Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Ralph K. Messo, Jr., DO
(OI File No. 2-09-40518-9),
Petitioner,
v.
The Inspector General.
Docket No. C-19-404
Decision No. CR5344
June 14, 2019
DECISION
The Inspector General (IG) of the United States Department of Health and Human Services excluded Petitioner, Ralph K. Messo, Jr., DO, from participation in Medicare, Medicaid, and all other federal health care programs based on his conviction of a felony criminal offense that was related to both the delivery of a health care item or service under Medicare or a state health care program and health care fraud. For the reasons discussed below, I conclude that the IG has a basis for excluding Petitioner because he has a felony conviction for accepting bribes in exchange for his referral of blood specimens to a specific laboratory, which is a felony conviction for a criminal offense that is related to both the delivery of an item or service under Medicare or a state health care program and health care fraud. The IG has proven two aggravating factors, and there are no mitigating factors present. An eight-year exclusion is reasonable, effective December 20, 2018.
I. Background
In a letter dated November 30, 2018, the IG excluded Petitioner from participation in Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f)
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of the Social Security Act (Act) (42 U.S.C. § 1320a-7b(f)) for a minimum period of 10 years, effective 20 days from the date of the letter. IG Exhibit (Ex.) 1 at 1. The IG explained the following bases for excluding Petitioner:
IG Ex. 1 at 1. The IG informed Petitioner that the exclusion was for “a minimum period of 10 years.” IG Ex. 1 at 1; see 42 U.S.C. § 1320a-7(c)(3)(B). The IG extended the exclusion period from the statutory minimum of five years to 10 years based on the presence of three aggravating factors. IG Ex. 1 at 2. As for the aggravating factors, the IG found the following: 1) The acts resulting in the conviction, or similar acts, that caused, or were intended to cause, a financial loss to a government program or one or more entities of $50,000 or more; 2) The acts that resulted in the conviction, or similar acts, were committed over a period of one year or more from December 2010 to about March 2013; and, 3) Petitioner was sentenced to 24 months of incarceration. IG Ex. 1 at 2; 42 C.F.R. § 1001.102(b). The IG did not find evidence of any mitigating factors. IG Ex. 1; see 42 C.F.R. § 1001.102(c).
Petitioner filed a timely request for an administrative law judge (ALJ) hearing on February 1, 2019. On February 14, 2019, pursuant to 42 C.F.R. § 1005.6, ALJ Leslie A. Weyn presided over a telephonic pre-hearing conference, and she issued an Order and Schedule for Filing Briefs and Documentary Evidence (Order) on February 15, 2019.1
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The IG, through counsel, filed an informal brief (IG Br.) and a reply brief (IG Reply), along with six exhibits (IG Exs. 1-6). Petitioner, who is represented by counsel, filed an informal brief (P. Br.) and four exhibits (P. Exs. 1-4). In the absence of any objections, I admit all submitted exhibits.
The parties agree that an in-person hearing is not necessary for me to decide this case. See IG Br. at 15; P. Br. § IV. Therefore, I will decide this case on the merits on the written record.
II. Issues
Whether there is a basis for exclusion, and if so, whether the length of the exclusion that the IG has imposed is unreasonable. 42 C.F.R. § 1001.2007(a)(1).
III. Jurisdiction
I have jurisdiction to adjudicate this case. 42 U.S.C. § 1320a-7(f)(1); 42 C.F.R. § 1005.2.
IV. Findings of Fact, Conclusions of Law, and Analysis2
1. Petitioner was convicted of a program-related crime, in that his offense related to the delivery of a health care item or service under the Medicare program, and he is subject to a mandatory exclusion from all federal health care programs for a minimum of five years.
2. Petitioner was convicted of a felony offense related to health care fraud, in that his 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, and he is subject to a mandatory exclusion from all federal health care programs for a minimum of five years.
