Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
The Inspector General
- v. -
Wesley Hal Livingston and
Shoals Medical Equipment and Supply Co., Inc.,
Respondents.
DATE: April 19, 1993
Docket No. C-92-381
Decision No. 1406
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE
DECISION
Wesley Hal Livingston (Respondent Livingston) and Shoals Medical
Equipment
and Supply Co., Inc. (Respondent Shoals) appealed a November
9, 1992 decision
by Administrative Law Judge (ALJ) Steven T. Kessel.
See Wesley Hal Livingston
and Shoals Medical Equipment and Supply Co.,
Inc., DAB CR240 (1992) (ALJ
Decision). The ALJ Decision modified the
Inspector General's (I.G.'s)
determination to impose assessments against
Respondents of $97,437.60 and
penalties of $304,000.00, jointly and
severally, under section 1128A(a) of
the Social Security Act (Act); the
ALJ instead imposed assessments of
$85,000.00 and penalties of
$300,000.00, jointly and severally. The ALJ
Decision also affirmed a
determination by the I.G. to exclude Respondents
from participation in
Medicare and to direct their exclusion from state
health care programs
for five years. ALJ Decision (Dec.) at 2, 3.
In support of his
decision, the ALJ made 287 numbered findings of fact and
conclusions of
law (FFCLs).
We reverse the ALJ Decision in part and affirm in part. Below, we
first
provide a summary of our decision. We then set out the
applicable
statutory and regulatory provisions and the relevant, undisputed
facts.
Next, we summarize the ALJ Decision and Respondents' exceptions to
that
decision. Finally, we analyze each of the issues on appeal.
The
detailed FFCLs, as affirmed or as modified in our decision, are set
out
in an Appendix to this decision.
SUMMARY OF OUR DECISION
In this case, the I.G. sought to prove that Respondent Shoals,
a
corporation supplying durable medical equipment, and
Respondent
Livingston, Shoals' president, knew of fraud perpetrated by
their
independent contractors and, indeed, had conspired with the
independent
contractors. The ALJ found that the I.G.'s witnesses were
not credible
and, consequently, that he could not find that Respondents knew
of the
fraud. The ALJ nonetheless concluded that Respondents were
liable under
the Act because they had reason to know and should have known
that 173
claims they presented or caused to be presented to Medicare for
oxygen
equipment were false, fraudulent, and for items or services not
provided
as claimed. The ALJ also concluded that the independent
contractors
were agents of Respondent Shoals, that Respondent Shoals was the
agent
of Respondent Livingston, and that both Respondents were
therefore
liable under a provision of the Act making a principal liable
for
certain acts of an agent.
Respondents challenged these conclusions on a number of bases,
including
that the factual findings were not supported by substantial
evidence in
the record and that the ALJ had not applied proper legal
standards, but
had held Respondents to a strict liability standard.
Respondents also
challenged the ALJ's determination about the sanctions to be
imposed and
raised a number of legal issues about the statutory provisions
and the
procedures applied.
We conclude that, while the ALJ clearly intended to apply the proper
legal
standard for reason to know and should know liability under the
Act, the ALJ
erred in applying these standards here. In general, the
ALJ erred
by--
o Finding that certain information placed Respondents on notice of
the
fraud when that information was not sufficient information from which
to
infer the existence or likelihood of fraud;
o Basing his conclusions on certain duties he found Respondents
had,
without making adequate findings on what a reasonable supplier
with
those duties would have done which Respondents did not do and
which
would have prevented or detected the specific fraud at issue;
o Failing to place the burden on the I.G. to show liability by
a
preponderance of the evidence;
o Basing findings on evidence which does not support those
findings;
and
o Failing to consider all of the evidence in the record.
Thus, we reverse the ALJ's conclusions that Respondents had reason to
know
and should have known that the 173 claims were false, fraudulent,
and for
items or services not provided as claimed.
We nonetheless conclude that Respondent Shoals is liable under the
Act
since we affirm the ALJ's conclusion that Respondent Shoals is
liable
for actions of Shoals' independent contractors, whom the ALJ
correctly
determined were Shoals' agents acting within the scope of their
agency.
We reverse the ALJ's conclusion that Respondent Livingston is liable
as
the principal of Respondent Shoals, since this conclusion is
supported
neither by the proper legal analysis nor by the record.
In addition, we do the following:
o Modify the ALJ's findings concerning aggravating and
mitigating
factors relevant to determining the amount of the penalties and
the
length of the exclusion;
o Reduce the sanctions imposed on Respondent Shoals;
o Reject the remaining legal arguments raised by Respondents.
BACKGROUND
Statutes and Regulations
Since enactment of the Omnibus Budget Reconciliation Act of 1987
(1987
OBRA), section 1128A(a)(1) of the Act has provided, in pertinent
part,
that any person or entity that presents or causes to be presented
a
claim which --
(A) is for a medical or other item or service that the
person
knows or should know was not provided as claimed, [or]
(B) is
for a medical or other item or service and the person
knows or
should know the claim is false or fraudulent
shall be subject to civil monetary penalties of up to $2,000 for each
item
or service wrongly claimed and an assessment of up to twice the
amount
claimed. Prior to 1987 OBRA, section 1128A(a) contained the
phrase
"knows or has reason to know" rather than "knows or should know"
and imposed
liability for claims for items or services "not provided as
claimed," with no
specific mention of false or fraudulent claims. 1/
See generally H.R. Rep.
No. 391, 100th Cong., 1st Sess. 533-534 (1987),
reprinted in 1987
U.S.C.C.A.N. 2313-353 and -354 (1987 House Report); S.
Rep. No. 109, 100th
Cong., 1st Sess. 14-17 (1987), reprinted in 1987
U.S.C.C.A.N. 695-696 (1987
Senate Report); H.R. Conf. Rep. No. 495,
100th Cong., 1st Sess. 755-761;
reprinted in 1987 U.S.C.C.A.N. 2313-1501
through -1507 (1987 Conference
Report).
Section 1128A(a) of the Act provides that a person or entity liable
under
the Act may also be excluded from participating in Medicare and
state health
care programs. Section 1128A(l), added in 1988, provides
that a
principal is liable for penalties, assessments, and an exclusion
for the
actions of the principal's agent acting within the scope of the
agency.
The ALJ determined that the decision to impose assessments, penalties,
and
exclusions in this case is governed by regulations at 42 C.F.R. ..
1003.100
through 1003.133, as in effect prior to January 29, 1992. ALJ
Dec. at
35 (FFCL 258). 2/ Section 1003.106 provides criteria and
guidelines for
determining the extent of sanctions within the statutory
framework which
should be applied to a particular provider. The
criteria and guidelines
are not binding on the ALJ. 42 C.F.R. .
1003.106(d). The criteria
which the ALJ is to consider in determining
sanctions under both the statute
and the regulations include the nature
and circumstances surrounding
submission of the claims in question, the
degree of culpability of the person
submitting the claim, the history of
prior offenses, the financial condition
of the person or entity, and
such other matters as justice may require.
Section 1128A(d) of the Act;
42 C.F.R. . 1003.106(a). The ALJ may admit
evidence which is relevant
and material. 42 C.F.R. . 1003.118(e).
If there are substantial
mitigating factors, the aggregate amount of the
assessment and penalties
should be set at an amount sufficiently below the
maximum permitted by
the law. If there are substantial aggravating
factors, the aggregate
amount of the assessment and penalties should be set
at an amount close
to or at the maximum. The regulation further
provides that unless there
are extraordinary mitigating circumstances, the
aggregate amount of the
penalties and assessment should be not less than
double the approximate
amount of damages sustained by the United
States. 42 C.F.R. .
1003.106(c).
Under the regulations, the I.G. has the burden of proving liability by
a
preponderance of the evidence. The I.G. also has the burden of
proving
aggravating factors, and Respondents have the burden of
proving
mitigating factors. 42 C.F.R. . 1003.114 (1986); see also 42
C.F.R. .
1005.15 (1992).
Case History
The following facts are not in dispute, and we summarize them here
solely
to provide background information necessary to understanding our
decision.
3/
Respondent Livingston, a respiratory therapist by training and
experience,
incorporated in 1983 a durable medical equipment (DME)
business with its
principal place of business in Alabama. That
business, which is
Respondent Shoals, provided home oxygen rental
equipment to patients with
respiratory difficulties. Respondent
Livingston was the President of
Shoals.
Respondent Shoals did business in part through independent
contractors.
Shoals contracted with a number of respiratory therapists who
were
employed by various hospitals and who obtained referrals of patients
who
would be needing home oxygen equipment. Respondent Shoals agreed to
pay
each independent contractor a commission, which ranged from $25 to
$80
per month, depending on the rental fee for the equipment rented.
The
independent contractors agreed to obtain documents necessary to
qualify
Medicare beneficiaries for Medicare reimbursement, including
a
certification form executed by a physician showing the medical
necessity
of the equipment ("DME Certification form"), arterial blood gas
studies
(ABGs), and equipment rental agreements executed by beneficiaries or
by
other persons on behalf of beneficiaries. While the requirements
for
tests showing medical necessity varied during the time Respondent
Shoals
was doing business, the two tests used by Shoals consisted of ABGs
and
an ear oximetry test. The Medicare carrier to which the claims
were
presented was Blue Cross and Blue Shield of Alabama (BCBSA). 4/
On April 19, 1991, the I.G. notified Respondents that he intended
to
impose civil monetary penalties, assessments, and exclusions
against
them pursuant to section 1128A of the Act. The I.G. based
these
sanctions on the grounds that Respondents had filed claims for
Medicare
reimbursement which they knew or should have known were
false,
fraudulent, or for items or services which were not provided as
claimed.
Specifically, the I.G. alleged that Respondents had conspired with
their
independent contractors who had engaged in fraud with respect to
183
claims. Respondents requested a hearing on the merits.
The ALJ found that the I.G. did not prove liability with respect to 10
of
the 183 claims, but did prove liability for 173 claims. The ALJ
found
that Respondent Shoals had presented and Respondent Livingston had
caused to
be presented each of these 173 claims. ALJ Dec. at 11-27
(FFCLs 65, 66,
80, 81, 95, 96, 109, 110, 121, 122, 135, 136, 156, 157,
173, 174, 184, 185,
and 196). The ALJ found that independent
contractors had perpetrated
fraud with respect to each of these claims,
either by falsifying ABGs, by
forging a physician's signature on a DME
Certification form, or by
misrepresenting that equipment was placed with
or was being used by a patient
when in fact it was not. The ALJ held
that the I.G. did not prove that
Respondents knew that the independent
contractors falsified ABG results and
forged and falsified DME forms.
ALJ Dec. at 2, 33 (FFCL 244), 46-53.
However, the ALJ determined that
Respondents had reason to know and should
have known of the fraud
relating to the 173 claims at issue. Id. at 2,
34 (FFCLs 253, 254),
53-58.
The ALJ also found that the independent contractors were the agents
of
Respondent Shoals and were working within the scope of the
agency
relationship when the fraud was committed; therefore, he concluded
that
Shoals was liable under the principal-agent liability provision
of
section 1128A(l). ALJ Dec. at 11, 32-34 (FFCLs 63, 241,
255).
Additionally, the ALJ found that Respondent Shoals was the agent
of
Respondent Livingston, and that, therefore, Livingston was also
liable
under section 1128A(l). ALJ Dec. at 5-6 (FFCLs 21-25).
In determining the amount of the assessments, penalties, and exclusion
to
be imposed, the ALJ made findings concerning aggravating and
mitigating
factors. Among other things, the ALJ considered it an
aggravating
factor that claims in addition to the 173 claims were also
fraudulent.
The I.G. did not allege liability based on these claims
because the six-year
statute of limitations in section 1128A(c) of the
Act had expired.
(Below, we refer to these claims as "expired" claims,
as Respondents
did.)
The Issues Before the Board
We have a limited role as the forum for administrative review of an
ALJ's
decision in a CMPL case. The standard of review on disputed
issues of
fact is whether the ALJ Decision is supported by substantial
evidence in the
record. The standard of review on disputed issues of
law is whether the
ALJ Decision is erroneous. See 42 C.F.R. .
1005.21(h) (1992);
Joyce Faye Hughey, DAB 1221, at 11 (1990); Lakshmi
N. Murty Achalla,
DAB 1231, at 7 (1991).
Respondents conceded that fraudulent acts occurred, and there
is
substantial evidence supporting the ALJ's findings regarding the
fraud.
R. Br. at 3-4. The major issue before the Board is whether the
ALJ
erred in determining that Respondents had reason to know and should
have
known that the 173 claims were false, fraudulent, and for items
or
services not provided as claimed. 5/ Respondents alleged that the
ALJ
had applied an improper legal standard, that his findings were
not
supported by substantial evidence in the record, and that he had
failed
to consider all of the evidence. .In addition, Respondents'
exceptions
raised the following issues:
Whether the ALJ erred in applying principles
of
principal-agent liability under section 1128A(l) of
the
Act;
Whether the ALJ erred in admitting evidence
regarding
claims that were barred by the statute of
limitations;
Whether the ALJ erred in finding substantial
aggravating
factors and a total lack of mitigating factors;
and
Whether the CMPL as applied to Respondents
violated
Respondents' constitutional rights to due process
and
against double jeopardy on the grounds that
1)
contractor Hayes did not testify in person, 2) the
ALJ
allegedly became biased toward Respondents because
of
the expired claims, and 3) the sanctions are extreme
and
therefore punitive.
Respondents directly excepted to the following numbered FFCLs:
25,
198-237, 252-256, 264, 267-274 and 279-280. Respondents'
arguments
necessarily implied that they also excepted to FFCLs 24, 45-48,
59-60,
64, 238, 240-242, 257, 278, and 281-287. We affirm and adopt
without
further discussion the FFCLs to which Respondents did not except.
6/
ANALYSIS
I. The ALJ erred in concluding that Respondents
had reason to know
and should have known that the claims they presented or
caused to be
presented were for items or services which were false,
fraudulent, and
not provided as claimed.
Respondents excepted generally to the findings and analysis in the
ALJ
Decision based on which the ALJ concluded that Respondents had reason
to
know and should have known that the 173 claims were false,
fraudulent,
and for items or services not provided as claimed.
Respondents argued
that the ALJ erred in his legal analysis and had in effect
imposed
strict liability upon Respondents. Respondents also argued that
certain
ALJ findings were not supported by substantial evidence in the
record.
For the reasons stated in this section, we determine that the ALJ did
err
in concluding that Respondents were liable under the reason to know
and
should know standards. We further determine that not all of the
ALJ's
related findings were supported by substantial evidence in the
record.
A. Reason to Know
The ALJ concluded that, under the "reason to know" standard of
liability,
a provider "has the duty to prevent submission of false
claims where:
(1) the provider had sufficient information to place him
on notice that the
claims were for items or services not provided as
claimed, or (2) there were
pre-existing duties requiring a provider to
verify the truth, accuracy and
completeness of claims." ALJ Dec. at 53.
Respondents argued that the
ALJ Decision provided "no explanation . . .
of any pre-existing duty to
verify claims." R. Br. at 15. According to
Respondents, the ALJ's
analysis focused on the notice part of the test.
Id. Respondents argued
both that the ALJ had erred in determining that
knowledge Respondents had
gave rise to a duty to investigate and that
the ALJ had failed to consider
all of the evidence in determining that
Respondents had not fulfilled their
duty to investigate.
In support, Respondents cited to certain cases applying a "reason to
know"
standard, either in CMPL or other cases, arguing that the
circumstances here
were distinguishable. Respondents also argued that
these cases required
that there be an element of causation, and that the
ALJ had failed to
consider this element here.
1. The applicable standard
This Board has not previously had to address the issues of what
the
"reason to know" standard means and whether an ALJ has properly
applied
it. The ALJ here relied for his statement of the "reason to
know"
standard on various ALJ decisions. ALJ Dec. at 53,
citing
Anesthesiologists Affiliated et al. and James E. Sykes, D.O. et al.,
DAB
CR65, at 54 (1990); Thuong Vo, M.D. and Nga Thieu Du, DAB CR38, at
19
(1989); George A. Kern, M.D., DAB CR12, at 5-7 (1987). The
ALJ,
however, does not fully articulate the basis for the standard and, to
a
certain extent, misstates it. The cited ALJ decisions
ultimately
derived .the standard from the Restatement (Second) of Torts,
which
articulates the standard as follows:
The words "reason to know" are used . . . to denote the
fact
that the actor has information from which a person of
reasonable
intelligence or of the superior intelligence of the actor
would
infer that the fact in question exists or that such person
would
govern his conduct upon the assumption that such fact exists.
Section 12; see also Restatement (Second) of Agency, . 9. This
is
similar to the standard applied by the courts in the cases cited
by
Respondents. See Novicki v. Cook, 946 F.2d 938 (D.C. Cir.
1991);
Stevens v. Commissioner of Internal Revenue, 872 F.2d 1499 (11th
Cir.
1989); Sanders v. United States, 509 F.2d 162 (5th Cir. 1975).
The ALJ's reference to information sufficient to place a respondent
on
notice that claims were for items or services not provided as
claimed
tracks the first part of the Restatement definition of reason to
know.
While the ALJ Decision does not specifically state the alternative
basis
for liability in the Restatement definition and the court cases
(that
information may be sufficient if one can infer the likelihood of
the
existence of the facts from that information), the ALJ
apparently
applied both parts of the Restatement definition. The ALJ
stated that,
while he did not find that Respondents had facts which placed
them on
notice that each of the 173 claims was false, he did find
that
Respondents had sufficient information in their possession to put
them
on notice that there was "a likelihood that any one of these claims
was
false." ALJ Dec. at 53-56; 33-34 (FFCLs 245-251). Under
the
Restatement and court cases, however, a person with information
from
which one can infer only the likelihood of the existence of a fact
must
act as a reasonable person would under the circumstances. The
I.G.'s
post-hearing brief describes the receipt of such information as
creating
a "duty to investigate facts bearing on the falsity of claims . . .
."
I.G. post-hearing br. at 13.
While the Restatement does not specifically articulate the second part
of
the standard articulated by the ALJ (the pre-existing duty standard),
the
second part is a reasonable corollary from the Restatement standard:
if a
person has a pre-existing duty equivalent to the duty to
investigate that
would arise from information sufficient to cause a
"reason to know," then one
has "reason to know" if in the exercise of
the pre-existing duty one would
have discovered the existence of the
fact in question.
As Respondents argued, the ALJ did not in his analysis focus on the
second
part of the standard he articulated. The ALJ did, however, make
FFCLs
concerning such pre-existing duties. See ALJ Dec. at 9 (FFCLs
48,
49). The ALJ also made specific findings on what notice
Respondents
had. See ALJ Dec. at 33, 34 (FFCLs 246-251). Thus,
the ALJ clearly
intended to apply a standard different from the "strict
liability"
standard Respondents contended he had applied.
