Steven Paul Haddorff, DAB CR5171 (2018)

DECISION

Petitioner, Steven Paul Haddorff, owned and operated Wheelchair Express, a medical transportation service in Sioux Falls, South Dakota.  Following an investigation into claims Wheelchair Express submitted to South Dakota Medicaid, Petitioner pled guilty to failing to keep records, in violation of S.D. Codified Laws § 22-45-6.  Now, pursuant to section 1128(a)(1) of the Social Security Act (Act),1 the Inspector General (I.G.) has excluded Petitioner from participation in Medicare, Medicaid, and all federal health care programs for a minimum period of five years.

For the reasons explained below, I find that Petitioner was convicted of a criminal offense related to the delivery of an item or service under Medicaid.  The I.G. was therefore required to exclude him from program participation.  The duration of the exclusion is the minimum period required by section 1128(c)(3)(B) of the Act; accordingly, it is reasonable as a matter of law.

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I.  Background

In a letter dated February 28, 2018, the I.G. advised Petitioner that he was excluded from participation in Medicare, Medicaid, and all federal health care programs because he had been convicted, in the South Dakota Judicial Circuit Court, County of Minnehaha (state court), of a criminal offense related to the delivery of an item or service under Medicare or a state health care program.  I.G. Exhibit (Ex.) 1.  The letter explained that the exclusion was imposed pursuant to section 1128(a)(1) of the Act.  Id.  Petitioner timely requested review.  I convened a telephone prehearing conference and issued an Order and Schedule for Filing Briefs and Documentary Evidence (Briefing Order).

Pursuant to the Briefing Order, the I.G. submitted a brief and six proposed exhibits (I.G. Br.; I.G. Exs. 1-6).  Petitioner filed a brief and one proposed exhibit (P. Br.; P. Ex. 1).  The I.G. filed a reply brief (I.G. Reply).  Neither party objected to the exhibits offered by the opposing party.  Accordingly, in the absence of objection, I admit into evidence I.G. Exs. 1-6 and P. Ex. 1.

I directed the parties to indicate in their briefs whether an in-person hearing would be necessary, and if so, to submit the testimony of any proposed witness as “written direct testimony in the form of an affidavit or declaration.”  Briefing Order ¶ 7.c.ii.  I also explained that I would hold a hearing only if a party offered witness testimony that is relevant and non-cumulative and the opposing party requested cross-examination.  Id. ¶ 9.  Petitioner submitted the testimony of one proposed witness (himself) in the form of an affidavit.  P. Ex. 1.  However, the parties agree that an in-person hearing is not necessary.  I.G. Br. at 5; P. Br. at 5.  I therefore decide this case based on the written record.

II.  Discussion

A. Petitioner must be excluded pursuant to section 1128(a)(1) of the Act because he was convicted of a criminal offense related to the delivery of an item or service under the Medicaid program.2

The Act requires the Secretary of Health and Human Services (Secretary) to exclude from program participation any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under Medicare or a state health care program.  Act § 1128(a)(1).  The Secretary has delegated this authority to the I.G.  42 C.F.R. § 1001.101(a).

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1. Petitioner was convicted of a criminal offense.

Petitioner concedes that he was convicted of a criminal offense.  P. Br. at 4-5.  The I.G.’s evidence demonstrates that, on January 11, 2018, the state court entered a judgment of conviction, finding Petitioner guilty of failure to keep records in violation of S.D. Codified Laws § 22-45-6, pursuant to Petitioner’s guilty plea.  I.G. Ex. 6 at 1-3; see also I.G. Ex. 3.  Accordingly, Petitioner was convicted of a criminal offense as that term is defined in subsections 1128(i)(1), (2), and (3) of the Act.

2. The criminal offense of which Petitioner was convicted is related to the delivery of an item or service under Medicaid.

The I.G.’s evidence proves that Petitioner’s conviction is related to the delivery of items or services under the Medicaid program.  As part of his plea agreement, Petitioner signed a document styled “Factual Basis Statement” (Factual Basis).  I.G. Ex. 4.  According to the Factual Basis, “the parties agree that [Petitioner] and/or Wheelchair Express submitted at least some improper claims to South Dakota Medicaid between 2009 and 2015.”  Id. at 2.  The Factual Basis elaborates that the improper claims involved the following discrepancies, among others:

• Wheelchair Express submitted some claims for separate rides, even though the transports involved shared rides;
• Wheelchair Express submitted some claims for round-trip rides, even though the transports involved one-way rides;
• Wheelchair Express submitted some claims for which Wheelchair Express had insufficient documentation to fully substantiate such claims.

Id.  In summary, the Factual Basis recites that Petitioner “submitted claims to South Dakota Medicaid for transportation services and [Petitioner] intentionally failed to maintain sufficient records to fully substantiate those claims.”  Id. at 3.  Finally, by signing the Factual Basis, Petitioner further agreed that the value of the improper claims was at least $64,601.58.  Id. at 2.

Notwithstanding the Factual Basis to which Petitioner stipulated, Petitioner now argues that his conviction is not related to the delivery of an item or service under Medicaid because, “it is clear that the services were provided though the proper documentation was not maintained.”  P. Br. at 2.  Petitioner’s argument reflects a misunderstanding of the statutory basis for exclusion.  To be subject to exclusion pursuant to section 1128(a)(1) of the Act, an individual need not be convicted of failing to deliver an item or service.  Rather, the conviction must be “related to” the delivery of an item or service under Medicare or Medicaid.  Appellate panels of the Departmental Appeals Board (DAB) have long held that that the phrase “related to the delivery of an item or service” requires only a “nexus” or “common sense connection” between a conviction and the delivery of items

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or services under a protected program to invoke the I.G.’s exclusion authority.  See, e.g., Scott D. Augustine, DAB No. 2043 at 5-6 (2006) (and cases cited therein).

