SUBJECT: James Randall Benham,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

James Randall Benham (Petitioner) appealed the February 3, 2006, decision of Administrative Law Judge (ALJ) Alfonso J. Montano. James Randall Benham, DAB CR1405 (2006) (ALJ Decision). The ALJ Decision upheld a determination by the Inspector General (I.G.) excluding Benham from participation in any federal health care program for five years. The I.G. excluded Benham pursuant to section 1128(a)(1) of the Social Security Act (the Act) on the ground that he had been convicted of a criminal offense related to the delivery of an item or serviceunder Medicare. ⁽¹⁾

For the reasons discussed below, we uphold the ALJ's determination that the I.G. properly excluded Benham from participation in federal health care programs for five years. [Page 2] Our decision is based on the record before the ALJ, the parties' submissions on appeal, and the transcript of an oral argument before the Board.

Standard of Review

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).

Applicable Statutes

The I.G. excluded Benham for five years pursuant to section 1128(a)(1) of the Act, which provides:

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

(1) Conviction of program-related crimes.--An individual . . . that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII [Medicare] or under any State health care program.

Section 1128(c)(3)(B) provides that an exclusion pursuant to section 1128(a) must be for a minimum period of five years.

Background

Benham pled guilty to a misdemeanor under section 1128B(a)(2) of the Act. ALJ Decision at 2. The misdemeanor provision of section 1128B(a)(2) states that whoever "at any time knowingly and willfully makes or causes to be made any false statement of a material fact for use in determining rights to . . . payment [under a federal health care program] shall (ii) in the case of such a statement [or] representation . . . by any other person be guilty of a misdemeanor . . . ."

The Information to which Benham pled guilty provided:

On or about July 7, 2000 . . . [Benham] knowingly and willingly aided and abetted others in causing to be withheld from Southern Medical Distributors [SMD] a material fact for use in determining rights to . . . [Page 3] payments under . . . the Medicare program, in violation of 42 U.S.C. Section 1320a-7b(a) [section 1128B(a)] and 18 U.S.C. § 2.

I.G. Ex. 3.

Benham's plea was based on a Stipulation of Facts that provided:

1. [Benham] was General Counsel of Augustine Medical, Inc. ("AMI"), a Minnesota corporation that manufactured and sold Warm-Up Active Wound Therapy ("Warm-Up").

2. [Benham] knew that claims for Warm-Up were periodically submitted by others for reimbursement to the Medicare program, a Federal health care program.

3. On or about June 27, 2000, Scott D. Augustine [CEO of AMI] received a letter from TriSpan Health Services [TriSpan], a fiscal intermediary of the Medicare program which had earlier approved coverage for Warm-Up. TriSpan had now determined that Warm-Up was investigational. Defendant believed that this determination was material.

4. Shortly thereafter, [Benham] knowingly and intentionally aided and abetted others in deciding not to disclose the June 27^th letter to Southern Medical Distributors [SMD].

5. By entering into this Stipulation of Facts, [Benham] admits that the facts set forth herein establish that he knowingly and intentionally aided and abetted the offense of 42 U.S.C. Section 1320a-7b(a)(2) [section 1128B(a)(2)] as set forth in the information filed herewith and is in fact guilty of that offense.

[Page 4] I.G. Ex. 5. ⁽²⁾

SMD represented itself to be a durable medical equipment (DME) distributor but was actually a fictional entity set up as part of a government sting operation. ALJ Decision at 1, citing P. Response at 2; I.G. Ex. 5.

As a result of his guilty plea, Benham was sentenced to three years of probation and fined $100,000. ALJ Decision at 2, citing I.G. Ex. 2.

On March 31, 2005, the I.G. notified Benham of his exclusion from participation in Medicare, Medicaid, and all federal health care programs for a mandatory five-year period pursuant to section 1128(a) of the Act. ALJ Decision 2, citing I.G. Ex. 1. Benham appealed the I.G.'s determination. The ALJ upheld the I.G.'s determination. ⁽³⁾

ALJ Findings and Benham Exceptions

The ALJ adopted the following numbered findings of fact and conclusions of law (FFCLs):

1. Summary disposition is appropriate in this case.

2. Petitioner was convicted within the meaning of section 1128(i) of the Act.

[Page 5] 3. Petitioner's conviction was related to the delivery of an item or service under Medicare or a state health care program. ⁽⁴⁾

4. Neither an ALJ nor the I.G. may impose a permissive exclusion once a legal basis for a mandatory exclusion has been established.

5. Petitioner's exclusion for a period of five years is the mandatory minimum period as a matter of law.

ALJ Decision at 4-11.

