SUBJECT: Kenneth M. Behr,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Kenneth M. Behr (Petitioner), a pharmacist, appealed a decision by Administrative Law Judge (ALJ) Jose A. Anglada, dated April 25, 2005. Kenneth M. Behr, DAB CR1297 (2005) (ALJ Decision). The ALJ found that Petitioner had been convicted of the felony of attempted embezzlement in connection with the delivery of a health care item or service. The ALJ granted summary judgment for the Inspector General (I.G.) and affirmed the I.G.'s determination that, under section 1128(a)(3) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)), Petitioner should be excluded from participation in all federal health care programs as defined in section 1128B(f) of the Act for a period of five years. ⁽¹⁾

[Page 2] Our decision is based on the record before the ALJ and the parties' briefs on appeal from the ALJ Decision. For the reasons explained below, we affirm the ALJ Decision.

Applicable Law

Section 1128(a)(3) of the Act provides, in relevant part -

The Secretary shall exclude the following individuals and entities from participation in any Federal health care program (as defined in section 1128B(f)):

(3) FELONY CONVICTION RELATED TO HEALTH CARE FRAUD - Any 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 . . . of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

Our standard of review of an ALJ decision in an I.G. case 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 ALJ Decision

The ALJ Decision contained the following three numbered findings of fact and conclusions of law (FFCLs):

1. Petitioner's conviction 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 justifies [Page 3] his exclusion by the I.G. from participation in Medicare, Medicaid, and all other federal health care programs. ⁽²⁾

2. Petitioner's exclusion for a period of five years is not unreasonable.

3. Petitioner's constitutional argument is unavailing.

Petitioner excepts to all three FFCLs.

1. The ALJ did not err in concluding that Petitioner was convicted of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

The ALJ concluded that Petitioner, a pharmacist licensed in the State of Michigan, was convicted of attempted embezzlement of drugs from a medical center at which he was employed. ALJ Decision at 5; I.G. Exs. 4, 5.

Petitioner argues that the ALJ erred in concluding that attempted embezzlement is an offense "relating to . . . embezzlement," as required by section 1128(a)(3). Request for Review (RR) at 9.

We reject this argument. Section 1128(a)(3) encompasses felonies "relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct." The ALJ reasonably construed the phrase "relating to embezzlement" to include the crime of attempted embezzlement since attempted embezzlement is a necessary precursor to and part of embezzlement. The ALJ's construction is consistent with the goal of section 1128(a)(3), which is to protect federal health care programs, and their beneficiaries and recipients, from individuals who have been shown to be untrustworthy. The fact that an individual attempts to embezzle funds or property demonstrates untrustworthiness. Thus, both individuals who attempt and individuals who succeed in committing financial [Page 4] misconduct in connection with the delivery of a health care item or service pose a threat to federal health care programs.

2. The ALJ did not err in concluding that Petitioner was convicted of a criminal offense that occurred in connection with the delivery of a health care item or service.

Petitioner raises a number of arguments as to why the ALJ erred in concluding he was convicted of an offense that "occurred . . . in connection with the delivery of a health care item or service" as required by section 1128(a)(3). First, Petitioner argues that the ALJ erred in relying on certain facts, set forth in an administrative complaint before the Michigan Board of Pharmacy, to establish the requisite connection. ⁽³⁾ Petitioner asserts that nothing in the record connects the facts alleged in the administrative complaint to the facts underlying the conviction.

This argument does not provide a basis for reversing the ALJ Decision because there is substantial evidence, independent of the administrative complaint, that establishes that the offense occurred in connection with the delivery of a health care item or [Page 5] service. Therefore, even if the ALJ erred in relying on the administrative complaint in discussing the connection, such reliance would constitute harmless error.

The Information, Judgment of Sentence, and Petitioner's admissions in this proceeding establish the requisite connection to the delivery of a health care item or service. The Information charged Petitioner with two counts, the first of embezzlement and the second of attempted embezzlement. The Information provided:

Count I - On or about June - September 2001, Defendant Kenneth Michael Behr, did, being an agent, servant, trustee, bailee, employee or custodian of the property of Hillsdale Community Health Center, without the consent of the principal, fraudulently dispose of or convert to his own use, drugs belonging to the principal, having a value of $1000.00 or more but less than $20,000, that came into the Defendant's possession or Defendant's charge or control by virtue of his relationship with the principal; contrary to MCL 750.174(4)(a) . . .

* * *

Count II - On or about June - September 2001, Defendant, Kenneth Michael Behr, did attempt to commit an offense prohibited by law, to wit: Embezzlement-Agent or Trustee, $1000 or more but less than $20,000, and was prevented in the execution thereof; contrary to MCL 750.92 . .

