Rachel E. Scott, DAB CR5687 (2020)

DECISION

Petitioner, Rachel E. Scott, is a licensed practical nurse, who worked at a nursing home in the State of Indiana.  She was charged with crimes (three felony counts and one misdemeanor count) connected to her handling of controlled substances that went missing from the nursing home.  She pled guilty to one misdemeanor count of recklessly, knowingly, or intentionally failing to make, keep, or furnish records of controlled substances.  Based on her conviction, the Inspector General (IG) has excluded her from participating in the Medicare, Medicaid, and all federal health care programs for a period of two years, pursuant to section 1128(b)(1) of the Social Security Act (Act). 

For the reasons discussed below, I find that the IG is authorized to exclude Petitioner and that the two-year exclusion is reasonable.

Background

In a letter dated January 31, 2020, the IG advised Petitioner Scott that, because she had been convicted of a misdemeanor offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of

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a healthcare item or service, the IG was excluding her from participating in Medicare, Medicaid, and all federal health care programs for a period of two years.  IG Ex. 1.  Petitioner requested review.

The parties have submitted their written arguments (IG Br.; P. Br.).  The IG also submitted five exhibits (IG Exs. 1-5) and a reply.  

In the absence of any objections, I admit into evidence IG Exs. 1-5. 

The parties agree that this case does not require an in-person hearing.  IG Br. at 13; P. Br. at 7.

Discussion

1. Petitioner Scott may be excluded from program participation because she was convicted of a misdemeanor offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service.1

Section 1128(b)(1) of the Act authorizes the Secretary of Health and Human Services to exclude from participating in all federal health care programs any individual or entity convicted of a misdemeanor offense “relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.”  See 42 C.F.R. § 1001.201(a).

Petitioner was a licensed practical nurse, working at an Indiana nursing home.  In that capacity, she was responsible for dispensing controlled substances.  Federal and state laws required her to keep complete and accurate records of the drugs dispensed to patients (number of units or volume, name and address of recipient, date, name or initials of person dispensing the drug).  21 U.S.C. § 827(a)(3); 21 C.F.R. §§ 1304.21, 1304.22; see Ind. Code § 35-48-3-7.  If she removed any controlled substance but did not actually give it to a patient, federal regulations required her to destroy the drug.  The destruction had to be witnessed by another staff member, and she was required to make a drug destruction record.  21 C.F.R. § 1317.95(d); see IG Ex. 2 at 1-2. 

On September 10, 2018, the nursing home’s executive director reported to the Indiana Office of the Attorney General that a significant amount of the drugs Norco (containing

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hydrocodone) and Percocet (containing oxycodone) was missing, and the loss was directly attributable to Petitioner Scott.  IG Ex. 2 at 2. 

A state investigation, which included reviews of the facility’s medication records and its audits of the missing medications, concluded that Petitioner Scott knowingly or intentionally:  1) failed to make, keep, or furnish the required records of her dispensing or administering controlled substances; 2) furnished false or fraudulent information in, or omitted material information from, a required report regarding her dispensing or administering controlled substances; 3) acquired possession of hydrocodone by “misrepresentation, fraud, forgery, deception, subterfuge, or concealment of a material fact,”; and 4) exerted “unauthorized control” over hydrocodone with the intent to deprive the nursing home of it.  IG Ex. 2 at 8. 

In an Information dated February 22, 2019, Petitioner was charged with three felony counts: 

1. Failing to make, keep, or furnish records, in violation of Ind. Code § 35‑48‑4‑14(a)(3); specifically, between August 1 and September 10, 2018, she “recklessly, knowingly, or intentionally” failed to make a record and/or an order form and/or information required by the state law;
2. Furnishing false or fraudulent information, in violation of Ind. Code § 35‑48‑4‑14(b)(3); specifically, between August 1 and September 10, 2018, she “knowingly or intentionally” omitted material information from a medication administration record; and
3. Obtaining a controlled substance by fraud or deceit, in violation of Ind. Code § 35‑48-4-14(c); specifically, between August 1 and September 10, 2018, she “knowingly or intentionally” acquired possession of a controlled substance, hydrocodone, by deception – she improperly removed the drug from a medical cart.

IG Ex. 3 at 1.  She was also charged with one misdemeanor count of theft; specifically, between August 1 and September 10, 2018, she “knowingly or intentionally” exerted unauthorized control over the nursing home’s property – medication and/or controlled substances – intending to deprive the nursing home of “any part of the use or value of the property.”  IG Ex. 3 at 1-2.  

On May 22, 2019, Petitioner signed a plea agreement and pled guilty to Count 1of the Information (failing to make, keep, or furnish records).  IG Ex. 4.  Under Indiana law, if a person is convicted of a level 6 felony, the court may enter judgment of conviction of a misdemeanor and sentence accordingly.  Ind. Code § 35-50-2-7.  The court did so,

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convicting Petitioner of a misdemeanor and sentencing her to 365 days in jail, followed by 360 days probation.  She was required to pay court costs.  IG Ex. 5.

Based on these underlying facts, it seems certain that Petitioner’s conviction was related to fraud and theft.  She knowingly failed to maintain the records required for monitoring controlled substances, and, based on the evidence in this record, she committed that crime in order to conceal the fact that she was diverting the narcotics, probably for her own use. 