Both subsections 1128(a)(1) and 1128(a)(3) of the Act require a mandatory exclusion from all federal health care programs under certain conditions.3 Section 1128(a)(1) states:
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(a)Mandatory Exclusion.—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—Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII or under any State health care program.
42 U.S.C. § 1320a-7(a)(1).
Section 1128(a)(3) states:
(a) Mandatory Exclusion.—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 relating to health care fraud.—Any individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.
42 U.S.C. § 1320a-7(a)(3).
As explained below, I find that Petitioner was convicted of a felony criminal offense for purposes of the Act that mandates exclusion from all federal health care programs.
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On or about January 29, 2015, the United States filed an information charging that Petitioner violated 18 U.S.C. §§ 1952(a)(3) and 2.4 IG Ex. 2. Specifically, the United States charged that from “in or about December 2010 through in or about March 2013,” Petitioner accepted bribes from Biodiagnostic Laboratory Services, LLC (BLS) that, “in the aggregate, were at least approximately $82,500.” IG Ex. 2 at 3. The United States charged that “[i]n return, [Petitioner] referred patient blood specimens to BLS that BLS used to submit claims to Medicare and the Private Payors and collect from those payors at least approximately $828,000.” IG Ex. 2 at 3. The information included an allegation that Petitioner should forfeit $82,500, “which constitutes or is derived, directly or indirectly, from gross proceeds traceable to the offense of conviction.” IG Ex. 2 at 5. On the same day the United States filed the information, January 29, 2015, it filed a plea agreement that it executed with Petitioner on October 9, 2014. IG Ex. 3. In the plea agreement, Petitioner agreed to enter a plea of guilty to Count 1 of the information for violating 18 U.S.C. § 1952(a)(3), which relates to “the acceptance of bribes for the referral of blood specimens to [BLS] from December 2010 through March 2013.”5 IG Ex. 3 at 1. Petitioner also admitted that he received bribes that “were at least $82,500” and agreed to forfeit $82,500. IG Ex. 3 at 2-3.
On July 15, 2015, a United States District Judge issued a consent judgment and order of forfeiture in which he ordered that a “money judgment in the amount of $82,500 . . . is hereby entered against [Petitioner] pursuant to 18 U.S.C. § 981(a)(1)(C),6 28 U.S.C. § 2461(c),7 and Federal Rule of Criminal Procedure 32.2(b).”8 IG Ex. 4 at 3.
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In advance of Petitioner’s sentencing hearing, the United States filed a letter requesting an unspecified downward departure from the advisory sentencing guidelines based on Petitioner’s substantial cooperation. Petitioner (P.) Ex. 2 at 1, 4. The United States explained that Petitioner “provided information into a then-ongoing aspect of the overall BLS investigation,” and that the “information was reliable, truthful, and timely.” P. Ex. 2 at 3. The United States reported that Petitioner agreed to provide testimony (which was not necessary), and that “[t]he information corroborated other evidence obtained during the investigation, but did not result in the prosecution of any individual.” P. Ex. 2 at 3. Judgment was imposed on May 10, 2018, at which time Petitioner’s sentence included 24 months of incarceration. IG Ex. 5 at 1-2.
Petitioner does not dispute his felony conviction for a criminal offense relating to both the delivery of an item or service under both Medicare and Medicaid and health care fraud. Pursuant to section 1128(i)(3) of the Act, an individual is considered to have been convicted of a criminal offense “when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court.” 42 U.S.C. § 1320a-7(i)(3). Petitioner has a felony conviction for the purposes of exclusion, as a United States District Judge accepted Petitioner’s guilty plea and imposed judgment based on his guilty plea to the offense of taking bribes in violation of 18 U.S.C. § 1952(a)(3). IG Ex. 5.