We conclude, however, that the ALJ erred in applying the "reason to
know"
standard. Generally, we conclude that the ALJ:
o Failed to explain how the information which the ALJ found
Respondents
had was sufficient to give rise to a duty to investigate which
would
have uncovered the particular fraud at issue here with respect to
each
of the 173 claims;
o Failed to place the burden on the I.G. of showing by a
preponderance
of the evidence that Respondents had reason to know;
o Failed to explain adequately how any pre-existing duties arose,
what
those duties entailed, how Respondents failed to meet those duties,
and
how any failure caused the 173 claims to be presented;
o Failed to compare what Respondents in fact did to what a
reasonable
medical supplier in Respondents' circumstances would have
done;
o Made certain findings not supported by substantial evidence in
the
record as a whole.
Below, we discuss in more detail the ALJ's findings and analysis on
first
the notice standard and then the pre-existing duties standard,
explaining the
reasons for our conclusions. With respect to the notice
standard, we
first discuss notice the ALJ found that Respondents had
prior to spring 1986,
when Respondents reported to BCBSA the possibility
of fraud by their
independent contractor Timothy Hayes, and then discuss
notice the ALJ found
Respondents had, but which they obtained in spring
1986 or after that.
We note that we reject Respondents' argument that other CMPL cases
where
"reason to know" liability was found indicate that a respondent
is
liable only if the respondent directed the fraud. Those cases
found
liability based on "knowledge" as well as "reason to know" and, thus,
do
not stand for the proposition that only a person actually
directing
fraud has "reason to know." Here, the I.G. failed to prove by
a
preponderance of the evidence that Respondents directed the fraud,
but
this does not automatically mean that Respondents did not have reason
to
know.
On the other hand, this case is distinguishable from the cited cases
in
several important respects. In those cases, a respondent could
have
easily uncovered the relevant facts simply by comparing actual
knowledge
the respondent had of what services he provided (and which was
usually
reflected in patient records) with information on claims forms, read
in
light of Medicare requirements (of which respondents had notice).
Here,
the issue is whether Respondents had reason to know, with respect to
the
173 claims at issue, that independent contractors had forged
physician
signatures, had falsified blood gas tests, had obtained signatures
from
patients stating that they had received equipment when in fact
the
patients had not received the equipment, or had failed to report
that
the patient was no longer using the equipment. Second, in those
cases,
the respondents had sufficient information at a point in time when
they
could have prevented the submission of the claims. Some of
the
information Respondents obtained here was obtained in spring 1986
after
most of the claims had already been submitted, and it is not
disputed
that Respondents took some steps to investigate after obtaining
this
information. Thus, part of the issue here is the sufficiency
of
Respondents' investigation.
2. Information Respondents had prior to Spring 1986
The ALJ's analysis does not correspond exactly with the FFCLs
regarding
what information the ALJ found that Respondents had. Thus, we
discuss
in this section and the next both the numbered findings on this
point
and those stated in the ALJ's analysis.
In FFCL 245, the ALJ found that Respondents "knew that
independent
contractor respiratory therapists had the opportunity to
falsify
documents related to claims for reimbursement for home
oxygen
equipment." ALJ Dec. at 33. In his analysis, however, the
ALJ stated
that Respondents knew that the respiratory therapists had
the
opportunity and incentive to provide false documentation. ALJ Dec.
at
54. These statements were based on an earlier finding regarding
the
compensation system which Respondent Shoals used to pay the
independent
contractors. See ALJ Dec. at 11 (FFCL 64). The ALJ
stated that
Respondents knew that "the compensation arrangement they
established
rewarded the therapists only for those claims that were paid
by
Medicare, and rewarded those therapists more for expensive
equipment
rentals than for inexpensive equipment rentals." ALJ Dec. at
54. The
ALJ further found that Respondents knew that the documents had
at least
the potential for being false because Respondents knew that
"the
respiratory therapists could generate ABG reports without any check
or
balance to assure that these ABG reports were honest and
accurate."
Id., citing FFCL 245. The ALJ concluded from this that
"Respondents
knew that there existed a real possibility that the claims that
they
were presenting or causing to be presented could be for items
or
services which were not provided as claimed" and that knowledge
was
sufficient to meet the "reason to know" standard for all of the
173
claims. ALJ Dec. at 54.
First, the ALJ erred in equating knowledge that there was a
"real
possibility" the 173 claims were false with knowledge from which
one
would infer the existence or likelihood that the claims were false.
The
mere opportunity or incentive on the part of the respiratory
therapists
to falsify documents is not by itself sufficient information from
which
Respondents could have inferred that the respiratory therapists were,
in
fact, submitting false documents. While this knowledge would place
a
higher duty on Respondents to have systems to prevent fraud and
to
investigate if they obtained any information suggesting the
likelihood
of fraud or calling the respiratory therapists' integrity into
question,
by itself this knowledge is not sufficient to find that Respondents
had
reason to know all 173 claims were false.
In any event, the ALJ's findings regarding the nature of the
commissions
Respondents paid their contractors is not supported by
substantial
evidence in the record. The ALJ found that the independent
contractors
were paid only if Medicare reimbursed Respondent Shoals for
the
particular claims. ALJ Dec. at 10 (FFCLs 59, 60). On
appeal,
Respondents denied the accuracy of these findings. R. Br. at
24. The
sections of the hearing transcript and deposition testimony
cited by the
ALJ do not support the proposition that the independent
contractors were
paid only if Medicare reimbursed Shoals. Tr. at
1253-54; I.G. Ex.
533/258-59; I.G. Ex. 534/8. 7/ The testimony does
support the
proposition that independent contractors received a commission
for each
month the beneficiary used the equipment, and that the amount
depended
on the type of equipment. While this might provide some degree
of
incentive for a contractor to falsify DME Certification forms, it
would
certainly not provide the degree of incentive for fraud that would
occur
if a contractor's monthly commissions were conditioned on
Medicare
reimbursement, as the ALJ found. In responding to
Respondents'
exceptions, the I.G. did not point to any additional support for
the
ALJ's findings regarding the commissions. 8/
Moreover, testimony by Respondent Livingston (which is consistent
with
what the I.G.'s witnesses said) indicates that services were provided
by
the independent contractors in addition to obtaining
qualifying
documents. These services included maintaining the
equipment, training
patients in its use, making follow-up service calls to
the patients'
homes, and being on call for emergency services 24 hours a day,
seven
days a week. See, e.g., Tr. at 1426-1429; 1055-1056;
1154-1155. The
I.G. did not cite to any evidence that the commissions
paid were
excessive for these services.
We also find unsupported the ALJ's statement in his analysis
that
"Respondents knew that the respiratory therapists could generate
ABG
reports without any check or balance to assure that these ABG
reports
were honest or accurate." See ALJ Dec. at 54. The ALJ
cited FFCL 245,
which states generally that Respondents knew the respiratory
therapists
had the opportunity to falsify documents and that finding is based
in
turn on an I.G. exhibit and other FFCLs. The cited FFCLs (1, 41-45,
and
559-65) support the ALJ's statement that a respiratory therapist
could
generate ABG reports, but do not address the issue of whether there
were
any checks or balances. The I.G. exhibit cited is a transcript
of
testimony by Respondent Livingston in which he agrees with a
statement
that when a respiratory therapist has a financial interest in
qualifying
a patient, one loses a check and balance that is there when a test
is
performed by an independent third party. I.G. Ex. 534/60-61.
This
admission does not, however, support the proposition that
the
independent contractor respiratory therapists were performing the
tests
without any checks or balances, as the ALJ stated. Indeed, the
record
shows that there were some checks and balances. For example, the
record
shows that the independent contractors performed the ABG studies
to
qualify a patient initially in response to orders by a physician.
See,
e.g., Tr. at 638-639; 1078-1080; 1155. The Medicare Bulletin
published
in September 1985 indicates that the physician has the
responsibility to
order and evaluate the laboratory tests. R. Ex. 13/3;
see also I.G. Ex.
25/2; I.G. Ex. 17/2. The result of the test is to be
entered onto the
DME certification form, and the physician is to certify the
correctness
of the information on the form. See, e.g., R. Ex. 20/1; Tr.
at 686.
Moreover, under Medicare policies, the Medicare carrier (here BCBSA)
had
a responsibility for verifying the medical necessity for
oxygen
equipment. R. Ex. 13/3; I.G. Ex. 30/4. Thus, the
record as a whole
does not support a finding that Respondents knew that
respiratory
therapists could generate ABG results "without any" checks and
balances.
In FFCL 246, the ALJ found that Respondents "knew that an
independent
contractor respiratory therapist had sent Respondent Shoals DME
forms
which had purportedly been signed by a physician or stamped with
his
signature, but which had not been completed by the physician who
had
purportedly signed the forms." ALJ Dec. at 33. 9/ In his
analysis, the
ALJ said that receipt of such documents was sufficient to
put
Respondents on notice of "possible dishonesty" by the
therapist
(independent contractor Timothy Hayes) because Respondents knew
DME
forms were, in effect, physicians' prescriptions. According to the
ALJ,
blank DME certification forms suggest at least the abdication of
the
physician's responsibility and the possibility of "more sinister
acts,
including the falsification of claims documents." ALJ Dec. at
55.
Respondent Livingston testified that it was common industry practice
at
the time for DME suppliers to complete forms on behalf of
physicians.
He stated that, according to Hayes, the particular physician
whose name
appeared on the forms had requested that Respondent Shoals handle
his
clients in this manner so that he would not have to be
routinely
bothered with signing the DME certification forms. Tr. at
1299-1301.
As Respondents argued, the ALJ did not consider this evidence.
10/ In
response to this argument, the I.G. did not point to any
rebutting
evidence, and Respondent Livingston's testimony is supported by
other
evidence in the record. The DME certification form itself states
that
the physician "must" sign and complete the bottom part of the form,
but
only that the physician "should" complete the top part of the
form.
See, e.g., R. Ex. 1/5. While the physician in question testified
that
he had not given Hayes signed blank forms, he also testified that it
was
his practice to have his office staff or the respiratory
therapists
complete the forms for him. Tr. at 719. An I.G.
witness who had been
an insurance clerk for three months with Respondent
Shoals testified
that, as an insurance clerk, he would call physicians'
offices to
complete information needed on the forms. Tr. at 1507, 1604,
1609,
1612; see also Tr. at 1300-01. Thus, while we agree with the ALJ
that
receipt of the blank forms may have indicated that this
particular
physician was not being conscientious in his duties, we fail to
see how
mere receipt of the blank forms would have led Respondents to
suspect
that Hayes was engaged in the particular fraudulent activities at
issue
here.
In FFCL 247, the ALJ found that Respondents "knew that Respondent
Shoals
had received DME forms which were purportedly signed by a physician,
but
which designated a treating physician who was not the patient's
treating
physician." ALJ Dec. at 33; see ALJ Dec. at 25 (FFCL 180);
I.G. Exs.
222-223. According to the ALJ, this "discrepancy suggests to
any
reasonable reviewer that the information contained in the forms might
be
false" and the "possibility that the signatures on the forms
were
forged." ALJ Dec. at 55. In reaching this conclusion, the
ALJ failed
to fully consider the circumstances. Respondents
asserted that this
discrepancy would indicate to them that the document was
possibly signed
by the attending physician's partner. R. Br. at
16. It also could
signal that the form was signed by a consulting
physician, as this was
allowed under Medicare regulations applicable at the
time. See R. Exs.
20, 25. A different name appearing on the form
probably would not
signal a forgery since a person forging a document would
more likely
forge the name of the physician which appeared on the
document. Thus,
the ALJ erred in concluding that any reasonable
reviewer would infer
either the existence or likelihood of falsity or forgery
from this
discrepancy. 11/
In FFCL 249, the ALJ found that Respondents "knew that an employee
of
Respondent Shoals had informed them that an independent contractor
may
have forged a physician's signature on a DME form." ALJ Dec. at
33
(FFCL 249) (citing Tr. at 1440; FFCLs 24, 25). Respondents argued,
and
we agree, that reliance by the ALJ on this information as
providing
sufficient notice of fraud completely ignores evidence in the
record.
Respondent Livingston testified regarding the information in
question
that Respondent Shoals' employee Sandra Hollis had contacted
the
physician and determined that the signature was not forged. Tr.
at
1440, 1457-58. The ALJ did not find that Respondent
Livingston's
testimony about this was not credible. Moreover, the I.G.
did not argue
that it had provided any rebuttal to this testimony, and the
I.G. had
the burden of proving liability. 12/
In FFCL 251, the ALJ found that Respondents "knew that Respondent
Shoals
had been provided with conflicting statements from a
Medicare
beneficiary concerning whether that beneficiary continued to use
home
oxygen equipment rented to him by Respondent Shoals." ALJ Dec. at
34.
In support, the ALJ cited FFCLs 165 to 167, which in turn cite to
I.G.
Exhibits 272, 273, and 280. Exhibit 272 is a letter from BCBSA,
dated
January 28, 1986, which states: "Mr. Stevens has advised us that
he
discontinued using the equipment which he had rented from you in
March
of 1984." Exhibit 280 is a handwritten statement dated February
13,
1986, which Barney Stevens, the beneficiary, signed and which appears
to
be notarized (although the ALJ found that the statement had
been
dictated to a Shoals representative and not notarized in the presence
of
Stevens). This statement says Stevens "returned" the equipment May
1,
1985. Exhibit 273 is a letter dated February 17, 1986, from
Shoals'
insurance clerk to BCBSA enclosing the statement. These
exhibits do not
show that Respondents were aware of conflicting statements by
Stevens.
The letter from BCBSA is ambiguous on whether the phrase "March of
1984"
refers to the date Stevens said he discontinued using the equipment
or
the date he rented the equipment. In any event, the signed
statement
refers to the date the equipment was returned. Thus, the
evidence cited
does not support FFCL 251.
In its appeal brief, the I.G. cited to FFCL 251 and the related
exhibits,
arguing that "Respondents' files were replete with returned
equipment
notifications, informing BCBSA that the beneficiaries in this
case had
returned oxygen equipment to Shoals" and that, although some of
these records
indicated that the beneficiaries returned the same
equipment several times,
Respondents continued to bill Medicare for the
returned equipment over a
significant period of time. Id. at 16-17.
However, the documents
related to beneficiary Stevens do not indicate
that Respondents knew that
beneficiaries had returned the same equipment
several times, as the I.G.
alleged. Two other exhibits which the I.G.
cited as showing that the
same equipment was returned several times are
return notifications covering
three items of equipment, each with a
different description and a different
code number. I.G. Exs. 150, 151.
In his analysis, the ALJ also refers to Respondents having evidence
of
fraud which "consisted of several DME forms sent to them by a
therapist,
which bore the same physician's name as the purported signing
physician,
but which were signed with obviously different writing
styles." ALJ
Dec. at 55. Respondents did not deny that Shoals had
possession of
documents in its files which, if carefully examined, might
have
indicated that certain signatures were not consistent. Mere
receipt of
the documents, however, does not constitute information about
the
inconsistencies. In effect, this would mean that a DME supplier had
an
obligation each time it received a document to dig through thousands
of
documents in its files for the possibility that it might find
something
inconsistent or to maintain exemplars on all physicians in the
area
served by the supplier. The I.G. presented no evidence of such
a
requirement in the statutes, regulations, Medicare policy guidance,
or
accepted practice in the DME supplier community. In the absence of
such
evidence, we conclude that it is unduly burdensome to hold providers
to
such an unrealistic standard. Clearly, if the I.G. had proved
that
Respondent Livingston or Respondent Shoals' employees had seen
the
inconsistencies and had ignored them, we would have a different
case.
However, there was no testimony that either Respondent Livingston
or
Respondent Shoals' employees looked at the signatures side-by-side
and
therefore had reason to see the differences in styles, thus triggering
a
duty to investigate. Indeed, the ALJ made no specific finding
that
Respondents knew of the differences.
Finally, regarding information Respondents had received prior to
spring
1986, the ALJ in his analysis referred to "evidence of likely
fraud"
Respondents received as including documentation received beginning
in
1983 pertaining to the "expired" claims found fraudulent, as well as
the
173 claims in the I.G.'s case-in-chief. According to the
ALJ,
"Respondents were therefore in a position to know, long before
they
began receiving the documents relevant to the 173 claims, that
documents
provided to them by respiratory therapists were suspect and needed
to be
scrutinized carefully." ALJ Dec. at 55-56. However, being
"in a
position to know" is not equivalent to having reason to know.
Moreover,
as Respondents argued, Respondents' employees could not reasonably
be
expected to have expertise in analyzing handwriting. Thus,
mere
possession of forged documents is not the same as possession
of
information from which one would infer the existence or likelihood
of
fraud.
3. Information Respondents had in spring 1986
In FFCLs 248 and 250, the ALJ found as follows:
248. Respondents Shoals and Livingston knew that, on at least
one
occasion, an independent contractor had provided them with a DME form
on
which the physician's signature had been forged.
250. Respondents Shoals and Livingston knew that an independent
contractor
respiratory therapist obstructed their efforts to determine
the extent to
which patients had actually been supplied with home oxygen
equipment for
which Respondent Shoals had presented Medicare
reimbursement claims.
ALJ Dec. at 33-34 (citations omitted).
The first of these FFCLs refers to information which Respondent
Shoals
received regarding equipment that independent contractor Hayes had
not
in fact placed with beneficiary Ruby Ellis and the possibility that
he
had forged the related DME certifications. Tr. at 1262-1263.
It is
undisputed that Respondents reported this information in a timely
manner
to BCBSA and then made some efforts to investigate Hayes, which
Hayes
obstructed. In his analysis, the ALJ does not discuss what duty a
DME
supplier has to continue to investigate potential fraud after
reporting
it. The ALJ states in his analysis:
Once [Respondents] were made aware that Hayes was
obstructing
their efforts, Respondents made no further effort
to
investigate. Instead, they allowed the respiratory
therapist
who was allegedly perpetrating the fraud to control
the
investigation. Respondents therefore had ample reason
to
suspect that the therapist had engaged in dishonest conduct
with
respect to a large number of claims.
ALJ Dec. at 56. Respondents argued that the ALJ had ignored
the
evidence concerning what steps they took in reporting and
investigating
Hayes and cooperating with the investigating authorities.
Respondents
also argued that, had they done more to uncover the fraud, they
might
have been accused of obstructing the government investigation. R.
Br.
at 40.
We conclude that the ALJ erred in basing reason to know liability here
on
notice of the possibility of Hayes' fraud related to one beneficiary
and on
Hayes' obstruction of Respondents' efforts to investigate. The
ALJ
failed to consider relevant evidence and also erred by failing to
place the
burden on the I.G. to show what a reasonable DME supplier in
Respondents'
circumstances would have done which Respondents did not do
and which would
have revealed the extent of the fraud.
Respondent Livingston testified that when Respondents discovered
possible
fraud by Hayes, they terminated him as a contractor and
notified the Medicare
carrier, BCBSA. Respondent Livingston also
testified that Shoals'
accountant accompanied Hayes to approximately 20
homes of Hayes' clients and
verified that the equipment was there, and
may very well have investigated
more had Hayes not blocked these
efforts. Tr. at 1440-43,
1464-65. After this, Respondent Livingston
attempted to get an unbiased
person involved, by asking another DME
supplier, Larry Ready, to take over
from Shoals in Hayes' territory and
to "swap" Ready's equipment for
Respondent Shoals' equipment, recording
serial numbers. Tr. at 1441.
