Adel A. Kallini, MD, DAB CR5192 (2018)

DECISION

Based on violations of section 1128A(a)(1)(A) and (B) of the Social Security Act (Act) (42 U.S.C. § 1320a‑7a(a)(1)(A) and (B)), there are bases for imposing a civil money penalty (CMP), an assessment in lieu of damages, and exclusion from Medicare, Medicaid, and all federal health care programs upon Respondent, Adel A. Kallini, MD.  A CMP of $1,727,000.00, an assessment in lieu of damages of $3,263,132.07, and exclusion of Respondent from Medicare, Medicaid, and all federal health care programs for 20 years are reasonable sanctions.1

I. Background

The Inspector General of the United States Department of Health and Human Services (IG) sent Respondent a notice of proposed determination dated November 6, 2017.  The IG advised Respondent in the notice that he intended to impose against Respondent a CMP of $1,727,000.00 and an assessment in lieu of damages of $3,263,132.07, a total of $4,990,132.07.  The IG also advised Respondent that he intended to exclude Respondent

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from participation in Medicare, Medicaid, and all federal health care programs for a minimum of 20 years.2  The IG cited as the bases for the proposed sanctions Respondent’s alleged violations of section 1128A(a)(1)(A) and (B) of the Act.  The IG alleged that between about June 2013 and February 2014, Respondent submitted 1,727 claims for 6,282 items and services totaling $3,133,700.00, and Respondent received reimbursement from Medicare totaling $1,087,710.69.  The IG alleged that Respondent’s conduct amounted to the knowing presentation to Medicare of claims for services that Respondent knew or should have known were either not provided as claimed or were false or fraudulent.  The IG alleged that pursuant to an improper arrangement with third parties, Respondent submitted claims for services that he knew he had not provided or supervised, at an office he had never been to, and for Medicare beneficiaries he had never met.  The IG proposed a CMP of $1,000 for each of the 1,727 claims filed by Respondent.  The IG proposed an assessment in lieu of damages of $3,263,132.07, three times the amount paid by Medicare for the false claims.  IG Exhibit (Ex.) 1.

Respondent timely requested a hearing through counsel on January 3, 2018 (RFH).  On January 16, 2018, the case was assigned to me to hear and decide.  I convened a telephone prehearing conference on February 6, 2018, the substance of which is memorialized in my Prehearing Scheduling Order dated February 7, 2018, as amended by order dated February 15, 2018 (Prehearing Order).

The IG filed a motion for summary judgment and supporting brief (IG Br.) on June 22, 2018, with IG Exs. 1 through 22.  Respondent filed a response in opposition to the IG motion for summary judgment and a cross-motion for summary judgment and brief in support thereof (R. Br.) on August 6, 2018, with Respondent’s Exhibits (R. Exs.) 1 and 2.  Neither party objected to the opposing party’s exhibits and IG Exs. 1 through 22 and R. Exs. 1 and 2 are admitted and considered as evidence.

II. Dicussion

A. Applicable Law and Jurisdiction

Congress granted the Secretary authority to impose CMPs and assessments in lieu of damages against, and to exclude from Medicare, any person that:

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(1) knowingly presents or causes to be presented to an officer, employee, or agent of the United States, or any department or agency thereof, or of any State agency . . . a claim . . . that the Secretary determines –

(A) is for a medical or other item or service that the person knows or should know was not provided as claimed . . . [or]

(B) is for a medical or other item or service and the person knows or should know the claim is false or fraudulent . . . .

Act § 1128A(a)(1)(A)-(B) (42 U.S.C. § 1320a-7a(a)(1)(A)-(B)).  Congress authorized the Secretary to delegate to the IG the authority granted by section 1128A(a) of the Act.  Act § 1128A(j)(2).  The Secretary has promulgated regulations implementing section 1128A of the Act at 42 C.F.R. pt. 1003 and delegated to the IG authority to impose sanctions under the Act.  42 C.F.R. §§ 1003.150, 1003.200(a)(1)-(2).

Congress provided that any person who violates section 1128A(a)(1)(A) or (B) of the Act is subject:

to a civil money penalty of not more than $10,000 for each item or service . . . [and] an assessment of not more than 3 times the amount claimed for each such item or service in lieu of damages sustained by the United States or a State agency because of such claim . . . .  In addition the Secretary may make a determination in the same proceeding to exclude the person from participation in the Federal health care programs . . . and to direct the appropriate State agency to exclude the person from participation in any State health care program.

Act § 1128A(a); 42 C.F.R. §§ 1003.200(a), 1003.210(a)(1), (b).  In determining the amount of any CMP or assessment and the duration of an exclusion, the Secretary and IG must consider:  (1) the nature of the claims and the circumstances under which they were presented; (2) the degree of culpability, history of prior offenses, and financial condition of the alleged violator; and (3) such other matters as justice may require.  Act § 1128A(d); 42 C.F.R. §§ 1003.140, 1003.220.

