Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Louis Mathews,
Petitioner,
- v. -
The Inspector General.
DATE: May 8, 1996
Docket No. C-95-104
Decision No. 1574
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION
Louis Mathews, Petitioner, appealed the decision of
Joseph K. Riotto, Administrative Law Judge (ALJ),
upholding his three-year exclusion from participation in
Medicare and certain state health care programs. 1/
Louis Mathews, DAB CR403 (1995) (ALJ Decision). The ALJ
found that Petitioner had been convicted of one criminal
misdemeanor relating to the unlawful prescription or
dispensing of a controlled substance under California
state law. The ALJ upheld the Inspector General's
(I.G.'s) exclusion of Petitioner based on section
1128(b)(3) of the Social Security Act (42 U.S.C. 1320a-
7(b)(3)). The ALJ also upheld the length of the
exclusion imposed by the I.G., finding that the "record
in this case does not support the presence of any of the
mitigating factors." ALJ Decision at 5.
As explained below, we remand this case to the ALJ for
further consideration of the issue of whether Petitioner
can establish the existence of a mitigating factor under
42 C.F.R. 1001.401(c)(3)(i)(A). We conclude, pursuant
to 42 C.F.R. 1005.21(f), that relevant and material
evidence concerning this factor was not presented before
the ALJ and that there were reasonable grounds for
Petitioner's failure to adduce this evidence.
We affirm the ALJ Decision on all other matters.
APPLICABLE LAW
Petitioner was excluded from participating in Medicaid
for three years under section 1128(b)(3) of the Act.
That section provides--
(b) The Secretary may exclude the following
individuals . . .
* * *
(3) CONVICTION RELATING TO CONTROLLED
SUBSTANCE.--Any individual or entity that has been
convicted, under Federal or State law, of a criminal
offense relating to the unlawful manufacture,
distribution, prescription, or dispensing of a
controlled substance.
The regulations governing section 1128(b)(3) exclusions
provide that such an exclusion "will be for a period of 3
years, unless aggravating or mitigating factors . . .
form a basis for lengthening or shortening that period."
42 C.F.R. 1001.401(c)(1). The mitigating factor which
is relevant to this case is set forth at 42 C.F.R.
1001.401(c)(3)(i)(A). It provides that the three-year
period may be shortened if--
(i) The individual's or entity's cooperation
with Federal or State officials resulted in--
(A) Others being convicted or excluded from
Medicare or any of the State health care programs
. . . .
PETITIONER'S EXCEPTIONS
In his appeal to the Departmental Appeals Board (Board or
DAB), Petitioner did not take specific exception to any
of the ALJ's findings of fact and conclusions of law
(FFCLs). Rather, Petitioner alleged that he had
"additional information" related to a mitigating
circumstance. Petitioner's Brief at 1. He went on to
set forth information related to his cooperation with
State officials which, he represented, led to the
conviction of another. Based on this portion of Petitioner's Brief, we conclude
that Petitioner is
excepting to the following FFCLs:
22. The record in this case does not support the
presence of any of the mitigating factors.
23. Petitioner was properly excluded for a period of
three years pursuant to section 1128(b)(3).
24. There is no basis for either increasing or
decreasing Petitioner's three-year exclusion.
27. Petitioner was properly excluded for three
years, pursuant to section 1128(b)(3) of the
Act.
ALJ Decision at 5 (citations omitted). 2/
Since Petitioner did not take exception in this appeal to
the remaining FFCLs, we affirm the remaining FFCLs with
the exception of FFCL 13. FFCL 13 appears to contain a
typographical error. That FFCL provides that an
aggravating factor can be that an individual's acts have
had "significant adverse . . . impact on program
beneficiaries or other individuals in the Medicare or
State health care programs." ALJ Decision at 4. The
language of 42 C.F.R. 1001.401(c)(2)(ii), on which this
FFCL relies, provides that the impact be on
"beneficiaries or other individuals or the Medicare or
State health care programs." (Emphasis added).
BACKGROUND
At all times relevant to this exclusion, Petitioner was a
Physician Assistant licensed in the State of California.
3/ In July 1994, Petitioner was convicted in the
Superior Court of California of one misdemeanor count of
prescribing, on March 3, 1993, a controlled substance
(codeine) without a medical purpose. 4/
In December 1994, the I.G. wrote Petitioner that, based
on his conviction, the Department of Health and Human
Services was considering excluding him from participation
in Medicaid pursuant to section 1128(b) of the Act. The
letter did not cite section 1128(b)(3) or the regulations
implementing section 1128(b)(3) exclusions. The letter
gave Petitioner 30 days to "provide any information which
you want the Office of Inspector General to consider . .
