Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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IN THE CASE OF | |
George E. Smith, M.D., M.Ed., |
DATE: March 25, 2002 |
-v - |
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The Inspector General
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Docket No.C-01-680 Decision No. CR885 |
DECISION | |
DECISION This case is before me in
review of the Inspector General's (I.G.) determination to exclude the
Petitioner, George E. Smith, M.D., M.Ed. (Petitioner), from participation
in Medicare, Medicaid, and all other federal health care programs until
Petitioner's debt has been completely satisfied, pursuant to the authority
set out in section 1128(b)(14) of the Social Security Act (Act). Because
I believe that no material facts remain in dispute and that the I.G.'s
action is correct as a matter of law, I affirm the I.G.'s determination. By letter dated March 30,
2001 (notice letter), the I.G. of the United States Department of Health
and Human Services (DHHS) notified Petitioner that he was to be excluded
from Medicare, Medicaid, and all federal health care programs as a result
of his failure to repay or otherwise discharge his indebtedness to the
government incurred through a series of National Health Service Corps
(NHSC) scholarships. The exclusion was to remain in effect until Petitioner
had discharged his debt to the satisfaction of the Public Health Service
(PHS). The I.G. relied on the terms of sections 1128(b)(14) and 1892 of
the Act, 42 U.S.C. �� 1320a-7(b)(14) and 1395ccc. Petitioner timely sought
review of the I.G.'s action by his letter of May 10, 2001. The sufficiency
of Petitioner's hearing request has not been challenged, and no other
jurisdictional issues have been raised or become apparent to me. On June
19, 2001, I held a telephone conference with the parties to discuss the
issues presented by the case and the procedures best suited for addressing
them. As a result, the parties were directed to submit briefs in support
of their respective positions in the context of disposition by summary
judgment, supplemented by exhibits in documentary form. Those briefs and
exhibits are now before me, and in the absence of objection by either
side, I admit I.G. Exhibits (I.G. Ex.) 1-34 and Petitioner's Exhibits
(P. Ex.) 1-11 into evidence. I refer to the I.G.'s initial brief as "I.G.
Br.," and to Petitioner's response brief as "P. Br." The I.G. also submitted
a reply brief, to which I refer as "I.G. Reply Br."
Because the exhibits before
me clearly establish all facts material to this litigation and leave no
material facts in dispute, and because those material facts support the
I.G.'s position as a matter of law, I enter summary judgment in favor
of the I.G. and thereby sustain the determination to exclude Petitioner,
George E. Smith, M.D., M.Ed., from all Medicare, Medicaid, and all other
federal health care programs until such time as Petitioner has cured his
default or otherwise discharged his obligations to the satisfaction of
the PHS. 42 C.F.R. � 1001.1501(b). I shall set forth my reasons for doing
so, together with the findings of fact and conclusions of law on which
I rest my decision, below.
The legal issues before
me in this case are limited to two. The first issue, however, is best
understood if set out in two parts. The two issues are: 1. Whether the I.G. had
a basis upon which to exclude Petitioner? By the explicit terms of section
1128(b)(14) of the Act, such a basis exists if Petitioner is "in default
. . . of scholarship obligations or loans in connection with health professions
education made or secured, in whole or in part, by the Secretary" and
if "all reasonable steps" have been taken to secure repayment of Petitioner's
obligations; and 2. Whether the length of
the exclusion imposed against Petitioner by the I.G. is reasonable? CONTROLLING
STATUTES AND REGULATIONS Exclusions from the Medicare and Medicaid programs, and from all other federal health care programs, based on a health care practitioner's default on NHSC obligations, are based on sections 1128(b)(14) and 1892 of the Act, 42 U.S.C. �� 1320a-7(b) and 1395ccc. Section 1128(b)(14) of the Act confers its discretionary authority on the Secretary of DHHS in these terms:
The I.G. exercises this
discretionary authority to exclude through a valid delegation of the Secretary's
statutory authority. Neither the validity of that delegation of authority,
nor the general applicability of these statutory provisions, is challenged
by Petitioner in these proceedings. The duration of an exclusion based on an individual's default on repayments of the scholarship obligations covered by section 1128(b)(14) of the Act is specified in mandatory terms at 42 C.F.R. � 1001.1501(b):
The notice letter of March
30, 2001, also cites section 1892 of the Act, and references to section
1892 appear at several places in the I.G.'s briefing before me as an additional
basis for Petitioner's exclusion. In general, section 1892(a)(3)(B) of
the Act confers mandatory authority on the Secretary or his delegate to
exclude a health care practitioner who "owes a past-due obligation to
the United States" and who fails or refuses to establish certain payment
offset arrangements specified in section 1892(a)(2) of the Act, or who
fails or refuses to fulfill those payment arrangements. As will be seen,
Petitioner was offered such an offset payment arrangement. My decision here does not
address Petitioner's exclusion under section 1892(a)(3)(B) of the Act.
