Deborah Petty, DAB CR5559 (2020)

DECISION

Petitioner, Deborah Petty, is excluded from participation in Medicare, Medicaid, and all federal health care programs pursuant to section 1128(a)(3) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)), effective August 20, 2019.  Petitioner’s exclusion for the minimum period of five years is required by section 1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).  Exclusion for an additional five years, a total minimum exclusion of 10 years,1 is not unreasonable based on the presence of one aggravating factor and the absence of any mitigating factors.

I. Background

The Inspector General (IG) notified Petitioner by letter dated July 31, 2019, that she was excluded from participation in Medicare, Medicaid, and all federal health care programs for a minimum of 10 years.  The IG cited section 1128(a)(3) of the Act as the basis for

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Petitioner’s exclusion.  The IG stated that the exclusion was based on Petitioner’s felony conviction in the United States District Court, Northern District of Texas (District Court) of a criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item of service.  IG Exhibit (Ex.) 1 at 1.

Petitioner requested a hearing pursuant to 42 C.F.R. § 1005.2 on August 30, 2019 (RFH).  I convened a prehearing conference by telephone on October 23, 2019, the substance of which is memorialized in my Prehearing Conference Order and Schedule for Filing Briefs and Documentary Evidence dated October 24, 2019 (Prehearing Order).  The IG filed a motion for summary judgment with supporting brief on November 22, 2019, and IG Exs. 1 through 6.  Petitioner filed a response on January 13, 2020 (P. Br.).  On January 27, 2020, the IG filed a reply brief.  Petitioner did not object to my consideration of IG Exs. 1 through 6, and they are admitted as evidence.

II. Discussion

A. Applicable Law

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) establishes Petitioner’s rights to a hearing by an administrative law judge (ALJ) and judicial review of the final action of the Secretary of Health and Human Services (the Secretary).

Pursuant to section 1128(a)(3) of the Act, the Secretary must exclude from participation in any federal health care program:

Any individual or entity that has been convicted for an offense which occurred after [August 21, 1996], under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in [section 1128(a)(1)]) operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

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The Secretary has promulgated regulations implementing those provisions of the Act.  42 C.F.R. § 1001.101(c).2

Pursuant to section 1128(i) of the Act, an individual is convicted of a criminal offense when:  (1) a judgment of conviction has been entered by a federal, state, or local court whether or not an appeal is pending or the record has been expunged; (2) there is a finding of guilt in a court; (3) a plea of guilty or no contest is accepted by a court; or (4) the individual has entered into any arrangement or program where judgment of conviction has been withheld.  42 U.S.C. § 1320a7(i)(1)-(4); 42 C.F.R. § 1001.2.

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a) of the Act will be for no fewer than five years.  42 C.F.R. § 1001.102(a).  The Secretary has published regulations that establish aggravating factors that the IG may consider to extend the period of exclusion beyond the minimum five-year period, as well as mitigating factors that may be considered only if the IG proposes to impose an exclusion greater than five years.  42 C.F.R. § 1001.102(b), (c).

The standard of proof is a preponderance of the evidence, and there may be no collateral attack of the conviction that provides the basis of the exclusion.  42 C.F.R. § 1001.2007(c), (d).  Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors, and the IG bears the burden on all other issues.  42 C.F.R. § 1005.15(c); Prehearing Order ¶ 4.

B. Issues

The Secretary has by regulation limited my scope of review to two issues:

Whether the IG has a basis for excluding Petitioner from participation in Medicare, Medicaid, and all federal health care programs; and

Whether the length of the proposed period of exclusion is unreasonable.

42 C.F.R. § 1001.2007(a)(1).

C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold followed by the pertinent findings of undisputed fact and analysis.

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1. Petitioner’s request for hearing was timely and I have jurisdiction.

