Andrea Moniquea Jackson Henry, DDS, DAB CR6007 (2021)

DECISION

The Inspector General of the United States Department of Health and Human Services (the IG) excluded Petitioner, Andrea Moniquea Jackson Henry, DDS, for 17 years from participation in Medicare, Medicaid, and all other federal health care programs pursuant to section 1128(a)(3) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)).  The IG’s exclusion of Petitioner is the result of Petitioner’s conviction of felony tax evasion in violation of 26 U.S.C. § 7201.  For the reasons stated below, I overturn the IG’s exclusion determination.

I.   Procedural History

The IG issued a notice to Petitioner on March 31, 2021, informing her that she was being excluded from participation in Medicare, Medicaid, and all federal health care programs for 17 years.  IG Ex. 1 at 1.  The IG cited section 1128(a)(3) of the Act as the basis, which mandates exclusion, in relevant part, when an individual is convicted of a criminal

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offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service.  Id.  Petitioner timely requested a hearing, and I was designated to hear and decide this case.

I conducted a pre-hearing telephone conference on June 28, 2021, the substance of which I memorialized in my June 29, 2021 Order (Summary Order), including a schedule for submission of arguments and evidence by the parties.  The IG submitted a brief (IG Br.), and five exhibits (IG Exs. 1-6), while Petitioner submitted a brief (P. Br.) without exhibits. 

II.   Jurisdiction

Petitioner timely requested a hearing.  I therefore have jurisdiction to hear and decide this case.  See 42 C.F.R. §§ 1001.2007(a)(1)-(2), 1005.2(a); see also 42 U.S.C. § 1320a‑7(f)(1).

III.   Issues

The Secretary of Health and Human Services (Secretary) has by regulation limited my scope of review to two issues:  Whether the IG has a basis for excluding Petitioner from participating in Medicare, Medicaid, and all other federal health care programs and, if so, whether the length of the exclusion imposed by the IG is unreasonable.  See 42 C.F.R. § 1001.2007(a)(1).

IV.   Exhibits and Decision on the Record

Petitioner does not object to the IG’s proposed exhibits.  I therefore admit IG Exhibits 1 through 6 into evidence.

Neither party indicated a hearing was necessary in this matter.  P. Br. at 4; IG Br. at 14-15.  I therefore proceed to a decision based on the record before me.  See Civ. Remedies Div. P. § 19(d).

V.   Applicable Law

The Secretary shall exclude an individual from participation in Medicare, Medicaid, and all other federally funded health care programs if that individual:

[H]as been convicted for an offense which occurred after [August 21, 1996], under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program . . . operated by or financed in whole or in part by any Federal,

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State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

Act § 1128(a)(3); 42 U.S.C. § 1320a-7(a)(3).  The Secretary has promulgated regulations implementing this provision of the Act.  42 C.F.R. § 1001.101(c).  The Secretary has interpreted this statutory provision to include “the performance of management or administrative services relating to the delivery of such items or services” as sufficient to mandate exclusion.  42 C.F.R. § 1001.101(c)(1).

Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section 1128(a) of the Act will be for a period of no fewer than five years.  

The standard of proof is a preponderance of the evidence and there may be no collateral attack of the conviction that provides the basis of the exclusion.  42 C.F.R. § 1001.2007(c), (d).  Petitioner bears the burden of proof and the burden of persuasion on any affirmative defenses or mitigating factors, and the IG bears the burden on all other issues.  42 C.F.R. § 1005.15(c).

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

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

A. The IG did not establish a basis for Petitioner’s exclusion pursuant to section 1128(a)(3) of the Act (42 U.S.C. § 1320a-7(a)(3)).

The IG must exclude an individual from participation in federal health care programs if the individual was (1) convicted, under Federal or State law, of a felony offense (2) that occurred after August 21, 1996, (3) relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct (4) that was committed in connection with the delivery of a health care item or service.  42 U.S.C. § 1320a-7(a)(3); 42 C.F.R. § 1001.101(c).  An individual's criminal conviction in connection with the delivery of a health care item or service can include “the performance of management or administrative services relating to the delivery of such items or services.” 42 C.F.R. § 1001.201(a)(1)(i).

On October 13, 2017, Petitioner was charged with one count of tax evasion in violation of 26 U.S.C. § 7201 for willfully attempting “to evade and defeat the payment of the income and self-employment taxes due and owing by her” to the United States of America for the calendar years 2005-6, 2008, and 2010-13 in the amount of $163,354.64.  IG Ex. 4.  Specifically, the Information states that Petitioner paid a nominee $130,000 to

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purchase her residence on Forest Hill Road in Memphis, Tennessee.  Id.  In order to create a false explanation as to the source of funds transferred to the nominee’s bank account, the charging document states that Petitioner entered into a sham lease with the nominee for another residence in Tennessee.  Id.

Also on October 13, 2017, Petitioner pleaded guilty to Count 1, and the government agreed not to pursue additional charges regarding tax years 2005-2015 based on the incidents described in the Statement of Facts filed with the Plea Agreement and the Information.  IG Ex. 2 at 1-2.  As part of the plea agreement, Petitioner agreed to pay a restitution amount that included both her income and self-employment taxes for 2005-6, 2008, and 2010-13; Trust Fund Recovery Penalties associated with Henry Polk Dental Group and The Smile Spa; and the employer portion of the Trust Fund Taxes associated with the Smile Spa for 2006-2008 and 2010-2015.  Id. at 3-5.  Notably, however, Count 1 of the Information did not include any reference to Trust Fund Recovery Penalties, employer portion of the Trust Fund taxes, or anything related to tax years 2007, 2014, or 2015.  IG Ex. 4.