I have two reasons for not doing so. First, because I sustain the exclusion
based on section 1128(b)(14) of the Act, it is unnecessary to consider
the application of section 1892(a)(3)(B). The more significant reason,
however, is that a series of carefully-considered decisions on this point
suggests that Administrative Law Judges (ALJs) are without authority to
review exclusions based on section 1892 of the Act. Based on that line
of decisions, I decline to do so here. Cynthia Iraci, D.C., DAB
CR629 (1999); Yolanda Crespo Capo Fernandez, D.O., DAB CR606
(1999); George P. Bahadue, D.O., DAB CR575 (1999); Cynthia
M. Ramkelawan, D.D.S., DAB CR415 (1996); and cases cited therein. FINDINGS
OF FACT AND CONCLUSIONS OF LAW I find and conclude as follows: 1. Petitioner incurred a
NHSC obligation when he received NHSC scholarship grants for his medical
education during the academic years 1979-1980, 1980-1981, 1981-1982, and
1982-1983. I.G. Exs 1-4. 2. The monetary value of
the scholarship grants awarded to Petitioner totaled approximately $74,000.00.
I.G. Ex. 10; see I.G. Exs. 4, 11. 3. Upon completion of his
medical school education, Petitioner did not enter a graduate training
program approved for deferment by NHSC, and was therefore in default of
his NHSC obligation. I.G. Ex. 8, at 1. 4. As provided by law, liquidated
damages in cases of default on NHSC obligations are calculated at three
times the amount of the grants or loans involved, plus interest, and for
that reason the amount of Petitioner's debt included principal of $222,123.00
in 1984. I.G. Exs. 4, 8. 5. The Secretary made at
least four efforts to collect Petitioner's debt between August 27, 1984
and November 1, 1985. I.G. Exs. 7-9. 6. The Secretary offered
to forbear collection efforts and allow Petitioner to return to an approved
training program and discharge his obligation through NHSC service on
May 29, 1986 and March 4, 1987. I.G. Ex. 9. 7. At the request of the
Secretary, the United States brought suit against Petitioner to collect
the debt on or about June 23, 1987. I.G. Ex. 10. 8. Petitioner executed a
Stipulation and Settlement Agreement in that action on or about October
14, 1987. In that Agreement, Petitioner conceded his default and admitted
his debt in the sum of $456,748.29 plus interest, and agreed to maintain
a three-year hospital residency in family practice medicine, followed
by fulfillment of a four-year service obligation as a family practitioner
at a high priority site determined by the NHSC, in return for the United
States' agreement to forbear collection efforts on the judgment debt and
the Secretary's agreement to allow him to discharge his NHSC obligation
through service. I.G. Ex. 11. 9. On or about March 31,
1988, Petitioner breached the Stipulation and Settlement Agreement by
leaving the residency program without permission and without notifying
NHSC or other government official, thereby placing himself again in default
of his NHSC obligation. I.G. Ex. 12. 10.On March 25, 1997 and
May 15, 1997, the United States provided Petitioner with a detailed statement
of the information, documents, and professional data he must provide in
order to apply to be allowed to discharge his NHSC obligation through
service. I.G. Exs. 13, 14. 11.Petitioner sought the
discharge of his NHSC debt in a Chapter 7 bankruptcy proceeding, but was
unsuccessful: the Bankruptcy Judge determined that Petitioner's debt was
non-dischargeable on May 9, 2000. I.G. Ex. 24. 12.At the conclusion of
the bankruptcy proceedings, the Secretary agreed to credit Petitioner
with 1005 days of service toward his NHSC obligation of 1461 days, based
on Petitioner's practice in Philadelphia, Pennsylvania, and to reduce
the monetary calculation of that obligation pro rata from approximately
$1,285,673.22 to approximately $401,277.88, plus interest. I.G. Exs 17,
18. 13.On or about June 2, 2000,
the United States offered Petitioner another opportunity to discharge
his NHSC obligation through service, but Petitioner did not respond. I.G.
Ex. 25. 14.Beginning on or about
October 20, 2000, and continuing until on or about December 21, 2000,
the United States, acting on behalf of the Secretary, continued to offer
Petitioner the opportunity to reach a repayment agreement, a Medicare
offset agreement, or a forbearance agreement which would allow him to
discharge his NHSC obligation through service, but Petitioner made no
satisfactory response. I.G. Exs. 26-31. 15.By March 30, 2001, the
Secretary had taken all reasonable steps available to secure repayment
of Petitioner's NHSC obligation, as required by section 1128(b)(14) of
the Act, 42 U.S.C. � 1320a-7(b). Findings and Conclusions 1-14, supra. 16.Because Petitioner was
in default of his NHSC obligation on March 30, 2001, and because the Secretary
had taken all reasonable steps available to secure repayment of Petitioner's
obligation by March 30, 2001, on that date the I.G. had a basis to exclude
Petitioner from Medicare, Medicaid, and all federal health care programs.
Act, section 1128(b)(14); 42 U.S.C. � 1320a-7(b). 17.The term of exclusion
imposed is prescribed by regulation and is therefore reasonable. 42 C.F.R.