Petitioner does not dispute that his criminal conviction for receiving bribes in exchange for referring blood tests to a particular laboratory subjects him to exclusion based on it being both a criminal offense relating to the delivery of a health care item or service and a felony offense relating to health care fraud.9 P. Br. § II. Congress, through enactment of the Act, determined that an individual who has been convicted of a criminal offense related to either the delivery of an item or service under Medicare or a state health care program or felony health care fraud must be excluded from federal health care programs for no less than five years, and it afforded neither the IG nor an administrative law judge the discretion to impose an exclusion of a shorter duration. 42 U.S.C. § 1320a-7(c)(3)(B). I cannot shorten the length of the exclusion to a period of less than five years because I do not have authority to “find invalid or refuse to follow Federal statutes or regulations.” 42 C.F.R. § 1005.4(c)(1). Petitioner has a criminal conviction for accepting bribes in exchange for referring blood specimens to a laboratory that received reimbursements from Medicare. Petitioner’s offense therefore related to the delivery of a health care item or service under Medicare and is also a felony offense related to health care fraud. Petitioner’s exclusion is mandated for a minimum period of five years based on subsections 1128(a)(1) and 1128(a)(3).
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3. An 8-year minimum exclusion is reasonable based on the presence of two aggravating factors and no mitigating factors.
The Act requires a minimum exclusion period of five years when the exclusion is mandated under section 1320a-7(a). 42 U.S.C. § 1320a-7(c)(3)(B). In this case, exclusion is required under sections 1320a-7(a)(1), (3), and therefore Petitioner must be excluded for a minimum of five years. The IG has the discretion to impose an exclusion longer than the minimum period when aggravating factors are present. See 42 C.F.R. § 1001.102. The IG increased the minimum exclusion period from five years to ten years based on the presence of three aggravating factors. IG Ex. 1 at 1-2. Because I have determined that only two aggravating, and no mitigating, factors are present, an eight-year exclusion is reasonable.
The IG asserts that the first aggravating factor is that the loss to a Government program or other entities as a result of Petitioner’s criminal conduct was greater than $50,000, based on the order as part of Petitioner’s criminal proceedings that he forfeit $82,500. IG Br. at 6-7; IG Ex. 1 at 2; 42 C.F.R. § 1001.102(b)(1). The IG next argues that the acts that resulted in the conviction, or similar acts, were committed over a period of one year or more, occurring from about December 2010 to March 2013. IG Br. at 7-8; IG Ex. 1 at 2; 42 C.F.R. § 1001.102(b)(2). Third, the IG argues that the sentence imposed included incarceration, specifically, 24 months of incarceration. IG Br. at 6; 42 C.F.R. § 1001.102(b)(5). Petitioner argues that a 10-year exclusion is not reasonable because the evidence does not support that financial loss is an aggravating factor, and mitigation is warranted based on his cooperation with law enforcement officials. The IG bears the burden of persuasion with respect to aggravating factors, and Petitioner bears the burden of persuasion with respect to mitigating factors. 42 C.F.R. § 1005.15(c); Order §§ 4, 5.
Pursuant to 42 C.F.R. § 1001.102(b)(1), which addresses the aggravating factor of financial loss, an exclusion may be lengthened if “the acts resulting in the conviction, or similar acts, caused, or were intended to cause, a financial loss to a government agency or program or to one or more other entities of $50,000 or more.” Although Petitioner was not ordered to pay restitution, he was ordered to forfeit the $82,500 that was “the proceeds of the offense charged in the Information . . . .” IG Ex. 4 at 1.
