of any agreements of cooperation with prosecutors. The individual being excluded need only follow up with the officials to find out whether that information or evidence led to the opening of a new case for investigation. Pursuant to 42 C.F.R. § 1005.9, Petitioner could have requested that the ALJ issue a subpoena for any investigator or prosecutor she had met with to make sure she received information pertaining to any resulting case investigation, but the record demonstrates that she chose not to do so. Petitioner could also have subpoenaed any successors to investigators who had subsequently changed positions. Petitioner could also have contacted or requested subpoenas for other officials, as necessary, who might have had responsibility to investigate or prosecute Gambro at the state or federal level. If Petitioner believed that the I.G. had information pertaining to her cooperation that would be useful to establish this mitigating factor, Petitioner could have requested that information. Petitioner could also have requested the I.G.'s assistance in explaining the nature and significance of this mitigating factor in the exclusion process to any affected state or federal official who might have assisted Petitioner to meet her burden. The I.G. has an interest in having this mitigating factor be fully evaluated when alleged during the exclusion process since the Department has included the factor as one of three mitigating factors that deserves to be considered in determining the reasonableness of the length of an exclusion. While the regulations making this a mitigating factor mean that the I.G. cannot fairly withhold information in its possession or readily available to it that would support application of the factor, it is a far different thing to require the I.G. to develop information by seeking out a state investigator whom Petitioner could have, but did not, seek to subpoena for the hearing.

Ultimately, however, it is Petitioner's responsibility to present her own argument and evidence as to the existence of any mitigating factors established by the regulation. The I.G. is not required to investigate each instance of cooperation and demonstrate that the cooperation did not result in new cases being investigated. Here, by applying inferences and presumptions to conclude that there was a mitigating factor not reasonably derived from Petitioner's argument and evidence before the ALJ, the ALJ effectively rejected Petitioner's own case presentation about why her cooperation resulted in new cases being investigated. Nevertheless, although the ALJ effectively rejected her position, Petitioner decided not to respond to the I.G.'s appeal of the ALJ Decision, and thus chose not to argue that if the Board agreed that the ALJ had erroneously applied inferences and presumptions to conclude she met the mitigating factor, the evidence relied upon by her still established that requirement. Moreover, after independently reviewing the record below, we have no basis to conclude that Petitioner did establish by her testimony and exhibits that her cooperation resulted in any new cases being investigated.

Accordingly, on the basis of the preceding analysis, we delete Findings of Fact 9 and 11 through 15 and Conclusions of Law 6 through 11 and substitute the following Conclusions of Law

6. Petitioner has the burden to demonstrate the existence of the mitigating factors authorized by 42 C.F.R. § 1001.102(c).

7. Although Petitioner alleged that she met the requirements of 42 C.F.R. § 1001.102(c)(ii)(3), she failed to demonstrate that any cooperation she may have provided resulted in any new cases being investigated.

II. The 15-year exclusion imposed by the I.G. is within a reasonable range.

Petitioner's sole argument before the ALJ was that the existence of the mitigating factor at 42 C.F.R. § 1001.102(c)(ii)(3) should serve to mitigate the exclusion to the minimum level of five years in spite of the existence of three aggravating factors. However, Petitioner failed to meet her burden to demonstrate the existence of that mitigating factor. After weighing the seriousness of the three aggravating factors that the I.G. had demonstrated to exist, we conclude that the 15-year exclusion that the I.G. originally imposed is within a reasonable range. Accordingly, we delete Conclusions of Law 12 and 13 and substitute the following Conclusion of Law:

8. The 15-year exclusion imposed by the I.G. is within a reasonable range given the seriousness of the three aggravating factors demonstrated to exist and the absence of any mitigating factor.

Conclusion

Based on the preceding analysis, we reinstate an exclusion of 15 years for Petitioner.

Judith A. Ballard

Cecilia Sparks Ford

Donald F. Garrett
Presiding Board Member

1. This specific documentation was not identified in the ALJ Decision. ALJ Decision at 3.

2. The ALJ based his findings of fact on the uncontested and undisputed assertions of fact in the parties' pleadings and the exhibits admitted. ALJ Decision at 5.

3. The Medicare and Medicaid Patient and Program Protection Act of 1987 consolidated many of the Secretary's pre-existing exclusion authorities into section 1128 of the Act and added significant new grounds for exclusions under those authorities. 57 Fed. Reg. 3,298 (January 29, 1992).

4. At the hearing, in response to questioning from Counsel for the I.G., Mr. Pugh testified, in part:

A. . . . So, when we went into the interview, it was our aim and our goal and our hope that we would be able to gain sufficient evidence against Gambro to further the investigation.

Q. Okay. And did that, in fact, happen?

A. No.

Q. Okay. Can you describe why you think, as the prosecutor, that didn't happen?

A. No, it did not happen.

Q. Okay.

A. We were disappointed. It seemed that Mrs. Gale's answers were - - it seems she was more concerned about where I was going with the question than actually just providing the information that the question asked for. She acted like she was in fear, and like she wanted to give more information, but so many of her answers - - and I reviewed the transcript yesterday, and it rekindled the frustration of the meeting. She really didn't say much at all.

Q. Okay. What if anything did you do with any of the information that Ms. Gale gave you in that meeting?

A. Well, what did we do? I guess what we did was we did not pursue Gambro. We ultimately made the decision that we didn't have anything.

Tr. at 252-253.