2. Summary judgment is appropriate in this case.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to reasonable notice and an opportunity for a hearing.  The Secretary has provided by regulation that a sanctioned party has the right to a hearing before an ALJ, and both the sanctioned party and the IG have a right to participate in the hearing.  42 C.F.R. § 1005.2‑.3.  Either or both parties may choose to waive appearance at an oral hearing and to submit only documentary evidence and written argument for my consideration.  42 C.F.R. § 1005.6(b)(5).  An ALJ may also resolve a case, in whole or in part, by summary judgment.  42 C.F.R. § 1005.4(b)(12).

Summary judgment is appropriate in an exclusion case when there are no disputed issues of material fact and when the undisputed facts, clear and not subject to conflicting interpretation, demonstrate that one party is entitled to judgment as a matter of law.  Tanya A. Chuoke, R.N., DAB No. 1721 (2000); David A. Barrett, DAB No. 1461 (1994); Robert C. Greenwood, DAB No. 1423 (1993); Thelma Walley, DAB No. 1367 (1992); Catherine L. Dodd, R.N., DAB No. 1345 (1992); John W. Foderick, M.D., DAB No. 1125 (1990).  When the undisputed material facts of a case support summary judgment, there is no need for a full evidentiary hearing, and neither party has the right to one.  Surabhan Ratanasen, M.D., DAB No. 1138 (1990); Foderick, DAB No. 1125.  In opposing a properly supported motion for summary judgment, the nonmovant must allege facts that show there is a genuine dispute of material fact that affects the proponent’s prima facie case or that might establish a defense.  The nonmovant may not rely upon mere allegations or denials to defeat a properly supported motion for summary judgment.  To defeat a properly supported motion for summary judgment and proceed to a trial, the nonmovant must show there is a genuine dispute as to a material fact that requires determination by the fact finder.  On summary judgment, the judge does not weigh the evidence or attempt to determine the truth.  Rather, the judge accepts the nonmovant’s evidence as true and draws all permissible inferences in the nonmovant’s favor.  Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-57 (1986).

There is no genuine dispute of material fact in this case.  Petitioner does not dispute that she was convicted of a felony offense that occurred after August 21, 1996.  Petitioner admits she was convicted of identity theft and that she was sentenced to prison.  She argues that her offenses were not in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in [section 1128(a)(1)]) operated by or financed in whole or in part by any Federal, State, or local government agency.  RFH, P. Br.  However, that issue must be resolved against her as a matter of law based on the undisputed facts related to

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her conviction.  Petitioner does not dispute that the mandatory minimum exclusion for participation in Medicare and all federal healthcare programs is five years.  Petitioner also does not dispute the existence of the aggravating factor that she was sentenced to incarceration.  Petitioner does not argue that any of the mitigating factors established by 42 C.F.R. § 1001.102(c) exist in this case.  RFH, P. Br.  Petitioner also argues that she was wrongfully convicted and her criminal case is currently on appeal.  RFH, P. Br. 1, 2, 4.  However, as a matter of law, neither argument is grounds for any relief for Petitioner.  I conclude that summary judgment is appropriate.

3. Petitioner’s exclusion is required by section 1128(a)(3) of the Act.

a. Facts

Petitioner states that she was not a provider, which I construe to mean that she was not enrolled in Medicare as either a provider or supplier.  She states that she did not do Medicare billing but states that her job was to audit the collections department.  RFH, P. Br. at 1-4.  I accept both of her representations as true for purposes of summary judgment. 