." in its decision of whether to exclude him. Petitioner
responded to the I.G.'s letter on January 17, 1994 but
the record does not establish what material Petitioner
submitted to the I.G. Petitioner Ex. 6.
On February 3, 1995, the I.G. wrote Petitioner that he
had been excluded from Medicaid for a period of five
years pursuant to section 1128(a)(1). The letter stated
that the I.G. had considered the information Petitioner
had submitted. The letter informed Petitioner that
Your period of exclusion was arrived at by taking
into consideration the fact that you were convicted
of a criminal offense related to the delivery of a
health care item or service, and the fact that our
records do not contain evidence of any aggravating
circumstance. Therefore, as required by section
1128(c)(3)(B) of the Act, your exclusion period will
be for the statutory 5-year period.
I.G. Letter dated February 3, 1995.
As the I.G. subsequently admitted, this letter
erroneously stated the basis for Petitioner's exclusion
as section 1128(a)(1) and erroneously imposed a mandatory
minimum exclusion under section 1128(a) of five years.
Because of these errors, Petitioner was not informed in
his exclusion notice that his exclusion was pursuant to
section 1128(b)(3) or that, under 42 C.F.R 1001.401(c),
certain aggravating and mitigating factors applied to
section 1128(b)(3) exclusions.
Pursuant to the instructions in the I.G.'s February 3,
1995 letter, Petitioner appealed his exclusion to the
Civil Remedies Division of the Board. On April 4, 1995,
the ALJ issued an Order and Notice of Prehearing
Conference. It stated that at the conference the ALJ
would discuss with the parties "how this case should
proceed" and provided that--
[f]or example, one way would be to submit briefs
supported by exhibit evidence. If there is no
genuine issue of material fact, this would allow me
to decide the case after considering the parties'
arguments, without an in-person hearing.
ALJ Order at 1-2. (Emphasis added). The ALJ went on to
inform the parties that if it was appropriate to have an
in-person hearing, they would discuss such matters as
scheduling, access to documents, witnesses, subpoenas,
etc.
After the April 21, 1995 prehearing conference, the ALJ
issued an order describing the conference. That order
provided as follows--
o At the conference, counsel for the I.G. stated
that the exclusion notice sent to Petitioner
incorrectly informed him that he had been
excluded pursuant to section 1128(a)(1).
Counsel requested leave to amend the notice or
issue a new notice.
o Petitioner consented to the amendment of the
notice of exclusion. Accordingly, the ALJ
directed the I.G. to file an amended notice
pursuant to section 1128(b)(3).
o At the conclusion of the ALJ's summary of the
parties' statements about the case, the ALJ
stated: "The parties agreed that there are no
genuine issues of material fact which would need
to be resolved by an in-person hearing. Thus, I have set up a schedule for the
parties to file
briefs supported by documentary evidence."
Order at 2.
On May 10, 1995, the I.G. sent Petitioner an exclusion
notice pursuant to section 1128(b)(3) which stated that
Petitioner's three-year exclusion period was arrived at
by taking into account "the fact that our records do not
contain evidence of any aggravating or mitigating
circumstances. See 42 C.F.R. 1001.401(c)." IG Ex. 6.,
at 2. On May 30, 1995, the I.G. filed his brief in this
case in which he discussed what can constitute a
mitigating factor under 42 C.F.R. 1001.401(c)(3)(i)(A).
On August 26, 1995, Petitioner filed a three-page brief.
In that brief he identified as "disputed material facts"
the following statement: "[P]etitioner state[s] that
petitioner qualified under that ruling due to a telephone
conversation with the IG offices in San Diego California
in 1990 which led to the arrest and conviction of a M.G."
Petitioner's Brief at 2-3. (Initials substituted for name
of doctor.)
On September 18, 1995, the I.G. filed a reply brief. The
I.G. argued that Petitioner had not met his burden of
proof as to the existence of a mitigating factor. The
I.G. also argued that, since the alleged mitigating
conduct had occurred years before the Petitioner's
criminal conduct, it could not be considered a mitigating
factor.
On November 24, 1995, the ALJ issued a decision upholding
Petitioner's exclusion. As his basis for the summary
disposition, the ALJ wrote--
As the parties have agreed that there are no facts
of decisional significance genuinely in dispute in
this case, and that the only matters to be decided
are the legal implications of the undisputed facts,
the parties wished to proceed by filing briefs and
exhibits and I have decided this case on the basis
of the parties' submissions.