I.G. Ex. 4.

Count I was dismissed, and Petitioner pled guilty to Count II. I.G. Ex. 5. The Judgment of Sentence ordered Petitioner to pay $7,796.06 in restitution to Hillsdale. I.G. Ex. 5.

Petitioner argues that the facts alleged in Count I are irrelevant because he did not plead guilty to Count I. Petitioner states:

Count I of the Information alleged the crime of embezzlement, and that Petitioner fraudulently converted to his own use drugs belonging the Hillsdale Community Health Center, and the other [Count II] simply alleg[es] attempted embezzlement, with no further description of the facts. . . . Count II does not state what it was that the Petitioner attempted to embezzle. It could be that Petitioner [Page 6] attempted to embezzle money, or property other than medications.

RR at 9.

For the following reasons, we conclude that the ALJ could reasonably infer from the Information that Count II was based on the facts described in Count I and that the ALJ could properly rely on those facts. First, Count I charges Petitioner with the crime of embezzlement under MCL 750.174(4)(a) while Count II charges Petitioner with attempting "to commit an offense prohibited by law, to wit: Embezzlement - Agent or Trustee." Plainly, Count II charges Petitioner with the attempt to commit the crime described in Count I. Second, without the facts in Count I, Count II would not be legally sufficient because it does not inform Petitioner of the substance of the offense; for example, it does not indicate what or from whom he attempted to embezzle. See Michigan Court Rules, Rule 6.112 (criminal information must "set forth the substance of the accusation against the defendant"). Finally, the facts that are alleged in Count II, i.e., the time period and value of the property, match those in Count I. ⁽⁴⁾

Additionally, in his request for a hearing before an ALJ, counsel for Petitioner stated that Petitioner was convicted of attempted embezzlement "arising out of his taking certain prescription drugs from Hillsdale Community Hospital, his employer at the time." I.G. Ex. 6, at 2. Therefore, substantial evidence supports the ALJ's finding that Petitioner was convicted of attempting to embezzle drugs from his employer, Hillsdale.

Next, Petitioner asserts that, even if he was convicted of attempting to embezzle drugs from his employer, this offense did not occur in connection with the delivery of a health care item or service. Petitioner argues:

The only reasonable inference to draw from [Petitioner's conviction for attempted embezzlement] is that Petitioner did not take possession of any property of his employer . . . [Page 7] and therefore did not deprive his employer of any such goods, or deliver such goods to any third party. . . . Petitioner could not possibly have delivered what he failed to obtain.

RR at 7-8.

Petitioner's reading of section 1128(a)(3) would require the entity being excluded to have actually delivered an item or service as an element of committing the offense. This construction would conflict with Congress's intent that the mandatory exclusion authority be used broadly to protect the integrity of covered programs (see Napoleon S. Maminta, M.D., DAB No. 1135 (1990) discussing the legislative history of section 1128(a) and its support for broad coverage) and our decisions addressing whether an offense is "related to" or occurred "in connection with" the delivery of an item or service. ⁽⁵⁾ In these cases, we have declined to require that a criminal offense include the pharmacist's actual delivery of an item or service. Lyle Kai,R.Ph., DAB No. 1979 (2005); Steven R. Caplan, R.Ph., DAB CR1112 (2003); aff'd, Steven R. Caplan, R.Ph. v. Tommy G. Thompson, CIV No. 04-00251 (D. Hawaii, Dec. 17, 2004), citing, Anderson v. Thompson, 311 F.Supp. 2d 1121, at 1127 n.17 (D. Kan. [Page 8] 2004) ("The conviction need only be related to delivery of an item or service, and the convicted individual need not have actually participated in the delivery.").

We also conclude that the mere fact that a criminal endeavor (which if successful would have resulted in actual delivery of a health care item or service) was unsuccessful does not mean that there is no connection to the delivery of an item or service. To construe section 1128(a)(3) to require success in the crime attempted would allow untrustworthy individuals continued access to federal health care programs simply because their criminal intentions had been thwarted.

In determining whether an offense is related to the delivery of an item or service, we look to whether there is a "common sense connection" (or "nexus") between the offense of which a petitioner was convicted and the delivery of a health care item or service. Erik D. Desimone, R.Ph., DAB No. 1932 (2004)(pharmacist stole drugs for his own use); see also Berton Siegel, D.O., DAB No. 1467 (1994); Thelma Walley, DAB No. 1367; Niranjana B. Parikh, DAB No. 1334 (1992).

