Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Francis Shaenboen, R. Ph.,
Petitioner,
- v. -
The Inspector General.
DATE: May 8, 1991
Docket No. C-221
Decision No. 1249
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE
DECISION
Francis Shaenboen, R. Ph. (Petitioner) requested review of a September
12,
1990 decision by Administrative Law Judge (ALJ) Charles E. Stratton.
See
Francis Shaenboen, R. Ph. v. The Inspector General, DAB Civ. Rem.
No. C-221
(1990) (ALJ's Decision). There the ALJ upheld the Inspector
General's
(I.G.'s) decision excluding the Petitioner from participation
in the Medicare
program and directing his exclusion from State health
care programs for five
years.
The exclusion was based on sections 1128(a)(1) and 1128(c)(3)(B) of
the
Social Security Act (Act). Section 1128(a)(1) mandates exclusion
from
Medicare and Medicaid for any individual or entity "convicted of
a
criminal offense related to the delivery of an item or service
under
title XVIII [Medicare] or under any State health care program."
1/
Section 1128(c)(3)(B) establishes that "[i]n the case of an
exclusion
under subsection (a), the minimum period of exclusion shall be not
less
than five years . . . ."
The record in this case consists of the record before the ALJ, the
ALJ's
Decision, the parties' briefs to this Panel, and the Transcript (Tr.)
of
the oral argument by telephone conference on January 11, 1991. Based
on
the following analysis, we affirm the ALJ's Decision.
Background
By letter dated February 26, 1990, the I.G. notified the Petitioner
that,
effective March 18, 1990, he would be excluded from participation
in Medicare
and Medicaid for five years. The exclusion was based on
the
Petitioner's state-court conviction of a criminal offense related to
the
delivery of an item or service under Medicaid. The Petitioner
timely
appealed to the ALJ.
The ALJ's Decision, upholding the exclusion and granting
summary
disposition for the I.G., was supported by 14 Findings of Fact
and
Conclusions of Law (FFCLs). The following FFCLs are undisputed:
1. Petitioner is a pharmacist and at the time of the
events
underlying his conviction was president of Racey Pharmacy,
Inc.,
Garden City, Michigan. 2/
2. On July 30, 1987, a 43 count criminal complaint was
filed
against Petitioner and Racey Pharmacy, Inc. in the 2lst
District
Court for the County of Wayne, charging them with defrauding
the
Michigan Department of Social Services, Medical
Assistance
Program for the medically indigent (Medicaid) and
Blue
Cross/Blue Shield of Michigan, by submitting bills
for
prescription drugs which had not been prescribed or
dispensed,
and which Petitioner knew to be false.
3. On November 21, 1988, in the Recorder's Court for the
City
of Detroit, Petitioner pled nolo contendere to Counts 1 and
30
of the complaint; Count 1 involved attempted violation of
the
Medicaid False Claim Act, and Count 30 involved
attempted
violation of the Health Care False Claim Act.
4. Petitioner's plea was accepted by the court.
5. Petitioner, individually and on behalf of Racey
Pharmacy,
Inc., was sentenced to six months probation, and was required
to
pay investigative costs and restitution to Medicaid in
the
amount of $18,001.75 and to Blue Cross in the amount
of
$16,317.50.
6. On or about March 18, 1990, the I.G. excluded
Petitioner
from participating in the Medicare and Medicaid programs for
a
period of five years.
7. The Secretary of the Department of Health and Human
Services
(DHHS) has delegated to the I.G. the authority to
determine,
impose and direct exclusions pursuant to section 1128 of
the
Act. 48 Fed. Reg. 21662 (May 13, 1983); 42 U.S.C. 3521 et seq.
8. Since the material facts are undisputed in this case,
the
classification of Petitioner's conviction of a criminal
offense
as subject to the authority of 1128(a) is a legal issue.
10. Petitioner was convicted of a criminal offense within
the
meaning of section 1128(a) and 1128(i) of the Act.
12. Petitioner's conviction occurred after the enactment of
the
1987 amendments instituting the mandatory exclusion provision
of
section 1128(c)(3)(B), for section 1128(a)(1) exclusions.
ALJ's Decision at 4-5.
As we discuss below, the Petitioner took exception to four of the FFCLs
in
the ALJ's Decision. Since the Petitioner did not challenge FFCL
Nos.
1-8, 10 and 12, we adopt and affirm those FFCLs without
further
discussion. Below we discuss the FFCLs challenged by the
Petitioner.
Petitioner's Exceptions
Although he did not specifically identify them, we conclude from
his
arguments that the Petitioner took exception to the following FFCLs:
9. Summary disposition is appropriate in this case.
56
F.R.C.P.