This would have revealed whether the
patients which Hayes serviced for
Respondent Shoals in fact had the
equipment. However, Hayes also
frustrated this effort. Respondent
Livingston's testimony on this point
is corroborated by testimony from
Ready. Tr. at 1340. The
I.G. did not provide any rebuttal, and the
ALJ did not find that this
testimony was not credible. Respondent
Livingston wrote to the BCBSA
investigator, reported that Hayes had
frustrated the investigation and
offered to repay claims for beneficiary
Ellis. R. Ex. 32.
Respondent Livingston testified that, after that, he
talked to the BCBSA
investigator (who had begun his own investigation),
offered to pay back every
dollar BCBSA discovered was owed, and informed
the investigator how the
attempts of investigating by Shoals and Ready
had been unsuccessful.
Tr. at 1443. The I.G. did not present any
rebuttal testimony, nor any
evidence that BCBSA told Respondent Shoals
it should continue to
investigate.
Absent any evidence that Respondents were informed that they
should
continue to investigate to identify the specific claims that
were
fraudulent and could not reasonably rely on BCBSA to inform them of
the
specific amount owed, we conclude that Respondents acted reasonably.
Implicit in the ALJ Decision is the assumption that a DME supplier
who
discovers the possibility of forgery or falsification after
having
already presented related claims will be considered as causing
those
claims to be presented until the supplier completes an
investigation
sufficient to identify each of the fraudulent claims and sends
a check
to Medicare for those claims. 13/ In our view, such a standard
imposes
an unreasonable burden on providers and invites amateurs to
interfere
with official investigations. While a provider clearly must
report
suspected forgery or falsification and take prompt and reasonable
steps
within the provider's competence to uncover the extent of the
problem,
the standard the ALJ imposed would discourage providers
from
participating in the program and therefore is inconsistent with the
Act.
In summary, we find that the I.G. did not prove by a preponderance
of
the evidence that Respondents had sufficient information to be on
notice
that these claims were false, fraudulent, or for items or services
not
provided as claimed.
4. The pre-existing duty test
The ALJ made the following findings regarding pre-existing
duties
Respondents had:
48. Under the DME diary procedure, providers of home oxygen in
Alabama
had a duty to determine each month whether Medicare
beneficiaries
qualified for reimbursement for home oxygen equipment
rental.
49. Providers who submit claims for Medicare reimbursement for
home
oxygen equipment have a duty to assure that the claims they
submit
accurately and honestly state the facts represented in the claims.
ALJ Dec. at 9 (citations omitted). 14/ As Respondents pointed out,
the
ALJ's analysis does not clearly indicate that the ALJ was basing
his
conclusion regarding Respondents' "reason to know" on these duties.
The
ALJ did not specifically discuss these duties, nor explain
how
fulfilling these duties would have given Respondents knowledge of
the
falsity of the 173 claims. The ALJ did dismiss summarily
Respondents'
evidence concerning what systems they had to prevent fraud,
and
concluded that "Respondents did not make meaningful efforts to
assure
that the reimbursement claims for Medicare items or services
that
Respondent Shoals presented were accurate and honest." ALJ Dec. at
34
(FFCL 252). This conclusion, however, is based on his analysis
in a
section of the ALJ Decision on the "should have known" standard.
Even assuming, however, that the ALJ intended these findings to
be
considered as support for his conclusions on the "reason to
know"
standard, we would conclude that the ALJ erred in concluding
these
"pre-existing duties" establish "reason to know" under the
circumstances
here. As we discuss below, the ALJ's finding that
Respondents made no
"meaningful efforts" ignores evidence in the record and
misplaces the
burden on Respondents to show that they fulfilled their duties,
rather
than on the I.G. to prove that they did not.
The I.G. argued that providers had a pre-existing duty to ensure
the
honesty and accuracy of claims they were submitting because they
were
attesting to their accuracy by signing them. I.G. Br. at 19, n. 8.
15/
However, a review of the claim forms in the record indicates
that
providers are assuming responsibility for reimbursing overpayments
which
occur because of equipment which is returned without the
Medicare
carrier being promptly notified. See, e.g., R. Ex. 9/5.
Providers are
also acknowledging that they may be prosecuted under applicable
laws for
false claims, statements, documents, or concealment of material
facts.
See R. Ex. 9/18 (reverse side). However, this acknowledgment
does not
necessarily imply that providers are assuming absolute liability
for
false statements of which they are unaware and have no reason or duty
to
be aware. Nor does it clearly indicate that they are or should
be
subject to penalties for inadvertent errors where their systems
for
preventing fraud and the measures taken in the particular
circumstances
are reasonable.
Therefore, while we find that providers have a pre-existing duty to
ensure
the accuracy and honesty of claims they are submitting to
Medicare, that duty
does not extend to taking heroic measures, as would
be required if we imposed
on providers a duty to compare thousands of
signatures in their files for
possible forgeries every time a new
document is filed. Providers
ordinarily can fulfill that duty by taking
reasonable measures under the
particular circumstances to address
problems which arise and by having in
place reasonable systems for
detecting errors and fraud.
B. Should Have Known
The ALJ concluded that Respondents should have known that the claims
they
submitted were false, fraudulent, and for items or services not
provided as
claimed. ALJ Dec. at 56-58. The ALJ found that Respondents
were
indifferent to the truth or falseness of the claims they submitted
because,
despite their contacts with physicians' offices and independent
contractors,
they ignored evidence which indicated that untruthful
documents were being
sent to them by the contractors. The ALJ stated
that Respondents had no
"meaningful system" to assure the accuracy and
honesty of their claims.
Id. The ALJ referred to documents purportedly
executed by the same
physician but in very different handwriting styles,
Shoals' inadequacies in
its inventory system, and the built-in
opportunities and incentives for fraud
in the commission system
Respondent Shoals established with its independent
contractors. Id.
Respondents argued that the ALJ applied an improper legal standard
of
"should know" liability, effectively applying a strict
liability
standard. See generally R. Br. at 23-26. Respondents
argued that the
evidence that Respondents should have known of the fraud is
not
supported by substantial evidence on the whole record for the
following
reasons:
There was significant evidence in the record
that
Respondents did have a system of inventory control
and
they relied on patient signatures to identify
which
equipment was in a patient's home;
There was significant evidence in the record
that
Respondents did make systematic efforts to
contact
physicians and patients and to investigate problems
with
possible forgeries, and no person supervising a
large
number of contractors and claims can verify
every
document; and
The compensation system of the independent
contractors
did not provide incentives for fraud because
each
contractor was paid even if Medicare did not
reimburse
Respondent Shoals for the equipment.
Id. Respondents further argued that an element of causation
was
missing. 16/
1. The "should know" standard
The ALJ stated that the "should know" standard 1) subsumes
reckless
disregard for the consequences of a person's acts and is inclusive
of
behavior (or lack thereof) which would cause liability under the
reason
to know standard; and 2) also subsumes a simple negligence
standard:
negligence in preparing and submitting claims or in directing
the
preparing and submitting of claims. ALJ Dec. at 56, citing Mayers
v.
Dept. of Health and Human Services, 806 F.2d 995 (11th Cir. 1986),
cert.
denied 484 U.S. 822 (1987); Anesthesiologists Affiliated at 56; Vo
at
20. While this is not incorrect, it does not directly articulate
the
standard itself, which the cited ALJ decisions ultimately derive
from
the Restatement definition. 17/ That definition states that the
words
"should know" are used "to denote the fact that a person of
reasonable
intelligence or of the superior intelligence of the actor
would
ascertain the fact in question in the performance of his duty
to
another, or would govern his conduct upon the assumption that such
fact
exists." Restatement (Second) of Torts, . 12; see also
Restatement
(Second) of Agency, . 9.
The Restatement also discusses the negligence standard.
Negligent
conduct is defined, in part, as a failure to do an act which
is
necessary for the protection or assistance of another and which
the
actor is under a duty to do. See generally Restatement (Second)
of
Torts, . 284(b). It is impossible to consider whether an individual
(or
entity) acted negligently without establishing a standard of
conduct
below which the actor must fall in order to be found liable.
In
American jurisprudence, that standard has been the standard of
the
reasonable man acting under like circumstances. Id. at . 283; see
also
Fane v. Zimmer, Inc., 927 F.2d 124 (2nd Cir. 1991) ("negligence"
is
conduct falling below the standard of what a reasonably prudent
person
would do under similar circumstances). The burden of proof is on
the
party alleging that another's conduct has fallen below the standard of
a
reasonable person. See, e.g., Geibel v. U.S., 667 F. Supp. 215,
219
(W.D.Pa. 1987); Hensley v. U.S., 728 F. Supp. 716 (S.D.Fla. 1989).
To satisfy the burden of proof, the party must introduce expert
testimony
to show that the other party's conduct varied from accepted
practice if the
subject presented is so distinctly related to some
science, profession,
business, or occupation as to be beyond the ken of
the average
layperson. See District of Columbia v. White, 442 A.2d 159,
164
(D.C.App. 1982) (standards for firearm training of police officers
is not
within common experience and requires expert testimony); Geibel
at 219
(standards of practice of reasonable physician requires expert
testimony in
malpractice action); Bartak v. Bell-Gayardt & Wells, Inc.,
629 F.2d 523
(8th Cir. 1980) (there can be no finding of architect's
negligence unless
there is expert testimony to support it). No expert
testimony is
necessary where the matter at issue is so simple, and the
want of care so
obvious, as to be within the range of ordinary
experience and comprehension
of even non-professional persons. Geibel
at 219; see also Kennedy v.
Ricker, 409 A.2d 778, 780 (N.H. 1979) (while
funeral directing is a licensed
profession and some aspects of the
profession would require expert testimony,
standard of care should focus
on the nature of the activity involved;
therefore, no expert testimony
required as to whether instructions should
have been given on the method
of carrying casket).
2. Application to the facts
While the ALJ recognized the correct legal standard generally, the
ALJ
erred in applying the standard and in concluding that Respondents
should
have known of the fraud. The ALJ put the burden on Respondents
to show
that they had made meaningful efforts to avoid the fraud of
the
independent contractors; instead, the ALJ should have put the burden
on
the I.G. to prove that Respondents did not have a reasonable system
to
avoid the fraud. Furthermore, the ALJ failed to consider all of
the
unrebutted evidence in the entire record of what Respondents did do.
While the ALJ Decision refers to Respondents' lack of a
"meaningful
system" to control inventory, the ALJ failed to consider the
evidence as
a whole on the systems Respondents did utilize. See Tr. at
1437-38.
For example, Respondent Shoals had a serial number inventory system;
had
a system of obtaining signed contracts from beneficiaries
giving
personal information and stating that they had received
particular
equipment identified by serial number; and relied on patients to
contact
Shoals if their monthly Medicare explanation of benefits
statements
(EOBs) identified equipment which they did not actually possess.
18/
Tr. at 1437-39. The ALJ relied on direct testimony by Shoals
employee
Blaylock as a basis for his finding that the inventory system was
not
adequate (even though the ALJ found Blaylock's other testimony
not
credible). This testimony merely goes to the system of logging
what
equipment was where, and not to reliance on the contracts or the
EOBs.
On cross-examination, moreover, Blaylock testified that, when
problems
with employees not adhering to the logging system arose,
Respondent
Shoals sent memoranda and changed the system several times to
address
the problems. Tr. at 1620-26.
Most of the fraud here was found because beneficiaries or their
relatives
testified that they had never received oxygen equipment.
Respondents argued
that they reasonably relied on signed contracts by
the beneficiaries
containing personal information and the serial number
of the equipment
received, as part of their system for preventing fraud.
R. Br. at 26.
The record shows that Respondents received such contracts
with respect to
each of the beneficiaries at issue here. R. Exs. 1-10.
Some of these
contracts explicitly stated that patients were to contact
Shoals' main office
in Florence, Alabama when they no longer needed the
equipment. See,
e.g., R. Ex. 1. The I.G. did not allege that the
beneficiaries'
signatures were forged, nor present evidence of any
greater duty of
Respondent Shoals to ensure that equipment was placed in
the homes than that
of relying on contracts which patients actually
signed. Moreover, the
record shows that several patients did contact
either Shoals, BCBSA, or the
physician when they received EOBs about
equipment they no longer had or no
longer were using. Tr. at 710-11,
1441; I.G. Exs. 172, 272/1.
Indeed, the fraud could have been uncovered
sooner since two patients
contacted one physician, but he spoke only
with Hayes and could not recall
informing Shoals. Tr. at 710-736. (He
also admitted throwing away
DME certification forms which he received
from Shoals to complete, but which
were for patients for whom he did not
find a medical need. Tr. at
710-11, 735-36.)
Furthermore, there was other evidence that Respondent Shoals
made
reasonable efforts to oversee its business transactions. The
record
shows that Shoals' employees spoke with patients, physicians,
and
independent contractors on a daily basis. Their duties
included
speaking with physicians regularly regarding certification of
medical
necessity and speaking with patients regularly to determine if they
had
the equipment Medicare was being billed for. Tr. at 1754-61.
Insurance
clerk Jean Isley testified that Respondent Livingston "was one of
the
hardest employers I ever worked for because he stayed on us
continually
regarding this matter." Id. at 1754. Respondent
Shoals investigated
when it suspected forgeries on the part of Hayes, and
reported the
possibility of false claims to the carrier when it became
suspicious.
Tr. at 1262-63; R. Ex. 32.
The ALJ also ignored evidence in the record concerning Respondents'
hiring
of a consultant, with experience in Medicare Part B, to examine
Respondents'
recordkeeping. Respondent Livingston testified that this
consultant had
commented positively on the recordkeeping. Tr. at
1438-39.
While the ALJ stated that Respondent Shoals did not make
meaningful
efforts to avoid fraud, the ALJ did not discuss what would
have
constituted a meaningful system, nor point to any evidence presented
by
the I.G. on what other DME suppliers in the business would have done
in
like circumstances that Respondents did not do.
To the extent that the ALJ thought that he was applying a
reasonableness
standard within the knowledge of common experience and that
therefore no
expert testimony was necessary (a conclusion which the ALJ did
not
articulate), we conclude that the standard which the ALJ applied
was
unrealistically stringent and inherently unreasonable.
Throughout his analysis, the ALJ implies that because fraud occurred
in
the 173 claims and the "expired" claims, the fact of the fraud
ipso
facto makes the Respondents' fraud prevention system substandard
under
the requirements of the program. As Respondents argued, this
fails to
consider the claims in the context of Respondents' business as a
whole.
Also, this puts a terrible burden on providers: either their
systems
must be 100 percent foolproof or they may be subject to
penalties,
assessments, and exclusions under the law. This would not
encourage
providers to participate in good faith in the Medicare program,
and
Congress, in enacting the CMPL, could not have intended it to
be
interpreted so stringently. 19/
The ALJ's statement that Respondents were indifferent to widespread
fraud
is also unsupported by substantial evidence in the record. There
is
unrebutted evidence that Respondents investigated the claim that
they
suspected was forged and found that it was not forged. Tr. at
1440,
1457-58. When they later found documents which were forged,
they
reported Hayes to the Medicare carrier and cooperated in
the
investigation. They attempted to investigate Hayes on their own,
and
did so until Hayes interfered with their efforts. Tr. at
1440-43,
1464-65. Respondent Livingston testified that he offered to
repay
Medicare on several occasions. See Tr. at 1412-13, 1419-21; R.
Ex. 32.
The ALJ did not find that Livingston was not credible on these
issues.
As discussed above, the ALJ's finding that Respondent Shoals'
commission
system provided incentives for fraud because Respondent Shoals
paid
commissions to the independent contractors only if Medicare
reimbursed
Shoals for the claims is not based on substantial evidence on
the
record. Even if the commissions provided some incentive for fraud
and
placed a higher duty on Respondents, there is no basis in the record
for
stating, as the ALJ did, that the commissions "induced" the fraud.
ALJ
Dec. at 41-43.
Finally, we find some merit in Respondents' argument that a
"causation
element" is missing from the facts of this case. The ALJ
Decision fails
to make clear the requisite connections between the
information and
duties he found Respondents had, and how the information and
duties
should have led Respondents to discover the specific fraud at
issue.
Since we do not find that there was substantial evidence in the record
on
which the ALJ could determine that Respondents acted negligently, we
likewise
do not find substantial evidence to support a determination
that Respondents
acted with reckless disregard of the consequences of
their actions.
Thus, we reverse the ALJ's conclusion that Respondents should have
known
that the 173 claims were false, fraudulent, and for items or
services
not provided as claimed.
II. The ALJ did not err in concluding that the
independent
contractors were agents of Respondent Shoals acting within the
scope of
their agency and that Shoals was therefore liable for their acts;
the
ALJ did err in concluding that Respondent Shoals was the agent
of
Respondent Livingston.
A. The Relationship of the Independent
Contractors and
Respondent Shoals
The ALJ found that the respiratory therapists, who were
independent
contractors of Respondent Shoals, were the agents of Shoals and
were
acting within the scope of their agency relationship with Shoals at
the
time they submitted falsified and forged documents. ALJ Dec. at
9-11
(FFCLs 58-59). Therefore, the ALJ found that Respondent Shoals
was
liable for the actions of its agents under the section
1128A(l)
provision holding a principal liable for the actions of the
principal's
agent acting within the scope of the agency relationship. 20/
Respondents argued that the independent contractors were not acting
within
the scope of their agency relationship at the time of the false
statements
because they were not authorized by Respondent Shoals to
commit fraud.
R. Br. at 38-39. However, the I.G. correctly stated the
law that a
principal is liable for the fraud of his agents where fraud
is committed
while the agent is executing a transaction or performing a
normal duty within
the apparent authority of the agent. See generally
I.G. Br. at
25-29. In this case, the agents' fraud occurred when the
independent
contractors were either 1) obtaining documentation regarding
the need for
oxygen equipment; 2) reporting on whether patients had ever
received the
equipment; or 3) reporting on whether a patient had sought
to return or had
returned equipment when the need for or use of the
equipment ended.
This fraud occurred while the independent contractors
were performing duties
which are among the responsibilities the record
shows that the independent
contractors had. See I.G. Br. at 298, n. 12,
and record cites
therein. Thus, the ALJ did not err in concluding that
the independent
contractors were acting within the scope of the agency
relationship at the
time the fraud occurred.
For these reasons, we affirm the ALJ's finding that Respondent Shoals
is
liable under section 1128A(l) for the actions of its
independent
contractors.
B. The Relationship of Respondent
Shoals and Respondent
Livingston
The ALJ found that Respondent Shoals was the agent of
Respondent
Livingston, that Respondent Shoals' presentation of the 173 claims
was
within the scope of the agency relationship, and that Livingston
was
therefore liable for the "unlawful" acts of Shoals. FFCLs 25, 242,
and
256. The ALJ based his conclusion on the findings that
Respondent
Livingston was the President of Shoals, obtained the Medicare
provider
number for Shoals, managed the affairs and supervised the employees
of
Shoals, and closely directed and controlled the actions of Shoals.