Benham excepts to FFCL 3 on the ground that the offense for which Benham was convicted was not related to the delivery of an item or service under Medicare as required by section 1128(a)(1). Benham excepts to FFCL 4 on the ground that the ALJ's construction of section 1128(a)(1) renders meaningless section 1128(b)(11), a permissive exclusion provision. Benham does not challenge the ALJ's determination that no dispute of material fact exists but, rather, raises purely legal issues.

A. The ALJ did not err in concluding that Benham was convicted of an offense that was related to the delivery of an item or service under Medicare.

Section 1128(a)(1) requires merely that an offense be "related to" the delivery of an item or service under a covered program. It does not require that the offense result in a delivery and therefore does not require an actual delivery of an item or service. Based on the plain meaning of the word "related," the Board has repeatedly held that an offense is "related to" the delivery of an item or service under a covered program if there is a common sense connection or nexus between the offense and the delivery of an item or service under the program. See, e.g., Berton Siegel, D.O., DAB No. 1467 (1994); Thelma Walley, DAB No. 1367 (1992); Niranjana B. Parikh, M.D., DAB No. 1334 (1992). Therefore, the Board has determined that an offense committed by someone providing billing or accounting services was related, Jack W. Greene, DAB No. 1078 (1989), aff'd, Green v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); Michael Travers, M.D., DAB No. 1237 (1991), aff'd Travers v. Sullivan, 791 F. Supp. 1471, [Page 6] 1481 (E.D. Wash. 1992) and Travers v. Shalala, 20 F.3d 993 (9^th Cir. 1994); that no showing of harm to a protected program was necessary in order for an offense to be related, Neil R. Hirsch, M.D., DAB No. 1550 (1995), aff'd, Hirsch v. Shalala,No. 96-4008 (C.D. Ill. Nov. 4, 1996); Paul R. Scollo, D.P.M., DAB No. 1498 (1994); that an offense could be related even if the services were actually provided by an entity different from the individual being excluded, Napoleon S. Maminta, M.D., DAB No. 1135, at 7 (1990); that an offense could be related even if no service or item was actually delivered, Francis Shaenboen, R.Ph., DAB No. 1249, at 4 (1991); that an offense could be related even if it did not directly involve the delivery of items or services, Salvacion Lee, M.D., DAB No. 1850 ( 2002); and that an offense could be related even if the individual did not personally engage in the scheme or was not aware of the scheme that resulted in the delivery of the mislabeled pharmaceuticals under a covered program, Lyle Kai, R.Ph., DAB No. 1979 (2005), aff'd, Kai v. Leavitt, Civ. No. 05-00514 BMK (D. Haw. 2006).

The undisputed facts that establish (in several different ways) that the offense for which Benham was convicted was related to the delivery of an item under Medicare include the following:

• Prior to June 2000, claims for Warm-Up were submitted to Medicare for reimbursement, and TriSpan, a Medicare fiscal intermediary, had approved Warm-Up for Medicare coverage. In June 2000, TriSpan modified its coverage determination by notifying AMI that Warm-Up was "investigational," and this is the fact that was withheld from SMD. ⁽⁵⁾ TriSpan had reason to notify AMI that it had altered Warm-Up's status with respect to Medicare coverage since Warm-Up had previously been delivered and claimed for Medicare payment. Thus, Benham's offense was related to the delivery of an item under Medicare.

• Benham pled guilty to violating section 1128B(a)(2) of the Act by knowingly and willfully aiding and abetting others in causing to be withheld a fact material to determining whether Medicare would pay for Warm-Up and stipulated that the fact withheld was TriSpan's determination. Benham's [Page 7] offense thus consisted of aiding others to withhold from SMD, a purported DME distributor, a fact material to a purchaser's ability to claim Medicare reimbursement for Warm-Up. The extent to which Warm-Up would continue to be delivered as an item under Medicare was dependent on this material fact, so the offense is related to delivery in this way as well.



• Benham committed this offense as part of an attempt to sell Warm-Up to SMD for distribution. Since it is undisputed that Warm-Up had been delivered to Medicare beneficiaries as a Medicare item in the past, it is reasonable to infer that, if Benham had succeeded in distributing Warm-Up, Warm-Up would have continued to be delivered to Medicare beneficiaries and claims would have been made for Medicare payment. Once delivered, either Medicare would pay or, if Medicare did not pay, Medicare beneficiaries or providers or suppliers would have to bear the cost. Either alternative is related to the delivery of an item under Medicare.

Thus, we conclude that the offense was related to the delivery of an item under Medicare.