On January 10, 2017, a second superseding indictment issued by a Grand Jury (indictment) was filed in the District Court charging Petitioner with seven counts of identity theft and one count of aggravated identity theft, all occurring beginning in about March 2014 and continuing to about May 2014.  More specifically, the indictment alleges that from November 28, 2011 to June 29, 2012, Petitioner worked for the Western Regional Center for Brain and Spine Surgery (WRCBSS), a medical facility in Las Vegas, Nevada.  In her job, Petitioner had access to patient records, which included patients’ names, dates of birth, Social Security Numbers, addresses, and health insurance information.  The indictment alleges that Petitioner obtained patient files and kept them in her possession.  In March 2014, Petitioner moved to Texas and moved with her the WRCBSS patient files.  From March 24, 2014 to October 29, 2014, Petitioner was employed by Epic Health Services, a Dallas, Texas company that specialized in providing home health services to special needs children.  Petitioner had access to patient files, which included patients’ names, dates of birth, Medicaid numbers, insurance information, and addresses.  The seven counts of identity theft charged that Petitioner knowingly transferred, possessed, and used in or affecting interstate or foreign commerce without lawful authority, a means of identification of seven persons, with knowledge that the means of identification belonged to another actual person, and with the intent to commit, aid or abet, or in connection with food stamp fraud, and as a result Petitioner or any other individual committing the offense obtained anything having an aggregate value of $1,000 or more during a one-year period.  The eighth count charged that Petitioner knowingly transferred, possessed, and used without lawful authority a means of identification of another person, i.e., the name, date of birth, and Social Security Number belonging to RJ

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in relation to the commission of a felony violation of 18 U.S.C. § 1029(a)(3), knowing that the means of identification belonged to another actual person.  IG Ex. 4. 

On January 31, 2017, a jury convicted Petitioner on all eight counts of the indictment.  IG Ex. 5. 

On April 10, 2019, judgment was entered against Petitioner in the District Court.  She was sentenced to prison for 42 months followed by two years of probation.  She was ordered to pay restitution of $44,438 to the Florida Department of Children and Families.  IG Ex. 6.  Petitioner states that her conviction is being appealed, which I accept as true but immaterial for purposes of summary judgment.  RFH.

b. Analysis

The IG cites section 1128(a)(3) of the Act as the basis for Petitioner’s mandatory exclusion.  The statute, as applicable in this case, requires the Secretary to exclude from participation any individual or entity:  

(l)  Convicted of an offense under federal or state law;

(2)  The offense occurred after August 21, 1996 (the date of enactment of the Health Insurance Portability and Accountability Act of 1996);

(3)  The offense was committed in connection with the delivery of a health care item or service;

(4)  The criminal offense was a felony; and

(5)  The offense was related to theft.

Act § 1128(a)(3); 42 C.F.R. § 1001.101(c).  When the elements of section 1128(a)(3) of the Act are satisfied, Congress mandates exclusion and the Secretary and I have no discretion not to exclude.  I conclude that the elements that trigger exclusion are satisfied in this case.

Petitioner cannot dispute that she was convicted of felonies as each count of which she was convicted carried a maximum punishment of more than one year.  18 U.S.C. § 3559(a)(1)-(5).  Petitioner does not dispute that the offenses for which she was convicted occurred after August 21, 1996.  Petitioner does not deny that her offenses, which the federal statutes label identity theft and aggravated identity theft, involved theft.

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Petitioner does not deny that she was convicted within the meaning of the Act of violations of 18 U.S.C. §§ 2, 1028(a)(7), and 1028A(a)(1).  IG Ex. 6 at 1.  However, she argues that she was wrongly convicted and that her criminal conviction is on appeal.  The regulations prohibit Petitioner from collaterally attacking her conviction in this forum on either substantive or procedural grounds, and I have no authority to conduct any review of her conviction.  42 C.F.R. § 1001.2007(d).  Pursuant to section 1128(i)(1) of the Act (42 U.S.C. § 1320a(i)(1)), an individual or entity is convicted when judgment of conviction is entered whether or not an appeal is pending.  The regulations also provide a remedy if Petitioner’s conviction is ultimately reversed or vacated on appeal, requiring that her exclusion be removed effective the date it was imposed.  42 C.F.R. § 1001.3005(a)(1).  Therefore, the fact Petitioner’s conviction may be pending appellate review is not material and provides no basis for staying or upsetting her exclusion.

I also construe Petitioner’s argument to be that her conviction should not trigger mandatory exclusion pursuant to section 1128(a)(3) of the Act because her offenses were not in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in [section 1128(a)(1)]) operated by or financed in whole or in part by any Federal, State, or local government agency.  I conclude that the undisputed facts establish the required connection, rational link, or nexus between Petitioner’s criminal offenses and the delivery of a health care item or service, in a health care program other than Medicare or Medicaid.  My decision is guided by the decision of the Departmental Appeals Board (Board) in W. Scott Harkonen, M.D., DAB No. 2485 (2012), aff’d, Harkonen v. Sebelius No. C13-0071 PJH, 2013 WL 5734918 (N.D. Cal. Oct. 22, 2013). 

