Craig R. Lane, D.P.M., ALJ Ruling 2019-9 (HHS CRD June 25, 2019)

ORDER OF DISMISSAL

On November 23, 2018, Petitioner, through counsel, submitted a “Request for Hearing & Statement of Issues in Opposition of Exclusion of Craig R. Lane” (herein “Request for Hearing”) in which he contended that he should not be excluded from Medicare, Medicaid, and all other federal health care programs because he “did not default” on his Health Education Assistance Loan (HEAL) and a settlement agreement that established repayment terms for that loan.  On February 22, 2019, the Inspector General (IG) filed a motion to dismiss (IG Motion) Petitioner’s request for hearing as untimely based on Petitioner’s failure to appeal his exclusion within 60 days of receipt of the June 1999 exclusion notice.The IG has submitted eleven proposed exhibits (IG Exs. 1-11) in support of her motion to dismiss. Petitioner objects to IG Ex. 7; I do not rely on that proposed exhibit in granting the IG’s motion to dismiss. Petitioner opposes the IG’s motion to dismiss. (P. Opposition).  For the reasons discussed herein, I grant the IG’s motion to dismiss.

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Factual Background and Procedural History

On October 15, 1998, the Department of Health and Human Services (Department) sent Petitioner a “final notice” regarding his HEAL delinquency, at which time the Department requested that Petitioner respond to the notice and establish a repayment agreement in which he would propose the new monthly payment amount.  IG Ex. 6 at 1.  The Department further notified Petitioner that a failure to negotiate a repayment agreement within 60 days would result in referral of his case to the IG for imposition of an exclusion from Medicare, Medicaid, and all other federal health care programs.  IG Ex. 6 at 1.  On June 30, 1999, the IG sent Petitioner a letter explaining that based on his failure to repay his HEAL or enter into an agreement to repay the debt, he would be excluded from participation in Medicare, Medicaid, and all federal health care programs pursuant to section 1128(b)(14) of the Social Security Act.  IG Ex. 1 at 1.  The letter informed Petitioner that in order to challenge the exclusion, he must request an administrative law judge (ALJ) hearing within 60 days from the date he received the letter notifying him of the exclusion.  IG Ex. 1 at 2.  The letter also informed Petitioner that “[s]hould [he] wish to negotiate an agreement to repay [his] debt, [he should] contact the United States Attorney’s office” in Baltimore, Maryland.  IG Ex. 1 at 1.  Petitioner admits that he “does not recall filing an appeal” of his exclusion.Based on my personal review of the Civil Remedies Division’s internal electronic database, Petitioner did not file a request for hearing to challenge the exclusion in 1999. Further, a review of the DAB’s public website on June 14, 2018, yielded no decisions or rulings pertaining to Petitioner. P. Opposition at 10.

In August 1999, Petitioner executed a settlement agreement with the United States Attorney’s Office in Baltimore in which he agreed to repay his HEAL indebtedness consistent with the stated terms of the settlement agreement.  IG Ex. 2.  The settlement agreement stated that “the debtor remains excluded until ‘such time as the entire past-due obligation . . . has been repaid’ and that this Agreement provides for a stay of the effect of the exclusion while the debtor is in compliance with its terms.”  IG Ex. 2 at 2.  The settlement agreement explained that Petitioner had been notified on October 15, 1998, that he was in default based on his “failure to repay the loans in accordance with the agreed upon terms” and that the October 1998 notice had demanded repayment.  IG Ex. 2 at 1.  The settlement agreement further explained that Petitioner failed to repay the debt or execute an offset agreement in response to the instructions in the October 1998 notice.  IG Ex. 2 at 1.  The settlement agreement reported that Petitioner had a total indebtedness of $175,126.00 as of June 1999, and that following an agreed upon reduction of the interest rate of the loan from 10% to 5.163%, Petitioner’s debt had been more favorably recalculated to be $160,696.77.  IG Ex. 2 at 1-2.  Petitioner promised to make a monthly

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payment of at least $750 per month.  IG Ex. 2 at 1.  The settlement agreement contained the following provision regarding any future default by Petitioner:

8. Default on Agreement .  Should default occur the debtor waives all procedural rights including but not limited to notice, hearing, appeal and administrative and judicial review, with respect to the immediate reinstatement of the exclusion under 42 U.S.C. §§ 1320a-7(b)(14) and 1395[cc](a)(3), and the United States may take any steps authorized by law to enforce its judgment.  If default occurs, the rate of interest will return to the legal rate of interest of the judgment until the debt is paid in full.