The Secretary and the IG may not make an adverse determination to impose a CMP, assessment, or exclusion under section 1128A(a) of the Act until the alleged violator has been given written notice and an opportunity for a hearing on the record at which the alleged violator is represented by counsel and has the opportunity to present and cross-

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examine witnesses.  Act § 1128A(c)(2); 42 C.F.R. §§ 1003.1500-.1540; 42 C.F.R. pt. 1005.  A person subject to a proposed penalty, assessment, and/or exclusion has a right to review by an administrative law judge (ALJ), appeal to the Departmental Appeals Board (the Board), and judicial review.  Act § 1128A(c)(2), (e); 42 C.F.R. §§ 1003.1500(b), 1003.1540; 42 C.F.R. pt. 1005.  Absent a timely request for hearing before an ALJ, a proposed penalty, assessment, or exclusion becomes final and not subject to further review.  42 C.F.R. §§ 1003.1500(c), 1003.1510.

Pursuant to 42 C.F.R. § 1005.15(a), a hearing on the record is required to determine whether an alleged violator, referred to as a respondent, is subject to a sanction, unless both parties waive appearance at an oral hearing and elect to submit only documentary evidence and written argument as authorized by 42 C.F.R. § 1005.6(b)(5).  An ALJ may also decide a case, in whole or in part, by summary judgment if there is no disputed issue of material fact.  42 C.F.R. § 1005.4(b)(12).  In a CMP case under 42 C.F.R. pt. 1003, a respondent bears the burden of going forward and the burden of persuasion with respect to affirmative defenses and any mitigating factors, and the IG bears the burden with respect to all other issues.  42 C.F.R. § 1005.15(b).  Because this case involves both a CMP proposed pursuant to 42 C.F.R. pt. 1003 and an exclusion pursuant to that part, there is no reason to allocate the burdens differently for review of the CMP and the exclusion.  42 C.F.R. § 1005.15(c) (except for exclusions listed in 42 C.F.R. § 1005.15(b), the ALJ determines the allocation of the burden of proof).  A preponderance of the evidence is required to meet the burden of persuasion.  42 C.F.R. § 1005.15(d).

B. Issues

Whether summary judgment is appropriate;

Whether there is a basis for the imposition of a CMP;

Whether there is a basis for the imposition of an assessment;

Whether there is a basis for excluding Respondent from participating in Medicare, Medicaid, and all other federal health care programs; and

Whether the sanctions proposed by the IG are reasonable or adjustment of the sanctions is necessary.

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

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

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

2. Summary judgment is appropriate.

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

The Secretary has provided by regulation that a sanctioned party has a 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).  I advised the parties in paragraph VI of the Prehearing Order that summary judgment is authorized by 42 C.F.R. § 1005.4(b)(12) but specific standards are not established by the regulation.  I advised the parties that the principles and standards that have developed related to Fed. R. Civ. P. 56, including those recognized by the federal courts and the Board, would be applied to resolve a motion for summary judgment in this case.

Summary judgment is appropriate 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.  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.  In opposing a properly supported motion for summary judgment, the nonmoving party must show that there are material facts that remain in dispute and that those facts either affect the proponent’s prima facie case or might establish a defense.  It is insufficient for the nonmovant to rely upon mere allegations or denials to defeat the motion and proceed to hearing.  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); Surabhan Ratanasen, M.D., DAB No. 1138 (1990); John W. Foderick, M.D., DAB No. 1125 (1990); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Fed. R. Civ. P. 56.

The material facts providing a basis for the IG’s proposed imposition of a CMP, assessment, and exclusion are either not in dispute or, even when viewed in the light most favorable to Respondent, support imposition of the CMP, assessment, and exclusion.  The facts that trigger sanctions under section 1128A(a) of the Act are undisputed.

Respondent does not contest that he allowed third parties to use his National Provider Identifier (NPI) for submitting claims for reimbursement to Medicare for items and services that were not provided or supervised by Respondent.  Respondent admits that, as

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part of a contractual arrangement with third parties, he allowed his NPI to be used to seek reimbursement for past services provided by the third parties. R. Br. at 3, 5. Respondent does not assert that he provided, supervised or otherwise had a valid right of reassignment for the 1,727 claims at issue. Rather, Respondent asserts that he relied on advice of counsel that the contractual arrangement was legal; that he did not know that the arrangement was not legal; that he did not have the specific intent to defraud Medicare; and therefore, that he should not be found to have violated section 1128A(a)(1)(A) and (B) of the Act. The issues Respondent raises as to his violations of section 1128A(a)(1)(A) and (B) of the Act are issues of law that must be resolved against him. There is no genuine dispute as to any material fact within the meaning of Fed. R. Civ. P. 56 and related cases. Accordingly, I conclude that summary judgment in favor of the IG is appropriate on the issue of whether Respondent violated section 1128A(a)(1)(A) and (B).

Regarding the issue of the reasonableness of the sanctions proposed by the IG, I conclude, for reasons described under that Conclusion of Law, that the IG also is entitled to summary judgment.

3. From between about June 2013 and February 2014, Respondent caused to be presented to Medicare 1,727 claims with his NPI, claims that Respondent knew were false claims because he knew he did not provide or supervise the nerve conduction studies for which the claims were filed.

4. Respondent committed 1,727 violations of section 1128A(a)(1)(A) and (B), one violation for each false claim he filed with Medicare, receiving $1,087,710.69 in reimbursement from Medicare for those false claims.

The IG initiated this action on November 6, 2017, when he gave Respondent notice of the determination to impose a proposed CMP, an assessment, and a 20-year exclusion.  IG Ex. 1.  Notice is required by section 1128A(c)(2) of the Act and 42 C.F.R. § 1003.1500.  Respondent has not challenged the sufficiency of the notice.

