Brett E. Taft, DAB CR6074 (2022)

DECISION

Petitioner 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 October 14, 2021. 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 10 years, for a total minimum exclusion of 15 years1 , is not unreasonable based on the presence of three aggravating factors and the absence of any mitigating factors.

I. Background

The Inspector General (IG) notified Petitioner by letter dated September 24, 2021, that he was excluded from participation in Medicare, Medicaid, and all federal health care

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programs for a minimum of 15 years.  The IG cited section 1128(a)(3) of the Act as the basis for Petitioner’s exclusion.  The IG stated that the exclusion was based on Petitioner’s felony conviction in the United States District Court, Southern Division, Northern District of Alabama (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 or service.  IG Exhibit (Ex.) 1 at 1.  

Petitioner requested a hearing pursuant to 42 C.F.R. § 1005.2 on November 1, 2021 (RFH).  I convened a prehearing conference by telephone on November 22, 2021, the substance of which is memorialized in my Prehearing Conference Order and Schedule for Filing Briefs and Documentary Evidence dated the same day (Prehearing Order). On November 29, 2022, Petitioner filed a more definite statement of his grounds for requesting a hearing (MDS).  The IG filed a motion for summary judgment with supporting brief on January 21, 2022, and IG Exs. 1 through 5. Petitioner filed an opposition to the IG’s motion for summary judgement on March 22, 2022 (P. Br.) with no exhibits. On April 6, 2022, the IG filed a reply brief. Petitioner did not object to my consideration of IG Exs. 1 through 5, 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. § 1320a-7(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 as a basis 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.  42 C.F.R. § 1001.2007(c). There may be no collateral attack of the conviction that is the basis for the exclusion on either substantive or procedural grounds. 42 C.F.R. § 1001.2007(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(b), (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).

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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.  

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

There is no dispute that Petitioner timely requested a hearing and that I have jurisdiction pursuant to section 1128(f) of the Act and 42 C.F.R. pt. 1005.  

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).

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There is no genuine dispute of material fact in this case.  Petitioner does not dispute that he was convicted of the felony offense of conspiracy to commit mail fraud that occurred after August 21, 1996. However, Petitioner argues that his conviction “is not related to the delivery of a healthcare item or service.” MDS; P. Br. at 1. This issue involves consideration of facts that are undisputed and application of the law to those undisputed facts to resolve against Petitioner the issue of law he raises. Petitioner further argues that the IG’s exclusion violates his Fifth Amendment right against double jeopardy and Eighth Amendment right against excessive fines and cruel and unusual punishment. MDS at 1-2; P. Br. at 2-4. For reasons discussed later in this decision, Petitioner’s arguments must be resolved against him as a matter of law. Petitioner does not dispute the existence of the aggravating factors relied on by the IG that loss related to Petitioner’s offense (reflected by the undisputed amount of restitution ordered and undisputed facts admitted by Petitioner as part of his plea bargain) was greater than $50,000; that the acts that resulted in conviction were committed over a period of one year or more; and that he was sentenced to incarceration, as alleged by the IG. Petitioner does not argue that any of the mitigating factors established by 42 C.F.R. § 1001.102(c) exist in this case. MDS; P. Br. I conclude that summary judgment in favor of the IG is appropriate.  

3. Section 1128(a)(3) of the Act requires Petitioner’s exclusion from participation in Medicare, Medicaid, and all other federal health care programs.  

a. Undisputed Facts

The following facts are undisputed and factual inferences are drawn in Petitioner’s favor.  

On December 23, 2020, an information was filed in the district court charging Petitioner with one count of conspiracy to commit mail fraud in violation of 18 U.S.C § 371. IG Ex. 2. The information alleges that, from about April 2012 and continuing until about February 2014, Petitioner:  

[K]nowingly and willfully conspired, combined, and agreed with others . . . to execute a scheme and artifice to defraud health care benefit programs and to obtain money and property belonging to health care benefit programs by means of materially false and fraudulent pretenses, representations, and promises by use of mail and/or interstate carrier, in violation of Title 18, United States Code, Section 1341.  

IG Ex. 2 at 5.

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On December 23, 2020, Petitioner agreed to a “Binding Plea Agreement” in which he agreed to plead guilty to the one count of conspiracy to commit mail fraud alleged in the information. As part of his plea agreement Petitioner stipulated, that is, he admitted certain facts, in exchange for a sentence limitation. Petitioner stipulated that the facts set forth in the plea agreement are substantially correct and agreed that the district court could use the facts in determining Petitioner’s sentence. Following is a summary of the facts Petitioner stipulated were correct in his plea agreement:  

Petitioner engaged in pharmaceutical sales through his business BTAFT Medical, LLC.  

Stanley F. Reeves, a licensed pharmacist, owned and operated F&F Drugs.  