11. Petitioner was convicted of a criminal offense "related
to
the delivery of an item or service" under the Medicaid
program,
within the meaning of section 1128(a)(1) of the Act.
13. The I.G. is not barred by the ex post facto clause of
the
United States Constitution from imposing an exclusion with
a
minimum mandatory term of five years.
14. A minimum mandatory exclusion of five years is required
in
this case by sections 1128(a)(1) and 1128(c)(3)(B) of the Act.
Analysis
I. The Petitioner's exception to FFCL No. 11
Although he presented no supporting analysis and did not press this
issue
further in oral argument, the Petitioner asserted that "a no
contest plea to
an attempted submission of a false bill does not . . .
relate to the delivery
of an item or service "since it was alleged that
no item or service was in
fact rendered." Petitioner's Br. at 4; see
Tr. at 17-18.
Section 1128(a) of the Act requires only that a conviction be "related
to"
the delivery of an item or service. For his analysis that
the
Petitioner's conviction was "related to" delivery of an item or
service,
the ALJ relied on Dewayne Franzen, DAB No. 1165 (1990); and Jack
W.
Greene, DAB No. 1078 (1989), aff'd sub nom., Greene v. Sullivan, 731
F.
Supp. 835 (E.D. Tenn. 1990). Those decisions found that the filing
of a
claim was "inextricably intertwined" with the delivery of an item
or
service since a claim by its very nature alleges such delivery,
and
that, therefore, the filing of a claim is "related to" delivery of
an
item or service under any reasonable reading of that term.
While
Franzen and Greene both involved petitioners who had billed
for
brand-name drugs after providing generic drugs, we conclude that the
ALJ
correctly applied the rationale of those cases to the
circumstances
here. The offense here similarly involves a claim filed
by a provider
asserting that he had delivered an item which he had not in
fact
delivered. Thus, the offense is "related to" delivery of an item
or
service within the plain meaning of section 1128(a) of the
Act.
Moreover, the Petitioner's proposed reading of that section simply
does
not make sense in light of the purposes of the section. The
offense of
billing for items not delivered at all has a greater potential
for
harming the programs than the offense of billing for more costly
items
than those delivered. 3/
Accordingly, we affirm and adopt FFCL No. 11.
II. The Petitioner's exceptions to FFCL Nos. 9, 13, and 14
The Petitioner's exceptions to these three FFCLs are interrelated.
In
general, the Petitioner asserted that a mandatory exclusion in his
case
was a punitive sanction, barred by the ex post facto clause of the
U.S.
Constitution. Relying on the Supreme Court's holding in United
States
v. Halper, 490 U.S. 435 (1989), the Petitioner asserted that the ALJ
was
required to hold a hearing to examine the circumstances
underlying
Petitioner's conviction. The Petitioner insisted that the
facts
developed at a hearing would have supported his arguments on
the
unconstitutional nature of his exclusion.
As explained more fully below, we reject the Petitioner's arguments.
We
conclude that the ALJ did not err when he concluded that the ex
post
facto clause did not apply and that no hearing was required.
Prior to August 18, 1987, section 1128 of the Act provided for
exclusion
in the case of conviction for a program-related offense. The
period of
exclusion was to be determined by the Secretary. On August
18, 1987,
section 1128(c)(3)(B) of the Act was amended to provide a
mandatory
minimum period of exclusion of five years for convictions
of
program-related crimes under section 1128(a)(1). See Medicare
and
Medicaid Patient and Program Protection Act of 1987, Pub. L. No.
100-93
(1987).
We have considered previously whether application of section
1128(c)(3)(B)
to actions occurring before that section's effective date
violated the
prohibition against ex post facto laws established by
Article I, Section 10,
of the United States Constitution. See Betsy
Chua, M.D., and Betsy
Chua, M.D., S.C., DAB No. 1204 (1990). Our
analysis in Chua began with
the well-established principle that the
Constitutional protection against ex
post facto laws applies only to
criminal laws. We then examined the
Congressional intent behind the
1987 amendments. The legislative
history clearly showed that Congress
designed the mandatory minimum exclusion
to safeguard program integrity
by preventing untrustworthy providers from
gaining ready access to
Medicare and Medicaid funds. Consequently, we
sustained the ALJ's
interpretation of the section 1128(c)(3)(B) mandatory
minimum exclusion
provision as a civil law outside the scope of the
Constitutional
prohibition against ex post facto laws. We also affirmed
the ALJ's
conclusion that Congress plainly intended the mandatory
minimum
exclusion to apply prospectively to all convictions occurring on
or
after August 18, 1987, even though the circumstances leading to
the
conviction may have occurred prior to that date. Id. at 6-8.