The IG alleges generally that Respondent violated section 1128A(a)(1)(A) and (B) because he allowed, and thereby caused, his NPI to be used to present 1,727 claims totaling $3,133,700.00 to Medicare for nerve conduction studies that Respondent knew he did not provide or supervise.  The IG theory is that Respondent’s NPI appeared on claims for nerve conduction studies as though Respondent delivered or supervised those studies, but Respondent knew he did not deliver or supervise the studies.  Therefore, the claims with Respondent’s NPI violated section 1128A(a)(1)(A) of the Act because the services for which reimbursement was claimed were not delivered or supervised by Respondent as claimed.  Further, the claims violated section 1128A(a)(1)(B) of the Act

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because Respondent knew that the representation based on use of his NPI that he delivered or supervised the nerve conduction studies was false.

A “claim” is “an application for payments for items and services” under a federal health care program and includes Medicare, Medicaid, and other health care programs funded in whole or in part by the federal government.  Act § 1128A(i)(2); 42 C.F.R. § 1003.110.  “Items and services” or an “item or service” includes “any particular  item, device, medical supply, or service claimed to have been provided to a patient and listed in an itemized claim for payment.”  Act § 1128A(i)(3); 42 C.F.R. § 1003.110.

The NPI is a standard, unique, ten-digit identifier issued to health care providers and suppliers.  42 C.F.R. § 162.406(a).  Required and permitted uses for the NPI are set forth in 42 C.F.R. § 162.406(b).  A health care provider or supplier must obtain a unique NPI from the National Provider System and use the NPI as an identifier on all standard transactions that require identification with the NPI.  42 C.F.R. § 162.410(a).  A provider or supplier enrolled in Medicare that “submits a paper or an electronic claim must include its NPI and the NPI(s) of any other provider(s) or supplier(s) identified on the claim.”  42 C.F.R. § 424.506(c)(1).  Selling or allowing another individual or entity to use its billing number, except in the case of a valid reassignment of benefits,3 is grounds for revocation of the Medicare enrollment and billing privileges of a provider or supplier.  42 C.F.R. § 424.535(a)(7).

Section 1128A(a)(1) of the Act requires that, to be subject to authorized sanctions, a person knowingly submits or causes to be submitted a claim.  The terms “knowing” or “knowingly” are not defined by the Act.  However, the implementing regulations define the term “knowingly” to mean that a person,

with respect to an act, has actual knowledge of the act, acts in deliberate ignorance of the act, or acts in reckless disregard of the act, and no proof of specific intent to defraud is required.

42 C.F.R. § 1003.110 (emphasis added). Pursuant to section 1128A(i)(7) of the Act:

The term “should know” means that a person, with respect to information –

(A) acts in deliberate ignorance of the truth or falsity of the information; or

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(B) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.

Act § 1128A(i)(7) (emphasis added).  Fraud and fraudulent are not defined under either section 1128A of the Act or 42 C.F.R. pt. 1003.  Fraud has several definitions depending upon the context.  A general legal definition for fraud is a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.”  Black’s Law Dictionary 685 (8th ed. 2004).  Fraud may also be a “misrepresentation made recklessly without belief in its truth to induce another person to act.”  Id.  Fraudulent is the adjectival form of the term fraud.  “A principal is liable for penalties, assessments, and an exclusion under this section for the actions of the principal’s agent acting within the scope of the agency.”  Act § 1128A(l).

Respondent does not dispute that the claims at issue in this matter were submitted to Medicare for reimbursement.  Respondent does not dispute that he caused the 1,727 claims to be submitted as part of a contractual agreement under which Respondent used or permitted his NPI to be used to submit claims to Medicare for items or services, specifically nerve conduction studies, Respondent did not provide or supervise.  Respondent argues that he did not violate section 1128A(a)(1)(A) or (B) of the Act because he reasonably relied on his attorney’s advice that the arrangement was legal.  R. Br. at 12.  Respondent’s argument must be resolved against him as a matter of law.

a. Facts

The following facts are undisputed or accepted as true as alleged by Respondent for purposes of summary judgment.

Respondent enrolled in Medicare in the 1970s.  Initially, he practiced anesthesiology but switched his focus to pain management in the late 1980s.  In 2011, Respondent hired an attorney named Mark McWilliams, to represent him in resolving a civil tax debt to the United States Internal Revenue Service.  R. Br. at 2-3; IG Ex. 3 at 356-59, 361-62, 398.

In June 2013, McWilliams called Respondent and asked whether Respondent knew any physician that would allow McWilliams’ friends to use the physician’s Medicare provider number (NPI) for medical services the friends had provided.  Respondent trusted McWilliams and did not believe he would suggest anything illegal.  Ultimately, Respondent met with McWilliams and his friends, Leonard Austin and Gregory Sylvestri, and a third, unidentified individual, at McWilliams’ office.  McWilliams advised Respondent that Austin and Sylvestri wanted to use Respondent’s Medicare provider number (NPI) for services that they provided in the past.  Respondent was assured by McWilliams that the arrangement was legal.  Respondent agreed to execute a contract to carry out the arrangement.  McWilliams negotiated terms of payment among the parties,

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drafted the contract, and controlled and/or distributed the funds among the parties including McWilliams.  Respondent, Austin, Sylvestri, and McWilliams all understood that Austin and Sylvestri would process claims through Respondent’s Medicare provider number (Respondent’s NPI).4  Respondent was to deposit all Medicare reimbursements to a trust account maintained by McWilliams, and McWilliams would distribute the funds pursuant to the parties’ contract (IG Ex. 13).  Respondent gave some of the funds he received to McWilliams.  Respondent did not know at the time of entering the agreement that Austin and Sylvestri were engaged in a completely separate scheme to commit health care fraud and money laundering using a diagnostic testing business they had purchased known as BioScan.  R. Br. at 3-6; IG Ex. 3 at 152-55, 362; IG Ex. 11 at 21; IG Ex. 13.  Austin and Sylvestri were ultimately prosecuted and convicted for health care fraud.  R. Br. at 8-9.