� 1001.1501(b). DISCUSSION As I have pointed out above,
there are two issues before me in this case: first, whether there is a
basis for the I.G.'s exclusion of Petitioner from Medicare, Medicaid,
and all other federal health care programs; and second, whether the length
of the exclusion imposed is reasonable. Resolution of the first issue
depends on the answers to two very specific questions: is Petitioner in
default of an obligation identified in section 1128(b)(14) of the Act,
and if so, has the Secretary taken all reasonable steps to secure repayment
of that obligation? The answers to both questions
may be found in the 23-year history of Petitioner's relationship with
the NHSC. Although neither the material facts nor the chronology of that
relationship is in dispute, it may be helpful if I set out the important
features of that relationship here. The History
of Petitioner's Obligation to the NHSC. In the late spring of 1979, Petitioner held a Master of Education degree from a university in New Jersey (P. Ex. 2, at 1) and had been accepted for matriculation at a medical school (I.G. Ex. 1, at 2) in Philadelphia, where he proposed to specialize in family medicine after his four-year course of study. His representations to the NHSC resulted in his being awarded a NHSC scholarship for the 1979-1980 academic year which included "tuition, an amount for all other reasonable educational expenses incurred by the student, and a monthly stipend for the 12-month period beginning with the first month of each school year . . . ." I.G. Ex. 2, at 1. Petitioner's NHSC scholarship was renewed for the 1980-1981, 1981-82, and 1982-1983 academic years. I.G. Exs. 3, 4. The total cash value of this four-year scholarship grant was later calculated at just over $74,000.00. I.G. Ex. 10, at 3; see I.G. Exs. 4, at 3; 11, at 2. The terms of NHSC scholarships
are relatively straightforward: for each year's scholarship, a recipient
is obliged to provide one year of medical service in a community or location
designated by the Secretary, usually one under-served by health care professionals,
with a minimum obligation of two years. 42 U.S.C. �� 254d, 254e, and 2541.
A successfully-completed service obligation extinguishes the recipient's
financial obligation completely. Should a NHSC scholar seek
to pursue graduate study following completion of medical school, the program
allows a deferment of the service obligation, but only if the doctor-scholar
enrolls in one of several designated specialties. One of those specialties
is family medicine, of which the NHSC was "especially in need" in 1983.
I.G. Exs. 5; 6, at 14. Others approved in 1983 for M.D. program graduates
included internal medicine, pediatrics, general surgery, obstetrics-gynecology,
emergency medicine, and psychiatry. Residencies or internships in anesthesiology
were not approved for deferment. Petitioner finished his
medical school education and graduated in the spring of 1984 with honors,
and was class president. P. Ex. 2. Rather than beginning his service obligation
then or obtaining a deferment of that obligation through enrollment in
an approved postgraduate training program, Petitioner chose to begin an
internship in anesthesiology. Because such a program was not approved
as deferring his service obligation, and because Petitioner did not then
commence his service, Petitioner was then in default of his NHSC obligation.
I.G. Ex. 8; P. Ex. 1, at 3-4. The NHSC scholarship program
provided for the contingency of a doctor-scholar's default: by terms of
the scholarship agreements and federal regulations, defaulters were liable
for liquidated damages equal to three times the scholarship amounts, plus
interest calculated from the date the scholarship payments were disbursed.
Petitioner admits here (P. Br., at 4) and has admitted elsewhere (I.G.
Ex. 11, at 2) both his default and his liability for liquidated damages
in the principal amount of $222,123.00 plus interest. That interest amounted
to $120,756.45 in August 1984 (I.G. Ex. 8, at 4) and was admitted by Petitioner
to have amounted to $234,625.29 by July 31, 1987. I.G. Ex. 11, at 2. Details of Petitioner's
internship are not abundant in this record, but it appears that he undertook
that program in a West Virginia teaching hospital. P. Ex. 2. The Secretary's
delegate wrote to Petitioner at that hospital at least four times between
August 27, 1984 and November 1, 1985 reminding him of his debt and demanding
payment. I.G. Exs. 7-9. Significantly, and although under no legal obligation
to do so, the Secretary twice offered Petitioner the opportunity to propose
a service commitment in satisfaction of part or all of his debt. I.G.
Ex. 9, at 2-4. The I.G. undertook no efforts to exclude Petitioner from
any of the federal health care programs, but instead continued to seek
collection of his debt or discharge of his service obligation. This record discloses no
direct response from Petitioner to those letters, but two letters from
the Secretary's delegate in 1986 and 1987 establish that the option of
service as a means of Petitioner's satisfying his debt remained open.
On May 29, 1986, the Secretary's delegate responded to a West Virginia
attorney who had apparently written to the Secretary on behalf of Petitioner.