In Harkonen, an appellate panel of the Board discussed in detail the elements of section 1128(a)(3) of the Act, which requires that the offense of which one is convicted have been committed in connection with the delivery of a health care item or service.  The Board discussed that in prior cases, it had interpreted the language “in connection with” to require a common sense connection or nexus, also characterized as a “rational link,” between the criminal offense and the delivery of a health care item or service.  Harkonen, DAB No. 2485 at 7.  The Board noted that in Erik D. DeSimone, R.Ph., DAB No. 1932 (2004), it found the required nexus in a case where a pharmacist, in the guise of performing his professional duties, took controlled substances for his own use.  Harkonen, DAB No. 2485at 7.  In Kenneth M. Behr, DAB No. 1997 (2005), the Board found the nexus where a pharmacist who had access to drugs due to his position attempted to embezzle those drugs, rejecting the argument that the underlying criminal offense must involve actual delivery of a health care item or service.  Harkonen, DAB No. 2485 at 7-8.  In Ellen L. Morand, DAB No. 2436 (2012), the Board concluded that the Petitioner’s theft from the evening deposit of the pharmacy that employed her had the requisite nexus considering that the evening deposit included revenue from the sale of health care items and that the Petitioner diverted those funds to her use.  Harkonen, DAB No. 2485 at 8.  The Board summarized its prior holdings to be that “frauds or thefts that

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are linked in a rational way to the delivery of a health care item or service do fall within the ambit” of section 1128(a)(3).  Harkonen, DAB No. 2485 at 8.  The Board further noted that its interpretation is consistent with the interpretation of similar language found in section 1128(a)(1) of the Act (42 U.S.C. § 1320a-7(a)(1)).  Harkonen, DAB No. 2485 at 9.  The Board pointed out that its interpretations of the language of section 1128(a) “effectuate the twin purposes of section 1128(a):  (1) to protect federal health care programs and their beneficiaries from individuals who have been shown to be untrustworthy; and (2) to deter health care fraud.  Harkonen, DAB No. 2485at 9 (citations omitted).  In Harkonen, the Board stated that section 1128(a)(3) does not require proof of an actual impact or effect upon the delivery of a health care item or service, rather the ALJ must consider all the evidence of circumstances underlying the criminal offense, including evidence extrinsic to the criminal proceedings if reliable and credible, to find the rational link between the criminal offense and the delivery of a health care item or service.  Id. at 10.  The rational link or nexus between Petitioner’s offenses and the delivery of a health care item or service exists in this case because Petitioner used her employment to gain access to the records of patients and then used their stolen personal information in furtherance of her criminal enterprise.

Petitioner also argues that she was not a provider or supplier enrolled in Medicare.  P. Br. at 1.  I construe Petitioner’s argument to be that she should not be subject to exclusion pursuant to section 1128(a)(3) of the Act.  Section 1128(a)(3) of the Act, however, provides that “[a]ny individual or entity” will be excluded from participation in any federal health care program.  Section 1128 of the Act is clearly not limited in its application to only those individuals or entities enrolled as providers or suppliers in a federal health care program such as Medicare.  Similarly, the Secretary’s regulations implementing the Act do not limit mandatory exclusions to those already enrolled in a federal health care program.  42 C.F.R. §§ 1001.1(a), 1001.101.

Accordingly, I conclude that the elements necessary to trigger an exclusion pursuant to § 1128(a)(3) of the Act are satisfied, and Petitioner’s exclusion is required by the Act.

4. Section 1128(c)(3)(B) of the Act requires a minimum exclusion of five years for any exclusion pursuant to section 1128(a) of the Act.