Safeguard Services began an investigation on behalf of Medicare triggered by a spike in Respondent’s billing for nerve conduction studies.  When investigators requested information from Respondent in November 2013, he sent the request and related information to McWilliams for McWilliams to handle as Respondent’s attorney.  Respondent also contacted Austin in an effort to obtain information about the Medicare claims he had filed for Austin and Sylvestri pursuant to their contract.  Respondent did not realize that he was being investigated for fraud, but he thought that, if anything, the issue was that Austin and Sylvestri were not performing the services being reported to Medicare.  Therefore, in November 2013, Respondent contacted McWilliams, who was to ensure that Austin and Sylvestri stopped using Respondent’s NPI.  R. Br. at 6-7; IG Ex. 3 at 369-73, 377; IG Ex. 5 at 226-28.

In my Prehearing Order dated February 7, 2018, para. VI, I advised the parties that when considering the motion for summary judgment that the IG requested to file and Respondent’s response in opposition or cross-motion, the facts alleged in briefing and not specifically denied may be accepted as true and evidence would be considered admissible and true absent specific objection to admissibility and accuracy.  The IG alleges and Respondent has not denied that Respondent improperly allowed his provider number (NPI) to be used to claim reimbursement from Medicare for services Respondent did not provide or supervise, for patients Respondent never met.  The IG alleges and Respondent does not deny that Respondent received 35 percent of the Medicare reimbursement for the Austin and Sylvestri claims filed using Respondent’s NPI.  The IG alleges and Respondent does not deny that between July 2013 and January 2014, Medicare paid Respondent $1,087,710.69 for Austin and Sylvestri claims for nerve conduction studies.

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The IG alleges and Respondent does not deny that between about June 2013 and February 2014, 1,727 false Austin and Sylvestri claims for nerve conduction studies were submitted to Medicare and the claims were false because the claims were submitted using Respondent’s NPI but Respondent did not provide or supervise the nerve conduction studies.  The IG alleges and Respondent does not deny that the Austin and Sylvestri claims totaled $3,133,700 and $1,087,710.69 was paid by Medicare on those claims.  The IG alleges and Respondent does not deny that based on his contract with Austin and Sylvestri, as prepared by McWilliams, Respondent would not provide or supervise the delivery of items or services for the claims submitted using his NPI.  The IG alleges and Respondent does not deny that he knew that the Austin and Sylvestri claims processed using Respondent’s NPI were for past dates of services for patients Respondent never saw, and for items or services delivered at an office to which Respondent had never been.  The IG alleges and Respondent does not deny that he never performed a nerve conduction study himself.  IG Br. at 19-24; IG Ex. 5 at 89-90; IG Ex. 15.

The IG does not deny that Respondent was charged and prosecuted in connection with the Austin and Sylvestri claims.  The IG does not deny that Respondent was acquitted after a jury trial that convened between February 29, 2016 and March 4, 2016.  IG Ex. 2; R. Ex. 1.  Further, the United States Attorney for the Middle District of Florida declined to bring a civil investigation into Respondent’s billing practices, apparently based on the same conduct at issue before me.  R. Ex. 2.

b. Analysis

Pursuant to section 1128A(a)(1)(A) of the Act and 42 C.F.R. § 1003.200(a)(1), the IG must establish the following elements by a preponderance of the evidence to impose upon Respondent a CMP, assessment, and/or exclusion from federal health care programs:  (1) that Respondent knowingly presented or caused to be presented one or more claims to Medicare; (2) that the claim or claims were for a medical or other item or service; and (3) that Respondent knew or should have known that the claim or claims were for medical items or services that were not provided as claimed.  The claims in this case were for nerve conduction studies not provided or supervised by Respondent contrary to the representation of the claims that bore Respondent’s NPI.  Pursuant to section 1128A(a)(1)(B) of the Act and 42 C.F.R. § 1003.200(a)(2), the IG must establish by a preponderance of the evidence that:  (1) Respondent knowingly presented or caused to be presented one or more claims to Medicare; (2) the claim or claims were for a medical or other item or service; and (3) Respondent knew or should have known the claim or claims were false because the item or services were not provided or supervised by Respondent as represented by the claims.  The elements of both section 1128A(a)(1)(A) and (B) of the Act are established by the undisputed evidence in this case.