I.G. Ex. 9, at 5-7. The attorney's May 2, 1986 letter had conveyed a proposal
by which Petitioner would have received credit toward his service obligation
for work already performed; this proposal was rejected, but the Secretary's
delegate made it clear that service in approved circumstances was still
an option for Petitioner, and provided the attorney a standard Forbearance
Agreement by which such an arrangement could be effected. No response
to that letter appears in the record before me. Nor does there appear
a response to the same delegate's letter to Petitioner, at an address
in McKeesport, Pennsylvania, on March 4, 1987. Id. at 8-9. The
March 4 letter was prompted by a telephone inquiry from Petitioner himself,
in which he requested another copy of the Forbearance Agreement. This
letter conveyed to Petitioner the requested document and again offered
the possibility that an approved term of service might eliminate some
or all of Petitioner's default. I can find no response to the March 4,
1987 letter in the record. On or about June 23, 1987,
the United States brought suit against Petitioner in an effort to collect
the debt (I.G. Ex. 10), which was alleged to have reached a sum well in
excess of $400,000 by the time the action was commenced. Within four months
a Stipulation and Settlement Agreement was entered, by which Petitioner
acknowledged that he had breached his NHSC scholarship agreement, and
admitted his resulting indebtedness to the United States in the sum of
$456,748.29 with interest accruing at the daily rate of $111.06. I.G.
Ex. 11. The Agreement went on, however, to establish a remarkable opportunity
for Petitioner to satisfy his debt: the United States agreed to forbear
execution on the judgment as long as Petitioner maintained his participation
in a three-year residency program in family practice medicine at McKeesport
Hospital, and agreed to allow Petitioner to completely satisfy the judgment
by completing four years of service as a family practitioner thereafter.
Id. The Stipulation and Settlement
Agreement was entered on October 14, 1987. On July 22, 1988, the Director
of the Family Practice Residency Program at McKeesport Hospital notified
NHSC administrators that Petitioner had left the program on March 31,
1988, after completing only seven months' training. I.G. Ex. 12. The explicit
terms of the Stipulation and Settlement Agreement required Petitioner
to notify NHSC authorities if he left the residency program before completing
it, but he failed to do so. Petitioner concedes that his premature departure
from the program constituted a breach of the Stipulation and Settlement
Agreement and that he was again in default on his NHSC indebtedness. P.
Br., at 4. The I.G. again undertook no efforts to exclude Petitioner after
this second conceded default. There is little detailed
information in the record about the nine-year period following Petitioner's
departure from McKeesport Hospital, but Petitioner represents that until
1991, and perhaps until November 1992 (P. Ex. 1, at 5), he experienced
serious problems of drug and alcohol abuse. P. Ex. 1; P. Br., at 4-5,
9. I have no reason to doubt that Petitioner experienced such problems,
but I note that he has also asserted that those problems began when he
was 17 years old (P. Ex. 1, at 4, lines 18-24; P. Br., at 5), and were
thus in existence during the time he successfully completed his undergraduate
studies, obtained his M.Ed. degree, served as a high school guidance counselor,
taught English in Colombia and the Dominican Republic, distinguished himself
academically and socially in medical school (P. Ex. 2), and earned licensure
as a Supervising Physician in Pennsylvania (P. Ex. 11, at 1). It would appear that Petitioner
completed a residency in family practice in a Florida teaching hospital
in 1996, earned board certification in that specialty (P. Ex. 2, at 8),
and joined a medical practice in Philadelphia soon after (P. Ex. 1, at
5). Petitioner's beginning salary at the practice was $110,000.00 per
year, and it increased to $119,000.00 per year in 1999. I.G. Ex. 34. The
record does not disclose whether that practice, or Petitioner individually,
participated in any federal health care programs, but no efforts had been
taken by the I.G. to exclude him from them. In any case, there was little
or no communication between government officials and Petitioner until
early 1997, when correspondence began again on the subject of Petitioner's
indebtedness and the possibility of some satisfaction of it. I.G. Exs.
13, 14; P. Ex. 1, at 5-6. The upshot of this correspondence was that on
May 15, 1997, the United States Attorney for the Eastern District of Pennsylvania
sent Petitioner a detailed statement of the information, documents, and
professional data he must submit in order to complete his application
to discharge his NHSC debt through service, and reminded him that until
the information was submitted and some tangible repayment tendered, his
application could not be approved. I.G. Ex. 14. By that time, the amount
of Petitioner's indebtedness had exceeded $557,526.54. I.G. Exs. 13, at
1; 24, at 4. No response appears to have been made by Petitioner to this
letter. Instead, in 1999, Petitioner
sought relief from his obligations to NHSC in United States bankruptcy
court. The exact dates on which he filed his Chapter 7 petition and his
adversary proceeding under 11 U.S.C. � 523(a)(8) do not appear in this
record, but it is obvious that they were both pending and the subject
of active litigation by mid-September 1999. I.G. Ex. 19. The United States
resisted Petitioner's efforts to avoid his NHSC debts, but once again
extended an offer to explore the possibility of his satisfying the NHSC
obligation through service. I.G. Exs. 19-22. By February 14, 2000, those
efforts seemed unlikely to succeed, chiefly as the result of Petitioner's
failure to supply necessary information. I.G. Ex. 23. Meanwhile, the bankruptcy
proceedings moved forward. Petitioner's efforts were
unsuccessful in absolute terms: on May 9, 2000, the Bankruptcy Judge granted
summary judgment against Petitioner in the adversary proceeding he had
commenced specifically to win the discharge of his self-confessed 1987
NHSC judgment debt and other health education-related debts. The Bankruptcy
Judge reviewed the history I have set out above and determined that it
was not unconscionable to refuse to excuse the debts. I.G. Exs. 15, 24.
