SUBJECT: Roberto Kutcher-Olivio, M.D.,

Petitioner,

Inspector General

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Roberto Kutcher-Olivio, M.D. (Petitioner) appealed a March 29, 2002 decision by Administrative Law Judge (ALJ) Jose A. Anglada. Roberto Kutcher-Olivio, M.D., DAB CR886 (2002) (ALJ Decision). The ALJ Decision modified the Inspector General's (I.G.'s) determination that Petitioner should be excluded from participation in Medicare, Medicaid and all Federal Health Care Programs (hereafter Medicare) for a five-year period. Instead, based on a mitigating factor that the I.G. failed to consider, the ALJ determined that Petitioner should be excluded for four years.

The I.G. excluded Petitioner pursuant to section 1128(b)(1) of the Social Security Act (Act). Petitioner's exclusion was based on his June 30, 1999 conviction, in the United States District Court for the District of Puerto Rico, of a criminal offense related to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct.

Background

The program regulation at 42 C.F.R. � 1001.201 addresses exclusions based on a conviction related to program or health care fraud. Under this section, an exclusion shall be for a period of three years unless aggravating or mitigating factors exist which would form a basis for lengthening or shortening the exclusion. 42 C.F.R. � 1001.201(b)(1).

The following facts, taken from the ALJ Decision, are undisputed. During the time period relevant here, Petitioner managed and controlled Basic American Medical-Puerto Rico, Inc. (BAMI), a corporation organized under the laws of the State of Indiana and registered and authorized to do business in the Commonwealth of Puerto Rico. BAMI operated the Hato Rey Community Hospital (Hato Rey). Petitioner was president of BAMI. Pursuant to financing provided by the United States Department of Housing and Urban Development (HUD), Hato Rey was subject to a regulatory agreement, effective March 31, 1984, which provided that -

the owners shall not, without the prior approval of the Secretary of HUD, encumber, pledge or dispose of, or encumber any personal property of the project including income, or pay out any funds except from surplus cash, except for reasonable operating expenses and repair.

I.G. Ex. 2, p. 11. An audit of Hato Rey revealed that, as of March 31, 1993, project funds had been diverted as loans and recorded as "Accounts Receivable" in the hospital's books. These funds were diverted to Petitioner as stockholder and to several affiliate entities owned by Petitioner. HUD did not approve these disbursements. Additionally, Petitioner made only four monthly mortgage payments for Hato Rey between 1988 and 1996. In October 1997, Petitioner and his wife were indicted in Federal District Court, for, among other things, using more than $5,000,000 of Hato Rey's rents, assets, proceeds, income and other funds for purposes other than actual and necessary expenses. On June 30, 1999, Petitioner signed a Plea Agreement (I.G. Ex. 2) where he pled guilty to Count II of his indictment. On April 7, 2000, Petitioner was sentenced to 10 months of home confinement, two years of probation and ordered to pay a $10,000 fine. Based on these facts, on February 28, 2001, the I.G. notified Petitioner that he was being excluded from Medicare for five years. ALJ Decision at 3-5.

Petitioner timely appealed his exclusion. As noted above, the ALJ reduced the length of the exclusion to four years. The I.G. did not appeal that reduction.

Standard of Review

Our standard of review on a disputed conclusion of law is whether the ALJ Decision is erroneous. Our standard of review on a disputed finding of fact is whether the ALJ Decision is supported by substantial evidence on the record as a whole. 42 C.F.R. � 1005.21(h).

Petitioner's Exception and Analysis

Our analysis is based on the ALJ Decision and the record before the ALJ, as well as the parties' briefs and Petitioner's exhibit on appeal.

The ALJ Decision was based on 21 findings of fact and conclusions of law (FFCLs). Petitioner did not dispute FFCLs 1-19 and 21. Therefore, we affirm those FFCLs without further discussion.

Petitioner did take exception to FFCL 20 where the ALJ determined that -

The I.G. had a basis for excluding Petitioner from participation in Medicare, Medicaid and all federal health care programs.