Benham argues that his offense does not meet the standard used by the ALJ for determining whether there is a nexus between an offense and the delivery of an item. ⁽⁶⁾ The ALJ relied on language in Jeffery Knute Connell, DAB CR1271, at 5 (2005); Board review declined DAB No. 1971 (2005). ⁽⁷⁾ P. Br. at 5. In Connell, ALJ Steven T. Kessel wrote:

. . . a crime that affects the performance of Medicare or a State Medicaid program - by affecting, either potentially or [Page 8] in fact, the quality of the items or services that the program delivers, or the monies spent for the delivery of items or services - relates to the delivery of Medicare or Medicaid items or services.

(Emphasis added.)

Benham argues that his offense does not meet the Connell "standard" because it "did not and could not have resulted in the delivery of an item or service under Medicare or the payment of program funds." P. Br. at 4; Tr. at 21, 40. Benham asserts that his offense could not have even potentially affected the performance of the Medicare program because (1) SMD was a fictitious entity that did not and would not have sold Warm-Up to suppliers (P. Br. at 5), and (2) because Medicare would not have paid for Warm-Up even if SMD had been a bona fide DME distributor that resold Warm-Up to suppliers (Tr. at 23-25, 37-38).

We reject Benham's arguments for the following reasons. First, if the relatedness of Benham's offense is evaluated from the perspective of what Benham knew and/or believed when he committed it, then the offense falls within the description in Connell. It is reasonable to infer from the undisputed facts that Benham believed when he committed the offense that SMD was a bona fide distributor. As explained below, withholding material information from an entity that represents itself as a distributor potentially could affect "the quality of the items or services that the program delivers, or the monies spent for the delivery of items or services" under Medicare.

In oral argument, Benham's counsel argued that relatedness should be evaluated on the basis of what the circumstances actually were rather than what Benham believed them to be. Tr. at 25-26. Counsel analogized to "federal bank robbery statutes." Tr. at 26. He asserted that a robbery does not satisfy the elements of the crime of federal bank robbery if the bank is not federally insured, even if the robber believes the bank is federally insured. We reject this analogy. Section 1128(a)(1) is not a criminal statute; it is a remedial statute intended to protect covered health care programs prospectively from individuals who are untrustworthy. Therefore, it is reasonable for the I.G. to evaluate relatedness in light of what an individual knew and/or believed at the time he/she committed the offense. ⁽⁸⁾

[Page 9] Second, this case presents a factor not present in Connell, i.e., the offense occurred in the context of a government sting operation. Construing section 1128(a)(1) to exclude Medicare-related crimes committed in the context of government sting operations would be contrary to the purpose of section 1128(a)(1). That purpose is to enable the Secretary to protect Medicare and state health care programs from untrustworthy individuals. ⁽⁹⁾ See Napoleon S. Maminta, M.D. (discussing the legislative history of section 1128(a) and its support for broad coverage). Sting operations enable the government to identify and convict dishonest individuals whom the government might not otherwise be able to identify. ⁽¹⁰⁾ See, e.g., Ricard Santos, DAB CR165 (1991) (exclusion upheld even though no claims filed because forged prescriptions were delivered to undercover agents and maintained as evidence).

Third, the ALJ's statement in Connell, while true, does not purport to limit the reach of section 1128(a)(1) to offenses that fall within that description. We note that, in implementing the 1987 amendments to section 1128 of the Act, the I.G. specifically [Page 10] declined to adopt a definition of the phrase "related to the delivery of an item or service." The I.G. wrote:

This term has served as the basis for exclusions from Medicare for many years and the absence of a definition has not posed any serious problems. The OIG assesses each conviction on a case-by-case basis to determine whether it falls within the ambit of the statutory language - that is, whether it is related to the delivery of an item or service under one of the programs - and each of those determinations is quite fact-specific. We believe that it will continue to be more effective to make these determinations on a case-by-case basis than to attempt to define the phrase further.

57 Fed. Reg. 3298, 3303 (January 29, 1992). Given that one could not anticipate all of the possible factual scenarios, this approach has been a wise one, permitting application of the wording of the statute in light of its purpose.

For the following reasons, we also reject Benham's assertion that this offense is not related because after June 2000, even if SMD had been a bona fide distributor, no delivery of Warm-Up would have occurred under Medicare because Medicare would not have paid for Warm-Up and thus was not at risk of harm from third-party claims for Warm-Up. Tr. at 23-25; 37-38.

First, as we discussed previously, an offense can be related to delivery of an item whether or not it results in the delivery of an item. In this case, Warm-Up had previously been covered as a Medicare item; the offense involved withholding material information as to a change in this coverage while attempting to put Warm-Up in a chain of delivery.