But after oral argument on the motion for summary judgment, and while
the issue was pending sub judice, on May 9, 2000, the United
States agreed to afford Petitioner credit towards his service obligation
for the three years he had practiced with the Philadelphia medical group.
By applying a pro rata formula to both principal and interest,
and treating the Philadelphia practice as if it had been approved by NHSC,
the United States credited Petitioner's debt with 1,005 days of service
and thereby reduced the monetary amount of the judgment debt established
in 1987 from $1,285,673.22 (as of April 25, 2000), to $401,277.88 (I.G.
Ex. 17; see also I.G. Ex. 18) and the obligation in terms of
days-of-service from 1,461 to 456 (I.G. Ex. 17). This concession had been
the keystone of Petitioner's negotiating position during the bankruptcy
litigation, but even after agreeing to it and after establishing the nondischargeability
of Petitioner's NHSC debt, the United States for yet another time offered
Petitioner the chance to serve rather than pay (I.G. Ex. 25), and took
no action toward an exclusion. There is no record of a
response from Petitioner to that offer, but it is clear that soon after
the adverse decision in bankruptcy court and the Secretary's concession
of credit for his service with the Philadelphia medical practice, Petitioner
went to work part-time as a physician for an organization called Prison
Health Services in Philadelphia. P. Ex. 8, at 3, 15. In this position
he was paid at the hourly rate of $60.00 per hour, which if calculated
on a full-time basis would equal an annual salary in excess of $100,000.00.
In actuality, during Petitioner's 2000 tax year, he reported income of
$40,560.00 at this employment (Id. at 4), and had earned $16,815.00
at it through the first six months of 2001. Id. at 3. During
this time he paid $823.00 per month to lease a 2000 Mercedes-Benz 280C.
Id. at 17; I.G. Ex. 24, at 25. In late October 2000, DHHS
officials began their penultimate collection efforts with a demand letter
to Petitioner, warning him that in the absence of a repayment or offset
agreement reached within 60 days, exclusion proceedings would be undertaken.
This letter directly reminded Petitioner that an offset agreement contemplated
by section 1892(a)(2) of the Act was available as an alternative. I.G.
Ex. 26. A second notice was sent to Petitioner on November 20, 2000: this
letter proffered a detailed memorandum setting out in detail the financial
and professional information he must submit in support of any proposed
repayment agreement and reminding him of the deadlines for doing so. I.G.
Ex. 27. In response, on or about December 4, 2000, Petitioner offered
to pay $150.00 per month "until the service component issue is resolved,"
but supplied none of the requisite information identified on November
20. I.G. Ex. 28. The United States responded immediately, insisting that
the information must be submitted before Petitioner's monthly-payment
offer could be evaluated, and reminding him that he had received service
credit for his three years of practice in Philadelphia. I.G. Ex. 29. Petitioner
submitted some, but not all, of the required information on or about December
20, 2000. I.G. Ex. 30. The United States reviewed
the incomplete information and, although the deadline had passed without
a satisfactory repayment agreement, extended a final offer based on the
information available to it: Petitioner might still avoid exclusion and
might still be permitted to settle his obligation through NHSC service
if he agreed to an interim monthly payment of $500.00 per month, made
an immediate first payment in that amount, and submitted five specified
items of information to allow NHSC authorities to evaluate a permanent
amount for monthly payments. I.G. Ex 31. No response to this offer appears
in the record before me, and on March 30, 2001, Petitioner was notified
of his exclusion. I.G. Ex. 32. Is Petitioner
in default of his NHSC obligation? The history reviewed above
leaves little room for discussion, and no room whatsoever for doubt: Petitioner
is now in default of his NHSC scholarship obligation, and has been in
default since at least March 31, 1988, when he left the family practice
residency in McKeesport, contrary to the terms of the October 14, 1987
Stipulation and Settlement Agreement. Petitioner does not contest this
point, and concedes not only that his breach of the 1987 Agreement was
a default, but admits that it was a default which occurred after he had
been offered the opportunity to avoid the default through service:
P. Br., at 4. It will be recalled that
more than a decade elapsed between Petitioner's 1988 departure from the
McKeesport family practice residency and his commencement of bankruptcy
proceedings in 1999, but the Memorandum and Order entered in those proceedings
on May 9, 2000, make it very clear that no event between 1988 and 2000
operated to cure or otherwise remedy that default. I.G. Ex. 24. No action
by Petitioner since entry of the bankruptcy court's Memorandum and Order
has altered that condition of default in any way: none of the proffered
repayment, offset, or service agreements has been executed, and no monetary
payment has been made towards Petitioner's NHSC obligation. The only reduction
of Petitioner's NHSC obligation has been the result of NHSC's and PHS's
decision to credit him with three years' service in the Philadelphia practice,
a decision which reduced the magnitude of his default by nearly sixty-nine
percent. Petitioner is now in default of the remaining obligation, which
stood at 456 days or $427,001.92, plus interest accruing at the rate of
$90.70 per diem, on January 4, 2002. I.G. Ex. 18, at 3. Have "all reasonable
steps" been taken to secure repayment of Petitioner's obligation? Any discussion of the reasonableness
of the Secretary's collection efforts must begin with the recognition
of this fundamental point: the intent of Congress in enacting section
1128(b)(14) of the Act was to provide the Secretary with a mechanism by
which some leverage could be brought into play over individuals who default
on government-funded health education loans. Thus, the exclusion mechanism
is, inter alia, a debt collection device by which the Secretary,
acting through the delegation of his authority to the I.G., can collect
an NHSC debt or obligation in situations where voluntary persuasion has
failed. The exclusion mechanism must not be regarded as a penalty or sanction:
it is rather to be understood as remedial, not punitive. Jack W. Greene,
DAB No. 1078 (1989), aff'd, Greene v. Sullivan,
731 F. Supp. 835 (E.D. Tenn.1990); John Strausbaugh, R.Ph., DAB
CR186 (1992); Bahadue, supra. Once Petitioner incurred his NHSC
obligation, the Secretary and thus the I.G. acquired the right - and became
obliged - to collect on it. Ramkelawan, D.D.S., supra; Mohammad H.