ALJ Decision at 2.
In the decision, the ALJ articulated two reasons for
finding that were no mitigating factors in this case.
First, the ALJ rejected Petitioner's assertion that his
cooperation led to the conviction of another individual
because "[t]here is nothing in the record other than
Petitioner's assertion to support that Petitioner's
cooperation with the I.G.'s office led to the arrest and
conviction of another individual." FFCL 21, ALJ Decision
at 5. The ALJ reasoned Petitioner failed to carry his
burden of proof because he did not "offer proof of his
allegation." ALJ Decision at 8. Second, the ALJ
concluded that, even if Petitioner's allegation was
accepted as true, it was irrelevant because Petitioner
failed to establish that it was "in any way related to
the events in this case." Id.
ANALYSIS
We have a limited role in reviewing ALJ decisions in
exclusion cases. The applicable standard of review on
disputed issues of fact is whether the ALJ Decision is
supported by substantial evidence on the record as a
whole. The applicable standard of review on disputed
issues of law is whether the ALJ Decision is erroneous.
42 C.F.R. 1005.21(h); see also Wesley Hal Livingston
and Shoals Medical Equipment and Supply Co., Inc., DAB
1406, at 7 (1993); Lakshmi N. Murty Achalla, DAB 1231, at
7 (1991); Joyce Faye Hughey, DAB 1221, at 11 (1990).
In reviewing an ALJ decision, we may decline to review
the case, or may affirm, increase, reduce, reverse or
remand any exclusion determined by the ALJ. 42 C.F.R.
1005.21(g). As to remanding a case to an ALJ, 42 C.F.R.
1005.21(f) provides:
If any party demonstrates to the satisfaction of the
DAB that additional evidence not presented at such
hearing is relevant and material and that there were
reasonable grounds for the failure to adduce such
evidence at such hearing, the DAB may remand the
matter to the ALJ for consideration of such
additional evidence.
For the reasons explained below, we conclude that
Petitioner's brief before the Board establishes the
possibility that he could present additional relevant and
material evidence as to a disputed material fact. We
further conclude that there are reasonable grounds for
Petitioner's failure to adduce this evidence during the
proceedings before the ALJ. Below, we first discuss why
we conclude that there are reasonable grounds for
Petitioner's failure to adduce the evidence, and then we
discuss why we conclude that the evidence is relevant and
material.
The ALJ's summary disposition of this case was based on
his reliance on the parties' agreement "that there are no
facts of decisional significance genuinely in dispute in
this case, and that the only matters to be decided are
the legal implications of the undisputed facts . . . ."
ALJ Decision at 2. However, Petitioner's "agreement" in
the prehearing conference as to the absence of disputed
material facts was based on inadequate and erroneous
information communicated to him by the I.G. prior to the
prehearing conference. Specifically--
o The I.G.'s initial notice of a proposed
permissive exclusion did not cite the subsection
of section 1128(b) that was the basis for
Petitioner's exclusion and did not give
Petitioner any indication of the type of
information that the I.G. would consider
relevant in determining whether to exclude him.
The notice also failed to inform Petitioner that
his cooperation with a state or federal official
in the conviction or exclusion of another could
be a mitigating factor. Therefore, Petitioner
was not informed that his cooperation in the
conviction or exclusion of another was relevant
to the I.G.'s consideration of whether to
exclude him and to the length of his exclusion.
5/
o Subsequently, the I.G. erroneously notified
Petitioner that he was being excluded under
section 1128(a)(1) and erroneously imposed an
exclusion of five years. This error resulted in
Petitioner's not being informed of the relevance of possible mitigating factors
since mitigating
factors do not apply to mandatory minimum
exclusions under section 1128(a)(1).
o At the time the ALJ conducted the prehearing
conference, the I.G. had not yet corrected its
erroneous exclusion notice. Therefore, at the
time Petitioner agreed with the ALJ and the I.G.
that there were no disputed material facts, the
I.G. had failed to give him appropriate written
notice of the section of 1128(b) pursuant to
which he was being excluded or of the factors
which would be used in determining an exclusion
under section 1128(b)(3).
o The amended notice of exclusion issued by the
I.G. after the prehearing conference correctly
cited section 1128(b)(3) and stated that the
three-year exclusion was "arrived at" by the
absence of "evidence of any aggravating or
mitigating circumstances. See 42 C.F.R.