The IG has demonstrated that Petitioner derived at least $82,500 from his crime. However, the IG has not proven that Petitioner caused, or intended to cause, at least a $50,000 loss to a government agency, program, or to one or more entities. Aside from not showing any direct financial loss or intent to cause such a loss, the IG has not submitted any evidence showing that Petitioner’s referrals for blood testing to a single laboratory that illegally bribed him were otherwise improper because they were unwarranted or medically unnecessary. Nor has the IG presented evidence that Petitioner’s illegal proceeds were paid as a result of a loss by any government agency,
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program, or entity. In fact, it appears that BLS’s scheme allowed it to illegally generate an increased volume of blood testing (for which it could be reimbursed by Medicare and private payors), but there is otherwise no evidence before me that BLS’s scheme caused Medicare or any private payor to pay for blood testing that would not otherwise have been performed by another laboratory.10 Petitioner’s receipt of bribes, alone, without evidence that he made unnecessary blood testing referrals or caused or intended to cause a financial loss to Medicare or other programs or entities, does not satisfy section 1001.102(b)(1). Absent evidence that Petitioner caused or intended to cause a financial loss to Medicare or another agency, program, or entity, the IG has not met its burden to prove the applicability of this aggravating factor.
The IG argues that the Departmental Appeals Board (DAB), in Farzana Begum, M.D., DAB No. 2726 at 16 n.8 (2016), “has determined that forfeiture may be a reasonable valuation of financial loss to the Medicare program caused by a crime.” IG Reply at 2. The IG also argues that ALJ decisions support that the amount of forfeiture “is a reasonable valuation of the financial loss that Petitioner’s crimes caused or were intended to cause to the Medicare program.” IG Reply at 2; see IG Br. at 7. Citing Nicholas P. Roussis, DAB CR5245 at 7 (2019), which involves the case of another physician who accepted bribes from BLS, the IG argues that “the evidence supports . . . the application of the financial loss aggravating factor.”11
I agree with the DAB that forfeiture in a criminal case may be a reasonable valuation of financial loss. The IG could have submitted evidence that Petitioner’s monetary forfeiture was connected to such a financial loss by submitting witness testimony, court filings, or evidence obtained during the criminal proceedings, yet the IG did not submit such evidence. In Begum, the DAB explained that a physician “knowingly and willfully solicit[ed] and receive[d] kickbacks” totaling $324,000 from a home health care agency “in return for referring Medicare patients” to the home health agency. Begum at 3. Thus, the proceeds of Dr. Begum’s crime, which totaled $324,000, were entirely derived from
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her referral of Medicare patients for home health services. Based on the evidence in that case, the DAB determined that the Medicare program incurred more than a $50,000 financial loss due to Dr. Begum’s crime. However, the IG has not demonstrated that the $82,500 Petitioner derived from his crime was due to a financial loss by Medicare or another agency, program or entity as contemplated by section 1001.102(b)(1). Although the IG argues that “Petitioner’s forfeiture amount, which represents the amount of bribes he received for referring blood specimens to BLS, is a reasonable valuation of the financial loss that Petitioner’s crime caused or were intended to cause to the Medicare program” (IG Reply at 2), it has not provided evidence that the Medicare program sustained such a loss due to Petitioner’s scheme with BLS. The DAB determined that the evidence demonstrated that Dr. Begum had caused a financial loss of $324,000 to the Medicare program and that her exclusion could have been lengthened on that basis. The IG has presented no such evidence in the current case. While Petitioner certainly engaged in criminal activity when he illegally accepted bribes from BLS, the IG has failed to link his acceptance of bribes totaling $82,500 to a loss to the Medicare program.
Petitioner does not dispute the length of the acts that resulted in his felony conviction, and the judgment of conviction reports a date of offense from December 2010 through March 2013, a time period that is also memorialized in Petitioner’s plea agreement. IG Ex. 3 at 1. The IG properly considered the length of acts that resulted in Petitioner’s felony conviction to be an aggravating factor in this case. See, e.g., Laura Leyva, DAB No. 2704 (2016) (determining that nearly two-and-a-half-year duration of conduct was an aggravating factor).
With regard to the length of Petitioner’s incarceration, the uncontroverted evidence demonstrates that Petitioner was sentenced to a substantial period of incarceration of 24 months for his offense. IG Ex. 5 at 2. The IG properly considered the 24-month length of imprisonment to be an aggravating factor in this case. See Jason Hollady, M.D., a/k/a Jason Lynn Hollady, DAB No. 1855 at 12 (2002) (stating that even a nine-month period of incarceration was “relatively substantial”).