Second, Benham's assertion that Medicare could not be harmed because all future claims for Warm-Up would have been denied is not supported by the record. Benham relies solely on statements by ALJ Blair in Hensley that "the potential harm to Medicare . . . was entirely within Medicare's control" and "Petitioner [Hensley] had no ability . . . to fool Medicare into paying claims for Warm-Up." Tr. at 24; Hensley, DAB CR1415, at 9. For the following reasons, we reject this argument as unsupported and as inconsistent with how the Medicare program operates:

• [Page 11] The ALJ in Hensley did not provide any basis for these statements, nor did Benham cite to any evidence or analysis to support the conclusion. ⁽¹¹⁾



• Even if TriSpan had programmed its claims processing system to reject fee-for-service claims for Warm-Up as a supply item, Medicare might still have had to pay under the limitation on liability of beneficiary provision at section 1879 of the Act.



• If costs for Warm-Up were included in a cost report of an institutional provider, such as a hospital or skilled nursing facility, TriSpan might not have identified those costs as costs of Warm-Up Therapy and prevented them from being included in the provider's Medicare rate calculation.



• To suggest that a program as complex as Medicare can prevent every possibility of a payment mistake is unreasonable.  Thus, Congress has seen the need to protect Medicare by criminalizing certain conduct, including the type of conduct to which Benham pled.

Third, Benham incorrectly assumes that the only risk to the program would be from payment of claims. The operation of the Medicare program could have been harmed by this offense even if TriSpan did not pay subsequent third party claims. For example, providers or suppliers that purchased Warm-Up thinking it was a covered item under Medicare would suffer economic loss when their claims were denied (at least absent relief under section 1879), which could affect access of Medicare beneficiaries to items or services. Also, withholding information related to whether an item is effective could result in receipt of less effective care and harm to Medicare beneficiaries' health.

[Page 12] Therefore, we reject Benham's argument that Medicare could not have been affected by his offense even if SMD had been a bona fide distributor.

Benham also argues that the elements of an offense under section 1128B(a)(2)(ii) do not include the delivery of an item, and, therefore, the ALJ erred by concluding that a conviction under section 1128B(a)(2)(ii) is "deemed" to be related to the delivery of an item or service under a covered program. P. Br. at 7.

Even assuming that Benham is correct that a person could be convicted of an offense under section 1128B(a)(2)(ii) that is not related to the delivery of an item or service, that does not make a difference here. As discussed above, we conclude that his offense falls within section 1128(a)(1) because the undisputed facts surrounding Benham's conviction establish that his offense is related to the delivery of an item under Medicare. The ALJ considered these facts in upholding the exclusion. Thus, even if the ALJ erred in "deeming" the offense to be related, that error is harmless.

Finally, Benham argues that the offense is not related to delivery of an item or service under Medicare because his plea "contained no mention of the Medicare program." P. Br. at 7. This argument has no merit since the indictment to which he pled and the Stipulations of Facts on which the plea was based both refer to Medicare.

B. The ALJ properly concluded that the I.G. was required to impose a mandatory rather than a permissive exclusion.

Benham argues that his offense is "specifically addressed" by the permissive exclusion provision at section 1128(b)(11) and, therefore, he should be excluded pursuant to that section rather than section 1128(a)(1). ⁽¹²⁾ P. Br. at 9.

[Page 13] Assuming only for the purposes of this argument that Benham's offense would also fall within section 1128(b)(11), we reject Benham's conclusion. As the ALJ stated, courts have repeatedly held that, when an individual's conduct falls within the scope of both a mandatory and a permissive exclusion provision, the I.G. is required to impose a mandatory exclusion. ALJ Decision at 10, citing Dan Anderson, DAB CR855 (2002), aff'd, Anderson v. Thompson, 311 F. Supp. 2d 1121 (D. Kansas 2004); Travers v. Sullivan; Greene v. Sullivan. Therefore, the ALJ, after determining that Benham's offense fell within section 1128(a)(1), properly upheld the I.G.'s imposition of a mandatory exclusion.

Benham is also incorrect that the ALJ's construction of section 1128(a)(1) impermissibly renders section 1128(b)(11) null. Section 1128(a)(1) concerns program-related offenses that have resulted in a conviction. Section 1128(b)(11) concerns conduct that has not necessarily resulted in a conviction. Sections 1128(a)(1) and 1128(b)(11) describe sets of conduct that intersect but are not coextensive. When conduct falls within the intersection of the two provisions, section 1128(a)(1), as the mandatory provision, applies.