ALJ
Dec. at 5-6 (FFCLs 21-25), 58-59. 21/ Respondents argued that the
ALJ
misstated the law and that his finding was not supported by
substantial
evidence. R. Br. at 35.
The ALJ reached his conclusion summarily, with no analysis of the law
of
agency. As Respondents argued, a corporation is generally not the
agent
of an officer of the corporation; rather, an officer is often an
agent
of the corporation. See Restatement (Second) on Agency, . 14C,
comment
b. While a corporation may be an agent of another corporation
in
certain circumstances, such as when a subsidiary corporation acts
on
behalf of and is controlled by a parent corporation, a corporation
in
most instances is not the agent of a private party. See
Restatement
(Second) on Agency, . 14M, comment a.
The I.G., in response to Respondents' exceptions on this point, did
not
cite any cases on the law of agency to support the ALJ's conclusion
that
Respondent Shoals was the agent of Respondent Livingston. Instead,
the
I.G. argued that the corporate form should be disregarded and
that
Shoals should be found to be the "alter ego" of Livingston,
thus
justifying piercing the corporate veil and holding Respondent
Livingston
liable for the actions imputed to Respondent Shoals. See
generally I.G.
Br. at 23-25. The I.G. sought to justify this on the
basis that
Respondent Livingston had stated in earlier sworn testimony that
he was,
basically, Shoals Corporation. Id. at 24.
Even officers and shareholders of closely held corporations enjoy
limited
protections from liability exceeding the corporate assets. 22/
See In re
Helder, 43 B.R. 40 (Bkrtcy. Mich. 1984). Otherwise, there
would be no
purpose in incorporating. While there are times when
piercing the
corporate veil and holding persons liable in their
individual capacities is
warranted, the I.G. did not explain how
piercing the corporate veil in this
instance would place liability on
Respondent Livingston. First, the
I.G. did not explain how, or provide
supporting authority to show how,
piercing the corporate veil would make
Respondent Livingston liable as a
principal under section 1128A(1).
Second, as a general rule, piercing the
corporate veil results in
holding shareholders liable. The ALJ did not
find that Respondent
Livingston was a shareholder, and the record indicates
that his wife was
the sole shareholder of the Respondent Shoals
corporation. I.G. Ex.
541/7.
Even if piercing the corporate veil held officers as well as
shareholders
liable for actions taken by the corporation, we would
reject the I.G.'s
arguments here. The I.G. referred to the Supreme
Court decision in
United States v. Kimbell Foods, Inc., 440 U.S. 715,
727-728 (1979), as
applying "a federal common law alter ego doctrine."
I.G. br. at 24.
That decision, however, simply does not address the
alter ego doctrine.
The I.G. also stated: "Other federal courts have
looked at the degree of
control the individual has over the
corporation." Id. The one
court case the I.G. cited for this
proposition, RRX Industries, Inc. v.
Lab-Con, Inc. 772 F.2d 543,
545-546 (9th Cir. 1985), is a diversity
case applying state law. The
I.G.'s statement is also misleading
because it implies that degree of
control is the only factor. Before
piercing the corporate veil, courts
have looked at other factors such as:
Whether such a unity of interest and
ownership
exists that the personalities of the
corporation
and the individual are no longer separate;
Whether there is an absence of formalities
which
are normally part of the corporate
existence
(e.g., issuance of stock, election of
directors,
keeping of corporate records,
regular
shareholder meetings);
Whether the corporation is
adequately
capitalized;
Whether there has been any personal use
of
corporate funds;
Whether there has been any
intentional
perpetuation of fraud by means of the
corporate
vehicle;
Whether an inequitable result will follow if
the
acts at issue are treated as those of
the
corporation alone.
See, e.g., Heller v. Video Innovations, Inc., 730 F.2d 50 (2nd Cir.
1984);
RRX Industries, Inc. v. Lab-Con Inc., 772 F.2d 543 (9th Cir.
1985); Van Dorn
Co. v. Future Chemical and Oil Corp., 735 F.2d 565 (7th
Cir. 1985). The
I.G. did not point to any evidence in the record on
these factors.
Thus, we conclude that the I.G. did not prove that Respondent Shoals
was
the agent of Respondent Livingston. We therefore reverse the
ALJ's
conclusion that Respondent Livingston is liable under section
1128A(l)
of the Act.
III. The ALJ did not err in admitting evidence
regarding claims on
which the statute of limitations had run.
The ALJ admitted evidence of claims filed by Respondents during 1983
and
1984 as evidence of a pattern or practice of submitting false
or
fraudulent claims. ALJ Dec. at 27-32 (FFCLs 198-237).
Respondents
objected to the admissibility of these "expired" claims on the
grounds
that the six-year statute of limitations in section 1128A(c) of the
Act
had run on them. Respondents argued that, although the ALJ
correctly
concluded that Respondents cannot be held liable for these claims
the
ALJ had effectively found Respondents liable for these previous
claims
by considering these claims in his analysis under the reason to
know
standard and in his analysis of Respondents' culpability. R. Br.
at
34-35.
We conclude that the ALJ did not err in admitting evidence related to
the
expired claims. The ALJ has considerable discretion in
admitting
evidence and was reasonable in determining that this evidence
was
relevant both in determining reason to know and degree of
culpability.
Under the pre-1992 regulations, the standard for admitting evidence
to
determine the reasonableness of sanctions is that which is relevant
and
material. 42 C.F.R. . 1003.118(e). Evidence of prior false
claims,
particularly of the same nature as those at issue in the
case-in-chief,
are extremely relevant and material in determining the level
of
culpability of a party and therefore the reasonableness of
particular
sanctions. We reject Respondents' argument that
admissibility of
evidence on these false claims potentially results in an ALJ
imposing
sanctions based on these claims. Under the CMPL, the maximum
penalties
and assessments are prescribed by law: $2,000 for each false claim
plus
twice the total amount claimed. See section 1128A(a). The
introduction
of these "expired" claims does not raise this ceiling on
sanctions. It
merely gives an ALJ evidence on which s/he can determine
the
reasonableness of sanctions within the statutory framework for
the
claims which make up the case-in-chief. See Mayers v. U.S. Dept.
of
Health and Human Services, 806 F.2d 995 (11th Cir. 1986), cert.
denied
484 U.S. 822 (1987).
Therefore, we conclude that the ALJ did not err in admitting evidence
of
the "expired" claims.
IV. The ALJ erred in determining the sanctions to be imposed.
Respondents challenged generally the ALJ's determination regarding
the
appropriate sanctions, arguing that the sanctions were
excessive
compared to sanctions imposed on respondents who had actually
directed
fraudulent activities. Respondents argued that the ALJ had
failed to
consider that the fraud here was committed by the
independent
contractors, rather than by Respondent Livingston or Shoals'
employees.
Further, Respondents objected to the ALJ's finding that there
were
substantial aggravating factors and a total lack of mitigating
factors,
thus justifying sanctions at or near the ceiling of allowable
penalties
and assessments. See R. Br. at 39-44. Respondents also
challenged
specific findings on aggravating factors and argued that the ALJ
should
have found other specific mitigating factors.
Since we conclude above that the ALJ's determinations regarding
liability
were erroneous, except with respect to Respondent Shoals'
liability as a
principal under section 1128A(l), some of Respondents'
arguments are
moot. Some of the factors the ALJ considered in
determining the
sanctions are nonetheless relevant to determining
Respondent Shoals'
liability as principal. Thus, we consider below
Respondents' arguments
concerning aggravating and mitigating
circumstances to the extent those
arguments are relevant to our
determination of the sanctions to be imposed on
Respondent Shoals as
principal. We then explain why we l) reduce the
amount of the
assessment to $44,838; 2) reduce the amount of the penalties
to
$129,750; and 3) reduce the length of the exclusion to three years.
A. Aggravating factors
The I.G. had the burden of proving aggravating factors by a
preponderance
of the evidence. The ALJ found the following aggravating
factors:
1) "The 173 claims . . . constituted a large number
of
unlawful claims for items or services which Respondent
Shoals
asserted it provided over an extended period of time." ALJ
Dec.
at 36 (FFCL 264).
2) "Respondents' claiming and receiving
substantial
reimbursement for [the 173 claims]." 23/ ALJ Dec. at
36-37
(FFCL 267).
3) "Respondents' indifference to their duty to comply
with
Medicare reimbursement requirements establishes a high level
of
culpability for the 173 claims . . . ." ALJ Dec. at 37
(FFCL
272).
Respondents excepted to each of these findings.
We conclude that, with respect to Respondent Shoals, the fact that
the
number of claims and the period of time involved (from January
1985
through June 1986) were extensive and the fact that the amounts
claimed
and received were substantial are aggravating factors.
While Respondents challenged these findings generally, Respondents did
not
dispute the underlying findings of fact. Respondents'
exception
appeared to be based in part on a misconception that the ALJ
had
considered the "expired" claims in determining the extent of the
fraud.
These findings were, however, based only on the 173 claims.
Respondents did, however, raise a number of arguments
specifically
directed at the ALJ's finding that they were indifferent to the
fraud of
the independent contractors, as well as to related findings that
they
were aware of facts that put them on notice of the fraud, and that
there
was a pattern of fraud that showed their indifference.
Respondents also
objected to the ALJ's statements in his analysis that they
did not make
meaningful efforts to investigate or deter Hayes' fraud and that
their
use of one of their employees (whose primary duties were as
a
bookkeeper) to perform ear oximetry tests showed a contempt for
the
program. 24/
We conclude that these objections have merit: these findings
and
statements are not based on substantial evidence in the record, and
the
ALJ erred by not placing the burden on the I.G. to prove any
aggravating
factor.
As discussed above, the unrebutted evidence shows Respondent Shoals
had
measures in place to prevent and detect fraud, and the I.G. did
not
prove that more was required. Since we do not find that there
was
substantial evidence in the record as a whole indicating
that
Respondents had reason to know or should have known of the fraud,
we
likewise do not find adequate support for the ALJ's finding
that
Respondents were aware of the fraud and thus showed indifference.
Second, the I.G. did not prove that Respondents failed to act when
they
were put on actual notice of the fraud. Uncontradicted evidence in
the
record shows the following:
When Respondents suspected a forgery on the part
of
independent contractor Hayes, Respondent
Livingston
asked Respondent Shoals' employee Sandra Hollis
to
investigate the authenticity of the signature.
Hollis
reported back that the signature was not forged. Tr.
at
1440, 1457-58.
When it became clear later that Hayes had
falsified
other claims, Respondent Livingston acted immediately
to
report Hayes to the Medicare carrier. Tr. at
1262-63.
Respondent Livingston sent Shoals' employee
Duane
Traglia to investigate Hayes and determine if
other
patients whom Hayes was also servicing equipment for
had
the equipment Hayes reported them as having.
Traglia
investigated until such time as Hayes blocked
his
investigation. Tr. at 1440-43, 1464-65. However,
by
that time, Respondent Shoals had already reported
Hayes
to the Medicare carrier and was in the process
of
terminating business relations with Hayes. Tr. at
1441.
Respondent Livingston also arranged for Larry Ready
to
investigate the fraud of Hayes. Tr. at 1340, 1441.
This evidence is unrebutted. Thus, the I.G. did not prove
that
Respondents failed to act when they did receive notice of fraud.
Further, the I.G. did not prove that the administration of pulse
oximetry
tests by non-medically trained personnel (who were employees of
Respondent
Shoals) showed contempt for the program. The I.G. presented
no evidence
that there were training requirements for persons
administering this
test. Testimony in the record on the matter
indicates that the test
consists merely of placing a clip on a person's
ear and reading a
gauge. Tr. at 1305. This does not necessarily
require medical
training. Furthermore, we note that, while this type of
test might
often be performed by a respiratory therapist, there are no
training or
qualifying requirements for respiratory therapists in
Alabama. ALJ Dec.
at 3 (FFCL 3). The I.G. did not introduce evidence
showing that other
DME suppliers used only medically-trained personnel
for the administration of
this test and that therefore Respondents'
practices fell below the reasonable
standard of care for the industry.
For these reasons, we reverse the ALJ's
apparent finding that Respondent
Shoals' use of pulse oximetry tests by
non-medical personnel showed
contempt for the program. See ALJ Dec. at
62, n. 23.
Since we conclude that the ALJ relied on findings which are not
supported
by substantial evidence in the record in determining that
Respondents had a
pattern of indifference to fraud, we reverse the ALJ's
finding that this
pattern was an aggravating factor.
B. Mitigating factors
Respondents also asserted that there were extensive mitigating
factors
which would justify imposing a lower sanction and which the ALJ
failed
to recognize. Specifically, Respondents asserted 1) that the
claims
were the result of unintentional and unrecognized errors and
corrective
steps were taken thereafter; 2) that the fraud was committed
by
independent contractors, rather than by Respondent Livingston or
Shoals'
employees, 3) that the actual fraud involved only a relatively
small
number of Respondent Shoals' total claims, patients, and
subcontractors;
4) that Respondents offered on several occasions to refund
the
overpayments which resulted on account of the independent
contractors'
fraud; 5) that this has been the first instance of liability,
though
Respondent Livingston has maintained a 20-year relationship
with
Medicare; 6) that an exclusion cannot deter Respondent Livingston and
is
not "rationally related" to any federal interest since he is no
longer
in the DME business and his current Medicare business
(diagnostic
imaging) does not involve subcontracting; and 7) that the
imposition of
joint and several liability placed all of the ultimate
liability on
Respondent Livingston since Respondent Shoals has been
dissolved. R.
Br. at 41-44. 25/
Arguments 5, 6, and 7 relate primarily to Respondent Livingston, and
we
have reversed findings of liability for Respondent Livingston. Since
we
do affirm the ALJ finding that Respondent Shoals is liable under
the
agent-principal provision, we discuss the remaining
arguments.
Respondents have the burden of proving mitigating factors.
The CMPL regulations provide that it is a mitigating factor if a
false
claim was the result of unintentional and unrecognized error
and
corrective steps were taken promptly after the error was
discovered. 42
C.F.R. . 1003.106(b)(2). Respondents argued that
this provision applies
to them under the facts of this case since the errors
in the 173 claims,
from the perspective of Respondents, were unintentional
and
unrecognized, and corrective steps were promptly taken. R. Br. at
41.
We reject this argument. While the I.G. did not prove that
Respondents
knew, had reason to know, or should have known that the 173
claims were
false, fraudulent, or for items or services which were not
provided as
claimed, neither did Respondents prove that from their
perspective the
claims were the result of unintentional and unrecognized
errors.
Subsection 1003.106(b)(5) allows the ALJ to consider, as mitigating
or
aggravating, such "other matters as justice may require."
Respondents
alleged that justice required considering it a mitigating factor
that
the fraud was committed by independent contractors, rather than
by
Shoals' officers or employees. R. Br. at 42. The
independent
contractors, however, were agents of Shoals and their degree
of
culpability is high since they engaged in extensive
fraudulent
activities. On the other hand, where a corporation is being
held liable
solely on the basis of section 1128A(l), a lesser sanction is
warranted
where the agent is merely an independent contractor than if the
acts had
been committed by officers or employees of the corporation.
Thus, we
consider this factor to be mitigating (although, as we discuss
below, we
do not give it significant weight).
Respondents argued that it is a mitigating factor that the claims
for
which the ALJ found liability involved only a very extremely
small
percentage of Respondent Shoals' total annual claims, total
patients,
and total independent contractors. R. Br. at 43. Not
all of
Respondents' assertions related to this argument are supported by
the
record, but the record does support the general claim that
the
percentages were extremely small (even when considering both the
173
claims and the "expired" claims). Respondents had between 500 and
800
patients a month. Tr. at 1452-53. Respondents had up to 60
independent
contractors at a time, but the 173 claims were for only nine
patients
who were all the responsibility of independent contractor Hayes and
the
expired claims involved only a few additional contractors. Tr. at
1452.
Thus, we find that Respondents proved that the portion of its
total
business involved in the independent contractors' fraud was
extremely
small and that this should be considered a mitigating factor.
26/
Respondents also argued that they had offered to repay the money owed as
a
result of the false claims on several occasions. R. Br. at 44.
We
conclude that the mere offer to repay is not a mitigating
factor.
Respondent Shoals had agreed under its assignment agreement to
accept
liability for any overpayments made. Thus, in offering to
repay,
Respondent Shoals was merely fulfilling its duty to Medicare.
C. Determination of the sanctions
After applying the various criteria in the statute and regulations
and
considering the guidelines in the regulations, we determine to impose
an
assessment of $44,838 (the total amount claimed), penalties of
$129,750
($750 per claim), and an exclusion of three years. 27/
Under the statute, the maximum amount of the assessment which could
be
imposed is $89,677.60 (twice the amount claimed) and the maximum
amount
of penalties is $346,000 ($2,000 for each of the 173 claims).
ALJ Dec.
at 39 (FFCLs 281 and 282). While we uphold the findings that
it is
aggravating that the number of claims was large, the period in
which
they were submitted was relatively lengthy, and the dollar
amounts
claimed and received were substantial, this is offset by our
finding
that it is mitigating that the acts of Respondent Shoals'
agents
constituted only an extremely small portion of Shoals' business.
Also,
we found it mitigating that the acts forming the basis of liability
were
acts of an independent contractor, rather than the acts of
the
corporation's officers or employees. We did not, however, give
this
factor significant weight.
We also reduce the five-year exclusion period imposed by the ALJ to
three
years, based on our analysis above.
V. The ALJ did not err in concluding that
Respondents' rights to
due process and against double jeopardy were not
violated.
Respondents argued that their rights to due process and against
double
jeopardy were violated by the hearing procedures in this
case.
Respondents argued that Hayes should have testified in person
rather
than having the ALJ rely on his previous sworn testimony from the
prior
related criminal trial. R. Br. at 59-62. 28/ Respondents
argued that
the ALJ became unfairly biased against Respondents because of
the
admission of evidence regarding the "expired" claims, thus resulting
in
an unfair hearing in violation of due process. Id. at
63-64.
Respondents also argued that the sanctions in this case were so
severe
in relationship to their culpability as to be punitive, thus
resulting
in a violation of the double jeopardy clause to the Constitution
because
they had been previously tried in criminal court for their
alleged
violations. Id. at 64-71.
For purposes of this decision, we do not have to decide whether it
is
proper for the ALJ to admit the previously sworn testimony of a
key
witness who did not testify in person in the current proceeding.
In
this particular instance, the ALJ found that Hayes' testimony was
not
credible, and the ALJ did not place any weight on it. ALJ Dec. at
48.
Therefore, the admission of any prior testimony of Hayes would
have
constituted, at most, harmless error.
We also conclude that Respondents' due process rights were not
violated
because of any potential bias on the part of the ALJ due to
the
"expired" claims. The law on the matter of bias has been
long-settled.
The Supreme Court has stated:
The alleged bias and prejudice to be disqualifying must
stem
from an extrajudicial source and result in an opinion on
the
merits on some basis other than what the judge learned from
his
participation in the case.
United States v. Grinnell Corp., 384 U.S. 563, 583 (1966) (citing
other
federal cases). Respondents here argued that the alleged bias
came from
the ALJ's exposure to the "expired" claims during the
proceedings. R.