Generally, Petitioner asserted both before the ALJ and on appeal, that he had been excluded from Medicare as of February 27, 1998, the effective date of his plea agreement. In support of this argument, Petitioner pointed to a January 29, 1999 letter from HUD's Acting Deputy Chief Counsel to the Assistant United States Attorney for the District of Puerto Rico which, Petitioner asserted, constituted Exhibit I to his Plea Agreement. Petitioner cited language in that letter which stated that Petitioner would be "debarred from all government programs for a period of five years upon execution of his plea agreement." Petitioner Br. at 6. Thus, Petitioner argued, "he could not be excluded again, based on the same facts and conviction, for a new period of five (5) years . . . starting on March 20, 2001." Id. at 7.

In considering Petitioner's argument, the ALJ relied upon Paragraph 11 of the plea agreement. He noted that, under the heading "DEBARMENT OF DEFENDANT FROM H.U.D. PROGRAMS," the agreement provided:

As part of this agreement . . . [HUD] states that the defendant shall be subject to debarment/exclusion from any of its benefits/programs for a period of five (5) years. . . . The starting date of the five (5) year debarment/exclusion shall be February 27, 1998.

I.G. Ex. 2, p. 5. The ALJ determined that the above-quoted language of the agreement referred only to exclusion from HUD programs. The ALJ recognized that the language in the letter relied on by Petitioner did refer to all government programs. However, the ALJ found that the language from the January 29, 1999 letter was not incorporated into the plea agreement. Additionally, the ALJ cited Paragraph 20 of the plea agreement, which stated that "the above-stated terms and conditions constitute the entire Plea Agreement between the parties and deny the existence of any other terms and conditions not stated herein." Thus, the ALJ reasoned, it was clearly the parties' intention to limit the scope of the exclusion to HUD programs. Accordingly, the ALJ concluded that Petitioner's argument, that the I.G. had no basis for this exclusion, was without merit.⁽¹⁾ ALJ Decision at 7-8.

On appeal, Petitioner asserted that, after the ALJ Decision was issued, he had received further evidence which showed that, contrary to the ALJ's finding, he had been excluded from Medicare effective February 27, 1998. Petitioner provided a May 14, 2002 letter (and seven pages of related "working papers") from the Medicare Audit Director which informed Petitioner that a Medicare Intermediary had conducted a field audit of a provider with whom Petitioner was associated.⁽²⁾ Based on that audit, the Intermediary proposed an adjustment in Petitioner's compensation for the fiscal years ending June 30, 1998 and 1999. Petitioner argued that -

Since the plea agreement and conviction that motivated the I.G.'s action are the only ones that Dr. Kutcher has ever had, said 1998 and 1999 exclusions were, obviously, based on the same plea agreement and conviction. Therefore, he could not be excluded again, based on the same facts and conviction, for a new period of five (5) years (reduced to 4 by the A.L.J.) Starting on March 20, 2001.

Petitioner Br. at 7.

Petitioner asserted that, based on this letter, the Appellate Panel should either reverse the ALJ Decision and find that Petitioner's Medicare exclusion began February 27, 1998 (the starting date of the HUD debarment/exclusion) and concluded February 26, 2002 (based on the ALJ reduction of the length of exclusion to four years), or remand this case to the ALJ so that he could consider the impact of the May 14, 2002 letter. Petitioner Br. at 8.

There is no error of law in the ALJ Decision. As the ALJ correctly noted, the I.G.'s authority to impose an exclusion remedy is derived solely from circumstances set out in the Act as well as in regulations promulgated by the Secretary of the Department of Health and Human Services. Petitioner's June 30, 1999 plea agreement constituted a conviction for purposes of a subsequent exclusion. See section 1128(i)(3) of the Act. Petitioner's exclusion was based on that conviction, pursuant to section 1128(b)(1)(B) of the Act and 42 C.F.R. � 1001.201.