There is no dispute that the 1,727 claims at issue were for medical services, specifically nerve conduction studies.  There is no dispute that Respondent did not provide or

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supervise the nerve conduction studies even though the 1,727 claims submitted included Respondent’s NPI indicating he did provide or supervise the services.  Respondent admits that the contract (IG Ex. 13) among Respondent, Austin, and Sylvestri provided for BioScan to submit past claims allegedly performed by Austin and Sylvestri using Respondent’s NPI.  R. Br. at 16, 19-20.  The undisputed facts show that Respondent violated section 1128A(a)(1)(A) of the Act because he knowingly caused claims to be submitted for nerve conduction studies knowing that the claims would list his NPI and knowing that the claims were for services he did not provide or supervise as claimed.  Respondent violated section 1128A(a)(1)(B) of the Act because he knowingly caused claims for nerve conduction studies to be submitted using his NPI and he knew those claims were false because he did not provide or supervise the delivery of the nerve conduction studies.

Respondent argues that he did not know, nor should he have known, that Austin and Sylvestri did not provide the nerve conduction studies for which claims were submitted using his NPI.  R. Br. at 13-14.  However, Respondent’s argument is without merit, even if accepted as true on summary judgment, because the conduct of Austin and Sylvestri is not the conduct at issue before me.  The undisputed conduct at issue is Respondent’s permitting his NPI to be used 1,727 times for the submission of claims that were for nerve conduction studies Respondent knew he neither conducted nor supervised and that were, therefore, false.  Respondent admits that he was told by his attorney McWilliams that Austin and Sylvestri wanted to use his NPI to file claims for medical services they told Respondent were provided by them in the past.  R. Br. at 3-4.  Respondent further admits that he permitted the use of his NPI to bill Medicare for services he thought had been provided by Austin and Sylvestri or BioScan in exchange for Respondent receiving a portion of the reimbursements received from Medicare.  R. Br. at 5.  Respondent admits that he has never conducted a nerve conduction study and never saw the beneficiaries listed in the claims to Medicare.  IG Ex. 5 at 89, 127-28.

Respondent argues before me, as he did at his criminal trial, that he should not be liable for any violation of section 1128A(a)(1)(A) or (B) of the Act because he acted on advice of his counsel McWilliams who told him the arrangement with Austin and Sylvestri was legal.  I conclude that this advice of counsel defense is not available to Respondent before me as a matter of law.  Respondent’s argument is that he lacked the mental state or scienter required to violate section 1128A(a)(1)(A) and (B) of the Act.  Scienter is a “degree of knowledge that makes a person legally responsible for the consequences of his or her act or omission. . . .”  Black’s Law Dictionary 1373.  The scienter required under section 1128A(a) of the Act is simply that Respondent knew or should have known that the claims submitted to Medicare in this case were for items or services not delivered as claimed or that the claims were false and fraudulent.  Act § 1128A(a)(1)(A) and (B).  There is no requirement under section 1128A of the Act or the implementing regulations at 42 C.F.R. pt. 1003 for Respondent to have had the specific intent to defraud Medicare by the submission of the claims at issue.  Indeed, the Act and regulations specifically

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state that specific intent to defraud is not required.  Act § 1128A(i)(7) (definition of should know); 42 C.F.R. § 1003.110 (definition of knowingly).

I accept as true that Respondent sought legal advice from McWilliams who Respondent considered his attorney.  I accept as true that McWilliams advised Respondent that the arrangement among Respondent, Austin, and Sylvestri was legal.  I accept as true that Respondent acted based on advice from McWilliams in entering the arrangement with Austin and Sylvestri.  Respondent’s position is that he was “duped into participating in a ‘business arrangement’ presented to him by [his lawyer McWilliams].”  R. Br. at 1-2.  I accept that Respondent was duped into the arrangement by McWilliams.  Respondent correctly states that he was tried in federal court by a jury and acquitted, and I accept his representation that he was acquitted based on evidence that he acted in good faith reliance upon the advice of his attorney McWilliams.  R. Br. at 2, 12.  Respondent argues that he should not be liable for violating section 1128A(a)(1)(A) and (B) of the Act because he relied upon the advice of his counsel and did not have the specific intent to commit fraud.

Respondent’s defense, known generally as the “advice of counsel defense,” is recognized in many, if not all jurisdictions, under both criminal and administrative law, but with specific limits.  Generally, a mistake of law based upon the advice of counsel is not a defense to a general intent crime, but such a mistake may negate any element of specific intent.  In other words, if the alleged perpetrator acted based on the advice of counsel, that may negate an allegation that he intended that his acts cause a specific unlawful result.  Advice of counsel has no impact when a statute prohibits an act regardless of intent.  Some commentators point out that reliance on the advice of counsel is not a distinct defense, rather, the advice of counsel may be evidence that an alleged perpetrator acted in good faith and with no intent to cause a specific result prohibited by law, refuting government evidence that the perpetrator intended to commit the violation of law.  The defense does not apply absent a showing that the alleged perpetrator acted reasonably and in good faith in seeking legal advice about whether future conduct was lawful, made full disclosure to the lawyer of all relevant facts, relied reasonably and in good faith upon the advice, and the attorney was acting as counsel and not a participant in the criminal scheme.  22 C.J.S. Criminal Law: Substantive Principles § 117 (2018); 79A C.J.S. Securities Regulation § 81 (2018); 87 C.J.S. Trademarks, Etc. §§ 21, 395 (2018) (Federal Trade Commission Act – advice of counsel not recognized as a defense because act is intended to protect the public not punish the wrongdoer and mental state irrelevant); 21 Am. Jur. 2d Criminal Law § 134 (2018); 17 Am. Jur. 2d Contempt § 145 (2018); 32 Am. Jur. 2d False Pretenses § 89 (2018) (False Claims Act).  In United States v. McClatchey, 217 F.3d 823 (10th Cir. 2000), a hospital executive was found guilty by a jury of conspiracy and violating the Medicare Anti-kickback Act (Act § 1128B(b)(2)(A)).  However, the district court granted the defendant’s motion for acquittal as to both charges based on the conclusion that there was insufficient evidence of specific intent.  On appeal the court concluded, inter alia, that conviction was not precluded based on the accused’s argument that he did not have the requisite criminal intent because his actions were