As the Factual Basis for his plea agreement demonstrates, Petitioner’s conviction for failing to keep records was directly related to the delivery of items or services under the South Dakota Medicaid program.  Petitioner’s conviction occurred because he and/or Wheelchair Express did not maintain adequate documentation to support claims for reimbursement that he or his company submitted to Medicaid.3  Accordingly, Petitioner is subject to exclusion pursuant to section 1128(a)(1) of the Act.  Furthermore, as I discuss in the following section, Petitioner’s contention that he should have been excluded, if at all, pursuant to section 1128(b)(1) of the Act is without merit.

B. The permissive exclusion provisions of section 1128(b) of the Act do not apply where, as here, there is a basis for a mandatory exclusion under section 1128(a).

Petitioner argues that he should have been excluded pursuant to the permissive exclusion authority found at section 1128(b)(1)(A) of the Act rather than under the mandatory exclusion provision at section 1128(a)(1).  P. Br. at 3-4.  Section 1128(b)(1)(A) permits the I.G. to exclude an individual or entity convicted “of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct” if the misdemeanor is “in connection with the delivery of a health care item or service” or if the criminal conduct occurred “with respect to any act or omission in a health care program (other than those specifically described in subsection (a)(1)).”

Petitioner argues that his exclusion under section 1128(a)(1) is contrary to the “fundamental” rule of “‘statutory construction that the specific governs the general.’” P.  Br. at 3-4 (citations omitted).  Petitioner asserts that the specification of a “misdemeanor” offense in section 1128(b)(1) makes that section applicable to him because he was convicted of a misdemeanor.  Id. at 4.  Petitioner’s argument ignores the portion of section 1128(b)(1) that explicitly excludes misdemeanors related to Medicare or Medicaid (the programs “specifically described in subsection (a)(1)”).  On this basis, both appellate panels and administrative law judges of the DAB have addressed and rejected this argument on many occasions.

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For example, in Lorna Fay Gardner, the appellate panel rejected the argument that sections 1128(a)(1) and 1128(b) “should be interpreted such that any individual or entity convicted of a misdemeanor is subject to the permissive, rather than the mandatory, exclusion provisions.”  DAB No. 1733 at 5 (2000).  Instead, the panel held that the Act “draws a distinction between felony and misdemeanor offenses only for fraud committed in connection with the delivery of a health care item or service in a health program other than Medicare or State health care programs.”  Id. (emphasis in original).  Similarly, in Tamara Brown, the appellate panel noted that the permissive exclusion provision “does not apply where . . . the misdemeanor involves ‘program-related crimes’ such as those ‘related to the delivery of an item or service’ in the Medicare or Medicaid programs” described in section 1128(a)(1).  DAB No. 2195 at 7 (2008).  Moreover, in Timothy Wayne Hensley, the appellate panel explained that, if an offense falls under the mandatory exclusion statute, “courts have repeatedly held that the I.G. is required to impose a mandatory exclusion even if an individual’s conduct also falls within the scope of a permissive exclusion provision.”  DAB No. 2044at 16 (2006), citing Dan Anderson, DAB CR855 (2002), aff’d, Anderson v. Thompson, 311 F. Supp. 2d 1121 (D. Kansas 2004); Travers v. Sullivan, 791 F. Supp. 1471 (E.D. Wash. 1992); and Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); see also Gregory J. Salko, M.D., DAB No. 2437 at 3 (2012), aff’d Salko v. Sebelius, No. 3:12cv515 (M.D Pa. Feb. 19, 2013) available at https://law.justia.com/cases/federal/district‑courts/pennsylvania/pamdce/3:2012cv00515/88687/27/.  In summary, because Petitioner was convicted of a misdemeanor offense related to the delivery of an item or service under the Medicaid program, he is subject to mandatory exclusion pursuant to section 1128(a)(1) of the Act; the permissive exclusion provision at section 1128(b)(1) does not apply.

C. As a matter of law, Petitioner must be excluded for a minimum period of five years.

The Act requires that Petitioner’s period of exclusion “shall not be less than five years.  .  .  .”  Act § 1128(c)(3)(B); see also 42 C.F.R. § 1001.102.  Thus, I am required to uphold the length of Petitioner’s exclusion.  Once I have concluded that Petitioner is subject to exclusion, I may not reduce Petitioner’s exclusion to zero, nor may I direct the I.G. to reinstate Petitioner to program participation.  See 42 C.F.R. § 1005.4(c)(6); see also 42 C.F.R. § 1001.3002(f).

III.  Conclusion

For the reasons explained above, I conclude that the I.G. was required to exclude Petitioner pursuant to section 1128(a)(1) of the Act due to his conviction of a criminal offense related to the delivery of an item or service under the Medicaid program.  An

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exclusion pursuant to section 1128(a)(1) must be for a minimum period of five years; accordingly, the length of Petitioner’s exclusion is reasonable as a matter of law.

• 1. The current version of the Social Security Act can be found at https://www.ssa.gov/OP_Home/ssact/ssact-toc.htm.  Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section.
• 2. My findings of fact and conclusions of law appear as headings in bold italic type.
• 3. Moreover, Petitioner was on notice from the time he signed the plea agreement that his conviction could result in exclusion from federal health care programs.  See I.G. Ex. 3 at 2 (Petitioner “understands that this plea may affect his eligibility or the eligibility of Wheelchair Express to serve as a provider for state and federally funded health care programs”).