In this case, there is an evident common sense connection between the offense of which Petitioner was convicted and the delivery of an item or service. Simply because Petitioner failed to embezzle the drugs at issue and therefore did not "deliver" them farther in the chain of commerce does not mean his offense did not "occur in connection with the delivery of an item or service." Hillsdale, Petitioner's employer, is a medical center which obtains drugs for the purpose of delivering them to individuals in order to meet those individuals' health needs. As a pharmacist at Hillsdale, Petitioner's responsibilities necessarily involved participating in delivery of drugs to the patients served by Hillsdale. Petitioner was able to attempt to embezzle those drugs because he had access to them as part of performing these professional services, and his attempted embezzlement occurred under cover of performing these professional responsibilities. These facts are sufficient to establish a "common sense connection" between Petitioner's offense and the delivery of a health care item or service.

This construction is consistent with the regulations implementing section 1128(a)(3), which provide that an offense occurring in connection with the delivery of a health care item or service includes "the performance of management or administrative services relating to the delivery of such items or services." 42 C.F.R. § 1001.101(c)(1). In the context of an exclusion provision aimed at financial misconduct, this is particularly [Page 9] appropriate since financial misconduct generally is not part of the actual delivery of the item or service, but is related, for example, to payment for (or misappropriation of) an item or service that was delivered, that was fraudulently claimed to have been delivered, or that was intended to be delivered. Thus, the Secretary has reasonably interpreted section 1128(b)(3) to include offenses such as this one, which occur in the context of an individual's participation in the chain of delivery of health care items or services even if the individual's offense does not involve his/her personally delivering an item or service as an element of the offense.

3. The ALJ did not err in concluding that Petitioner's exclusion for a period of five years is not unreasonable.

Petitioner does not challenge the ALJ's conclusion that an exclusion pursuant to section 1128(a) must be for a minimum period of five years. ALJ Decision at 7, citing section 1128(c)(3)(B) of the Act; 42 C.F.R. § 1001.2007(a)(2). Rather, Petitioner argues that if an exclusion is warranted in this case it should be imposed under section 1128(b)(4) rather than section 1128(a)(3) and that a five-year exclusion under section 1128(b)(4) would be unreasonable. RR at 9-10. Section 1128(b)(4) authorizes the I.G. to impose a permissive exclusion after an individual surrenders a health care license "while a formal disciplinary proceeding was pending before [a State licensing authority] and the proceeding concerned the individual's . . . professional competence, professional performance, or financial integrity." For purpose of this argument, Petitioner concedes that he surrendered his Michigan license while such a formal disciplinary proceeding was pending. ⁽⁶⁾ I.G. Ex. 2.

Petitioner's assertions are without merit. Petitioner cites no authority for the proposition that the I.G. has the discretion to decline to impose a section 1128(a)(3) exclusion simply because an individual has engaged in other conduct which falls within a permissive exclusion provision. The introductory language of section 1128(a) provides that the I.G. "shall exclude" individuals who meet the criteria of section 1128(a). The Secretary, in adopting implementing regulations, has construed this language to require the I.G. to exclude individuals meeting section 1128(a) criteria. 42 C.F.R. § 1001.101. But even if the I.G. could have imposed a section 1128(b)(4) exclusion instead, [Page 10] Petitioner's conclusion that a five-year exclusion would be unreasonable does not follow. Section 1128(c)(3)(E) provides that the period of exclusion for an exclusion pursuant to section 1128(b)(4) "shall not be less than the period during which the individual's . . . license . . . is revoked, suspended or surrendered . . . ." ⁽⁷⁾

4. The ALJ did not err in concluding that Petitioner's constitutional argument is unavailing.

Petitioner asserts that an exclusion of five years will result in a loss of salary of nearly $600,000. RR at 11. He contrasts this amount to the $7,796.06 he repaid Hillsdale in restitution for the offense. He represents that an exclusion from Medicare and Medicaid renders a pharmacist, though not a doctor or a nurse, virtually unemployable in his/her profession. Id. at 12. Thus, Petitioner argues, a five-year exclusion under section 1128(a)(3), as applied in this case, violates the Due Process Clause and the Excessive Fines Clause because it is punitive, arbitrary, and grossly excessive to the damages sustained. Id. at 11.