Br. at 63. Respondents therefore conceded that
the alleged bias
occurred within the proceedings at issue and not from any
outside
influence. Therefore, the ALJ was not under a duty to recuse
himself,
and Respondents were not deprived of a fair hearing in violation
of
their due process rights on this basis.
Finally, while we have reduced the sanctions against Respondent
Shoals
thus making Respondents' argument that the sanctions were punitive
and
in violation of double jeopardy less compelling, we conclude that
even
the original level of sanctions imposed by the ALJ did not violate
the
double jeopardy prohibition. U.S. Const. amend. V. The double
jeopardy
clause prohibits a person from being prosecuted twice for, or
receiving
multiple punishments for, the same conduct. See United States
v.
Halper, 490 U.S. 435 (1988). Respondent Livingston was indicted,
tried,
and acquitted in a United States District Court on a criminal charge
of
submitting falsified ABG studies performed in 1983 and 1984. See R.
Ex.
14; Tr. at 1410. Each of the 173 claims for which Respondents were
held
liable by the ALJ was based on actions taken during 1985 and 1986
and
therefore did not include the conduct which was the subject matter
of
the previous criminal proceedings. While some of the "expired"
claims
were based on the same actions for which Respondents were
previously
tried, these claims did not make up the I.G.'s case-in-chief or
the
basis of the sanctions imposed. Thus, there could have been
no
violation of the double jeopardy clause. See United States v.
Mayers,
957 F.2d 858 (11th Cir. 1992).
CONCLUSION
For the reasons listed above, we reverse the ALJ's conclusion as to
both
Respondents on the issue of whether Respondents had reason to know
or
should have known that claims they were submitting were
false,
fraudulent, or for items or services not provided as claimed. We
affirm
the ALJ's conclusion that Respondent Shoals is liable for the fraud
of
its independent contractor agents, and impose on Respondent Shoals
an
assessment of $44,838; penalties of $129,750; and a
three-year
exclusion.
The Appendix to this decision sets out in regular type the ALJ's
FFCLs
which we affirm and adopt. FFCLs we have added are set out in all
bold
type. FFCLs we have modified substantively show the additions in
bold
type and indicate deletions with brackets.
_______________________________
Donald
F. Garrett
________________________________
M.
Terry Johnson
________________________________
Judith
A. Ballard Presiding
Board Member
APPENDIX TO DAB 1406
MODIFIED FINDINGS OF FACT AND CONCLUSIONS OF LAW
As a convenience to the parties, we have retained the organization of
the
following Findings of Fact and Conclusions of Law (Findings) by
subject
headings. The headings are not Findings and they do not alter
the
meaning of our Findings.
A. Respondents and their home oxygen equipment rental business
1. Respondent Livingston is trained as and has worked as a
respiratory
therapist. I.G. Ex. 534/2 - 3, /8 - 9, /22; Tr. at
1407.
2. A respiratory therapist is a health care provider who furnishes
care
to patients who suffer from chronic breathing problems. Tr. at
1150 -
1151.
3. In Alabama, there are neither education nor licensing
requirements
to qualify individuals to work as respiratory therapists.
I.G. Ex.
534/3; Tr. at 1466.
4. The care provided by respiratory therapists includes
administering
tests to patients to determine whether patients qualify for
oxygen
equipment for home use. See Tr. at 1052 - 1053, 1150 - 1151.
5. Tests administered by respiratory therapists may include
arterial
blood gas studies (ABGs) and ear oximetry tests. I.G. Ex.
17/2; Tr. at
1053, 1151, 1157 - 1158, 1194.
6. An ABG involves withdrawing blood from a patient's artery
and
testing it to determine the degree of oxygen pressure (PO2) in
the
patient's arterial blood. I.G. Ex. 17/2; Tr. at 420 - 421, 569 -
571.
7. The PO2 level in a patient's arterial blood evidences the extent
to
which that patient's breathing is impaired. Tr. at 569 - 570.
8. Blood withdrawn from a vein (venous blood) has a lower PO2
level
than arterial blood, and cannot be substituted legitimately for
arterial
blood for the purpose of conducting an arterial blood gas
study. Tr. at
1166; See Tr. at 1185, 1197.
9. An oximetry test determines the oxygen saturation of a
patient's
blood by measuring the passage of light through that patient's ear
lobe.
I.G. Ex. 17/2; Tr. at 1193 - 1194.
10. The care provided by respiratory therapists includes
maintaining
oxygen equipment provided to patients for use in their
homes. Tr. at
1055.
11. Respondent Livingston incorporated Respondent Shoals in
January,
1983. I.G. Ex. 541; Tr. at 1409.
12. Respondent Shoals maintained its principal office in
Florence,
Alabama. I.G. Ex. 533/333; I.G. Ex. 534/6.
13. Respondent Shoals was organized to provide medical
equipment,
including oxygen equipment, to patients, to be used by them in
their
homes. I.G. Ex. 533/110; I.G. Ex. 534/4; I.G. Ex. 541/3.
14. Respondent Shoals provided home oxygen equipment to
patients
residing in several states in the southern United States,
including
patients residing in the State of Alabama. Tr. at 1409,
1453.
15. Between 1983 and 1986, Respondent Shoals rented home
oxygen
equipment to between 500 and 800 patients at any one time. I.G.
Ex.
534/69; Tr. at 1452 - 1453.
16. The home oxygen equipment which Respondent Shoals rented
to
patients included oxygen concentrators, portable oxygen
equipment,
ultrasonic nebulizers, and compressors. See R. Ex. 1/2; R.
Ex. 3/3; R.
Ex. 4/2; R. Ex. 6/4; R. Ex. 7/2.
17. An oxygen concentrator is a device which extracts oxygen from
room
air, thereby providing oxygen to a patient without the presence
of
oxygen tanks or stored oxygen. Tr. at 394, 557 - 558.
18. Portable oxygen equipment includes tanks which contain oxygen
and
which can be transported by a patient from one location to another.
Tr.
at 554.
19. An ultrasonic nebulizer is a device which humidifies air
breathed
by a patient. Tr. at 556 - 557.
20. A compressor is a device which pressurizes medications for
the
purpose of aiding breathing by opening the patient's air passages.
Tr.
at 557.
21. Respondent Livingston was the President of Respondent Shoals.
I.G.
Ex. 1/2.
22. In December 1982, Respondent Livingston obtained a
Medicare
provider number for Respondent Shoals so that Respondent Shoals
could
present reimbursement claims for Medicare items or services. I.G.
Ex.
2; see I.G. Ex. 534/4 - 5.
23. Respondent Livingston managed the affairs of Respondent Shoals
and
supervised Respondent Shoals' employees closely in the performance
of
their duties. I.G. Ex. 534/387, /394; Tr. at 1430, 1754, 1757, 1758
-
1759, 1760 - 1761.
24. Deleted.
25. The I.G. did not prove that Respondent Shoals was the agent
of
Respondent Livingston.
B. The conditions under which Medicare beneficiaries in
Alabama
qualified for Medicare reimbursement for home oxygen equipment
rentals,
and the manner in which providers in Alabama received reimbursement
for
Medicare claims for home oxygen equipment rentals
26. Blue Cross and Blue Shield of Alabama (BCBSA) is the agent of
the
United States Government which processes claims for
Medicare
reimbursement in the State of Alabama, and it served in that
capacity
from 1983 through 1986. Tr. at 412 - 413.
27. Prior to October 1, 1985, there existed no national standards
of
eligibility to qualify Medicare beneficiaries for reimbursement for
home
oxygen equipment. Tr. at 413 - 414.
28. Prior to October 1, 1985, BCBSA established standards
of
eligibility to qualify Medicare beneficiaries in Alabama
for
reimbursement for home oxygen equipment. I.G. Ex. 8; I.G. Ex. 12;
I.G.
Ex. 13; I.G. Ex. 17; I.G. Ex. 26; Tr. at 414.
29. Beginning October 1, 1985, the Medicare program
established
national standards of eligibility to qualify Medicare
beneficiaries for
reimbursement for home oxygen equipment. I.G. Ex. 21;
I.G. Ex. 22; I.G.
Ex. 25; I.G. Ex. 30; Tr. at 414.
30. Prior to October 1, 1985, BCBSA required as supporting evidence
for
an initial claim for Medicare reimbursement for home oxygen
equipment:
(1) a Durable Medical Equipment Certification (DME form), signed
by a
physician, which certified the need for the specific equipment
ordered,
and which contained specified additional information concerning
the
beneficiary's medical condition and the length of time for which
the
equipment was likely to be needed; and (2) documentation of
the
beneficiary's arterial blood gas, through an ABG, demonstrating a
PO2
below 55mm Hg. I.G. Ex. 8/1 - 2; Tr. at 415.
31. Prior to October 1, 1985, BCBSA required that claims for
home
oxygen equipment be recertified every six months with the submission
of
an updated DME form, signed by a physician. Tr. at 417 - 18.
32. Prior to June 1984, BCBSA did not require that
recertification
requests for home oxygen equipment be accompanied by ABG or
other test
results. Tr. at 417.
33. Beginning in June, 1984, BCBSA continued to require that a
request
for reimbursement for home oxygen equipment be recertified once
every
six months with an updated DME form, signed by a physician. It
also
required that, once every twelve months, a recertification request
for
reimbursement for home oxygen equipment be submitted with an
ABG
documenting that the beneficiary had a PO2 below 55mm Hg., along with
an
updated DME form, signed by a physician. Tr. at 417.
34. Beginning in early 1985, BCBSA required that, once every 12
months,
a recertification request for reimbursement for home oxygen equipment
be
submitted with either an ABG documenting that the beneficiary had a
PO2
of below 55mm Hg., or an ear oximetry test result documenting a
blood
oxygen saturation level of 90 percent or less, along with an updated
DME
form, signed by a physician. Tr. at 418 - 419, 423.
35. Beginning October 1, 1985, Medicare and BCBSA required that, for
an
initial claim for reimbursement for home oxygen, the claim
be
accompanied by a completed DME form signed by a physician, along
with
either an ABG test result documenting specified PO2 levels or an
ear
oximetry test documenting specified oxygen saturation levels. I.G.
Ex.
21; I.G. Ex. 30; Tr. at 419 - 420.
36. The PO2 or oxygen saturation levels which would qualify
a
beneficiary for reimbursement under the October 1, 1985
Medicare
reimbursement criteria varied, depending on the level of
physical
activity engaged in by the beneficiary while the test was
being
conducted. I.G. Ex. 21; I.G. Ex. 30; Tr. at 419 - 420.
37. Beginning October 1, 1985, Medicare and BCBSA did not require
that
additional ABG studies or ear oximetry studies accompany
recertification
requests for reimbursement of home oxygen equipment, so long
as the
beneficiary's medical condition at the time of recertification
remained
unchanged. I.G. Ex. 21; I.G. Ex. 30; Tr. at 420.
38. Between 1983 and 1986, BCBSA sent to health care
providers,
including suppliers of home oxygen equipment, documents which
announced
BCBSA's and Medicare's criteria for qualifying Medicare
beneficiaries
for Medicare reimbursement for home oxygen equipment.
I.G. Ex. 8; I.G.
Ex. 12; I.G. Ex. 13; I.G. Ex. 17; I.G. Ex. 21; I.G. Ex. 22;
I.G. Ex. 25;
I.G. Ex. 26; Tr. at 409, 412 - 413.
39. Respondents received BCBSA's publications of criteria
for
qualifying Medicare beneficiaries for Medicare reimbursement for
home
oxygen equipment, and knew about those criteria. I.G. Ex. 533/319;
I.G.
Ex. 534/11, 14, 54, 56; R. Ex. 13; R. Ex. 19 - 26; R. Ex. 28; R. Ex.
29;
Finding 38.
40. Between September, 1980, and October, 1986, BCBSA
reimbursed
Medicare claims for home oxygen equipment under a procedure known
as the
"DME diary." Tr. at 430 - 431.
41. Under the DME diary procedure, a claim for home oxygen
equipment,
once initially qualified for reimbursement, would automatically be
paid
by BCBSA monthly, for six months. Tr. at 430 - 431.
42. Under the DME diary procedure, a provider claiming
reimbursement
for home oxygen equipment would only need to submit one claim
which
qualified for reimbursement in order to receive reimbursement from
BCBSA
for a six month period. Tr. at 430 - 431.
43. Under the DME diary procedure, each time a provider submitted
a
recertification to BCBSA which qualified a beneficiary for
additional
reimbursement for home oxygen equipment rental, BCBSA would
reimburse
the provider for six additional months' rental of the
equipment. Tr. at
431.
44. Under the DME diary procedure, BCBSA would send a document to
a
provider once a month, known as a "turn-around document," which told
the
provider whether a claim was being paid by BCBSA, and whether
a
recertification was due in order for a beneficiary to continue
to
qualify for reimbursement rental of home oxygen equipment to
that
beneficiary. Tr. at 432 - 433.
45. Under the DME diary procedure, the provider of home
oxygen
equipment had the duty to notify BCBSA if a beneficiary returned to
the
provider home oxygen equipment in less than six months' time. I.G.
Ex.
37; Tr. at 433 - 434.
46. Respondents were aware of the DME diary procedure and
understood
their duty to notify BCBSA in the event that a beneficiary
returned home
oxygen equipment in less than six months' time. R. Ex.
1/26; R. Ex.
2/22; Finding 44.
47. BCBSA relied on the documents submitted by providers to
determine
whether Medicare beneficiaries qualified for reimbursement for
home
oxygen equipment rental. Findings 26 - 46.
48. Deleted.
49. Providers who submit claims for Medicare reimbursement for
home
oxygen equipment have a duty to ensure the accuracy and honesty
of
claims they submit to Medicare, by having in place systems for
detecting
errors and fraud and taking reasonable measures under the
circumstances
to address problems which arise. [ ]. Findings 26 -
47.
C. The relationship between Respondents and independent
contractor
respiratory therapists
50. Respondent Shoals rented home oxygen equipment to patients
through
respiratory therapists who had independent contractor relationships
with
Respondent Shoals. I.G. Ex. 534/7 - 8.
51. Respondent Livingston personally recruited independent
contractor
respiratory therapists on behalf of Respondent Shoals, and
worked
closely with the independent contractor respiratory therapists.
I.G.
Ex. 533/199, /208 - 209; I.G. Ex. 534/19, /28, /30; Tr. at 1446,
1469,
1761, 1766.
52. Respondent Shoals had independent contractor relationships with
as
many as 60 respiratory therapists at any given time. I.G. Ex.
534/6;
Tr. at 1452.
53. Typically, an independent contractor respiratory therapist
would
service about 10 patients at a time on behalf of Respondent
Shoals.
I.G. Ex. 534/7.
54. Some of Respondent Shoals' independent contractors serviced
more
than, or less than, 10 patients at a time on behalf of
Respondent
Shoals. I.G. Ex. 534/7.
55. Respondent Shoals' purpose in doing business with
independent
contractors was to obtain access to patients who were candidates
to rent
home oxygen equipment. Respondent Shoals would rent home
oxygen
equipment to patients through the independent contractors. I.G.
Ex.
534/61; see Tr. at 1426 - 1429.
56. The independent contractor respiratory therapists through
whom
Respondent Shoals rented home oxygen equipment to patients
were
respiratory therapists who were employed by various hospitals. Tr.
at
669 - 670, 785 - 786, 789, 1053, 1153.
57. The independent contractor respiratory therapists would
obtain
referrals for home oxygen equipment rental from physicians who were
on
the staffs of hospitals at which the respiratory therapists
were
employed. Tr. at 543 - 544, 669 - 670, 674 - 675.
58. Respondent Shoals agreed to pay independent contractor
respiratory
therapists a commission ranging from $25 to as much as $80 per
month for
each patient from whom the contractors could obtain an agreement to
rent
home oxygen equipment from Respondent Shoals, with the amount of
the
commission depending on the rental fee for the equipment rented.
Tr. at
796, 798 - 799, 1259 - 1260.
59. Deleted.
60. Deleted
61. Under the terms of Respondent Shoals' agreements with
independent
contractors, the independent contractors were required to obtain
the
documents necessary to qualify Medicare beneficiaries for
Medicare
reimbursement for rental of home oxygen equipment, including DME
forms
executed by physicians, ABGs which met qualifying criteria,
and
equipment rental agreements executed by beneficiaries or by persons
on
behalf of beneficiaries. I.G. Ex. 533/189, /210 - 211; Tr. at
1228,
1426 - 1429.
62. The independent contractors through whom Respondent Shoals
rented
home oxygen equipment to patients performed ABGs on those patients
to
qualify them for Medicare reimbursement for home oxygen
equipment
rentals. Tr. at 1256.
63. The independent contractors through whom Respondent Shoals
rented
home oxygen equipment to patients were Respondent Shoals'
agents.
Findings 50 - 62.
64. Respiratory therapists operating as independent contractors
have
some opportunities and incentives to falsify documents, including
DME
forms, ABGs, and home oxygen equipment rental agreements, and to seek
to
qualify patients for rental of the most expensive home equipment,
in
order to maximize their compensation. Findings 50 - 63.
D. Medicare reimbursement claims by Respondent Shoals that were
false
or fraudulent or for items or services that were not provided as
claimed
65. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Morris
Broughton from September 20, 1985 through June 20, 1986. I.G.
Ex. 403 -
416; Finding 23; see I.G.'s April 19, 1991 notice letter to
Respondents,
Counts 1 - 16.
66. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted to have provided to Morris Broughton from September 20,
1985
through June 20, 1986. Findings 23, 65.
67. The reimbursement claims for the items or services which
Respondent
Shoals asserted it provided to Morris Broughton from September 20,
1985
through June 20, 1986 include 16 claims for reimbursement for the
rental
of either an oxygen concentrator or portable oxygen. I.G. Ex.
403 -
416; see I.G. Ex. 9/18.
68. Morris Broughton did not suffer from a medical condition
from
September 20, 1985 through June 20, 1986, which would warrant the use
by
him of either an oxygen concentrator or portable oxygen. I.G.
Ex.
395/2.
69. Morris Broughton's physician did not prescribe either an
oxygen
concentrator or portable oxygen for Morris Broughton from September
20,
1985 through June 20, 1986. I.G. Ex. 395/1 - 2.
70. Morris Broughton did not receive from Respondent Shoals either
an
oxygen concentrator or portable oxygen from September 20, 1985
through
June 20, 1986. I.G. Ex. 396.
71. Respondent Shoals presented to BCBSA two DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Morris Broughton
from
September 20, 1985 through June 20, 1986. I.G. Ex. 401 - 402.
72. Although the two DME forms bear the purported signature of
Morris
Broughton's physician, that physician neither prepared nor signed
the
forms, nor authorized other individuals to prepare or sign the
forms.
I.G. Ex. 395/1 - 2; See I.G. Ex. 401 - 402.
73. Respondent Shoals presented to BCBSA an ABG result
purportedly
ordered by Morris Broughton's physician, and dated September 12,
1985,
to support its reimbursement claims for an oxygen concentrator
or
portable oxygen and which it asserted it provided to Morris
Broughton
from September 20, 1985 through June 20, 1986. I.G. Ex.