Regardless of our holding in Chua, the Petitioner argued that a
comparison
of sections 1128 and 1128B of the Act led to the conclusion
that the section
1128(c)(3)(B) minimum mandatory provision is a
punitive, and therefore
criminal, provision. The Petitioner contended
that when Congress added
the mandatory minimum exclusion provision to
the Act in 1987, it also added
section 1128B, titled "Criminal Penalties
for Acts Involving Medicare or
State Health Program." Comparing the
two, the Petitioner argued that in
light of the provision in section
1128B whereby a state may suspend an
individual's eligibility for
Medicaid for no more than one year, it was
inconceivable that similar
sanctions of greater severity in section
1128(a)(1) were not punitive as
well. Petitioner's Brief (Br.) at 6-10;
Tr. at 10.
The Petitioner is mistaken in his assertion that these sections
were
created simultaneously. As the I.G. noted, section 1128B was
merely
relocated within the Act by the August 1987 amendments. 4/ See
Medicare
and Medicaid Patient and Program Protection Act of 1987, Pub. L.
No.
100-93 (1987); see also S. Rep. No. 109, 100th Cong. 1st Sess.
17
(1987), reprinted in 1987 U.S. Code Cong. & Admin. News 682,
698.
Additionally, a substantive comparison of the two sections shows
that
the Petitioner's argument has no merit. The part of section 1128B
on
which the Petitioner relied applies to "an individual who is
otherwise
eligible for assistance" under the Medicaid program, but who
is
convicted of a program-related offense. See section 1128B(a)
(last
sentence). In other words, it applies to indigent or medically
needy
individuals who would otherwise receive medical services under
Medicaid.
The effect of depriving these individuals of access to medical
services
simply is not comparable to the effect of excluding a provider
of
medical services from participating in Medicare and Medicaid.
Moreover,
eligible individuals are those whom the Medicaid program was
designed to
benefit, whereas a provider's relationship to the programs is
a
voluntary, contractual one.
Additionally, contrary to the Petitioner's assertions, both in the
oral
argument and in his reply brief, we conclude that the
mandatory
five-year exclusion under section 1128(a) is not rendered a
penalty
enhancement provision and thus penal simply by comparison to
the
provision in section 1128A which provides for both a civil
monetary
penalty and an exclusion but which does not fix the term of
the
exclusion.
Finally, while recognizing that section 1128(c)(3)(B) of the Act
mandated
a five-year exclusion for conviction of program-related crime,
the Petitioner
maintained that under Halper the ALJ was required to
conduct a hearing to
examine the facts underlying the Petitioner's
criminal conduct and to
consider various other factors, such as his age,
in order to properly weigh
the impact of the five-year exclusion against
the underlying criminal
conduct. 5/ Petitioner's Reply Br. at 4-5
(unnumbered); Tr. at
38-39.
We do not agree. A review of the Halper case shows that it
is
inapposite to the circumstances here. Halper was convicted, pursuant
to
federal statute at 18 U.S.C. 287, of submitting 65 false claims
for
Government reimbursement resulting in a $585 overcharge to the
Federal
Government. 6/ Halper was sentenced to two years in prison and
fined
$5,000.
Relying on the same facts, the Government then obtained judgment
against
Halper in District Court under the civil False Claims Act, 31
U.S.C.
3729 et seq. While noting that the False Claims Act provided a
civil
remedy, the district court found that a potential recovery of more
than
$130,000 ($2,000 liability x 65 claims) bore no rational relation to
the
Government's actual loss and costs. The court found that, as
applied to
Halper, the penalty provision of the False Claims Act violated
the
Constitutional protection against Double Jeopardy. Halper at
437-440.
On review, the Supreme Court indicated that the determination whether
a
civil sanction constitutes punishment requires a
particularized
assessment of the penalty imposed and the purpose which that
penalty
could fairly be said to serve. The Court announced "a rule for
the rare
case" where a fixed-penalty provision subjected a "small-gauge
offender"
to a sanction overwhelmingly disproportionate to the damages
sustained.
Specifically, the Court ruled that the Government could not impose
a
criminal penalty against a defendant, then bring a separate civil
action
based on the same conduct and receive a judgment not rationally
related
to the goal of making the government whole. Halper at
447-451.
Here, the case against the Petitioner is not one where the
Federal
Government has subjected him to criminal prosecution and is now
seeking
an additional "make whole" civil remedy. 7/ Rather, following
the
Petitioner's criminal conviction (as defined by section 1128(i) of
the
Act) in State court, the Federal Government simply moved to apply
the
minimum sanction available in order to protect program integrity.
There
is no evidence that the Government's action is anything other
than
consistent with the acknowledged purpose of section 1128 of the
Act.