Conclusion

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

Donald F. Garrett

Sheila Ann Hegy

Judith A. Ballard
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. On its letterhead, TriSpan identified itself as a Medicare Part A intermediary. P. Ex. 1. Part A of Medicare pays for a portion of the costs of hospital, related post-hospital, home health services, and hospice care. Section 1811 of the Act. Part B pays for, among other things, a portion of costs for physicians' services, outpatient care, and other services and supplies, such as durable medical equipment, that are medically necessary. Section 1832 of the Act.

The Medicare program is administered by the Centers for Medicare & and Medicaid Services (CMS). CMS contracts with intermediaries, such as TriSpan, "to determine and make Medicare payments for Part A or Part B benefits payable on a cost basis (or under the Prospective Payment System for hospitals) and to perform other related functions." 42 C.F.R. § 421.3.

3. The ALJ Decision was one of three involving convictions under section 1128B(a)(2) for AMI's nondisclosure to SMD of TriSpan's letter. The two other decisions are Scott D. Augustine, DAB CR1406 (2006), also decided by ALJ Montano, and Timothy Wayne Hensley, DAB CR1415 (2005), decided by ALJ Anne E. Blair. Dr. Augustine was the CEO of AMI and Mr. Hensley was its National Sales Manager. Dr. Augustine and Benham are represented by the same counsel. Dr. Augustine and Mr. Hensley also appealed their respective ALJ Decisions to the Board, and we issue decisions in those cases at DAB No. 2043 and DAB No. 2044.

4. FFCL 3 had a typographical error in it which we have corrected.

5. CMS uses Food and Drug Administration (FDA) categorizations such as "investigational" as a factor in making Medicare coverage decisions for devices, specifically, whether they are "reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member" within the meaning of section 1862(a)(1) of the Act. 42 C.F.R. §§ 405.201(a); 405.203(c).

6. In the oral argument, Benham's counsel stated that, as to arguments made by Mr. Hensley's counsel, "I adopt and endorse those arguments" (Tr. at 18) and "I'd like to explicitly adopt the argument made in Mr. Hensley's briefing that under Greene an item is not cognizable under the program unless a claim or bill is submitted." (Tr. at 20). We reject Mr. Hensley's arguments in Timothy Wayne Hensley, DAB No. 2044 (2006). We do not repeat our analysis of those arguments in this decision but incorporate that analysis by reference here.

7. In Connell, a druggist was excluded pursuant to section 1128(a)(1) after he was convicted of a crime related to repackaging returned drugs for resale. The ALJ rejected his argument that his crime involved only the storage of controlled substances and not delivery of an item.

8. However, the fact that an individual is unaware of a relationship between his/her offense and the delivery of items or services under a covered program does not necessarily make the offense unrelated. See Robert C. Greenwood, DAB No. 1423 (1993) (I.G. excluded home health aide who falsified time records that were subsequently used by his employer to bill Medicaid for services the aide had not provided to a Medicaid recipient).

9. We also reject Benham's argument that this offense is not related to a delivery because "no product was purchased by SMD." Tr. at 21. The relatedness arose from Benham's attempt to put Warm-Up in a chain of commerce without disclosing that its coverage under Medicare had changed. The fact that this attempt failed, for whatever reason, does not extinguish that relatedness.

10. Benham argues that his construction does not impair the I.G.'s ability to protect Medicare because he would still be subject to the permissive exclusion provisions of section 1128. Tr. at 35. We disagree with Benham's conclusion. In section 1128(a), Congress described a set of offenses that must result in exclusion. The possibility that the I.G. might be able to fit an offense into a permissive category would not justify removing crimes committed in the context of sting operations from section 1128(a)(1).

11. Benham asserted in oral argument that "there would be absolutely a zero basis in the record for the Board to conclude the claim would have been paid . . . . There is at least some basis to reach the conclusion that the claim wouldn't have been paid. Namely a determination had been made that it wasn't covered." Tr. at 37-38. This assertion, however, is based on the unsupported assumption that when one fiscal intermediary determines that an item is not covered, this automatically protects the program from payment. Benham points to no support for this statement. In any event, we do not need to find that Medicare in fact would have been harmed by this one act (but for the sting operation) in order to hold that section 1128(a)(1) applies.

12. Section 1128(b)(11) provides that the Secretary may exclude --

[a]ny individual furnishing items or services for which payments may be made under [Medicare] that fails to provide such information as the Secretary or the appropriate State agency finds necessary to determine whether such payments are or were due and the amounts thereof, or has refused to permit such examination of its records by or on behalf of the Secretary or that agency as may be necessary to verify such information.