1001.401(c)." I.G. Ex. 6, at 2. However, there
is no indication in the record as to the basis
of the I.G.'s evaluation of this case under the
proper standard. There is certainly no
indication that the I.G. gave Petitioner an
informed opportunity to present mitigating
evidence or had otherwise attempted to develop
mitigating circumstances.
o The first time the I.G. actually informed
Petitioner of what constituted a mitigating
factor was after the prehearing conference when
the I.G. filed his brief in this case. In the
brief, the I.G. quoted the text of 42 C.F.R.
1001.401(c)(3).
After receiving the I.G.'s brief discussing the fact that
cooperation in the conviction of another could be a
mitigating factor, Petitioner alleged in his brief the
existence of "disputed material facts" and went on to
describe, albeit in a summary and nonspecific manner,
such facts. Petitioner's Brief at 1.
Both ALJ decisions and Board decisions have recognized
that, in order to ensure that an exclusion or civil money
penalties proceeding is "fair and impartial" (42 C.F.R
1005.4(a)), pro se petitioners should be accorded some
extra measure of consideration in developing a complete
record. 6/
Given the I.G.'s prior treatment of Petitioner's
exclusion and Petitioner's subsequent proffer of evidence
once the I.G. corrected its notice and explained the
ramifications of the revised exclusion, we conclude that
the ALJ could no longer rely on Petitioner's prior
agreement that there were no disputed material facts at
issue. Petitioner's brief clearly raises a disputed
material fact that Petitioner could not have known would
be relevant to his exclusion at the time he agreed that
there were no disputed material facts. Once Petitioner
raised a disputed issue of material fact, it was
incumbent on the ALJ to conduct, at a minimum, further
proceedings to consider what evidence Petitioner was
offering and how Petitioner's evidence could be
introduced into the record. The ALJ's failure to conduct
such further proceedings constitutes reasonable grounds
for Petitioner's failure to adduce this evidence.
Additionally, we conclude that evidence as to
Petitioner's cooperation in the conviction of another is
relevant and material for the following reasons. First,
42 C.F.R. 1001.401(c)(3)(i)(A) sets forth cooperation
in the conviction of another as a mitigating factor in a
section 1123(b)(3) exclusion. In his statement before
the ALJ and in his appeal to the Board, Petitioner is
clearly trying to reduce the length of his exclusion
pursuant to this factor. In his appeal to the Board,
Petitioner expanded upon his description of his
mitigating conduct as follows--
On are about September, 21, 1991 the State of
California Department Of Health And Human Services
Medical Review Unit located in the state of
California at 8885 Rio San Diego Drive suit #300,
San Diego, California 92108-1625 conducted a medical
review, this was led by Dr. John Peters, who at the
time was looking to obtain information on the Temple
Medical Clinic located in the city of Long Beach,
California and Dr. M.G. A telephone call from Dr.
peters to the Temple Medical Clinic which state that
he was conduction an audit and needed information as
to the where about of Dr. M.G. At that time
Petitioner gave information to Dr. Peters to the
location of Dr. M.G. medical office located at724 E.
Foothill Blvd., in the city of Rialto, California, a
personal telephone number, attained 30 medical
record for review and negotiated a call from Dr.
M.G. to Dr. John Peters.
Petitioner will show that the address of
investigation and the address of Petitioner arrest,
724 E. Foothill Blvd. Rialto, California 92376 are
one of the same, and that the investigation was
ongoing prior to petitioner employment. Although
Dr. M.G. had left that location and the name was
change from St. John's Medical Clinic to Foothill
Medical Clinic Under the supervision of Dr. M.D.,
the investigation was a result of the September, 21,
1991 review.
Petitioner Brief at 2. (Errors in original; initials
substituted for names of doctors under investigation.)
This type of evidence on its face appears to be relevant
and material to whether a mitigating factor exists under
42 C.F.R. 1001.401(3)(c)(i)(A). The ALJ nevertheless
concluded that Petitioner's allegation of cooperation as
described in his brief before the ALJ would not be
relevant because Petitioner "failed to establish that his
allegation, even if true, is in any way related to the
events of this case." ALJ Decision at 8.
If the facts, as developed on remand, establish that
Petitioner's cooperation was related to the events
underlying his exclusion, the ALJ will not have to
address the issue of whether the mitigating cooperation
must be related to the events of the exclusion. However,
if on remand the ALJ is required to address the issue of
relatedness, we question whether such a narrow
interpretation of the regulation is required in light of
the following considerations--
o The plain language of 42 C.F.R.