The ALJ's interpretation of Petitioner's Plea Agreement as clearly limited to debarring/excluding Petitioner from HUD programs was not erroneous. Moreover, although not mentioned by the ALJ, Paragraph 17 of the agreement specifically provides -

It is specifically understood by the defendant that this Plea Agreement does not extend to or bind other federal districts, federal civil and/or tax authorities, and/or State or Commonwealth of Puerto Rico tax authorities, civil and/or State or Commonwealth of Puerto Rico law enforcement authorities.

I.G. Ex. 2 at 8 (emphasis added).

Thus, the agreement did not bar subsequent action by a different federal agency stemming from the facts giving rise to the agreement.

Moreover, as the I.G. argued in response to Petitioner's current appeal and the ALJ noted in his decision, the ALJ is precluded by law from backdating (to February 27, 1998) the effective date of an exclusion by the I.G. to a point prior to the (June 30, 1999) "conviction" upon which the exclusion is based. I.G. Br. at 11-12; ALJ Decision at 8.

Additionally, the May 14, 2002 letter from the Medicare Audit Director is not evidence that, as early as 1998, Petitioner was excluded pursuant to section 1128(b)(1) of the Act. That letter sets out one aspect of an audit of a Medicare provider which resulted in an adjustment to Petitioner's compensation from that provider. Specifically, the substance of the May 14, 2002 letter to Petitioner provided --

This is to inform you that during the field audit of . . . the Medicare intermediary proposed and (sic) audit adjustment for your compensation of $174,711 for fiscal year 6/30/99. Also we adjusted some $193,820 for your compensation during fiscal year ended on 6/30/98 for the same provider.

There is no evidence in the record that these adjustments were based on his exclusion pursuant to section 1128(b)(1) of the Act, rather than his debarment/exclusion from HUD programs, inadequate recordkeeping, or other reasons.

By law, a petitioner can only be excluded by the I.G. under section 1128(b)(1) of the Act pursuant to the petitioner's conviction of a criminal offense involving financial misconduct. Petitioner was not convicted until June 30, 1999, and the I.G. did not notify Petitioner of her intent to exclude him until February 28, 2001.

The I.G. noted that pursuant to the Federal Acquisition and Streamlining Act of 1994, Public Law No. 103-355 (October 13, 1994), all debarments, suspensions and other exclusions imposed by Federal agencies shall be given government-wide effect. Parties who are debarred, suspended or excluded are reported to the General Services Administration (GSA). Medicare contractors are required to match their provider files against GSA's listing of individuals debarred by other agencies. Where a Medicare provider shows up on GSA's list, a contractor may cease payment to the provider. While the record does not clearly indicate the basis for the adjustments described in the May 14, 2002 letter, the fact that the contractor took this action against Petitioner is irrelevant to the I.G.'s decision to exclude Petitioner. The I.G.'s authority to exclude an individual is independent of any other actions which may have been taken by another federal agency. Petitioner has not shown that the contractor's action was, in any way, related to Petitioner's exclusion pursuant to the Act.

The ALJ's FFCL 20 was not erroneous.

Conclusion

Based on the preceding analysis, we sustain the ALJ's Decision in its entirety. In doing so, we affirm and adopt each of the ALJ's FFCLs.

Donald F. Garrett

M. Terry Johnson

Marc R. Hillson
Presiding Panel Member

1. The ALJ also determined that even if Petitioner had, as he claimed, bound himself in the Plea Agreement from participation in all government programs, such exclusion would not operate as a bar to prevent the I.G. from exercising her discretion to exclude Petitioner under the Act. ALJ Decision at 8.

2. We admit this letter into the record for this case. The I.G. did not object to Petitioner's inclusion of this letter in his appeal. As Petitioner asserted, this letter was not available to him in the proceeding before the ALJ as it post-dates the ALJ Decision. The issue presented by this letter could not have been raised before the ALJ. Thus, it is not precluded from our consideration here by 42 C.F.R. � 1005.21(e). While the regulation at 42 C.F.R. � 1005.21(f) permits us to remand such new evidence to the ALJ, it does not require that we do so and we do not do so here. As we explain below, the letter's impact does not have the significance attributed to it by Petitioner.