In April 2012, Petitioner proposed to Reeves that Reeves could expand F&F Drugs revenue by increasing compounded drug3 sales.

Paul Roberts was a physician and co-owner of Southeast Urgent Care (SEUC).  SEUC was an urgent care and primary care clinic with a program to treat patients with substance addiction and Attention Deficit Hyperactivity Disorder.  

Reeves/F&F Drugs provided doctors through sales representatives like Petitioner, pre-written prescription forms listing multiple compounded drugs. During the period of the conspiracy, Reeves/F&F Drug most frequently dispensed a pain-relieving cream.

Beginning in 2012, Roberts wrote prescriptions for both medically necessary and unnecessary compounded drugs that were filled by Reeves/F&F Drugs.  Roberts also authorized automatic refills.  

To induce patients to accept medically unnecessary drugs, Reeves/F&F Drugs routinely waived patient copays, a fact that Petitioner admits he deliberately ignored.  

Reeves/F&F Drugs billed necessary and unnecessary prescriptions to a Pharmacy Benefit Manager, a third-party administrator of prescription drug programs.4

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Reeves/F&F Drugs paid Petitioner, through BTAFT Medical LLC, a commission of from 32 to 50 percent of F&F Drugs’ profit on each compounded drug dispensed, whether medically necessary or not.  

Petitioner admitted he was deliberately ignorant of the fact that some prescriptions were medically unnecessary.  

Petitioner made four payments between December 2014 and March 2015, to Roberts, three by check and one in cash.  One check was sent through the U.S. Mail.5

Between April 2012 and February 2014, Reeves/F&F Drugs billed Pharmacy Benefit Managers for approximately $2.2 million for medically unnecessary drugs ordered by Roberts.  

IG Ex. 3 at 1-5.

On April 8, 2021, the district court accepted Petitioner’s plea agreement and entered a judgment of guilty of conspiracy to commit mail fraud as alleged in the one-count information. The district court sentenced Petitioner to 12 months in prison, 3 years of supervised release, a fine of $1,000, forfeiture of $10,000 in proceeds, and $2,261,198.69 in joint and several restitution with Reeves and Roberts. IG Ex. 4.

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 in any federal health care program any individual or entity:  

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

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

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(3) The criminal offense was committed (a) in connection with the delivery of a health care item or service or (b) with respect to any act or omission in a health care program other than Medicare or Medicaid, that is operated or financed by the federal, state, or a local government; 

(4) The criminal offense was a felony; and 

(5) The criminal offense was related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.  

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 to not exclude. I conclude that the elements that trigger mandatory exclusion under section 1128(a)(3) of the Act are satisfied in this case.  

Petitioner does not dispute that he was convicted under federal law. He does not dispute that he was convicted of the felony6 offense of conspiracy to commit mail fraud. Petitioner does not dispute that his offense was related to fraud, specifically conspiracy to commit mail fraud as alleged in the one-count information. He does not dispute the offense of which he was convicted occurred after August 21, 1996. RFH, MDS at 1 ¶ 1; P. Br. at 1 ¶ A, 3 ¶ 8; IG Exs. 2, 3, 4.

Petitioner does dispute that his criminal offense was committed in connection with the delivery of a health care item or service.7 Petitioner argues that his conviction of conspiracy to commit mail fraud is not related to the delivery of a healthcare item or service and is not a basis for exclusion pursuant to section 1128(a)(3) of the Act. MDS at 1; P. Br. at 1-2 ¶¶ A, 2. Petitioner’s argument must be resolved against him as a matter of law.

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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. 2485 at 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 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) “effectuates 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. 2485 at 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 felony conviction of the offense of mail fraud and the delivery of a health care item or service exists in this case. Petitioner

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admitted in his plea agreement that he was involved in a scheme with Reeves/F&F Drugs and Roberts to sell compounded drugs. Petitioner admitted that beginning in 2012, Roberts wrote prescriptions for medically unnecessary compounded drugs that were filled by Reeves/F&F Drugs. Petitioner admitted that he was deliberately ignorant of the fact some prescriptions ordered and sold were medically unnecessary. Petitioner admitted that as part of the scheme, Reeves/F&F billed insurance companies, and from 32 to 50 percent of the proceeds were paid by Reeves/F&F to Petitioner who then paid Roberts a share for his role in the scheme. Petitioner admitted that between April 2012 and February 2014, Reeves/F&F Drugs billed Pharmacy Benefit Managers for approximately $2.2 million of medically unnecessary drugs ordered by Roberts. CMS Ex. 3. By pleading guilty, Petitioner admitted that he conspired to commit mail fraud based on the fact that he sent Roberts one check for payment as part of the scheme to sell medically unnecessary compounded prescriptions and obtain payment from insurers. Petitioner does not dispute that the compounded prescriptions were health care items. Petitioner cannot dispute that the scheme with Reeves/F&F Drugs and Roberts involved the delivery of the compounded prescriptions which were health care items.