1001.401(c)(3)(i)(A) does not require that the
mitigating cooperation be related to the events
underlying the exclusion at issue.
o The preamble to 42 C.F.R. 1001.401(c)(3)(i)(A)
did not indicate that the mitigating cooperation
must be related to the events underlying the
exclusion at issue. 57 Fed. Reg. 3298, 3314-
3316 (Jan. 29, 1992).
o While the ALJ did not cite any authority in
support of his construction of 42 C.F.R.
1001.401(c)(3)(i)(A), in his brief the I.G.
cited Scott Gladstone, M.D., DAB CR331 (1994).
In that case, a doctor was excluded under
section 1128(a)(1) for 10 years. The doctor
tried to mitigate by submitting a newspaper
article about the indictment of his former
accountant for the theft of two of the doctor's
checks. The ALJ excluded the exhibit on the
grounds that it was irrelevant because the
indictment of the accountant "has no connection
to Petitioner's Medicaid conviction or to
Medicare or any State health care program." DAB
CR331, at 3. This decision states a broader
rule than that used by the ALJ herein and does
not discuss the absence of a relatedness
requirement in the plain language of the
relevant mitigation regulation.
o As we have repeatedly held, the purpose of an
exclusion is to protect federal programs and
beneficiaries from untrustworthy individuals.
Frances Shaenboen, R.Ph., DAB 1249 (1991);
DeWayne Franzen, DAB 1165 (1990). To the extent
that cooperation in the conviction of another is
an indicia of trustworthiness or of lessened
culpability, such cooperation could reasonably
be considered to be consistent with this
purpose.
CONCLUSION
We remand this case to the ALJ for further proceedings
concerning whether Petitioner could present additional
material and relevant evidence which could establish the
existence of a mitigating factor under 42 C.F.R.
1001.401(c)(3)(i)(A).
__________________________
M. Terry Johnson
___________________________
Cecilia Sparks Ford
___________________________
Donald F. Garrett
Presiding Board
1. "State health care program" is defined in section
1128(h) of the Act and includes the Medicaid program
under Title XIX of the Act. Unless the context indicates
otherwise, we use the term "Medicaid" here to refer to
all programs listed in section 1128(h).
2. Depending on the results of the remand,
Petitioner's exceptions may also require modification of
FFCL 21. FFCL 21 provides that--
21. There is nothing in the record other than
Petitioner's assertion to support that
Petitioner's cooperation with the I.G.'s office
led to the arrest and conviction of another
individual.
3. This discussion of the proceedings before the ALJ
is not intended to modify or reverse any findings or
conclusions of the ALJ.
4. In the proceeding before the ALJ, the Petitioner
attempted to collaterally attack his conviction by
introducing evidence that he had performed a "physical
examination appropriate to the presenting complaint" and
"the findings in the medical record made the prescription
of the Robitussin A/C (Codeine) appropriate." Petitioner
Ex. 3, Letter from Program Director of Physician
Assistant Program, School of Medicine, University of
Southern California. Petitioner also alleged that the
California Attorney General's Office had agreed not to
initiate administrative proceedings against Petitioner
and the I.G.'s exclusion was a violation of this
agreement. The ALJ properly ruled that the circumstances
of Petitioner's conviction and any agreement he had with
the state prosecuting officers were not relevant to this
exclusion proceeding. Peter J. Edmonson, DAB 1330
(1992); Anthony Accaputo, Jr., DAB 1416 (1993).
5. Petitioner described his contact with the I.G.'s
office in regards to this initial notice as follows:
On December 13, 1994 petitioner was notified that
petitioner was being excluded stating in part that
petitioner had 30 days to send in any information
which you want the office of Inspector General (OIG)
to () consider prior to its determining or not to
exclude you from program participation. a call to
the IG offices, Vicki Shepard, in December
petitioner was told that the exclusion was automatic
and that petitioner could due to avoid the
exclusion, and was told not to work under the
Medicare programs.
Petitioner's Brief at 2. (Errors in original).
6. See Timothy L. Stern, M.D., DAB 1314, at 15 (1992)
("Any reading of the transcript of the hearing will show
that the ALJ exhibited an inordinate amount of patience
and forbearance toward Respondent . . . . The ALJ was
clearly aware of Respondent's pro se status and made
every effort to ensure that Respondent received a full
and fair opportunity to present his case."); George
Iturralde, M.D., DAB 1374, at 13 (1992); Edward J.
Petrus, Jr., M.D., DAB 1264, at 26 (1991); George
Iturralde, M.D., DAB CR218, at 12 (1992) ("Given that he
lacked the assistance of counsel, I [the ALJ] gave him
wide latitude in challenging the reasonableness of the
I.G.'s exclusion.); Robert L. Alexander, M.D., DAB CR244,
at 12 (1992).