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directed and controlled by legal counsel.  The court rejected the application of the advice of counsel defense, pointing out that the evidence showed the accused told the lawyer what to include in the contract that was the basis of the criminal activity, and not vice versa.  217 F.3d at 830-31.

Specific intent to defraud Medicare is not required to establish a violation of section 1128A(a)(1)(A) or (B).  Therefore, the fact that Respondent lacked specific intent to defraud based on advice of counsel is no defense in this case.  The advice of counsel defense is not available to Respondent in this case as a matter of law because whether or not Respondent had the specific intent to defraud is not the issue.  All that is required is for Respondent to have had the general intent to cause to be submitted claims with his NPI for nerve conduction studies he knew he did not perform or supervise and that were, therefore, false.

Furthermore, as a condition of participating in Medicare, Respondent agreed to abide by the rules and regulations of participation in Medicare.  Respondent asserts little knowledge of Medicare law.  R. Br. at 16.  However, this is also no defense as a matter of law.  Participation in Medicare imposes obligations upon suppliers such as Respondent.  Suppliers must submit complete, accurate, and truthful responses to all information requested in the enrollment application.  42 C.F.R. § 424.510(d)(2).  Pursuant to 42 C.F.R. §§ 424.502 and 424.510(d)(3), a supplier’s application to enroll in Medicare must be signed by an authorized official, i.e., one with authority to bind the provider or supplier both legally and financially.  The regulation provides that the signature attests to the accuracy of information provided in the application.  The signature also attests to the fact that the provider or supplier is aware of and abides by all applicable statutes, regulations, and program instructions of the Medicare program.  42 C.F.R. § 424.510(d)(3).  The Board has recognized that by enrolling in Medicare, a provider or supplier agrees to be bound by Medicare program instructions.  Proteam Healthcare, Inc., DAB No. 2658 at 11-12 (2015); Realhab, Inc., DAB No. 2542 at 17 (2013).  Furthermore, as a participant in Medicare, Respondent has “a duty to familiarize [him]self with the legal requirements for cost reimbursement.”  Heckler v. Comm. Health Servs., 467 U.S. 51, 64 (1984).  Respondent had a duty, as a participant in Medicare, to understand Medicare billing requirements.  Heckler, 467 U.S. at 64.  When Respondent completed an application to become an approved Medicare supplier, he acknowledged that he was familiar with and agreed to abide by the Medicare laws and regulations that applied to him.  IG Ex. 9.

Accordingly, I conclude that the IG has established by a preponderance of the evidence violations of section 1128A(a)(1)(A) and (B) of the Act, which are bases to impose a CMP, an assessment, and exclusion of Respondent from Medicare, Medicaid, and all other federal health care programs.  I further conclude that Respondent has failed to either rebut the prima facie showing by the IG or to establish an affirmative defense.

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5.  A CMP of $1,727,000, an assessment in lieu of damages in the amount of $3,263,132.07, and exclusion of Respondent for a minimum of 20 years are reasonable sanctions.

I have concluded that there is a basis for the imposition of sanctions against Respondent.  Therefore, it is necessary to determine if the sanctions proposed by the IG are reasonable.  My authority is limited in this review as the Secretary has provided that I may not review the exercise of discretion by the IG to exclude Respondent or impose a CMP and assessment pursuant to 42 C.F.R. pt. 1003, if I conclude that there is a basis for the imposition of sanctions.  42 C.F.R. § 1005.4(c)(5)-(7).

Section 1128A(a) of the Act authorizes a CMP of $10,000 for each claim subject to section 1128A(a)(1) of the Act; an assessment in lieu of damages of no more than three times the amount claimed; and exclusion from participation in federal health care programs as defined by section 1128B(f)(1) of the Act.  The Secretary has delegated authority to the IG to impose a CMP, assessments, and exclusions against any person who has violated one or more provisions of section 1128A of the Act or 42 C.F.R. pt. 1003.  42 C.F.R. § 1003.150.

Section 1128A(d) of the Act requires consideration of the following factors in determining the amount of the CMP or assessment and the duration of an exclusion:

1. Nature of claims and circumstances of their presentation;

2. Culpability, history of prior offenses, and financial condition of the person presenting the claims; and

3. Other matters as justice may require.

In determining the amount of any penalty, assessment, or period of exclusion, the Secretary has required by 42 C.F.R. § 1003.140(a) the consideration of certain factors summarized as follows:

1. Nature and circumstances of the violations;

2. Degree of culpability;

3. History of prior offenses;

4. Other wrongful conduct; and

5. Such other matters as justice may require.

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The regulation also provides that whether there are substantial or several mitigating or aggravating circumstance should be considered in determining reasonable sanctions.  42 C.F.R. § 1003.140(c)(1)-(3).