I have concluded that a basis exists to exclude Petitioner pursuant to section 1128(a)(3) of the Act.  Therefore, the IG must exclude Petitioner for a minimum period of five years pursuant to section 1128(c)(3)(B) of the Act.  There is no discretion to impose a lesser period.  The remaining issue is whether it is unreasonable to extend Petitioner’s exclusion by an additional five years for a total period of exclusion of 10 years.

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5. It is undisputed that Petitioner was sentenced to be incarcerated, one of the aggravating factors recognized under 42 C.F.R. § 1001.102(b)(5).

The IG notified Petitioner that one aggravating factor is present in this case that justifies an exclusion of more than five years.  IG Ex. 1 at 1-2.  I conclude the aggravating factor alleged by the IG is established by a preponderance of the evidence in this case and is undisputed.

Under 42 C.F.R. § 1001.102(b)(5), the IG may extend the period of exclusion past the mandatory minimum five‑year period when the sentence imposed by the court includes incarceration.  On April 10, 2019, the District Court sentenced Petitioner to 42 months incarceration.  IG Ex. 6 at 2.  Petitioner does not dispute the existence of this aggravating factor.  Accordingly, this aggravating factor exists in this case. 

6. No mitigating factors exist in this case. 

If any of the aggravating factors authorized by 42 C.F.R. § 1001.102(b) are cited by the IG to justify an exclusion of longer than five years, as in this case, then mitigating factors may be considered as a basis for reducing the period of exclusion to no fewer than five years.  42 C.F.R. § 1001.102(c).  The only authorized mitigating factors that I may consider are listed in 42 C.F.R. § 1001.102(c). 

Petitioner does not allege that any of the mitigating factors recognized by 42 C.F.R. § 1001.102(c) exist in this case.  RFH, P. Br. 

7. Exclusion for 10 years is not unreasonable in this case.

Petitioner does not dispute that she was sentenced to incarceration or that her incarceration is an aggravating factor the IG may consider.  Petitioner does not allege the existence of any authorized mitigating factors. 

The Secretary requires by regulation that the ALJ determine whether the length of exclusion imposed is “unreasonable,” if a period greater than the minimum period is imposed by the IG.  42 C.F.R. § 1001.2007(a)(1)-(2).  The Board has interpreted the regulations as significantly limiting the scope of ALJ review.  The regulation states that the ALJ must determine whether the length of exclusion imposed is “unreasonable,” without definition of what is unreasonable or direction for how to determine whether a period of exclusion is unreasonable.  42 C.F.R. § 1001.2007(a)(1)(ii).  The drafters of the regulation explained that the intent of the regulation is to ensure that if the IG’s proposed period of exclusion is “within a reasonable range based on demonstrated criteria, the ALJ

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has no authority” to change the period of exclusion.  57 Fed. Reg. 3298, 3321 (Jan. 29, 1992).  Again, the drafters provided no explanation of what are “demonstrated criteria.” 