Evidence of aggravation may be offset by evidence of mitigation if it relates to one of the factors set forth at 42 C.F.R. § 1001.102(c). I am not able to consider evidence of mitigation unless one or more of the enumerated aggravating factors listed in 42 C.F.R. § 1001.102(b) justifies an exclusion of longer than five years. 42 C.F.R. § 1001.102(c).
Petitioner argues that a mitigating factor in this case supports some tempering of any increase to his exclusion period, in that he executed a cooperation agreement and provided assistance to government officials. P. Ex. 2 (letter from the United States to the sentencing judge supporting a downward sentencing departure pursuant to section 5K1.1 of the United States Sentencing Guidelines). Pursuant to 42 C.F.R. § 1001.102(c)(3), Petitioner may demonstrate mitigation if his cooperation resulted in others being convicted or excluded from Medicare, Medicaid and all other federal health care
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programs; resulted in additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses; or resulted in a civil monetary penalty or assessment pursuant to 42 C.F.R. part 1003. The United States confirmed that Petitioner provided assistance to law enforcement, and it explained that his cooperation was the basis for the government’s support of a reduced sentence of incarceration. Although Petitioner provided substantial assistance for which he received the benefit of a reduced prison sentence, his cooperation does not meet any of the circumstances specified in section 1001.102(c)(3). In order to receive mitigation based on section 1001.102(c)(3), one need not just cooperate; the cooperation must produce specific results, which, unfortunately for many offenders, are outside of their control. While Petitioner could control the amount of cooperation he provided, he expectedly had little or no control over whether his cooperation would result in other convictions, exclusions, investigations, reports, civil monetary penalties or assessments. Thus, even if I were to determine that Petitioner provided extraordinary cooperation, I am nonetheless precluded from applying such cooperation as a mitigating factor unless it has yielded one of the specified results listed in section 1001.101(c)(3). The evidence of record fails to demonstrate that Petitioner’s cooperation resulted in any convictions or additional cases being investigated or that it led to any of the other outcomes listed in section 1001.101(c)(3). In fact, the evidence indicates that Petitioner provided additional information regarding an already ongoing investigation. P. Ex. 2 at 3 (“The information corroborated other evidence obtained during the investigation, but did not result in the prosecution of any individual.”); P. Ex. 2 at 4 (“At the time it was provided, the information related to a then-ongoing aspect of the overall BLS investigation.”). Although Petitioner’s cooperation is commendable, unfortunately, section 1001.102(c)(3) does not contemplate mitigation based on “truthful, complete, and reliable information” that “was corroborated by other evidence” in the absence of an enumerated outcome. P. Ex. 2 at 3-4. The federal criminal justice system rewarded Petitioner with a reduced sentence of incarceration based on his cooperation,12 but the IG, by regulation, rewards cooperation in very limited circumstances. 42 C.F.R. § 1001.102(c)(3).
The IG had informed Petitioner, in the letter dated November 30, 2018, that a 10-year exclusion was warranted based on consideration of three aggravating factors (one of which was based on 42 C.F.R. § 1001.102(b)(1) for financial loss) and no mitigating factors. IG Ex. 1 at 2. I have determined that two aggravating factors, and no mitigating factors, apply. The DAB has previously explained that a reduction in the length of the exclusion is warranted when an aggravating factor is not found, explaining:
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Gary Alan Katz, R.Ph., DAB No. 1842 (2002). In that case, the Board determined that an eight-year exclusion was reasonable when the IG proved two aggravating factors but did not prove a third aggravating factor. The Board reasoned that “an eight-year exclusion is reasonable, since it reduces the exclusion by two years, which is slightly more than one-third of the five-year extension as determined by the [IG] based on three aggravating factors.” Id. Applying the same rationale to the similar circumstance presented here in which one aggravating factor has not been upheld, an additional three years of exclusion, for a total of an eight-year exclusion, is warranted.