Additional aggravating and mitigating factors specifically related to false or fraudulent claims and similar misconduct, which is what is charged in this case, are established by 42 C.F.R. § 1003.220.  It is mitigating if all claims for items or services or violations were of the same type and occurred within a short period, there were few items or services and violations, and the total amount claimed was less than $5,000.  42 C.F.R. § 1003.220(a).  Pursuant to 42 C.F.R. § 1003.220(b):

(b) Aggravating circumstances include—

(1) The violations were of several types or occurred over a lengthy period of time;

(2) There were many such items or services or violations (or the nature and circumstances indicate a pattern of claims or requests for payment for such items or services or a pattern of violations);

(3) The amount claimed or requested for such items or services, or the amount of the overpayment was $50,000 or more;

(4) The violation resulted, or could have resulted, in patient harm, premature discharge, or a need for additional services or subsequent hospital admission; or

(5) The amount or type of financial, ownership, or control interest or the degree of responsibility a person has in an entity was substantial with respect to an action brought under § 1003.200(b)(3).

Once the amount of any penalty and assessment is determined, the IG must consider the ability of the person to pay the proposed CMP or assessment if the person provides sufficient financial documentation deemed necessary to determine the person’s ability to pay.  42 C.F.R § 1003.140(b).  Respondent has presented no financial documentation and ability to pay is not, therefore, at issue before me.

The Secretary has determined that unless there are extraordinary mitigating circumstances, the aggregate amount of the CMP and assessment should not be less than double the approximate damages and costs sustained by the federal or any state

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government as a result of the Respondent’s violations.  42 C.F.R. § 1003.140(c)(3).  The Secretary has also provided that the amount of the CMP and assessment “will not be less than the approximate amount required to fully compensate the United States, or any State, for its damages and costs, tangible and intangible, including, but not limited to, the costs attributable to the investigation, prosecution, and administrative review of the case.”  42 C.F.R. § 1003.140(d)(2).  In this case, the CMP is calculated based on $1,000 per false claim and that is only 6.5 percent of the authorized CMP amount of $15,270 per item or service claimed.  Act § 1128A(a); 42 C.F.R. § 1003.201(a) (n.1); 45 C.F.R. § 102.3 (table).  The IG is proposing an assessment in lieu of damages of treble the amount paid by Medicare for the false claims rather than the minimum double damages.  The IG has not argued that the CMP and assessment in lieu of damages are the minimum necessary to recover the damages and costs to the United States.  Accordingly, whether or not the CMP and assessment are sufficient to recover fully the amount of damages and costs to the United States is not at issue before me.

The Secretary is very specific that the standards established by the regulations are binding except to the extent that their application would violate the United States Constitution.  42 C.F.R. § 1003.140(d)(1).  The Secretary has provided that if more than one person is responsible for violating section 1128A of the Act, each person may be held liable for the CMP authorized.  Liability for an assessment may be imposed against any one person involved or jointly and severally, if two or more persons were involved, but the aggregate amount of the assessments collected may not exceed the amount that could be imposed if only one person was responsible for the violations that are the bases of the assessment.  42 C.F.R. § 1003.120(a)-(b).  The evidence before me indicates that only Respondent is the target of the IG.

The IG notified Respondent that he intended to impose an assessment in lieu of damages of $3,263,132.07 and a CMP of $1,727,000, and to exclude Respondent from participation in Medicare, Medicaid, and all federal health care programs for 20 years.  IG Ex. 1.  Based on the IG notice and the IG’s pleading, I conclude that the CMP and assessment were calculated as follows:

• A CMP of $1,727,000 is $1,000 for each of the 1,727 false claims filed using Respondent’s NPI; and
• An assessment in lieu of damages to the United States of $3,263,132.07 is three times the $1,087,710.69 paid by Medicare for the false claims filed using Respondent’s NPI.

The IG described in his November 6, 2017 notice how the factors required by section 1128A(d) of the Act and 42 C.F.R. §§ 1003.140 and 1003.220 were considered.  The IG considered as aggravating circumstances:

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• The false claims totaled $3,133,700, and the amount paid by Medicare on the false claims totaled $1,087,710.69;
• Respondent was culpable because he attempted to conceal his conduct from investigators and he used the proceeds of the scheme to pay his federal tax debt; and
• Respondent engaged in other wrongful conduct because the contractual arrangement amounted to an unlawful kickback agreement in violation of section 1128B(b)(1) of the Act (42 U.S.C. § 1320a-7b(b)(1)), and the money received by Respondent was an overpayment that he did not return to Medicare.

IG Ex. 1 at 3-4.  The IG identified in his November 6, 2017 notice no mitigating circumstances considered.