400.
74. The ABG result is dated prior to the date that Morris
Broughton's
physician first saw Morris Broughton. I.G. Ex. 395/1.
75. Morris Broughton's physician did not order an ABG for
Morris
Broughton, to be performed on September 12, 1985. I.G. Ex.
395/1;
Finding 74.
76. The ABG result which Respondent Shoals presented to BCBSA
to
support its reimbursement claims for Morris Broughton
contains
information concerning the PO2 levels in Morris Broughton's blood
which
is inconsistent with the clinical findings and diagnosis made by
Morris
Broughton's physician. I.G. Ex. 395/1 - 2, /24 - 26; I.G. Ex.
400.
77. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
or portable oxygen which it asserted it provided to Morris
Broughton
from September 20, 1985 through June 20, 1986 contain materially
false
information. Findings 71 - 76.
78. The 16 reimbursement claims for either an oxygen concentrator
or
portable oxygen which Respondent Shoals asserted it provided to
Morris
Broughton from September 20, 1985 through June 20, 1986 are false
or
fraudulent. Findings 67 - 77.
79. The 16 reimbursement claims for either an oxygen concentrator
or
portable oxygen which Respondent Shoals asserted it provided to
Morris
Broughton from September 20, 1985 through June 20, 1986 are for items
or
services which were not provided as claimed. Findings 67 - 78.
80. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Estelle
Coleman from February 20, 1985 through June 20, 1986. I.G. Ex.
373 -
389; Finding 23; see I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents, Counts 17 - 30, 153 - 155.
81. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Estelle Coleman from February 20, 1985
through
June 20, 1986. Findings 23, 79 - 80.
82. The reimbursement claims for the items or services which
Respondent
Shoals asserted it provided to Estelle Coleman from February 20,
1985
through June 20, 1986 include 17 claims for reimbursement for the
rental
of an oxygen concentrator. I.G. Ex. 373 - 389; see I.G. Ex.
9/18.
83. Estelle Coleman did not suffer from a medical condition from
March
20, 1985 through June 20, 1986 which would warrant her using an
oxygen
concentrator. I.G. Ex. 354; I.G. Ex. 392.
84. Estelle Coleman's physician did not prescribe an
oxygen
concentrator for Estelle Coleman from March 20, 1985 through June
20,
1986. I.G. Ex. 354.
85. Estelle Coleman did not receive an oxygen concentrator
from
Respondent Shoals from March 20, 1985 through June 20, 1986. I.G.
Ex.
355; I.G. Ex. 356.
86. Respondent Shoals presented to BCBSA six DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Estelle Coleman from March
20,
1985 through June 20, 1986. I.G. Ex. 363 - 367; I.G. Ex. 369 - 370.
29/
87. Estelle Coleman's physician signed two of the six DME
forms.
However, Estelle Coleman's physician did not complete these two
forms,
nor did he direct other individuals to complete these forms in a
way
which would indicate that Estelle Coleman suffered from
respiratory
illness, or that she needed home oxygen equipment. I.G. Ex.
354/2; See
I.G. Ex. 365; I.G. Ex. 367.
88. Although the four remaining DME forms bear the purported
signature
of Estelle Coleman's physician, he did not complete or sign the
four
remaining forms, nor did he direct other individuals to complete or
sign
the forms. I.G. Ex. 354/1 - 2; See I.G. Ex. 363 - 364; I.G. Ex.
366;
I.G. Ex. 369 - 370.
89. Respondent Shoals presented to BCBSA two ABG results
purportedly
ordered by Estelle Coleman's physician, to support its
reimbursement
claims for an oxygen concentrator which it asserted it provided
to
Estelle Coleman from March 20, 1985 through June 20, 1986. I.G. Ex.
361
- 362.
90. Estelle Coleman's physician never ordered ABGs to be performed
on
Estelle Coleman. I.G. Ex. 354.
91. The ABG results which Respondent Shoals presented to BCBSA
to
support its reimbursement claims for Estelle Coleman contain
information
concerning the PO2 levels in Estelle Coleman's blood which
is
inconsistent with the clinical findings and diagnosis made by
Estelle
Coleman's physician. I.G. Ex. 361 - 362; I.G. Ex. 392.
92. The DME forms and the ABG results which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
which it asserted it provided to Estelle Coleman from March 20,
1985
through June 20, 1986 contain materially false information.
Findings 86
- 91.
93. The 17 reimbursement claims for an oxygen concentrator
which
Respondent Shoals asserted it provided to Estelle Coleman from March
20,
1985 through June 20, 1986 are false or fraudulent. Findings 80 -
92.
94. The 17 reimbursement claims for an oxygen concentrator
which
Respondent Shoals asserted it provided to Estelle Coleman from March
20,
1985 through June 20, 1986 are for items or services which were
not
provided as claimed. Findings 80 - 93.
95. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Antonio
Elizondo from March 18, 1985 through December 18, 1985. I.G.
Ex. 154 -
161; Finding 23; See I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents, Counts 31 - 37, 156 - 158.
96. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Antonio Elizondo from March 18, 1985
through
December 18, 1985. Findings 23, 95.
97. The reimbursement claims for the items or services which
Respondent
Shoals asserted it provided to Antonio Elizondo from March 18,
1985
through December 18, 1985 include 10 claims for reimbursement for
the
rental of an oxygen concentrator. I.G. Ex. 154 - 161; see I.G.
Ex.
9/18.
98. The physician who treated Antonio Elizondo from March 18,
1985
through December 18, 1985 never prescribed an oxygen concentrator
for
Antonio Elizondo. Tr. at 577 - 578.
99. Antonio Elizondo never received an oxygen concentrator. I.G.
Ex.
138.
100. Respondent Shoals presented to BCBSA five DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Antonio Elizondo from
March
18, 1985 through December 18, 1985. I.G. Ex. 142 - 146.
101. Antonio Elizondo's physician signed one of the five DME
forms.
However, Antonio Elizondo's physician did not complete this form,
nor
did she direct other individuals to complete the form in a way
which
would indicate that Antonio Elizondo needed a respiratory support
system
(as is indicated on the form). I.G. Ex. 142; Tr. at 577 -
578.
102. Although the four remaining DME forms bear the purported
signature
of Antonio Elizondo's physician, she did not complete or sign the
four
remaining forms, nor did she direct other individuals to complete
or
sign the forms. Tr. at 579 - 582; see I.G. Ex. 143 - 146.
103. Respondent Shoals presented to BCBSA an ABG result,
purportedly
ordered by Antonio Elizondo's physician, to support its
reimbursement
claims for an oxygen concentrator which it asserted it provided
to
Antonio Elizondo from March 18, 1985 through December 18, 1985.
I.G.
Ex. 141; Tr. at 585.
104. Antonio Elizondo's physician did not order the ABG which
she
purportedly ordered, and which Respondent Shoals presented to BCBSA
to
support its reimbursement claims for an oxygen concentrator which
it
asserted it supplied to Antonio Elizondo. Tr. at 584 - 586.
105. The ABG result which Respondent Shoals presented to BCBSA
to
support its reimbursement claims for Antonio Elizondo
contains
information concerning the PO2 levels in Antonio Elizondo's blood
which
is inconsistent with the clinical findings and diagnosis made by
Antonio
Elizondo's physician. I.G. Ex. 141; I.G. Ex. 171; Tr. at 586 -
587.
106. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
which it asserted it provided to Antonio Elizondo from March 18,
1985
through December 18, 1985 contain materially false
information.
Findings 100 - 105.
107. The 10 reimbursement claims for an oxygen concentrator
which
Respondent Shoals asserted it provided to Antonio Elizondo from
March
18, 1985 through December 18, 1985 are false or fraudulent.
Findings 95
- 106.
108. The 10 reimbursement claims for an oxygen concentrator
which
Respondent Shoals asserted it provided to Antonio Elizondo from
March
18, 1985 through December 18, 1985 are for items or services which
were
not provided as claimed. Findings 95 - 107.
109. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Ruby
Ellis from May 19, 1985 through June 19, 1986. I.G. Ex. 181 -
206;
Finding 23; See I.G.'s April 19, 1991 and July 8, 1991 notice letters
to
Respondents, Counts 38 - 65.
110. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Ruby Ellis from May 19, 1985 through June
19,
1986. Findings 23, 109.
111. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Ruby Ellis from May 19,
1985
through June 19, 1986 include 28 claims for reimbursement for the
rental
of either an oxygen concentrator or portable oxygen. I.G. Ex.
181 -
206; see I.G. Ex. 9/18.
112. The physician who treated Ruby Ellis during the period from
May
19, 1985 through June 19, 1986, never prescribed an oxygen
concentrator
or portable oxygen for Ruby Ellis. Tr. at 577 - 578.
113. Ruby Ellis did not have or use an oxygen concentrator or
portable
oxygen at her home in 1985 or 1986. I.G. Ex. 172/1.
114. Respondent Shoals presented to BCBSA four DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Ruby Ellis from May 19,
1985
through June 19, 1986. I.G. Ex. 176 - 179.
115. Ruby Ellis' physician did not sign, nor did she give any
other
individual permission to sign, the four DME forms. Tr. at 590 -
594;
see I.G. Ex. 176 - 179.
116. Respondent Shoals presented to BCBSA an ABG result for Ruby
Ellis
to support its reimbursement for claims for an oxygen concentrator
or
portable oxygen which it asserted it provided to Ruby Ellis from May
19,
1985 through June 19, 1986. I.G. Ex. 175.
117. The PO2 level reported in the ABG result for Ruby Ellis
is
inconsistent with the clinical findings made by her physician. I.G.
Ex.
209/1 - 46; Tr. at 595.
118. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
or portable oxygen which it asserted it provided to Ruby Ellis
from May
19, 1985 through June 19, 1986, contain materially false
information.
Findings 109 - 117.
119. The 28 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Ruby Ellis
from
May 19, 1985 through June 19, 1986, are false or fraudulent.
Findings
109 - 118.
120. The 28 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Ruby Ellis
from
May 19, 1985 through June 19, 1986 are for items or services which
were
not provided as claimed. Findings 109 - 119.
121. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Jennie
Mae King from March 28, 1985 through August 28, 1985. I.G. Ex.
89 - 90;
R. Ex. 10/1; Finding 23; See I.G.'s April 19, 1991 and July 8,
1991
notice letters to Respondents, Counts 66 - 67, 159 - 168.
122. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Jennie Mae King from March 28, 1985
through
August 28, 1985. Findings 23, 121.
123. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Jennie Mae King from March
28,
1985 through August 28, 1985 include 12 claims for reimbursement for
the
rental of either an oxygen concentrator or portable oxygen. I.G.
Ex. 89
- 90; R. Ex. 10; See I.G. Ex. 9/18.
124. The physician who treated Jennie Mae King during the period
from
March 28, 1985 through August 28, 1985 never prescribed an
oxygen
concentrator or portable oxygen for Jennie Mae King. I.G. Ex.
74/1.
125. Jennie Mae King never received an oxygen concentrator or
portable
oxygen from Respondent Shoals. I.G. Ex. 75; Tr. at 326 - 327,
329 -
330.
126. Respondent Shoals presented to BCBSA four DME forms
for
certification or recertification for claims for home oxygen
equipment
that Respondent Shoals asserted it provided to Jennie Mae King for
the
period of time from March 28, 1985 through August 28, 1985. I.G.
Ex. 81
- 84; R. Ex. 10.
127. Jennie Mae King's physician signed one of the four DME
forms.
However, Jennie Mae King's physician did not complete this form, nor
did
he direct other individuals to complete the form in a way which
would
indicate that Jennie Mae King suffered from impaired breathing (as
is
indicated on the form). I.G. Ex. 74/1 - 2; see I.G. Ex. 81.
128. Although the three remaining DME forms bear the
purported
signature of Jennie Mae King's physician, he did not complete or
sign
the three remaining forms, nor did he direct other individuals
to
complete or sign the forms. I.G. Ex. 74/2 - 3; See I.G. Ex. 82 -
84.
129. Respondent Shoals presented to BCBSA an ABG result for Jennie
Mae
King to support its reimbursement claims for an oxygen concentrator
or
portable oxygen which it asserted it provided to Jennie Mae King
from
March 28, 1985 through August 28, 1985. I.G. Ex. 80; R. Ex. 10/16
- 17.
130. Jennie Mae King's physician did not order the ABG which
Respondent
Shoals presented to BCBSA to support its reimbursement claims for
an
oxygen concentrator or portable oxygen which it asserted it supplied
to
Jennie Mae King. I.G. Ex. 74/1; see I.G. Ex. 80.
131. The PO2 level reported in the ABG result for Jennie Mae King
is
inconsistent with the clinical findings made by her physician. I.G.
Ex.
74; See I.G. Ex. 80.
132. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
or portable oxygen which it asserted it provided to Jennie Mae
King from
March 28, 1985 through August 28, 1985 contain materially
false
information. Findings 121 - 131.
133. The 12 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Jennie Mae
King
from March 28, 1985 through August 28, 1985 are false or
fraudulent.
Findings 121 - 132.
134. The 12 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Jennie Mae
King
from March 28, 1985 through August 28, 1985 are for items or
services
which were not provided as claimed. Findings 121 - 133.
135. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Prentiss
Lambert from April 28, 1985 through March 28, 1986. I.G. Ex.
59 - 64;
66 - 71; Finding 23; see I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents, Counts 68 - 80; 170 - 171.
136. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Prentiss Lambert from April 28, 1985
through
March 28, 1986. Findings 23, 135.
137. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Prentiss Lambert from
April
28, 1985 through March 28, 1986 include 15 claims for reimbursement
for
the rental of either an oxygen concentrator or portable oxygen. I.G
Ex.
59 - 64; 66 - 71; see I.G. Ex. 9.
138. The physician who treated Prentiss Lambert during the period
from
April 28, 1985 through March 28, 1986 never ordered home
oxygen
equipment for Prentiss Lambert. I.G. Ex. 31/1.
139. Prentiss Lambert never received home oxygen equipment
from
Respondent Shoals. I.G. Ex. 32; Tr. at 287 - 288.
140. Respondent Shoals presented to BCBSA three DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Prentiss Lambert from
April
28, 1985 through March 28, 1986. I.G. Ex. 42 - 44.
141. Prentiss Lambert's physician did not sign, nor did he give
any
other individual permission to sign, the three DME forms. I.G. Ex.
31/1
- 3; see I.G. Ex. 42 - 44.
142. Respondent Shoals presented to BCBSA an ABG result for
Prentiss
Lambert to support its reimbursement claims for an oxygen
concentrator
or portable oxygen that it asserted it provided to Prentiss
Lambert from
April 28, 1985 through March 28, 1986. I.G. Ex. 39.
143. Prentiss Lambert's physician did not order the ABG
which
Respondent Shoals presented to BCBSA to support its reimbursement
claims
for an oxygen concentrator or portable oxygen which it asserted
it
provided to Prentiss Lambert from April 28, 1985 through March 28,
1986.
I.G. Ex. 31/1; See I.G. Ex. 39.
144. The PO2 level reported in the ABG result for Prentiss Lambert
is
inconsistent with the clinical findings made by his physician. I.G.
Ex.
31; See I.G. Ex. 80.
145. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
or portable oxygen which it asserted it provided to Prentiss
Lambert
from April 28, 1985 through March 28, 1986 contain materially
false
information. Findings 135 - 144.
146. The 15 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Prentiss
Lambert
from April 28, 1985 through March 28, 1986 are false or
fraudulent.
Findings 135 - 145.
147. The 15 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Prentiss
Lambert
from March 28, 1985 through August 28, 1986 are for items or
services
which were not provided as claimed. Findings 135 - 146.
148. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary Amos
Odom
from April 1, 1985 through February 1, 1986. I.G. Ex. 465 - 472;
I.G.
Ex. 477/23; R Ex. 7/1; Finding 23; See I.G.'s April 19, 1991 and July
8,
1991 notice letters to Respondents, Counts 81 - 83; 172 - 178. 30/
149. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Amos Odom from April 1, 1985 through February
1,
1986. Findings 23, 148.
150. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Amos Odom from April 1,
1985
through February 1, 1986, include 10 claims for reimbursement for
the
rental of an oxygen concentrator. I.G. Ex. 465 - 472; I.G. Ex.
477/23;
see I.G. Ex. 9/18.
151. Respondent Shoals presented to BCBSA two DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Amos Odom from April 1,
1985
through February 1, 1986. I.G. Ex. 463 - 464.
152. The physician who was treating Amos Odom on the dates when the
two
DME forms referred to in Finding 151 were completed and executed
admits
signing the forms and prescribing home oxygen equipment for Amos
Odom.
I.G. Ex. 453.
153. Respondent Shoals presented to BCBSA two blood oxygen
saturation
reports (ear oximetry test results) to support its claims
for
reimbursement for rental of home oxygen equipment to Amos Odom
from
April 1, 1985 through February 1, 1986. I.G. Ex. 459 - 460.
154. The I.G. did not prove that the information contained in the
two
blood oxygen saturation reports was false.
155. The I.G. did not prove that the 10 reimbursement claims
which
Respondent Shoals presented to BCBSA for items or services which
it
asserted it provided to Amos Odom from April 1, 1985 through February
1,
1986 were false, fraudulent, or for items or services which were
not
provided as claimed. See Findings 148 - 154.
156. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Barney
Stevens from March 1, 1985 through June 1, 1985. I.G. Ex. 287 -
292;
Finding 23; see I.G.'s April 19, 1991 and July 8, 1991 notice letters
to
Respondents, Counts 84 - 87; 179 - 181.
157. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted to have provided to Barney Stevens from March 1, 1985
through
June 1, 1985. Findings 23, 156.
158. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Barney Stevens from March
1,
1985 through June 1, 1985 include seven claims for reimbursement for
the
rental of an oxygen concentrator or portable oxygen. I.G Ex. 287 -
292;
see I.G. Ex. 9/18.
159. Barney Stevens had been supplied an oxygen concentrator but
ceased
using it in January 1984. I.G. Ex. 278/1; Tr. at 351.
160. Beginning in early 1984, Barney Stevens requested the
independent
contractor who had supplied the oxygen concentrator to him on
behalf of
Respondent Shoals to remove the equipment from his home. I.G.
Ex.
278/1; Tr. at 351 - 352.
161. The oxygen concentrator was removed from Barney Stevens' home
in
March 1985. I.G. Ex. 278/1; Tr. at 352.
162. Respondent Shoals presented to BCBSA a DME form for
certification
or recertification of home oxygen equipment that Respondent
Shoals
asserted it provided to Barney Stevens from March 1, 1985 through
June
1, 1985. I.G. Ex. 285.
163. Barney Stevens was not a patient of the physician who
purportedly
signed the DME form on the date that the form purportedly was
signed.
Tr. at 698 - 699; See I.G. Ex. 285.
164. The physician who purportedly signed the DME form did not sign,
nor
did he give any other individual permission to sign, the DME form.
Tr.
at 699; See I.G. Ex. 285.