IG Ex. 2 at 2.  Petitioner agreed “to promptly withdraw any present appeal to the administrative law judge . . .  or agrees not to request a hearing . . . and waives all procedural rights . . . .”  IG Ex. 2 at 2.  The IG agreed “[i]n consideration of the debtor’s agreement . . . to stay the effect of the exclusion on debtor’s eligibility to receive reimbursement from Medicare” and “this Agreement provides a stay of the effect of the exclusion while the debtor is in compliance with its terms.”  IG Ex. 2 at 2.  Finally, the settlement agreement specified that when Petitioner had made his final payment to satisfy his entire HEAL obligation, he “will be eligible for full reinstatement into the Medicare and State health care programs.”  IG Ex. 2 at 3.

On September 3, 1999, the IG notified Petitioner that effective that same date, it had stayed his exclusion from participation in Medicare, Medicaid, and all federal health care programs based on his settlement agreement.  IG Ex. 3 at 1.  The IG cautioned that “[f]ailure to adhere to the terms of the repayment agreement will result in the stay being lifted and the exclusion going back into effect . . . .”  IG Ex. 3 at 1.

The IG has submitted evidence that Petitioner had several defaults on his HEAL in contravention of the August 1999 settlement agreement.Petitioner quizzically argued in his request for hearing that he “has been faithful to the Settlement Agreement since November 1996.” Request for Hearing at 2. IG Ex. 8 at 1 (“FINAL DEMAND” letter, dated April 3, 2009, informing Petitioner that he was in default of the repayment terms stipulated in the settlement agreement); IG Ex. 9 at 1 (“FINAL DEMAND” letter, dated July 19, 2011, informing Petitioner that he was in default of the repayment terms stipulated in the settlement agreement, noting that he had missed five payments in the prior 12 months); IG Ex. 10 (June 2016 letter notifying Petitioner that he was in default of his agreement with the United States and must pay $2,400 within 30 days); IG Ex. 11 at 1 (September 14, 2016 letter informing Petitioner that although he had agreed in a June 23, 2016 telephone call to resume payments in the amount of $850

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per month, he had not made his August and September payments); IG Ex. 4 at 1 (March 8, 2018 letter informing Petitioner that he was in default, directing him to submit payment in full within 30 days, warning that failure to comply would result in the stay of his exclusion being lifted, and explaining that Department policy does not allow subsequent settlement agreements for monthly payments).

On October 31, 2018, the IG informed Petitioner that he was in default of the terms of his settlement agreement.Petitioner, who is represented by counsel, does not assert that he is prejudiced by the sloppiness of the IG’s October 31, 2018 letter informing him that it had reinstated the previously stayed exclusion. See IG Ex. 5. Nonetheless, I observe that the letter contains gross factual errors. IG Ex. 5 at 1 (listing a September 15, 1996 exclusion date and a November 1, 1996 date that the effect of the exclusion was stayed). Further, the IG’s letter provided appeal rights, which is inappropriate because Petitioner has no such right and the IG has taken the position that there is no right of appeal. IG Ex. 5 at 2; IG Motion. By including a statement of appeal rights in such an instance, the IG needlessly invited Petitioner to file the instant request for hearing. IG Ex. 5 at 1.  The letter further informed Petitioner that “[d]ue to [h]is default on the settlement agreement,” the IG “is rescinding the stay of [his] exclusion.”  IG Ex. 5 at 1.  The IG explained that the exclusion “will remain in effect until the entire judgment amount and all accrued interest have been paid in full, as stated in the settlement agreement.”  IG Ex. 5 at 1.