Azarpira, D.D.S., DAB CR372 (1995); Charles K. Angelo, Jr., M.D.,
DAB CR290 (1993). The term "all reasonable
steps" has been uniformly construed to mean "all reasonable and legitimate
means of debt collection." Iraci, D.C., supra;
Bahadue, supra; Ramkelawan, supra. In a particularly clear statement
of this principle, it has been held that "[i]n attempting to collect a
debt, the Secretary must be 'reasonable' only in the sense that she should
not insist on repayment arrangements which are palpably unfair." James
F. Cleary, D.D.S., DAB CR252 (1993). The concept of reasonableness
does not require, and may very well forbid, the Secretary's consideration
of collection arrangements which cannot accomplish the goal of repayment
or which are contrary to the public interest, and it does not require
the Secretary to excuse defaulters because of their financial status.
Capo Fernandez, D.O., supra; Rikantas (Rik) Majauskas,
D.O., DAB CR441 (1996). In cases where a defaulter failed to provide
information necessary to entering an agreement, failed to make an initial
payment until after exclusion proceedings had been undertaken, and failed
to offer payments sufficient even to offset the accruing interest on his
obligation, the remedy of exclusion has been upheld as reasonable.
Capo Fernandez, supra; Azarpira, supra. And as a matter of law, the
Secretary has taken "all reasonable steps" to collect an NHSC debt when
the debtor has been offered a Medicare offset arrangement pursuant to
section 1892(a)(2) of the Act: although such an offset arrangement is
not a necessary component of "all reasonable steps," it is a sufficient
component and is conclusive proof that all reasonable steps have been
taken. 42 C.F.R. � 1001.1501(a)(2); Capo Fernandez, supra; Angelo,
supra. By the time the I.G. invoked
the exclusion remedy, Petitioner's conduct had demonstrated every one
of the indicia of stubborn unwillingness to pay his NHSC debt:
Azarpira, supra, at 8. Petitioner had established
a 16-year history of default and evasion even before the bankruptcy litigation,
which history included his unapproved anesthesiology program in 1984 (I.G.
Ex. 8; P. Ex 1, at 3-4), his refusal to answer repeated inquiries and
offers from the Secretary between August 1984 and November 1985 (I.G.
Exs. 7-9), his violation of the 1987 Stipulation and Settlement Agreement
by his unauthorized and unexplained departure from the McKeesport residency
in 1988 (I.G. Exs. 11, 12), and his failure to provide essential information
necessary to entering an agreement when urged to do so in 1997 (I.G. Exs.
13, 14). During this 16-year period, Petitioner made no payments of any
sort toward his NHSC debt, although he was employed as a medical doctor,
health sciences professor, or researcher during most of that time (P.