Petitioner attempts no factual analysis in an effort to rebut the close relationship between Petitioner’s offense of mail fraud and the underlying conduct of the scheme to sell medically unnecessary compounded prescriptions and obtain payment from insurers. Rather, Petitioner argues that Congress limited the Secretary to exclude only those convicted of a particular set of felonies. According to Petitioner, a “remote relatedness to any healthcare service delivery” should not be sufficient to trigger exclusion under section 1128(a)(3) of the Act. Petitioner relies upon the unreported decision in Kabins v. Sebelius, No. 2:11-cv-01742-JCM-RJJ, 2012 WL 4498295 (D. Nev. Sep. 28, 2012). P. Br. at 2 ¶¶ 2, 3; MDS at 1 ¶ 1. However, Petitioner’s reliance is misplaced because in Kabins the court reversed an exclusion pursuant to section 1128(a)(3) of the Act because, as the court analyzed the conduct underlying the conviction, it found that the conduct involved the delivery of legal service not the delivery of a health care item or service. In Petitioner’s case he engaged in pharmaceutical sales and the scheme underlying his criminal conviction involved the sale of unnecessary pharmaceuticals. I conclude that there is a nexus between Petitioner’s felony conviction and the delivery of a health care item.

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. Petitioner argues that his exclusion violates his Fifth Amendment right against double jeopardy and Eight Amendment right against excessive fines and cruel and unusual punishment.  MDS at 1-2 ¶¶ 2-3; P. Br. at 2-4, ¶¶ 4-10. I am bound to follow the federal statutes and regulations and have no authority to declare them unconstitutional. Susan Malady, R.N., DAB No. 1816 (2002); 42 C.F.R. § 1005.4(c)(1). In interpreting and applying the Act and regulations, I must do so consistent with Constitutional principles.

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However, in this case there is no issue of interpretation for me, only an attack upon the Act and the regulations on Constitutional grounds. Petitioner has preserved his double jeopardy, excessive fines, and cruel and unusual punishment arguments for appeal, though both the Board and the federal courts have rejected similar arguments before. Exclusions imposed by the IG are civil sanctions, remedial in nature and not punitive and criminal. Because exclusions are remedial sanctions, they do not violate the double jeopardy clause or the prohibition against cruel and unusual punishment. Manocchio v. Kusserow, 961 F.2d 1539 (11th Cir. 1992); Greene v. Sullivan, 731 F. Supp. 838 (E.D. Tenn. 1990); Joann Fletcher Cash, DAB No. 1725 (2000); Douglas Schram, R.Ph., DAB No. 1372 (1992); and Janet Wallace, L.P.N., DAB No. 1326 (1992).8 Arguments that the exclusion provisions are anything but remedial have been found to be without merit. Manocchio, 961 F.2d at 1541-42; Greene, 731 F. Supp. at 839-40. Many federal courts have also rejected claims that the Secretary’s exclusion procedures amount to a deprivation of due process, finding no constitutionally protected property or liberty interests. Rodabaugh v. Sullivan, 943 F.2d 855 (8th Cir. 1991); Lavapies v. Bowen, 883 F.2d 465 (6th Cir. 1989); Hillman Rehab. Ctr. v. U.S. Dep’t. of Health & Human Servs., No. 98-3789 (GEB), slip op. at 16, 1999 WL 34813783, at 16 (D.N.J. May 13, 1999); Travers v. Sullivan, 801 F. Supp. 394, 404 05 (E.D. Wash. 1992), aff’d, Travers v. Shalala, 20 F.3d 993 (9th Cir. 1994). Accordingly, I conclude that Petitioner’s Constitutional arguments are without merit.  

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 10 years for a total period of exclusion of 15 years.

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5. Three aggravating factors established by 42 C.F.R. § 1001.102(b) exist in this case that may be relied upon by the IG to extend the period exclusion beyond five years and no mitigating factors established by 42 C.F.R. § 1001.102(c) exist.  

The IG cited three aggravating factors in extending Petitioner’s period of exclusion from the mandatory minimum five-year exclusion to 15 years. The IG considered no mitigating factors.  IG Ex. 1 at 1-2. Petitioner does not argue that the IG considered an aggravating factor authorized by 42 C.F.R. § 1001.102(b) that does not exist or that there was a mitigating factor authorized by 42 C.F.R. § 1001.102(c) that the IG failed to consider. RFH, MDS, P. Br.  

a. It is undisputed that Petitioner’s offense resulted in a loss to one or more entities of $50,000 or more.  42 C.F.R. § 1001.102(b)(1).  