Discussion

Petitioner has no right to appeal the lifting of the stay of his exclusion, and he previously acknowledged, in August 1999, that he would have no right to appeal any future reinstatement of his exclusion.  IG Ex. 2 at 3.  In fact, Petitioner acknowledged that his 1999 exclusion remained in effect, but that the settlement agreement stayed the effect of the exclusion as long as he complied with its terms.  IG Ex. 2 at 2. 

A hearing request must be filed within 60 days after receipt of the notice of exclusion, and therefore, if Petitioner wanted to appeal the exclusion that was imposed in the June 1999 letter, he should have done so nearly 20 years ago.  42 C.F.R. § 1005.2(c); see 42 C.F.R. § 1001.2002.  Further, I must dismiss a request for hearing if the “hearing request fails to raise an issue which may properly be addressed in a hearing.”  42 C.F.R. § 1005.2(e)(4).  Not only did Petitioner fail to timely request a hearing within 60 days of receipt of the June 30, 1999 letter informing him he would be excluded based on section 1128(b)(14) for default of his education loans, but he has no right to a hearing on the IG’s determination to lift the stay of the effect of that exclusion.  See 42 C.F.R.

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§ 1001.2007(a)(1) (request for hearing may only be filed on the issues of whether the basis for the imposition of the sanction exists and the length of the exclusion is reasonable).  Simply stated, Petitioner has no right to appeal the IG’s determination to lift the stay of the 1999 exclusion; in the absence of a timely appeal of the exclusion in 1999, Petitioner has no right to a hearing. 

Although Petitioner argues that he does notchallenge the 1999 exclusion determination, and only challenges the IG’s action to lift the stay of the exclusion, he devotes much attention to his claim that the August 1999 settlement agreement was invalid because he was “under duress” and the agreement was “unconscionable.”  P. Opposition at 4-11.  Petitioner apparently confuses his unenviable situation that he, and not the United States, caused when he failed to either repay his HEAL debt or timely propose new repayment terms, withthe sort of duress that would necessarily involve elements such as bad faith, wrongful or unlawful pressure, a threat, or coercion by the United States that induced him to sign the settlement agreement.  Petitioner had an obligation to timely make HEAL payments, and did not do so even though he had been forewarned that default could result in his exclusion and had previously declined a prior opportunity to renegotiate his payment agreement and avoid an exclusion.In October 1998, the “Debt Management Branch” informed Petitioner that he had defaulted on his HEAL payments in September 1997. IG Ex. 6 at 1. The letter enclosed instructions for establishing a repayment agreement. The letter informed Petitioner that if he was “unwilling or unable” to negotiate a repayment agreement, the IG would be required to immediately exclude him from participation in Medicare, Medicaid, and other federal health care programs. IG Ex. 6 at 1. If Petitioner felt he was not in default and that an exclusion was improper, then he had the opportunity to file a request for hearing to challenge the exclusion.Petitioner does not dispute his HEAL default at that time, so it is unclear on what basis Petitioner could have successfully challenged an exclusion. Instead, Petitioner chose not to appeal and voluntarily waived his right to appeal the exclusion, which resulted in his negotiated stay of the effect of the exclusion, a lower outstanding loan balance, and a lower interest rate in exchange for his resumption of payments on his six-figure debt.  IG Ex. 2.  There is simply no indication that Petitioner’s favorable resolution in 1999 was a product of duress.  And while Petitioner may now believe that his then-recent divorce, claimed homelessness, inability to keep his practice open, purported inability to obtain legal counsel, and the death of one of his podiatry patients amounted to duress, he has not submitted any evidence, such as sworn testimony, that these circumstances amounted to duress, nor has he presented evidence that the United States knew he was under such

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duress, much less that it caused or took advantage of such purported duress.  P. Opposition at 3.