Exs. 2, at 1-3; 11), and was employed as a medical doctor at an annual
salary of $110,000.00 in 1996, which increased to $119,00.00 per year
in 1999. Following the failure of his effort to win discharge of his NHSC
obligation through bankruptcy proceedings, his conduct did nothing to
suggest that he might be more willing to meet his obligation to NHSC voluntarily:
in spite of the Secretary's concession of credit for more than two-thirds
of his obligation, he remained obdurate in refusing to supply information
which would allow the Secretary to develop an offset agreement pursuant
to section 1892(a)(2) of the Act, a repayment agreement, or a service
agreement. I.G. Exs. 25-30. Petitioner's most explicit response to the
Secretary's post-bankruptcy proposals was to offer a $150.00 monthly payment
(I.G. Exs. 28, 29) at a time when interest on his debt accumulated at
a rate of more than $2,700 per month (I.G. Ex. 18, at 3) and he was paying
$823.00 each month to lease a Mercedes-Benz (P. Ex. 8, at 17). It is impossible to identify
anything "palpably unfair" in any of the Secretary's actions or proposals
between 1984 and March 30, 2001. Each effort at collection, and each proposal
extended to Petitioner, reflects a "reasonable and legitimate means of
debt collection." The repeated offers of a service-based method of repayment,
the commitment to forbear execution on the 1987 Judgment, the many extensions
of an opportunity to establish a workable monetary repayment plan, the
unilateral forgiveness of over two-thirds of Petitioner's debt in terms
of days and dollars, the proposal of a Medicare offset agreement, and
the extension of deadline after deadline, all bespeak the Secretary's
efforts to employ "all reasonable means" to persuade Petitioner voluntarily
to pay his NHSC debt. The Secretary was entirely justified in believing
that those efforts would succeed no more in the future than they had in
the past, and "all reasonable means" required no further efforts from
him by March 30, 2001. Although Petitioner concedes
the fact of his default, it is his vigorously-argued position that other
facts provide a basis for what can best be understood as equitable relief
from the exclusion, and for mandatory relief compelling the I.G. to "waive
a significant portion of the accumulating interest" (P. Br., at 17) and
to "enter into a reasonable repayment program permitting Dr. Smith to
maintain a suitable lifestyle in his community." Id. Those arguments
and those forms of relief are well beyond my jurisdiction, see Iraci,
supra and Ramkelawan, supra; but one element of Petitioner's
argument may benefit from close examination. The foundation of Petitioner's appeal to equity and fairness is his history of, and recovery from, alcohol abuse. It is instructive to examine his position in the language he chooses to frame it:
P. Br., at 6.
His substance abuse is
well-documented and prevented Dr. Smith from acting responsibly either
as a physician or a debtor on student loans until 1993. Thereafter, he
diligently completed a qualified residency and became board certified.
He also provided service that qualified for credit against his obligations
- this service spanning the period up thru September 19, 1999. P. Br., at 9. Whether Petitioner began
his recovery in 1991 (P. Ex. 1, at 2, line 15), in 1992 (P. Ex. 1, at
5) or 1993 (P. Br., at 9), this record provides no support for the suggestion
that, upon his recovery, Petitioner began to behave responsibly regarding
his NHSC debt. Instead, the record conclusively demonstrates his effort
to evade that responsibility. I.G. Exs. 13, 14, 21-23. But even more striking
is the effect of the Secretary's concession of credit to Petitioner: in
extending that concession during the late spring of 2000, the Secretary
gave Petitioner the "fresh start" he claims is due him here. In practical
effect, the Secretary's concession of credit (I.G. Ex. 17) erased most
of the consequences of Petitioner's default that could colorably be attributed
to his substance abuse. The fact of his default remains, and the remaining
consequences have accrued during Petitioner's period of recovery. If he
is heard to say that he must be excused for lapses of judgment prior to
his recovery, then he must also explain why his behavior toward his NHSC
obligation remains unchanged after that recovery. Petitioner notes that the
statutory basis of the exclusion is characterized as a "permissive exclusion,"
and emphasizes that section 1128(b)(14) of the Act provides that the "Secretary
may exclude" individuals in default of NHSC obligations. P. Br., at 8.
He then argues that the I.G.'s discretion has been exercised improperly,
and perhaps vindictively in retaliation for Petitioner's efforts to obtain
discharge in bankruptcy. P. Br., at 10-12. If I were authorized to address
the merits of Petitioner's argument, I would reject it as contrary to
the evidence before me. But once I have found that there is a nexus of
fact and law by which Petitioner became liable to exclusion, I am without
jurisdiction to evaluate the propriety of the I.G.'s exercise of discretion
in determining to proceed to imposition of the exclusion. Wayne E.
Imber, M.D., DAB CR661 (2000), aff'd, DAB No. 1740 (2000);
see also 42 C.F.R. � 1005.4(c). Insofar as Petitioner's position
relies on an attack on the timing or chronology of the I.G.'s determination
to exclude, I note that the I.G. is invested with discretion as to when
to undertake an exclusion, and I lack authority to review his exercise
of discretion in that sphere. Laurence Wynn, M.D., DAB CR344
(1994). Petitioner asserts that the I.G.'s position is "an abuse of power, confiscatory, punitive and discriminatory . . . arbitrary and capricious, at best, and overwhelmingly oppressive in its preclusive sweep." P. Br., at 12. As I have noted earlier, the nature of the exclusion remedy has been explicitly held to be remedial, not punitive, and the underlying basis of Petitioner's obligation - the provision for liquidated damages, the calculation of interest, the sufficiency of the 1987 Judgment, and the non-dischargeability of the debt without consideration of its substantial reduction based on the service credit - were all addressed in careful and measured fashion by the Bankruptcy Judge, who simply refused Petitioner's invitation to hold their collection unconscionable. I.G. Ex. 24. In fact, the Bankruptcy Judge addressed and rejected most of Petitioner's present arguments when he wrote (I.G. Ex. 24, at 24-25):
Nor is an ALJ empowered
to entertain a collateral attack on the obligation: it has been established
by the 1987 Judgment, and is thus beyond review in this forum. Capo
Fernandez, supra; Paul R. Scollo, D.P.M., DAB No. 1498 (1994);
Ernest Valle, DAB CR309 (1994); Peter J. Edmonson, DAB No.