Petitioner committed a serious felony offense over a period of more than two years, for which he received a significant sentence of incarceration. However, the IG has not established that Petitioner caused or intended to cause a financial loss of $50,000 or more, and Petitioner has not established that his cooperation counters any lengthening of the mandatory period of exclusion. I conclude that the imposition of a minimum period of exclusion for eight years is reasonable. 42 C.F.R. § 1001.2007(a).
4. The effective date of Petitioner’s exclusion is December 20, 2018.
The effective date of the exclusion, December 20, 2018, is 20 days after the date of the IG’s November 30, 2018 letter and is established by regulation (42 C.F.R. § 1001.2002(b)); I am bound by that regulation. 42 C.F.R. § 1005.4(c)(1).
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V. Conclusion
For the foregoing reasons, an eight-year exclusion from participation in Medicare, Medicaid, and all other federal health care programs, effective December 20, 2018, is reasonable.
Leslie C. RogallAdministrative Law Judge
- 1. This case was reassigned to me on March 8, 2019.
- 2. My findings of fact and conclusions of law are set forth in italics and bold font.
- 3. While there are slight differences in the wording of Section 1128 of the Act and its codification at 42 U.S.C. § 1320a-7, the two authorities are substantively identical and I refer to them interchangeably. I further note that the Secretary of the Department of Health and Human Services (Secretary) has delegated to the IG the authority “to suspend or exclude certain health care practitioners and providers of health care services from participation in these programs.” 48 Fed. Reg. 21662 (May 13, 1983); see also 42 C.F.R. § 1005.1.
- 4. Petitioner waived indictment. IG Ex. 2 at 1.
- 5. Pursuant to 18 U.S.C. § 1952(a)(3)(A), Count 1 is a felony offense because the maximum period of incarceration is five years. See 18 U.S.C. § 3559(a) (classifying felonies as offenses punishable by more than one year of incarceration).
- 6. Pursuant to 18 U.S.C. § 981(a)(1)(C), “[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to a violation . . . of any offense constituting ‘specified unlawful activity’ . . . or a conspiracy to commit such an offense” is subject to forfeiture to the United States.
- 7. Pursuant to 28 U.S.C. § 2461(c), “[i]f the defendant is convicted of the offense giving rise to forfeiture, the court shall order the forfeiture of the property as part of the sentence . . . .”
- 8. On December 14, 2015, the United States confirmed that Petitioner satisfied the criminal forfeiture money judgment. IG Ex. 6 at 1.
- 9. Petitioner’s brief is not paginated and I refer to the section numbers listed therein.
- 10. I make no finding that Petitioner’s crime did not include making improper or medically unnecessary referrals in exchange for bribes from BLS. Rather, I find that the evidence before me simply does not make such a connection.
- 11. I am not bound by other ALJs’ decisions. Further, although the IG applied the financial loss aggravating factor in the Roussis case, I note that the IG did not apply the financial loss aggravating factor in the cases of other physicians who accepted bribes from BLS even though the forfeiture in their cases exceeded the amount of forfeiture in the instant case. See Bret Ostrager, DAB CR4950 (2017); Angelo D. Calabrese, M.D., DAB CR4657 (2016); see also George P. Roussis, DAB CR5242 at 11 (2019) (discussing that Dr. Ostrager and Dr. Calabrese each received 10-year exclusions based on three aggravating factors, and that financial loss was not one of those aggravating factors).
- 12. The District Court determined that the guideline sentencing range was 37 to 45 months based on a base offense level of 21. P. Ex. 3 at 8. Thus, Petitioner’s cooperation afforded him a 24-month sentence that was well below the advisory guidelines range. IG Ex. 5 at 2.