Petitioner also argues that the settlement agreement was “unconscionable.”  P. Opposition at 7-8.  In the settlement agreement, Petitioner agreed to repay a loan that he was already obligated to repay, and he agreed that he would not appeal an exclusion that he does not dispute was warranted at that time.  IG Ex. 2 at 2; see P. Opposition at 3-4.  In consideration of Petitioner’s agreement, the United States reduced the interest rate of the loan by nearly half, which resulted in a nearly 10 percent reduction of his outstanding loan balance.  IG Ex. 2 at 1.  Further, the United States agreed to stay the effect of Petitioner’s exclusion, even though it had no obligation to stay an exclusion in such an instance where a debtor had defaulted on his HEAL.  IG Ex. 2 at 2.  It is hard to fathom how, based on the favorable terms of the settlement agreement, this agreement was “unconscionable.”  In fact, Petitioner admits that at the time of his initial default that he was unable to pay his debt and “no one . . . [can] squeeze water out of a stone.”  P. Br. at 3.  By my count, Petitioner had four options at the time he executed the settlement agreement:  allow the exclusion to go into effect; file a request for hearing; pay off the loan; or, negotiate a settlement with the United States that would stay the effect of the exclusion.  Petitioner selected what was logically the best course of action at that time, which resulted in a stay of the effect of the exclusion, a reduction of his total outstanding loan balance, and a nearly halving of the interest rate of his loan.  Petitioner has not shown how the settlement agreement was unconscionable.I note that if the United States exercised its “unequal bargaining power” at that time, as Petitioner claims, it is unclear why the United States would have lifted the effect of the exclusion, reduced the amount of the outstanding loan obligation, and cut in half the interest rate. See P. Opposition at 8. P. Opposition at 8.

Petitioner argues that he did not make a “knowing” and “voluntary” waiver of his right to appeal his exclusion.  P. Opposition at 9-11.  To the extent that Petitioner challenges the reinstatement of the 1999 exclusion, I note that Petitioner identifies no statutory or regulatory authority that would have otherwise enabled him to challenge the reinstatement of an unappealed exclusion.In fact, Petitioner explicitly states that he is not appealing the imposition of an exclusion in 1999. P. Opposition at 4. Petitioner was excluded in 1999 (IG Ex. 1), and the effect of the exclusion was stayed as long as Petitioner adhered to the settlement agreement (IG Ex. 2 at 2); Petitioner points to no authority that that enables him to belatedly challenge an exclusion that was imposed nearly two decades ago.  Further, Petitioner has not presented evidence that his approval of the settlement agreement was

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not knowing and voluntary.  To the contrary, Petitioner has a doctoral degree in podiatry and had owned and operated his own practice immediately prior to his exclusion.  See P. Opposition at 1.  I find it implausible that a sophisticated individual such as Petitioner would be incapable of understanding a straightforward two-and-a-half page agreement, regardless of whether he had legal counsel at that time.  See IG Ex. 2.  And while Petitioner now claims that he “was not in the proper mental state to execute an agreement” in 1999, he fails to submit any evidence of such.I find it troubling that Petitioner was a practicing podiatrist at that time and now claims he essentially lacked the mental capacity to enter into a loan repayment agreement. In fact, Petitioner baldly claims that “[t]he burden is on the [IG] to present evidence to this Court that Dr. Lane had a rational and factual understanding of the proceedings against him.” I reiterate that Petitioner has presented no evidence that he was incapable of understanding the settlement agreement that stayed the effect of the exclusion and established a new repayment plan, and I reject Petitioner’s baseless claim that the IG must demonstrate, nearly 20 years later, that a practicing podiatrist was capable of entering into a settlement agreement. Petitioner utterly fails to demonstrate that he did not knowingly and voluntarily enter into the agreement; as previously discussed, Petitioner pursued the sole option that enabled him to reduce his loan balance and interest rate while also allowing him to have the effect of his exclusion stayed. 