Finally, contrary to the Petitioner's assertions, Halper does
not
require an examination of the facts underlying the
Petitioner's
conviction. Specifically, the Supreme Court found the
details of
Halper's fraud to be "of little importance." Id. at 437, n.
2.
Additionally, the Court recognized that even remedial sanctions
carry
"the sting of punishment" and noted that it was not necessary to use
a
defendant's perspective to determine whether a sanction
constitutes
punishment. Id. at 447, n. 7.
Clearly, the correct forum for the Petitioner to have explained
the
factors underlying his conviction was the State court in which he
was
charged. The Petitioner's position before this Panel is essentially
one
in which he seeks to achieve the best of both worlds. The
Petitioner
noted that he pled nolo contendere as the most advantageous trial
tactic
available to him. Tr. at 39. Thus, it is fair to assume
that, by
forsaking an examination of the facts in court, the Petitioner
received
the most lenient treatment available to him from the State
court. Now,
insulated from the repercussions of the criminal justice
system, the
Petitioner essentially seeks to excuse his criminal conduct.
The Act precludes the examination which the Petitioner requested.
Section
1128(a)(1) mandates without exception that the Secretary exclude
an
"individual . . . convicted of a criminal offense related to the
delivery of
an item or service" under Medicaid or Medicare. Thus, the
Act renders
any consideration of the factors underlying a conviction
irrelevant to an
exclusion -- once convicted of program-related offense,
a provider must be
excluded for a minimum of five years. Consequently,
neither the ALJ nor
this panel has the authority to reduce the length of
the mandatory minimum
exclusion based on any allegedly mitigating
factors. 8/ Accordingly, we
affirm and adopt FFCL Nos. 9, 13, and 14.
Conclusion
Based on the foregoing analysis, we affirm and adopt the ALJ's Findings
of
Fact and Conclusions of Law Nos. 9, 11, 13, and 14.
Judith A. Ballard
Theodore J. Roumel Public Health Service
Cecilia Sparks Ford Presiding Panel Member
1. "State health care program" is defined by section 1128(h)
of the
Act to cover several federally-financed programs including
Medicaid. We
use the term "Medicaid" to refer to all State health care
programs from
which the Petitioner was excluded.
2. Citations to the record before the ALJ have been omitted from
this
statement of the FFCLs.
3. During oral argument, the Petitioner asserted for the first
time
that the I.G. should proceed under the permissive exclusion
provisions
at section 1128(b) of the Act. This was not raised before
the ALJ.
Moreover, we note that we have previously rejected this argument
in
holding that the I.G. is required to impose a five year exclusion
under
1128(a) once a determination is made that there was a
program-related
conviction. See Surabhan Ratanasen, M.D., DAB No. 1138
(1990).
4. Prior to the 1987 amendments, the general authority set out
at
section 1128B was found at section 1909 of the Act.
5. The Petitioner asserted that an examination of the facts would
show
the disproportionate nature of a five-year exclusion in this
case.
Specifically, the Petitioner contended that his criminal conduct
was
caused by medication prescribed for him following a heart attack,
that
the dollar amounts involved were relatively minimal, and that he
had
never previously been involved in any illegal or improper
conduct.
Further, the Petitioner asserted that his exclusion amounted to
a
lifetime sanction since he was 64 years old and would be prevented
from
working for any pharmacy serving Medicaid or Medicare
recipients.
Petitioner's Reply Br. at 3-4 (unnumbered).
6. Halper was also convicted of 16 counts of mail fraud.
See Halper
at 437.
7. Even if it were, the Court in Halper specifically did not
preclude
such prosecution. Id. at 450.
8. The Petitioner continuously asserted that his age should
be
considered a mitigating factor in deciding whether his exclusion is
a
punitive sanction, because, at 64, a five-year exclusion is
tantamount
to a lifetime exclusion. We note that even if this were a
permissive
exclusion under section 1128(b), where consideration of
mitigating
circumstances is allowed in determining the length of an
exclusion, we
would find that the Petitioner's age is not such a
mitigating
circumstance. The Petitioner's age is neither an
extenuating
circumstance which has some bearing on his culpability, nor
a
circumstance which indicates that the programs' interest can
be
sufficiently protected by a shorter period of exclusion. The
Petitioner
also asserted that this exclusion was penal in nature because
it
effectively forced him from the practice of pharmacy. The I.G.
noted
that Petitioner had been informed that while a pharmacy could not
bill
federal programs for prescriptions that the Petitioner filled,
the
effect of the exclusion was not to prohibit a pharmacy from hiring
the
Petitioner. In any event, we conclude that, under Halper, the
practical
difficulties presented by an exclusion are not factors to be
weighed in
determining whether the exclusion is