1330 (1992). Petitioner suggests that
the exclusion will "deprive Dr. Smith of a reasonable means by which he
could maintain any level of livelihood befitting his profession . . .
." P. Br., at 13. This suggestion is best answered by examining matters
of fact as well as matters of law. First, it is to be recalled that Petitioner
is still licensed to practice medicine in Pennsylvania as a board-certified
specialist in family medicine. P. Ex. 2, at 7-8. He holds valid credentials
as a supervising physician authorized to employ and oversee two physician
assistants (P. Ex. 11, at 1), and his legal authority to prescribe medications,
including controlled substances, if renewed, remains unimpaired (P. Ex.
2, at 9). Less than a year ago he was actively practicing medicine in
the state where he is licensed, working part-time at a salary equivalent
to an annual income of over $120,000.00, and paying nearly $10,000.00
a year to lease a Mercedes-Benz. P. Ex. 8, at 3, 4, 15, 17. The exclusion
here at issue is not from the practice of medicine, nor even from the
practice of medicine in any locality or State. The only effect of the
exclusion is to bar Petitioner from participation in Medicare, Medicaid,
and other federal health care programs. And if Petitioner's argument is
that such an exclusion amounts to a deprivation of his livelihood, then
that argument is simply irrelevant to these proceedings. Tracey Gates,
R.N., DAB CR708 (2000); Farhad Mohebban, M.D., DAB CR686
(2000); Carlos Rivera-Cruz, DAB CR677 (2000); Arlene Elizabeth
Hunter, DAB CR505 (1997). Petitioner argues that his
conduct since the institution of exclusion proceedings, and the I.G.'s
determination to go forward with those proceedings, combine to expose
an attitude of harshness and unreasonableness on the I.G.'s part (P. Br.,
at 8), and invites my examination of his efforts to negotiate a settlement
of this matter (P. Exs. 8-10). Although I have admitted those exhibits
into the record, I have done so for the purpose of establishing with finality
that they are fundamentally irrelevant. 42 C.F.R. � 1005.17(f). By no
reading, whether limited or broad, do they create a colorable issue that
I have the authority to address or decide. Nor is the relief sought
by Petitioner within my power to grant, even assuming arguendo
that the arguments on which it is based were sound. Whether the NHSC obligation
is waived in whole or in part is a matter committed to the discretion
of the Secretary and delegated to the Health Resources and Services Administration.
42 U.S.C. � 254o(d)(2). Procedures which, significantly in the context
of this record, require the submission of detailed documentation are set
out in 42 C.F.R. � 62.12(b)(1). Neither the I.G. nor an ALJ possesses
the authority to direct or compel any waiver of an NHSC obligation whatsoever.
42 C.F.R. � 1005.4(c). Since the record before
me demonstrates that Petitioner was in default of his NHSC obligation,
and that the Secretary has taken "all reasonable steps" to secure repayment
prior to invoking the exclusion remedy, I find and conclude that the I.G.
had a basis to exclude Petitioner pursuant to section 1128(b)(14) of the
Act. Is the term
of exclusion reasonable? My inquiry into the term
of exclusion imposed here is a very limited one: I may ask only whether
the term of exclusion imposed is consonant with the regulatory standard
established for such situations. 42 C.F.R. � 1505.4(c)(1). In this case
the notice letter (I.G. Ex. 32) employs the language "[t]hese exclusions
. . . will remain in effect until your debt has been completely satisfied."
The regulatory standard is different, and that difference has been pointed
out by ALJs several times, as I shall explain below. The language of 42 C.F.R.
� 1001.1501(b) provides that exclusions shall last "until such time as
PHS notifies the OIG that the default has been cured or the obligations
have been resolved to the PHS's satisfaction." While there may be little
practical difference between the language of the notice letter and the
regulation, there is a variance, and that variance has been explicitly
called to the I.G.'s attention in Iraci, supra; Bahadue, supra; and
Ramkelawan, supra. Here, as in those cases, the I.G.'s position as
enunciated in the briefing is that the term of exclusion is based on PHS's
satisfaction. I.G. Br., at 19; I.G. Reply Br., at 3, 5, 14. Here, as in
those cases, I am satisfied that the I.G.'s position as thus clarified
is in conformity with the terms of the regulation. I find and conclude
that the term of exclusion is reasonable, and I sustain it.
CONCLUSION For the reasons set forth above, I grant summary judgment in favor of the I.G. and sustain the I.G.'s exclusion of Petitioner from participation in Medicare, Medicaid, and all other federal health care programs pursuant to section 1128(b)(14) of the Act, 42 U.S.C. � 1320a-7(b)(14), until such time as his default on his NHSC obligation has been cured or the obligations thereon have been resolved to the PHS's satisfaction, in accordance with 42 C.F.R. � 1001.1501(b). |
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JUDGE | |
Richard J. Smith Administrative Law Judge
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