Petitioner also argues that the settlement agreement is invalid because it did not define default for purposes of the agreement.  P. Opposition at 8-9.  The settlement agreement required Petitioner to pay at least $750 by the first day of each month, and therefore, any failure to adhere to that repayment plan would be a default on the terms of the agreement.  IG Ex. 2 at 2.  The Department and the IG have both shown considerable leniency and patience over the years, despite Petitioner’s repeated failures to abide by the terms of his repayment agreement.  See IG Exs. 8, 9, 10, 11 (reflecting issuance of “final demand” letters in 2009, 2011, and 2016 based on Petitioner’s repeated failures to make timely payments).  Petitioner does not claim that he has timely made each payment that was required by the terms of his settlement agreement, and the IG, to the contrary, has demonstrated a pattern of repeated noncompliance with the terms of repayment.  The IG gave Petitioner an opportunity to forestall the effect of his exclusion, and this opportunity was premised on Petitioner’s agreement to meet his end of “the bargain between the parties.”  IG Ex. 2 at 3.  By failing to adhere to his end of the bargain, which was to repay his debt as he agreed to do (IG Ex. 2), Petitioner both broke the settlement agreement and defaulted on his repayment agreement.  Petitioner’s arguments challenging the validity of the settlement agreement lack merit.

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The IG draws parallels to the case of Sharon R. Anderson, D.P.M., DAB No. 1795 (2001), in her motion to dismiss, and Petitioner fails to distinguish the circumstances of that case from his own.I note that Petitioner erroneously claims that Dr. Anderson lacked standing before the DAB. IG Motion at 4.  In September 1993, the IG informed Dr. Anderson of her exclusion from participation in Medicare, Medicaid, and all other federal health care programs based on her HEAL default, just as it did the same to Petitioner in June 1999.  The following year, in June 1994, Dr. Anderson entered into a settlement agreement that resulted in a stay of the previously imposed exclusion, just as Petitioner did in August 1999.  And just like Petitioner, Dr. Anderson defaulted again years later, which likewise resulted in the IG lifting the stay of her exclusion in May 2000.  The DAB determined that, pursuant to section 1128(f) of the Act and 42 C.F.R. § 1001.2007(b), Dr. Anderson was given an opportunity for a hearing at the time of her exclusion, and that she was not entitled to another opportunity for a hearing when the stay of the exclusion was lifted, stating:  “Reading the statute and regulations to afford a petitioner two opportunities to challenge whether there was a basis for exclusion is unreasonable.”  Anderson, DAB No. 1795 at 3.  The DAB further stated:

Both the Settlement Agreement and the [letter informing her that the stay of the exclusion had been lifted] clearly informed Dr. Anderson of what the effect of the exclusion was and that this effect would be stayed only so long as she complied with the Settlement Agreement by making monthly payments on her debt.  She did not deny that she did not comply.  The [IG] provided evidence that she made very few payments.  Given her clear knowledge that she was not complying, she could not reasonably count on the stay of the effect of the exclusion as a basis for thinking she was entitled to Medicare and Medicaid payments—in the Settlement Agreement, she acknowledged that the “Agreement provides for a stay of the effect of the exclusion while the debtor is incompliance with its terms.”

Id. at 8 (internal citations omitted).  The DAB further determined that “the exclusion should have automatically gone back into effect when Dr. Anderson breached the terms of the Settlement Agreement by failing to pay according to the schedule.”  Id.  Petitioner fails to distinguish the substantive facts of his case from Dr. Anderson’s case, and the DAB’s Anderson decision is instructive.

I am required, pursuant to 42 C.F.R. § 1005.2(e)(1), to dismiss a hearing request when “[t]he petitioner’s or respondent’s hearing request is not filed in a timely manner.” 

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Petitioner has not demonstrated that he filed a timely request for a hearing based on the June 30, 1999 notice of exclusion, and the case is dismissed.  42 C.F.R. § 1005.2(c).