The Board has determined that the role of the ALJ in exclusion cases is to conduct a de novo review of the facts related to the basis for the exclusion and the existence of aggravating and mitigating factors identified at 42 C.F.R. § 1001.102 and determine whether the period of exclusion imposed by the IG falls within a “reasonable range.”  Edwin L. Fuentes, DAB No. 2988 at 7-10 (2020); Juan de Leon, Jr., DAB No. 2533 at 4-5 (2013); Craig Richard Wilder, DAB No. 2416 at 8 (2011); Joann Fletcher Cash, DAB No. 1725 at 17 n.6 (2000).  The Board explained that, in determining whether a period of exclusion is “unreasonable,” the ALJ is to consider whether such period falls “within a reasonable range.”  Cash, DAB No. 1725 at 17 n.6.  The Board cautions that whether the ALJ thinks the period of exclusion too long or too short is not the issue.  The ALJ may not substitute his or her judgment for that of the IG and may only change the period of exclusion in limited circumstances.  In John (Juan) Urquijo, DAB No. 1735 (2000), the Board concluded that if the IG considers an aggravating factor to extend the period of exclusion and that factor is not later shown to exist on appeal, or if the IG fails to consider a mitigating factor that is shown to exist, then the ALJ may make a decision as to the appropriate extension of the period of exclusion beyond the minimum.  In Gary Alan Katz, R.Ph., DAB No. 1842 (2002), the Board suggested that when it is found that an aggravating factor considered by the IG is not proved before the ALJ, then some downward adjustment of the period of exclusion should be expected absent some circumstances that indicate no such adjustment is appropriate.  The Board reasoned that when aggravating factors are considered by the IG as a reason to extend a period of exclusion, some part of the extended period of exclusion should be attributable to each aggravating factor considered.  Because in Katz, the ALJ found one aggravating factor considered by the IG was not proved before the ALJ, the Board concluded that the period of exclusion imposed by the IG was no longer in the reasonable range and reassessed the period of exclusion.  The Board had the opportunity to define the term “reasonable range” and describe how to weigh aggravating and mitigating factors, but did not do so.  The Board engaged in weighing the remaining aggravating factors in Katz, but did not explain the weighing process in any detail or cite any authority for the process it employed.  Id. at 4-8.  The Board, relying upon a prior Board decision and the preamble to the regulations, stated in a footnote that:

[A] “reasonable range” refers to a range of exclusion periods that is more limited than the full range authorized by the statute [five years to permanent exclusions under section 1128(a) of the Act] and that is tied to the circumstances of the individual case.  If the ALJ determines that the length of the exclusion imposed by the I.G. is within this range under the circumstance as found by the ALJ, he may not change it even

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if he believes that another exclusion period is more reasonable.

Id. at 5 n.4.  The Board’s decision in Katz reflects its determination that it is the aggravating and mitigating factors that the Board and an ALJ consider in determining whether a period of exclusion is unreasonable.  The Board’s decision also indicates that the facts and circumstances related to the aggravating factors are what are weighed when determining how each aggravating and mitigating factor affects whether a period of exclusion is unreasonable, i.e., outside the reasonable range.  Clearly, determining a reasonable range is not a simple process of counting the aggravating and mitigating factors, and considerable discretion remains for the Board and the ALJ to engage in the weighing process to decide what is unreasonable, although that weighing is significantly limited by the language of 42 C.F.R. § 1001.2007(a)(1)(ii) and the Board’s prior decisions on how the regulation is to be implemented.  The IG determination of the weight given aggravating and mitigating factors is clearly entitled to receive some deference due to the regulatory standard for review adopted by notice and comment rulemaking; by regulation, the issue is whether the period of exclusion is unreasonable.  42 C.F.R. § 1001.2007(a)(1)(ii).  No further deference is required by the Act or regulations or recognized by the Board.  In this case, however, it has not been shown that the IG considered an aggravating factor that did not exist or failed to consider mitigating factors that did exist.  Therefore, I have no discretion to reassess the period of exclusion under current Board decisions. 

Based on my de novo review, I conclude that a basis for exclusion exists and that the undisputed evidence establishes one aggravating factor and no mitigating factors.  The IG, in selecting a 10-year exclusion, did not consider aggravating factors shown not to exist or fail to consider mitigating factors that did exist.  IG Ex. 1 at 2.  I conclude that a period of exclusion of 10 years is in a reasonable range and not unreasonable considering the existence of one aggravating factor and the absence of any mitigating factors.  No basis exists for me to reassess the period of exclusion.

Exclusion is effective 20 days from the date of the IG’s notice of exclusion to Petitioner.  42 C.F.R. § 1001.2002(b).

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III. Conclusion

For the foregoing reasons, Petitioner is excluded from participation in Medicare, Medicaid, and all federal health care programs for 10 years, effective August 20, 2019.

1. Pursuant to 42 C.F.R. § 1001.3001, Petitioner may apply for reinstatement only after the period of exclusion expires.  Reinstatement is not automatic upon completion of the period of exclusion.
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2. Citations are to the 2018 revision of the Code of Federal Regulations, unless otherwise stated.
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