Respondent does not dispute that the false claims totaled $3,133,700 or that Medicare paid $1,087,710.69 on the false claims filed using Respondent’s NPI.  Respondent does not deny that he did not report to Medicare that he had been solicited to engage in the scheme.  Unlike the IG, I do not treat the fact that Respondent referred the matter to his supposed attorney McWilliams as an attempt to conceal the scheme when Medicare investigators started asking questions.  On summary judgment, I do not judge the credibility of the evidence but draw all favorable inferences for the nonmovant, i.e., Respondent, on the issue of aggravating factors.  Consulting counsel is fundamental in our jurisprudence and not a bad idea, particularly when one is uncertain about whether one is the target of an investigation.  It is also not admitted by Respondent that he spent all the proceeds of the scheme to pay his tax debt.  Whether or not Respondent was actively concealing the scheme and how he actually spent the ill-gotten gain would require a trial.  However, Respondent does not deny the allegation of the IG that he spent all the money he received as part of the scheme and no trial is required on that fact.  Respondent disputes the allegation that his conduct amounted to a violation of the anti-kickback law or was an overpayment.  R. Br. at 26-27.  The IG has presented no evidence that Respondent was tried and convicted of a kickback offense in violation of section 1128B(b)(1) of the Act.  The IG has not attempted to prove a kickback offense before me, and the mere assertion of the IG is insufficient to meet his burden to make a prima facie showing on that point.  Whether or not Respondent’s conduct amounted to an unlawful kickback scheme would require a trial.  The IG has also offered no evidence that Respondent was formally notified of any overpayment or that an overpayment claim against Respondent has been reduced to a judgment.  However, the fact that Respondent engaged with others to file false claims and receive remuneration from Medicare is not disputed and no trial is necessary to consider that conduct aggravating.  Respondent also does not deny that he received money from this scheme, money from Medicare to which he was not entitled.  Respondent does not deny that he did not return any of the money

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that he received through the scheme.  Even though the evidence does not show that an overpayment action was pursued against Respondent, the facts that he received money from Medicare to which he was not entitled and which he did not return, are undisputed, require no trial, and are aggravating conduct.

In addition to his arguments already discussed, Respondent argues that the CMP, assessment, and exclusion are unreasonable because:  Respondent is 79 years old and an exclusion of 20 years is a death sentence; there are mitigating facts, including the aggravating factors cited by the IG that should be considered mitigating; Respondent should not be punished for relying on advice of counsel; Respondent was minimally culpable; Respondent should not be punished for not returning his gain from the scheme and he is financially unable to return any money.  R. Br. at 17-26.  I have carefully considered Respondent’s arguments, accepting facts asserted as true and drawing all favorable inferences for Respondent for purposes of summary judgment.

I have considered the factors required by section 1128A(d) of the Act and 42 C.F.R. §§ 1003.140 and 1003.220.  I conclude that the CMP, assessment in lieu of damages, and 20-year exclusion are reasonable sanctions.  The undisputed facts in this case establish the presence of aggravating evidence that relates to the nature of the 1,727 false claims that Respondent presented or caused to be presented and to his culpability.  There is an evident pattern of filing 1,727 false claims.  The claims were filed over a lengthy period of roughly nine months.  Respondent knowingly allowed his NPI to be used to seek reimbursement for services as if he provided them when he knew that he did not.  Respondent was paid for his involvement in this scheme.  The amount obtained from Medicare based on the false claims – $1,087,710.69 – is substantial and Respondent does not dispute that he understood from the inception of the arrangement that the plan was to collect in excess of $1 million from Medicare.  IG Ex. 5 at 77.

Respondent is culpable.  There is evidence that Respondent knowingly engaged in the conduct that resulted in him and the others involved receiving significant amounts of money from Medicare based on the submission of false claims over a long period.  This is not a case of negligent claims filing.  Rather, it is a case in which Respondent knowingly allowed his NPI to be used to bill Medicare for services he knew that he did not provide or supervise, in order to obtain a portion of the reimbursement received from Medicare, money he was not entitled to receive.

The IG’s proposed CMP of $1,727,000 is significantly less than the allowable maximum CMP.  I conclude that a penalty of $1,727,000 is entirely reasonable based upon Respondent’s culpability and the notable absence of any significantly mitigating evidence even drawing all favorable inferences for Respondent.  The IG’s proposed assessment of three times the amount of the improper claims – $3,263,132.07 – is more than the minimum assessment allowed of double the loss to the government.  However, I conclude that the assessment proposed by the IG is reasonable on the undisputed facts.  I also

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conclude that the facts related to Respondent’s involvement in this scheme reflect that he is not trustworthy. Permanent exclusion would have been supportable in this case. However, as Respondent points out, given his age, a 20-year exclusion will likely have the effect of permanent exclusion.

III. Conclusion

For the foregoing reasons, Respondent is liable for a CMP of $1,727,000, an assessment of $3,263,132.07, and exclusion from Medicare, Medicaid, and all federal health care programs for a minimum of 20 years, all of which are reasonable sanctions.

• 1. “Sanctions” refers collectively to the penalties involved in this case, including the CMP, assessment, and exclusion.
• 2. Pursuant to 42 C.F.R. § 1003.1600, Respondent may apply for reinstatement only after the period of exclusion expires. Reinstatement is not automatic upon completion of the period of exclusion and any request for reinstatement will be considered in accordance with 42 C.F.R. §§ 1001.3001 through 1001.3004. 42 C.F.R. § 1003.1600. Citations are to the 2017 revision of the Code of Federal Regulations (C.F.R.), unless otherwise stated.
• 3. There is no assertion that a valid reassignment of claims occurred in this case. 42 C.F.R. pt. 424 subpt. F.
• 4. There is a conflict in the evidence regarding who actually submitted the claims to Medicare. However, that fact is not material and the evidentiary conflict need not be resolved. The material fact is that the 1,727 claims were submitted to Medicare pursuant to the contract by one or more of the parties to the contract or at their direction.