Petitioner admitted in his plea agreement that the scheme underlying his felony conviction resulted in Pharmacy Benefit Managers being billed for $2.2 million for medically unnecessary compounded drugs. IG Ex. 3 at 5. Petitioner was ordered by the district court to pay restitution of $2,261,198.69 with Reeves and Roberts having joint and several responsibility for the restitution.  IG Ex. 4 at 7. The Board has previously accepted that an amount ordered as restitution constitutes proof of the amount of financial loss. Jeremy Robinson, DAB No. 1905 at 11 (2004); Craig Richard Wilder, DAB No. 2416 at 9 (2011); Juan de Leon, Jr., DAB No. 2533 at 5 (2013); Laura Leyva, DAB No. 2704 at 9 (2016).

The IG may consider as an aggravating factor justifying extending a period of exclusion over five years that the acts for which one was convicted caused, or were intended to cause, a loss to the government agency or program of $50,000 or more. 42 C.F.R. § 1001.102(b)(1). This aggravating factor is undisputed as Petitioner admitted to participating in a scheme that caused a financial loss far greater than $50,000.  

b. It is undisputed that the acts that resulted in Petitioner’s conviction were committed over a period of one year or more. 42 C.F.R. § 1001.102(b)(2).  

Acts that resulted in the conviction that occur over a year or more may be considered by the IG to extend a petitioner’s period of exclusion beyond the five-year minimum. 42 C.F.R. § 1001.102(b)(2). In the present case, Petitioner admitted that the scheme underlying his conviction occurred between about April 2012 and February 2014. IG Ex. 3 at 5. This aggravating factor is undisputed and was properly considered by the IG.

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c. It is undisputed that Petitioner was sentenced to be incarcerated.  42 C.F.R. § 1001.102(b)(5).  

Under 42 C.F.R. § 1001.102(b)(5), the IG may extend the period of exclusion beyond the mandatory minimum five year period when the sentence imposed by the court includes incarceration. On April 8, 2020, the district court sentenced Petitioner to 12 months in prison. IG Ex. 4 at 2. Petitioner does not dispute the existence of this aggravating factor and I conclude that this aggravating factor exists in this case.  

d. No mitigating factors established by 42 C.F.R. § 1001.102(c) 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, MDS; P. Br.  

6. Exclusion for 15 years is not unreasonable in this case.

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 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); de Leon, Jr., DAB No. 2533 at 4-5; Wilder, DAB No. 2416 at 8; 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

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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 is 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 decide 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 exclusion 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 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

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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 a mitigating factor 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 three aggravating factors and no mitigating factors. The IG, in selecting a 15-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 15 years is within a reasonable range and not unreasonable considering the existence of three aggravating factors 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).

III. Conclusion

For the foregoing reasons, Petitioner is excluded from participation in Medicare, Medicaid, and all federal health care programs for 15 years, effective October 14, 2021.  

1. Pursuant to 42 C.F.R. § 1001.3001(a), 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 2020 revision of the Code of Federal Regulations (C.F.R.), unless otherwise stated.
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3. “Compounded drugs are customized and individualized drugs that are intended to meet the medical needs of specific patients.” IG Ex. 3 at 3.
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4. “A Pharmacy Benefit Manager is a third party administrator of prescription drug programs, including privately or government insured drug plans, and acts on behalf of one or more prescription drug plans. . . .” IG Ex. 2 at 3.
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5. The fact the one check was admittedly sent by U.S. Mail, is an essential fact for the charge of conspiracy to commit mail fraud. 18 U.S.C. § 1341.
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6. Petitioner acknowledged in his binding plea agreement that he was subject to a maximum period of imprisonment of not more than five years for conviction of conspiracy under 18 U.S.C. § 371. IG Ex. 3 at 1-2. A federal criminal offense that is punishable by imprisonment for less than 10 years, but for 5 or more years is a Class D felony. 18 U.S.C. § 3559(a)(3).
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7. Section 1128(a)(3) of the Act establishes alternative triggers. A felony conviction triggers exclusion if the offense is “in connection with the delivery of a health care item or service” or, alternatively, “with respect to any act or omission in a health care program [other than Medicare or a state Medicaid program]” operated or funded by the federal, state, or local government. 42 C.F.R. § 1001.101(c). No issue has been presented in this case related to the alternative element.
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8. The exclusion remedy serves twin congressional purposes: the protection of federal funds and program beneficiaries from untrustworthy individuals and the deterrence of health care fraud. S. Rep. No. 100-109, at 1-2 (1987), in 1987 U.S.C.C.A.N. 682, 686 (“clear and strong deterrent”); Cash, DAB No. 1725 at 18 (discussing trustworthiness and deterrence). When Congress added section 1128(a)(3) in 1996, it again focused upon the desired deterrent effect: “greater deterrence was needed to protect the Medicare program from providers who have been convicted of health care fraud felonies . . . .” H.R. Rep. 104-496(I), at 86 (1996), reprinted in 1996 U.S.C.C.A.N. 1865, 1886.
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