165. On January 28, 1986, BCBSA wrote to Respondent Shoals,
notifying
it that BCBSA had been advised by Barney Stevens that he
had
discontinued using oxygen equipment which he had rented from
Respondent
Shoals. I.G. Ex. 272/1.
166. BCBSA requested repayment from Respondent Shoals for
overpayments
which it asserted had been made in error to Respondent
Shoals. I.G. Ex.
272.
167. On February 17, 1986, Respondent Shoals sent to BCBSA a
signed
statement from Barney Stevens which recited that he had used
the
equipment rented from Respondent Shoals until May 1, 1985.
The
statement appears to have been notarized. I.G. Ex. 273; I.G. Ex.
280.
168. The statement which Respondent Shoals supplied to BCBSA
was
dictated to Barney Stevens by a representative of Respondent Shoals
and
was signed by Barney Stevens at the request of that representative.
Tr.
at 356 - 358.
169. The statement was not notarized in the presence of or at
the
request of Barney Stevens. Tr. at 358 - 359.
170. The DME form and the notarized statement which Respondent
Shoals
presented to BCBSA to support its reimbursement claims for an
oxygen
concentrator or portable oxygen which it asserted it provided to
Barney
Stevens from March 1, 1985 through June 1, 1985 contain materially
false
information. Findings 156 - 169.
171. The seven reimbursement claims for an oxygen concentrator
or
portable oxygen which Respondent Shoals asserted it provided to
Barney
Stevens from March 1, 1985 through June 1, 1985 are false or
fraudulent.
Findings 156 - 170.
172. The seven reimbursement claims for an oxygen concentrator
or
portable oxygen which Respondent Shoals asserted it provided to
Barney
Stevens from March 1, 1985 through June 1, 1985 are for items
or
services which were not provided as claimed. Findings 156 - 171.
173. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Lelar
Williams from January 18, 1985 through June 18, 1986. I.G. Ex.
232 -
264; Finding 23; see I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents, Counts 88 - 122, 182.
174. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Lelar Williams from January 18, 1985
through
June 18, 1986. Findings 23, 173.
175. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Lelar Williams from
January
18, 1985 through June 18, 1986 include 36 claims for reimbursement
for
the rental of an oxygen concentrator or portable oxygen. I.G Ex.
232 -
264; see I.G. Ex. 9/18.
176. The physicians who treated Lelar Williams during the period
from
January 18, 1985 through June 18, 1986 never ordered home
oxygen
equipment for Lelar Williams. Tr. at 599 - 601; 704.
177. Lelar Williams never received home oxygen equipment
from
Respondent Shoals. I.G. Ex. 210/3; I.G. Ex. 211; I.G. Ex. 212.
178. Respondent Shoals presented to BCBSA three DME forms
for
certification or recertification of home oxygen equipment
that
Respondent Shoals asserted it provided to Lelar Williams from
January
18, 1985 through June 18, 1986. I.G. Ex. 222 - 224.
179. The physician who purportedly signed the three DME forms did
not
sign, nor did she give other individuals permission to sign, the
three
DME forms. Tr. at 599 - 603; See I.G. Ex. 222 - 224.
180. Two of the three DME forms represent that a physician other
than
the physician who purportedly signed the forms was Lelar
Williams'
treating physician. I.G. Ex. 222 - 223.
181. The three DME forms that Respondent Shoals presented to BSA
to
support its reimbursement claims for an oxygen concentrator or
portable
oxygen which it asserted it provided to Lelar Williams from January
18,
1985 through June 18, 1986 contain materially false
information.
Findings 173 - 180.
182. The 36 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Lelar
Williams
from January 18, 1985 through June 18, 1986 are false or
fraudulent.
Findings 173 - 181.
183. The 36 reimbursement claims for an oxygen concentrator or
portable
oxygen which Respondent Shoals asserted it provided to Lelar
Williams
from January 18, 1985 through June 18, 1986 are for items or
services
which were not provided as claimed. Findings 173 - 182.
184. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
which
Respondent Shoals asserted it provided to Medicare beneficiary
Robert
Williams from January 13, 1985 through June 13, 1986. I.G. Ex.
109 -
128; Finding 23; see I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents, Counts 123 - 152, 183 - 184.
185. Respondent Livingston caused to be presented to BCBSA
the
reimbursement claims for the items or services which Respondent
Shoals
asserted it provided to Robert Williams from January 13, 1985
through
June 13, 1986. Findings 23, 184.
186. The reimbursement claims for the items or services
which
Respondent Shoals asserted it provided to Robert Williams from
January
13, 1985 through June 13, 1986 include 32 claims for reimbursement
for
the rental of an oxygen concentrator or portable oxygen). I.G. Ex.
109
- 128; See I.G. Ex. 9/18.
187. Robert Williams did not rent either an oxygen concentrator
or
portable oxygen from Respondent Shoals during the period from
January
13, 1985 through June 13, 1986. I.G. Ex. 95/1 - 2; Tr. at 1015
- 1016.
188. Respondent Shoals presented to BCBSA four DME forms
for
certification or recertification of home oxygen equipment
which
Respondent Shoals asserted it provided to Robert Williams from
January
13, 1985 through June 13, 1986. I.G. Ex. 102 - 105.
189. The physician who purportedly signed the four DME forms did
not
sign, nor did she give any other individual permission to sign, the
four
DME forms. Tr. at 556 - 562, 564; See I.G. Ex. 102 - 105.
190. Respondent Shoals presented to BCBSA an ABG result for
Robert
Williams to support its reimbursement claims for an oxygen
concentrator
or portable oxygen equipment which it asserted it provided to
Robert
Williams from January 13, 1985 through June 13, 1986. I.G. Ex.
100.
191. Robert Williams' physician did not order the ABG which
Respondent
Shoals presented to BCBSA to support its reimbursement claims for
an
oxygen concentrator or portable oxygen which it asserted it provided
to
Robert Williams from January 13, 1985 through June 13, 1986. Tr.
at
571; see I.G. Ex. 100.
192. The PO2 level reported in the ABG result for Robert Williams
is
inconsistent with the clinical findings made by his physician. I.G.
Ex.
137; Tr. at 572 - 573; see I.G. Ex. 100.
193. The DME forms and the ABG result which Respondent Shoals
presented
to BCBSA to support its reimbursement claims for an oxygen
concentrator
or portable oxygen which it asserted it provided to Robert
Williams from
January 13, 1985 through June 13, 1986 contain materially
false
information. Findings 184 - 192.
194. The 32 reimbursement claims for an oxygen concentrator or
portable
oxygen that Respondent Shoals asserted it provided to Robert
Williams
from March 13, 1985 through June 13, 1986 are false or
fraudulent.
Findings 184 - 193.
195. The 32 reimbursement claims for an oxygen concentrator or
portable
oxygen that Respondent Shoals asserted it provided to Robert
Williams
from March 13, 1985 through June 13, 1986 are for items or services
that
were not provided as claimed. Findings 184 - 194.
196. Respondent Shoals presented, and Respondent Livingston caused
to
be presented, 173 claims for Medicare reimbursement which were
false,
fraudulent, or for items or services which were not provided as
claimed.
Findings 65 - 67, 78 - 82, 93 - 97, 107 - 111, 119 - 123, 133 - 137,
146
- 147, 156 - 158, 171 - 175, 182 - 186, 194 - 195.
197. All of the 173 claims which Respondent Shoals presented,
and
Respondent Livingston caused to be presented which were
false,
fraudulent, or for items or services which were not provided as
claimed,
were presented by Respondent Shoals to BCBSA on or after April 19,
1985
(or in the case of those claims identified in the I.G.'s July 19,
1991
letter, on or after July 19, 1985). I.G. Ex. 72; I.G. Ex. 92; I.G.
Ex.
136; I.G. Ex. 170; I.G. Ex. 208; I.G. Ex. 268; I.G. Ex. 295; I.G.
Ex.
391; I.G. Ex. 419; see Tr. at 443 - 451.
E. Medicare reimbursement claims by Respondent Shoals that were
either
false or fraudulent or that were for items or services that were
not
provided as claimed other than the claims that comprise the
I.G.'s
case-in-chief
198. Respondent Shoals presented, and Respondent Livingston caused
to
be presented, Medicare reimbursement claims for Medicare
beneficiaries
Estelle Coleman, Antonio Elizondo, Ruby Ellis, Jennie Mae King,
Prentiss
Lambert, Lelar Williams, and Robert Williams in addition to the
173
claims for items that comprise the I.G.'s case-in-chief and for
periods
of time that predate the periods of time covered by those claims (or
in
the case of those claims identified in the I.G.'s July 19, 1991
letter,
on or after July 19, 1985). I.G. Ex. 45 - 58; I.G. Ex. 85 - 88;
I.G.
Ex. 162 - 169; I.G. Ex. 225 - 231; I.G. Ex. 371 - 372; Finding 23.
31/
199. Respondent Shoals presented to BCBSA a DME form and an ABG
report
which contain false information in support of its additional claims
for
reimbursement for items or services that it asserted it provided
to
Estelle Coleman from August 20, 1984 through January 20, 1985. I.G.
Ex.
354; I.G. Ex. 361; I.G. Ex. 363; Findings 80 - 94.
200. Respondent Shoals presented to BCBSA a DME form that
contains
false information in support of its additional claims for
reimbursement
for items or services that it asserted it provided to Antonio
Elizondo
from September 18, 1983 through January 18, 1985. I.G. Ex.
143; Tr. at
579; Findings 95 - 108.
201. Respondent Shoals presented to BCBSA a DME form that
contains
false information in support of its additional claims for
reimbursement
for items or services that it asserted it provided to Ruby
Ellis on
December 19, 1984. I.G. Ex. 176; Tr. at 594; Findings 109 -
120.
202. Respondent Shoals presented to BCBSA two DME forms and an
ABG
report which contain false information in support of its
additional
claims for reimbursement for items or services that it asserted
it
provided to Jennie Mae King for the period of time from February
28,
1984 through November 28, 1984. I.G. Ex. 74; I.G. Ex. 80 - 82; R.
Ex.
10/5 /7; Findings 121 - 134.
203. Respondent Shoals presented to BCBSA two DME forms and an
ABG
report which contain false information in support of its
additional
claims for reimbursement for items or services that it asserted
it
provided to Prentiss Lambert from March 30, 1984 through March 28,
1985.
I.G. Ex. 31; I.G. Ex. 38; I.G. Ex. 40 - 41; Findings 135 - 147.
204. Respondent Shoals presented to BCBSA four DME forms and an
ABG
report that contain false information in support of its
additional
claims for reimbursement for items or services that it asserted
it
provided to Lelar Williams from July 18, 1983 through January 18,
1984.
I.G. Ex. 217 - 221; Tr. at 704 - 706, 710; Findings 173 - 183.
205. Respondent Shoals presented to BCBSA two DME forms and an
ABG
report that contain false information, in support of its
additional
claims for reimbursement for items or services which it asserted
it
provided to Robert Williams from May 13, 1984 through January 13,
1985.
I.G. Ex. 99; I.G. Ex. 101 - 102; Tr. at 549, 559, 571; Findings 184
-
195.
206. The additional Medicare reimbursement claims that
Respondents
presented or caused to be presented for items or services
that
Respondent Shoals asserted it provided to Estelle Coleman,
Antonio
Elizondo, Ruby Ellis, Jennie Mae King, Prentiss Lambert, Lelar
Williams,
and Robert Williams, are false, fraudulent, or for items or
services
that were not provided as claimed. Findings 198 - 205.
207. Respondent Shoals presented, and Respondent Livingston caused
to
be presented, Medicare reimbursement claims for Medicare
beneficiary
Amos Odom for the period of time from September 1, 1984 through
March 1,
1985, in addition to claims for items or services which
Respondent
Shoals presented on or after April 19, 1985. I.G. Ex. 473 -
476;
Finding 23.
208. Respondent Shoals presented to BCBSA two DME forms in support
of
its additional claims for reimbursement for items or services which
it
asserted it provided to Amos Odom for the period of time from
September
1, 1984 through March 1, 1985. I.G. Ex. 461 - 462.
209. The physician whose name is stamped on the two DME forms did
not
sign or stamp these forms, nor did he authorize other individuals
to
sign or stamp these forms on his behalf. I.G. Ex. 452/1 - 3.
210. Respondent Shoals presented to BCBSA an ABG report dated
August
16, 1984 in support of its additional claims for reimbursement for
items
or services which it asserted it provided to Amos Odom from September
1,
1984 through March 1, 1985. I.G. Ex. 458.
211. The independent contractor respiratory therapist who completed
the
August 16, 1984 ABG report on behalf of Respondent Shoals falsified
the
report. Tr. at 875 - 877.
212. Respondent Shoals presented two DME forms and an ABG report
to
BCBSA in which Respondent asserted it provided items or services to
Amos
Odom. These two DME forms and the ABG report contain false
information.
Findings 208 - 211.
213. The additional Medicare reimbursement claims that
Respondents
presented or caused to be presented for items or services
that
Respondent Shoals asserted it provided to Amos Odom are
false,
fraudulent, or for items or services that were not provided as
claimed.
Findings 207 - 212.
214. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Orville
Harris from October 27, 1984 through March 27, 1985. I.G. Ex.
491 -
492; Finding 23.
215. Orville Harris was incarcerated from June 4, 1984 until October
2,
1987. I.G. Ex. 479.
216. Orville Harris did not receive home oxygen equipment
from
Respondent Shoals during the period when he was incarcerated.
Finding
215.
217. The claims that Respondents presented or caused to be
presented
for Medicare items or services that Respondent Shoals asserted
it
provided to Orville Harris are false, fraudulent, or for items
or
services that were not provided as claimed. Findings 214 - 216.
218. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Nash
Henderson from June 30, 1983 through February 28, 1985. I.G. Ex.
310 -
325; Finding 23.
219. Nash Henderson never received home oxygen equipment
from
Respondent Shoals. I.G. Ex. 297; Tr. at 519, 539.
220. The physician who treated Nash Henderson from June 30,
1983
through February 28, 1985 never prescribed home oxygen equipment
for
Nash Henderson. Tr. at 685, 689 - 690, 692.
221. Respondent Shoals presented to BCBSA DME forms to support
its
reimbursement claims for home oxygen equipment which it asserted to
have
supplied to Nash Henderson from June 30, 1983 through February 28,
1985
that were forged and that contained false information. I.G. Ex.
303 -
306; Tr. at 686, 689 - 693.
222. The claims which Respondents presented or caused to be
presented
for Medicare items or services which Respondent Shoals asserted
it
provided to Nash Henderson are false, fraudulent, or for items
or
services that were not provided as claimed. Findings 23, 218 -
221.
223. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
which
Respondent Shoals asserted it provided to Medicare beneficiary
Elmore
Mobley from August 6, 1984 through December 6, 1984. I.G. Ex.
444 -
448; Finding 23.
224. The physicians who treated Elmore Mobley from August 6,
1984
through December 6, 1984 did not prescribe or authorize the rental
of
home oxygen equipment for Elmore Mobley. I.G. Ex. 437 - 438.
225. Respondent Shoals presented to BCBSA two DME forms to support
its
claims for reimbursement for home oxygen equipment it asserted
it
supplied to Elmore Mobley. I.G. Ex. 441 - 442.
226. The physicians who are purported to have signed or stamped the
two
DME forms neither signed, stamped, nor authorized other individuals
to
sign the two DME forms. I.G. Ex. 437 - 438.
227. The claims which Respondents presented or caused to be
presented
for Medicare items or services which Respondent Shoals asserted
it
provided to Elmore Mobley are false, fraudulent, or for items
or
services which were not provided as claimed. Findings 223 - 226.
228. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA a Medicare reimbursement claim for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary
Rosa
Rigsby in July 1984. I.G. Ex. 434; Finding 23.
229. Respondent Shoals presented to BCBSA three ABG reports in
support
of its claim for reimbursement for items or services which it
asserted
it provided to Rosa Rigsby. I.G. Ex. 423 - 424; I.G. Ex.
431.
230. The ABG reports contain information which was falsified by
the
independent contractor who performed the ABGs. Tr. at 843 - 845,
851.
231. The claim which Respondents presented or caused to be
presented
for Medicare items or services which Respondent Shoals asserted
it
provided to Rosa Rigsby is false, fraudulent, or for items or
services
which were not provided as claimed. Findings 228 - 231.
232. Respondent Shoals, at Respondent Livingston's direction,
presented
to BCBSA Medicare reimbursement claims for items or services
that
Respondent Shoals asserted it provided to Medicare beneficiary Ed
Thomas
from July 28, 1983 through December 28, 1984. I.G. Ex. 339 -
352;
Finding 23.
233. Ed Thomas never received home oxygen equipment from
Respondent
Shoals. I.G. Ex. 329; I.G. Ex. 332.
234. The physician who treated Ed Thomas never prescribed home
oxygen
equipment for Ed Thomas. Tr. at 700 - 703.
235. Respondent Shoals presented to BCBSA three DME forms to
support
its claims for reimbursement for home oxygen equipment it asserted
it
supplied to Ed Thomas. I.G. Ex. 334 - 335; I.G. Ex. 337.
236. The physician who purportedly signed the three DME forms did
not
sign the DME forms, nor did he authorize other individuals to sign
the
DME forms. Tr. at 701 - 703.
237. The claims which Respondents presented or caused to be
presented
for Medicare items or services which Respondent Shoals asserted
it
provided to Ed Thomas are false, fraudulent, or for items or
services
which were not provided as claimed. Findings 232 - 236.
F. Respondents' responsibility for presenting or causing to
be
presented claims for Medicare reimbursement which were
false,
fraudulent, or for items or services which were not provided as
claimed
238. Respiratory therapists [ ] acted as agents for Respondent
Shoals
when they obtained and provided [ ] ABG results which Respondent
Shoals
submitted to BCBSA to support claims for home oxygen equipment
rentals.
I.G. Ex. 534A/14; Tr. at 813, 823, 826 - 827, 830, 840, 1059 -
1060,
1080; Findings 73 - 76, 89 - 91, 103 - 105, 116 - 118, 129 - 131, 142
-
144, 190 - 192.
239. Examples of the fraudulent conduct engaged in by
respiratory
therapists are performing ABGs with venous blood instead of
arterial
blood and recording fictitious ABG results. Tr. at 813,
1059.
240. Respiratory therapists [ ] forged or falsified DME forms
which
Respondent Shoals submitted to BCBSA to support claims for home
oxygen
equipment rentals. I.G. Ex. 534A/9 - 11; Tr. at 858 - 860,
870;
Findings 23, 71 - 72, 86 - 88, 100 - 102, 114 - 115, 126 - 128, 140
-
141, 162 - 164, 178 - 180, 188 - 189.
241. The actions of the respiratory therapists in causing to
be
presented to Medicare the 173 claims the respiratory therapists
knew
were false, fraudulent, or for items or services not provided as
claimed
were actions [ ] within the scope of their agency relationship
with
Respondent Shoals. Findings 63, 196.
242. Deleted.
243. The I.G. did not prove that respiratory therapists who acted
as
agents for Respondent Shoals falsified ABG results and forged
or
falsified DME forms at the direction or request of Respondent Shoals
or
Respondent Livingston. See Findings 238 - 240; Tr. at 785 - 1012,
1049
- 1146, 1148 - 1223, 1497 - 1729; I.G. Ex. 534A/4 - 144, /163 - 250.