We do not address the merits of this argument. As the ALJ correctly stated, he is without jurisdiction to consider Petitioner's constitutional attack. ALJ Decision at 7. Similarly, the Board has no authority to declare section 1128(a)(3), as applied to pharmacists, unconstitutional. See Susan Malady, R.N., DAB No. 1816 (2002). We do note that the constitutionality of section 1128 has been repeatedly upheld. Erickson v. United State ex rel. Dep't of Health and Human Serv, 67 F.3d 858, 864 n.2 (9^th Cir. 1995)(exclusion of an ophthalmologist); Manocchio v. Kusserow, 961 F.2d 1539 (11^th Cir. 1992) (exclusion of a physician); Kahn v. Inspector General of the U.S. Dep't of Health and Human Serv., 848 F. Supp. 432, 437 (S.D.N.Y. 1994)(exclusion of a podiatrist); Crawford v. Sullivan, 1993 WL 122294, *3 (N.D. Ill. 1993)(exclusion of a physician); Greene v. Sullivan, 731 F. Supp. 838 (E.D. Tenn. 1990) (exclusion of a pharmacist). These courts have concluded that section 1128 exclusions serve the remedial purpose of protecting federal [Page 11] health care programs and the programs' beneficiaries and recipients from untrustworthy providers.

Conclusion

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

Judith A. Ballard

Sheila A. Hegy

Donald F. Garrett
Presiding Board Member

1. The current version of the Social Security Act can be found at www.ssa.gov/OP_Home/ssact/comp-ssa.htm. Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section. Also, a cross reference table for the Act and the United States Code can be found at 42 U.S.C.A. Ch. 7, Disp Table.

2. Section 1128(a)(3) also requires that the offense occur after the date of enactment of the Health Insurance Portability and Accountability Act of 1996 (August 21, 1996) and that the offense consist of a felony. As the ALJ recognized, Petitioner conceded he was convicted of a felony that occurred after August 21, 1996. ALJ Decision at 6.

3. The administrative complaint charged Petitioner, in his capacity as a pharmacist employed by Hillsdale Community Health Center (Hillsdale), with violating the Robinson-Patman Price Discrimination Act (Robinson-Patman Act) (15 U.S.C. § 13c), the Food, Drug and Cosmetic Act (21 U.S.C. §§ 353(c)(3)(A)(ii)(I) and (II)), and a range of Michigan statutes and regulations concerning the operation of pharmacies. I.G. Ex. 2, at 12-14. As to the Robinson-Patman Act, the complaint stated that nonprofit entities, such as Hillsdale, are allowed to purchase drugs at prices below those charged to retail pharmacies only if the medication is for the institution's own use. Id. at 10. It charged that Petitioner, contrary to the Robinson-Patman Act, "routinely purchased prescription drugs at preferential, reduced prices through . . . Hillsdale . . . and transferred these prescription drugs to retail pharmacies he owned." Id. at 11. The complaint identified one of Petitioner's retail pharmacies that received these drugs as Litchfield Drugs. Id. at 10. The I.G. has identified nothing in the record which explicitly links the conduct described in the administrative complaint to the conduct described in the Information, although Litchfield Drugs was named in the Information as a co-defendant. Because other evidence in the record clearly establishes that Petitioner's offense was related to the delivery of a health care item or service, we find it unnecessary to determine whether the administrative complaint also supports such a connection.

4. Petitioner relies on Stephen J. Weiss, DAB CR581 (1999) for the proposition that the ALJ cannot rely on information in counts for which the person was not convicted. Assuming for the sake of argument that Weiss stands for this principle, it is not applicable here because the count describing the attempted embezzlement was dependent on the count describing the embezzlement.

5. The cases cited in the paragraph above (except for DeSimone) involve exclusions pursuant to subsection (a)(1) of section 1128, which was enacted in 1987. Medicare and Medicaid Patient and Program Protection Act of 1987, Public Law No. 100-93, § 2. Subsection (a)(1) mandates the exclusion of individuals who have been convicted of an offense "related to the delivery of an item or service under title XVIII or under any State health care program." At issue here is the requirement of subsection (a)(3) that the offense be "in connection with the delivery of a health care item or service." Subsection (a)(3) was added to section 1128 in 1996 to broaden the I.G.'s exclusion authority. Health Insurance Portability and Accountability Act, Public Law No. 104-191, § 221 (HIPAA). There is no legislative history for HIPAA indicating that Congress intended the term "in connection with" to require something more than some nexus between an offense and the delivery of a health care item or service. Congress' use of different words can give rise to an inference that Congress meant something different. However, here it appears that Congress used the term "connected with" simply to avoid confusion, since it had already used the term "relating to" in section 1128(a)(3) to require that the offense "consist[ed] of a felony relating to . . . embezzlement . . . or financial misconduct."

6. Petitioner continues to hold a pharmacist's license in Illinois. P. Ex. 2.

7. Since the consent order under which Petitioner surrendered his Michigan license stated that his license "shall not be renewed, reinstated, reissued or reactivated . . . at any future date" (I.G. Ex. 2, at 2), an exclusion under section 1128(b)(4) would here appear to result in permanent exclusion rather than a five-year exclusion.