Pointing out that the statutory subsection under which she was convicted does not require fraud or theft, Petitioner argues that, based on that provision, she simply made some “documentation errors.”  P. Br. at 2-3.  Although she concedes that “extrinsic evidence might be relevant,” she accuses the IG of “impermissible bootstrapping,” although she does not explain what she means by that term.  P. Br. at 4 (emphasis in original).2

Section 1128(b) recognizes that crimes do not occur in a vacuum, and criminals often plead guilty to non-specific crimes.  As I explained at length in Thomas B. Higgins, DAB CR3477 (2014), section 1128(b) does not require a conviction for fraud itself; the IG may exclude based on a conviction relating to fraud.  The statute “unambiguously authorizes . . . exclusion of an individual whose conviction is for conduct factually related to fraud.”  Friedman v. Sebelius, 686 F.3d 813, 820 (D.C. Cir. 2012) (emphasis added). 

The term “misdemeanor” [in section 1128(b)] refers to the particular circumstances of an individual’s conviction, and “relating to” must denote a factual relationship between the conduct underlying the misdemeanor and the conduct underlying a “fraud.”

Friedman, 686 F.3d at 821. 

In Higgins, I also listed a long line of Departmental Appeals Board cases rejecting efforts to limit section 1128 review to the elements of the criminal offense:  Narendra M. Patel, M.D., DAB No. 1736 at 7 (2000), aff’d sub nom, Patel v. Thompson, 319 F.3d 1317 (11th Cir. 2003); Timothy Wayne Hensley, DAB No. 2044 (2006); Scott D. Augustine, DAB No. 2043 (2006); Lyle Kai, R.Ph., DAB No. 1979 at 5 (2005), aff’d sub nom, Kai v. Leavitt, No. 05-00514 BMK (D. Haw. July 17, 2006); Berton Siegel, D.O., DAB No.

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1467 at 5 (1994); Carolyn Westin, DAB No. 1381 (1993), aff’d sub nom, Westin v. Shalala, 845 F. Supp. 1446 (D. Kan. 1994).  Higgins, DAB CR3477 at 5.

Thus, it is well-settled that I may consider the facts underlying Petitioner’s guilty plea.  And those facts include the disappearance of a significant quantity of narcotics, for which Petitioner was responsible:  103 5 mg tablets of Norco; 60 7.5 mg tablets of Norco; 25 5 mg tablets of Percocet; and 10 10 mg tablets of Percocet.  IG Ex. 2 at 2.  She was, by all accounts, a competent nurse, who had been trained to account for the narcotics she administered.  IG Ex. 2 at 6.  And she has not offered any credible explanation for her significant number of “recording errors” or for the missing drugs.  IG Ex. 2 at 7.  In fact, the only reasonable inference I can draw from the evidence before me is that Petitioner deliberately failed to maintain adequate narcotics records in order to hide the disappearance of all those drugs.  That’s fraud – or close enough to be considered “related” to fraud – whether she diverted the narcotics for her own use, gave them away, or just lost them.

Petitioner was thus convicted of a criminal offense relating to fraud in connection with the delivery of a health care item or service and may be excluded under section 1128(b)(1) of the Act. 

2. The two-year exclusion is reasonable. 

Having found a basis for the exclusion, I now consider whether a two-year exclusion falls within a reasonable range.  A permissive exclusion based on section 1128(b)(1) is for three years unless the Secretary determines, in accordance with published regulations, that a shorter period is appropriate because of mitigating circumstances or that a longer period is appropriate because of aggravating circumstances.  Act § 1128(c)(3)(D); 42 C.F.R. § 1001.201(b)(1).  So long as the period of exclusion is within a reasonable range, based on demonstrated criteria, I have no authority to change it.  Joann Fletcher Cash, DAB No. 1725 at 16-17 (citing 57 Fed. Reg. 3298, 3321 (1992)).

The IG did not increase the length of Petitioner’s exclusion based on any aggravating factor.3

The regulations consider mitigating the following factors:  1) a petitioner was convicted of three or fewer offenses, and the entire amount of financial loss due to the acts that resulted in the conviction and similar acts is less than $5,000; 2) the record in the criminal proceedings demonstrates that the court determined that the individual had a mental, emotional, or physical condition that reduced her culpability; 3) the individual’s

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cooperation with federal or state officials resulted in others being convicted or excluded, additional cases being investigated, reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or civil money penalties being imposed against others; and 4) alternative sources of the type of health care items or services furnished by the individual or entity are not available.  42 C.F.R. § 1001.201(b)(3).

Because Petitioner was convicted of fewer than three offenses and financial losses were less than $5,000, the IG decreased the length of the exclusion from three to two years.  This decrease seems more than reasonable.  No other mitigating circumstance justifies an additional decrease in the length of the exclusion. 

Conclusion

The IG was authorized to exclude Petitioner from participating in Medicare, Medicaid, and other federal health care programs, and no mitigating circumstance justifies shortening the length of the two-year exclusion.

• 1. My findings of fact/conclusions of law are set forth, in italics and bold, in the discussion captions of this decision.
• 2. Petitioner seems to engage in a modicum of “bootstrapping” herself.  She suggests that the dismissal of the fraud charges against her shows that the evidence of fraud was insufficient.  Prosecutors no doubt accept plea agreements for a wide variety of reasons, not necessarily because evidence of the crimes charged is insufficient.  In any event, to sustain the exclusion, I need not find her guilty of fraud; rather, I must find that her offense related to fraud.
• 3. Because the sentence imposed by the court included incarceration, the IG might have found an aggravating circumstance.  42 C.F.R. § 1001.201(b)(iv); see Stacy Ann Battle, D.D.S., DAB No. 1843 (2002).