244. The I.G. did not prove that Respondents Shoals and Livingston
knew
that respiratory therapists falsified ABG results and forged
and
falsified DME forms. See Findings 238 - 240.
245. Deleted.
246. Deleted.
247. Deleted.
248. Deleted.
249. Deleted.
250. Deleted.
251. Deleted.
252. Deleted.
253a. The I.G. did not prove that Respondents Shoals and Livingston
had
reason to know that the 173 claims for Medicare reimbursement that
they
presented or caused to be presented that were false, fraudulent or
for
items or services that were not provided as claimed were in fact
false,
fraudulent, or for items or services which were not provided as
claimed.
[ ]
253b. The I.G. did not prove that information Respondents had prior
to
spring 1986 was information from which a person with
reasonable
intelligence would infer the existence or likelihood of fraud
with
respect to the 173 claims.
253c. While the I.G. did prove that Respondents had information
in
spring 1986 from which Respondents could infer the likelihood of
the
existence of fraud with respect to the 173 claims, the I.G. did
not
prove that Respondents failed to govern their conduct accordingly.
253d. The I.G. did not prove that Respondents failed to fulfill
any
pre-existing duties.
254. The I.G. did not prove that Respondents Shoals and
Livingston
should have known that the 173 claims for Medicare reimbursement
that
they presented or caused to be presented that were false, fraudulent
or
for items or services that were not provided as claimed were in
fact
false, fraudulent, or for items or services that were not provided
as
claimed. [ ]
255. Respondent Shoals is liable under sections 1128A(a)(1)(A) and
(B)
of the Act for the [ ] acts of its independent contractor agents
in
causing to be presented the 173 claims. Finding 241; Social
Security
Act, sections 1128A(a)(1)(A), (B), 1128A(l).
256. The I.G. did not prove that Respondent Livingston is liable
under
section 1128A(l) [ ], since the I.G. did not prove that
Respondent
Shoals was agent of Respondent Livingston. Social Security
Act, section
1128A(l).
G. The need to impose remedies against Respondents
257. The substantive portions of regulations published on January
29,
1992, governing the imposition of penalties, assessments, and
exclusions
under section 1128A of the Act, are not applicable to this
case. 42
C.F.R. Parts 1001 - 1005, 57 Fed. Reg. 3298 et seq. (January
29, 1992).
258. The decision to impose assessments, penalties and exclusions
in
this case is governed by regulations that became effective on
September
[30][ ], 198[6][ ]. 42 C.F.R. .. 1003.100 through
1003.133.
259. The Act provides for the imposition against a party who
unlawfully
presents or causes to be presented a claim for an item or service
which
is false, fraudulent, or not provided as claimed, of a penalty of up
to
$2,000.00 for each such item or service, an assessment of up to
twice
the amount claimed for each such item or service which is
false,
fraudulent, or falsely claimed, and an exclusion from participating
in
Medicare or Medicaid. Social Security Act, section 1128A(a).
260. The Act and regulations direct the Secretary, or his or
her
delegate, in determining the amount or scope of any penalty,
assessment,
or exclusion imposed, to take into account both aggravating
and
mitigating factors. Social Security Act, section 1128A(d); 42
C.F.R. .
1003.106. 32/
261. Factors which may be considered as aggravating or
mitigating
include: the nature of the claims and the circumstances
under which
they were presented; the degree of culpability, history of
prior
offenses, and financial condition of the person presenting the
claims;
and such other matters as justice may require. Social Security
Act,
section 1128A(d); 42 C.F.R. . 1003.106.
262. In proceedings brought pursuant to the Act, the I.G. has
the
burden of proving the existence of any aggravating factors and
the
respondent has the burden of proving the existence of any
mitigating
factors.
263. The 173 claims which Respondents presented or caused to
be
presented which were false, fraudulent, or for items or services
which
were not provided as claimed involved items or services which
Respondent
Shoals asserted it provided from January 1985 through June
1986.
Findings 65, 80, 95, 109, 121, 135, 156, 173, 184.
264. The 173 claims that Respondents presented or caused to
be
presented that were false, fraudulent, or for items or services
that
were not provided as claimed constituted a large number of
unlawful
claims for items or services which Respondent Shoals asserted
it
provided over an extended period of time. This is an aggravating
factor
to be considered in deciding the remedies to be imposed in this
case.
Findings 262 - 263; 42 C.F.R. . 1003.106(b)(1).
265. The 173 claims that Respondents presented or caused to
be
presented that were false, fraudulent, or for items or services
that
were not provided as claimed, sought reimbursement from Medicare in
the
aggregate amount of $44,838.80. I.G. Ex. 59 - 64; I.G. Ex. 66 -
71;
I.G. Ex. 89 - 90; I.G. Ex. 109 - 128: I.G. Ex. 154 - 161; I.G. Ex. 181
-
206; I.G. Ex. 232 - 264; I.G. Ex. 287 - 292; I.G. Ex. 373 - 389;
I.G.
Ex. 403 - 416; R. Ex. 10. 33/
266. Respondent Shoals received payments totalling $25,440.64
from
BCBSA for the 173 claims that Respondents presented or caused to
be
presented that were false, fraudulent, or for items or services
that
were not provided as claimed. I.G. Ex. 71/10, 15 - 20; I.G. Ex.
93;
I.G. Ex. 136/15, 18 - 25; I.G. Ex. 170/6 - 8; I.G. Ex. 208/18, /22 -
23,
/25 - 33, /35 - 36; I.G. Ex. 295/12 - 14; I.G. Ex. 268/10, /13 -
19;
I.G. Ex. 391/9 - 10, /15 - 18; I.G. Ex. 419/12 - 14, /17 - 19.
267. Respondent[ ] Shoals' claiming and receiving
substantial
reimbursement for 173 Medicare claims that were false,
fraudulent, or
for items or services that were not provided as claimed is
an
aggravating factor to be considered in deciding the remedies to
be
imposed in this case. Findings 265 - 266; 42 C.F.R. .
1003.106(b)(1).
268. Deleted.
269. Deleted.
270. Deleted.
271. Deleted.
272. Deleted.
273. The actions of Respondent Shoals' agents with respect to the
173
claims [ ] damaged the financial integrity and reputation of
the
Medicare program.
274. The actions of Respondent Shoals' agents with respect to the
173
claims [ ] resulted in substantial costs to the United States
Department
of Health and Human Services (Department) that include the
following:
the amount paid to Respondent Shoals to reimburse it for claims
that
were false, fraudulent, or for items or services that were not
provided
as claimed; the costs of investigation [ ]; and the damage to
the
integrity and reputation of the Medicare program. I.G. Ex.
540;
Findings 266, 273.
275. Deleted.
276. Deleted.
277. Respondent Livingston offered to make voluntary restitution
for
claims or services that the I.G. proved were false or fraudulent, or
for
items or services that were not provided as claimed. Tr. 1412 -
1414,
1419 - 1420.
278. Deleted.
279. Deleted.
280. Deleted.
280a. It is uncontested that the respiratory therapists who
perpetrated
the fraud were independent contractors rather than officers or
employees
of Respondent Shoals. Justice requires that this be
considered a
mitigating factor under the circumstances here where the I.G.
proved
liability solely under section 1128A(l) of the Act.
280b. Respondent Shoals proved that the portion of its total
business
involved in the independent contractor respiratory therapists' fraud
was
extremely small. Justice requires that this be considered a
mitigating
factor under the circumstances here where the I.G. proved
liability
solely under section 1128A(l) of the Act.
281. The maximum assessments which [ ] may be imposed
against
Respondent[ ] Shoals are $89,677.60. Findings 259, 265.
282. The maximum penalties which [ ] may be imposed against
Respondent[
] Shoals are $346,000.00. Findings 196, 197, 259.
283. [ ] We impose on Respondent Shoals [ ] an assessment of [
]
$44,838, and penalties of [ ] $129,750.
284. Respondent[ ] Shoals is not trustworthy to provide care
to
beneficiaries and recipients of federally-funded health care programs.
285. Based on Respondent[ ] Shoals' lack of trustworthiness to
provide
care, as evidenced by [] the acts of its agents acting within the
scope
of their agency relationship to Respondent Shoals [ ] [we] exclude [
]
Respondent Shoals from participation in Medicare and Medicaid for [
]
three years.
286. The assessment, penalties, and exclusion [ ] imposed
against
Respondent[ ] Shoals are not prohibited by the constitutional
ban
against double jeopardy.
287. The assessment and penalties [ ] imposed against Respondent[
]
Shoals are reasonably related to the costs sustained by the
Department
as a result of Respondent[ ] Shoals' unlawful conduct, including
the
costs of investigating that conduct.
1. The ALJ addressed each of the three standards (know, has
reason to
know, and should know) in his decision specifically because no
court has
yet ruled on Congress' retroactive application of the should
know
standard. See ALJ Dec. at 45, n. 14.
2. These regulations were revised and updated on January 29,
1992.
See 57 Fed. Reg. 3298, 3345-3354. Neither party excepted to FFCL
258.
See also FFCL 257.
3. Throughout this decision, any summary of the ALJ's FFCLs
is
intended solely for the convenience of the reader. We do not intend
to
modify or reverse the findings and conclusions in the ALJ
Decision,
unless we expressly state that we are doing so (or include such
a
modification in the Appendix).
4. A Medicare carrier is an entity, usually a private
insurance
company, which contracts with the federal Health Care
Financing
Administration to process and reimburse claims which are filed
under the
Medicare Part B (supplementary medical insurance) program.
5. The I.G. did not appeal the ALJ's finding that the I.G. did
not
prove that Respondents knew of the fraud. Therefore, that issue is
not
before this Board.
6. We make a number of minor edits with respect to the
FFCLs which we
affirm and adopt to reflect that they have become our findings
or to
correct technical errors.
7. We refer to the Inspector General's exhibits as "I.G. ex.
(exhibit
number)/(page)." We refer to Respondents' exhibits as "R. Ex.
(exhibit
number)/(page)." We refer to the transcript as "Tr. at
(page)."
8. The I.G. merely pointed out that Respondents had cited no
support
in the record for the statement that each subcontractor was paid even
if
Medicare did not reimburse Shoals for the patient. I.G. br. at 13,
n.4.
The I.G. had the burden of proof here, however, and these findings
were
critical to the ALJ Decision.
9. The record indicates that Medicare did not specifically
prohibit
use of signature stamps prior to January 1986. See I.G. Ex.
22/3.
10. The only matter in which the ALJ stated that he found
Respondent
Livingston not credible was in regard to Livingston's assertions
that he
did not know of the extent of Hayes' fraud until the ALJ hearing and
was
appalled, and that he was willing to make restitution for any fraud
that
was established. ALJ Dec. at 63. The ALJ found these
assertions "to be
less than credible" based on the ALJ's conclusion that "the
evidence is
over- whelming that, for a three-year period, Respondents were
presented
with evidence of massive fraud by their contractors and did nothing
to
stop that fraud." ALJ Dec. at 63.
11. The I.G. argued that evidence showed that the two physicians
who
were the subject of these charges, in fact, were not partners and
did
not order oxygen equipment for this patient. I.G. Br. at 14,
n. 5.
However, what is at issue is whether Respondents had reason to know
that
this was the case. The I.G. did not argue that it was not a
reasonable
possibility that the physicians were partners. Since this is
a
possibility, the mere difference in the physicians' names on the form
is
not sufficient information to put Respondents on notice that
the
signature was likely forged.
12. The I.G. did argue in its brief that Respondent Livingston
had
admitted that he knew in prior instances, before his telephone call
to
BCBSA in spring 1986, that Hayes had forged Dr. Henson's signature
on
certificates and that he had failed to inform BCBSA of this fact.
The
testimony which the I.G. cited in support of this assertion,
however,
simply acknowledges that Respondent Livingston knew that Hayes
had
submitted to Shoals "blank DME certification forms with Dr.
Henson's
signature on them." Tr. at 1263. This is hardly an
admission of
knowledge of forgery.
13. We find this troublesome because it is
permissible for Medicare
to recover overpayments by offsetting them against
amounts due to a
provider. Respondent Livingston testified that Shoals
was having
difficulty getting payment for claims submitted under the
provider
number assigned to Shoals while the investigation of him was
pending.
Tr. at 1302. Absent evidence that BCBSA did not owe any
payment for
legitimate claims to Shoals, we are not willing to infer bad
faith on
the part of Respondents for not sending BCBSA a check if Respondents
had
no notice from BCBSA of the amount due. The ALJ did not find
that
Respondents had such notice.
14. Under the DME Diary procedure, a physician could certify
the
medical necessity of oxygen equipment for a period of six months.
Each
month, the Medicare carrier would send a "turnaround document" to
the
provider which told the provider whether a claim was being paid by
the
carrier and whether recertification was due. The provider was to
send
the carrier a return notice if the beneficiary returned the
equipment.
ALJ Dec. at 8 (FFCLs 40-44). The DME Diary procedure is
premised on an
assumption that the patient has a condition, usually chronic,
requiring
the equipment for at least six months unless the patient dies, goes
into
an institution, or rents from another supplier.
15. The I.G. did not explain how Respondent Livingston was a
provider,
and it does not appear that he signed the claims forms.
16. Respondents also objected to retroactive application of
the
"should know" standard of liability, which was added to the law as
part
of 1987 OBRA. R. Br. at 46-56. This amendment was, however,
expressly
made retroactive by section 4118(e)(3) of 1987 OBRA, which applies
the
standard to activities occurring before, on or after the date
of
enactment. See also 1987 House Report at 534. Since Congress
made this
provision expressly retroactive, application here does not violate
the
standards of Griffon v. U.S. Department of Health and Human
Services,
802 F.2d 146 (5th Cir. 1986), as Respondents alleged.
Respondents further objected to application of the provision, also
added
by 1987 OBRA, making a provider liable for claims which he knew
or
should have known were false or fraudulent. R. Br. at 46-56.
However,
the Senate Committee Report to the amendment stated that this was
simply
a clarifying amendment, and the addition of this language was meant
to
clarify that the scope of the statute includes such conduct as
double
billing. 1987 Senate Report at 14. In any event, the
claims here were
false or fraudulent in a manner which also made them claims
for items or
services which were not provided as claimed, as the ALJ
found.
Finally, Respondents alleged that these two provisions constitute ex
post
facto laws and violate Petitioner's due process rights. We do not
have
the authority to declare a statutory provision unconstitutional.
17. Vo cites to Frank P. Silver, M.D., DAB Docket No. C-19,
Opinion of
Deputy Undersecretary, April 27, 1987. Vo also cites Mayers
in support
of the proposition that "should know" subsumes reckless disregard
for
the consequences of a person's acts and also subsumes negligence.
In
our view, Mayers is not properly cited for this proposition.
18. An explanation of benefits statement is a monthly statement
mailed
by the Medicare carrier to each beneficiary stating what amounts
have
been paid out by the carrier for Medicare Part B items or services
on
that beneficiary's behalf for the previous month.
19. We do not mean to imply that providers would not still
be
responsible for reimbursing the program for overpayments which
occurred
as a result of errors which nevertheless occurred even though
their
systems and measures taken under the particular circumstances
were
reasonable.
20. Respondents objected to the retroactive application of
subsection
1128A(l). See Resp. Br. at 47-56. Subsection (l) was
added to the CMPL
by Public Law 100-360 (1988), . 411 (k)(10)(B)(ii)(III),
102 Stat.
794-95. This amendment was intended as one of several
technical and
conforming amendments to the civil monetary penalty amendments
contained
in 1987 OBRA. Id. Respondents conceded that the 1988
amendment adding
this provision was intended to be applied retroactively to
conduct
occurring before, on, or after the date of enactment of 1987
OBRA.
Resp. Br. at 47, see Pub. L. 100-203, . 4118(e)(3), 101 Stat.
1330-155
(1987). Respondents argued that such retroactive application
violates
Respondents' rights to due process. However, the Board must
apply the
statute as written and intended and does not have authority to
declare a
statute unconstitutional.
21. Respondent Livingston was also one of three directors
of
Respondent Shoals. I.G. Ex. 541/6.
22. The record does not indicate whether Shoals was a
closely-held or
traditional corporation. We note, however, that many
small family-run
businesses are designated as closely held corporations and
that
Respondent Livingston's wife was the sole shareholder of
this
corporation. However, the limited liability we discuss applies
also to
traditional corporations.
23. The ALJ found that the claims sought reimbursement of $44,838
and
that Respondent Shoals received payments totalling $25,440.64 from
BCBSA
for the claims. ALJ Dec. at 36 (FFCLs 265 and 266). These
findings
were not disputed.
24. Respondents also objected to the ALJ's consideration of
evidence
of the "expired" claims in determining whether there was a pattern
of
fraud. For the reasons stated above, we find no merit to
this
objection.
25. Respondent Livingston's testimony indicates that this
occurred in
January 1988. Tr. at 1270. Thus, we delete FFCLs 275
and 276 as
irrelevant here since in May 1988 Respondent Livingston could no
longer
be considered President of Shoals.
26. We note that, while we consider this a mitigating
circumstance
here, we would not necessarily reach the same result in a case
where
liability did not rest solely on section 1128A(l) of the Act.
27. The ALJ did not apply one of the guidelines related to
the
approximate amount of actual damages which are proved,
apparently
because there was some question of the reliability of the
I.G.'s
evidence. The I.G. did not take exception to this.
28. Respondent Livingston was acquitted in that trial.
29. I.G. Ex. 363 and 369 are the same DME form.
On I.G. Ex. 369
someone has placed the letter "F" next to the purported
signature of
Estelle Coleman's physician.
30. I.G. Ex. 477 is a copy of a BCBSA-generated
document of BCBSA's
records of claims and claims dispositions from Respondent
Shoals, with
respect to claims made for items or services allegedly provided
to Amos
Odom. Line 1 on page 23 of the exhibit documents claims from
Respondent
Shoals for the period beginning April 1, 1985 and ending June 1,
1985.
31. The claims discussed in subpart E are claims that
were presented
for reimbursement by Respondent Shoals prior to April 19,
1985, and that
are not part of the I.G.'s case-in-chief against
Respondents. []
32. Inasmuch as [we][I] hold that the substantive
regulations which
are applicable to this case are those in effect prior to
January 29,
1992, [our][my] citations to regulations which establish
aggravating and
mitigating factors governing penalties, assessments, and
exclusions are
to the pre-January 29, 1992 regulations.
33. The amounts claimed by and reimbursed to
Respondents do not
include the amounts claimed by and reimbursed to Amos Odom
(Counts 81 -
83 and 172 - 178 in the I.G.'s April 19, 1991 and July 8, 1991
notice
letters to Respondents). [ ] The I.G. did not prove that the
claims for
items or services provided to Amos Odom were false, fraudulent, or
for
items or services which were not provided as claimed. However, [
]
FFCLs 207-213 find that Respondents did present or cause to be
presented
some false claims involving Amos Odom. These claims relate to
the issue
of aggravating circumstances and not to [ ]