The Statement of Facts filed along with the Information and Plea Agreement on October 13, 2017, provides additional facts agreed to by Petitioner as true and correct.  IG Ex. 5.  Of those facts related to Count 1 in the Information, the Statement of Facts includes the following:

1. Petitioner co-purchased a residence on Forest Hill Road in Memphis, Tennessee for approximately $2.2 million.  Id. at 3.
2. The Forest Hill Residence was foreclosed upon in 2011, and Petitioner transferred $130,000 to a nominee to repurchase the residence for $689,900.  Id. at 5.
3. To create a false explanation for the transfer of the $130,000 to the nominee, Petitioner entered into a sham lease with the nominee for a residence in Rossville, Tennessee.  Id. at 5.
4. Petitioner used nominees to purchase and lease a 2010 Porsche Panamera, 2010 Dodge Viper, 2008 Mercedes Benz C350, 2011 Cadillac CTS, and a 2008 Infinity QX56.  Id. at 5-7.
5. Petitioner filed a Joint or Individual Income Tax Return in 2005-2006, 2008, 2010-2013 indicating tax liability but for which she did not actually pay.  Id. at 3-4, 6-7.

The Statement of Facts also includes a number of facts that relate to tax liabilities incurred in relation to the Henry Polk Dental Group and The Smile Spa – outside the scope of income and self-employment taxes and for tax years that the Government agreed not to pursue charges as a part of the Plea Agreement – as well as use of The Smile Spa’s bank account for personal expenses.  IG Ex. 2 at 2 (“Pursuant to this agreement, the UNITED STATES agrees not to pursue additional charges regarding tax years 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, and 2015 based on the incidents

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described in the Information and in the Statement of Facts filed herewith.”).  Such facts include the following:

1. On or about January 23, 2002, Petitioner and another individual formed Henry Polk Dental Group and Petitioner served as president and owned a substantial portion of its shares.  IG Ex. 5 at 3.
2. On or about September 22, 2009, Petitioner formed and served as the president of The Smile Spa, in which she had 100% ownership interest.  Id.
3. Petitioner was the responsible person at both the Henry Polk Dental Group and The Smile Spa for purposes of withholding Trust Fund Taxes from employee wages to pay to the IRS, and Petitioner had the ultimate and final decision making authority regarding The Smile Spa’s business activities.  Id. at 2, 6, 8.
4. In 2009, Petitioner was personally assessed Trust Fund Recovery Penalties for tax years 2006-2008 with respect to Henry Polk Dental Group.  Id. at 4.
5. In 2014, Petitioner was personally assessed Trust Fund Recovery Penalties for certain quarters in tax years 2010-2013 with respect to The Smile Spa.  Id. at 6-7.
6. Throughout calendar years 2012-2015, The Smile Spa withheld Trust Fund Taxes from its employees’ paychecks, but beginning in October 2012, The Smile Spa made only sporadic or no payments to the IRS.  Id. at 8.
7. Petitioner caused The Smile Spa to cease filing quarterly employment tax returns for certain quarters in 2012-2015 and not to pay the taxes due and owing for those quarters.  Id. at 8-9.
8. In or around October 2010, Petitioner stopped using her personal checking account and began using The Smile Spa’s bank account, for which she was a 100% owner, for her personal expenses, including home repairs and improvements, automobile payments, mortgage payments for the Forest Hill Residence, and tuition payments to a private school.  Id. at 4-7.

The penalties and the employment taxes referred to above are included in the restitution amount in the Plea Agreement even though no charges were brought with respect to these facts.  Compare IG Ex. 2 with IG Ex. 5.

As I discuss below, the IG has not established by a preponderance of the evidence that the felony offense was committed in connection with the delivery of a health care item or service.

1. Petitioner was convicted of a felony occurring after 1996.

Petitioner concedes that on January 24, 2018, she was convicted of felony tax evasion in violation of 26 U.S.C. § 7201, which expressly provides that a person violating that law “shall . . . be guilty of a felony.”  P. Br. at 2, IG Ex. 3 at 1.  On October 13, 2017, Petitioner pleaded guilty to one count of tax evasion, and the United States District Court for the Western District of Tennessee subsequently found Petitioner guilty of that

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offense.  IG Ex. 2, IG Ex. 3 at 1.  The acts underlying Petitioner’s offense occurred between May 2009 and December 2014.  See I.G. Ex. 6 at 1.

2. Petitioner was convicted of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct.

Section 1128(a)(3) of the Act requires that Petitioner’s felony offense relate to “fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.”  42 U.S.C. § 1320a-7(a)(3).  Petitioner concedes that her conviction is related to financial misconduct.  P. Br. at 2.  The IG further argues that the conviction is also related to fraud (IG Br. at 4-6), but as the conviction only need relate to one of the enumerated categories in Section 1128(a)(3) listed above for it to be a basis for exclusion, there is no need to determine as to whether Petitioner’s tax evasion conviction also relates to fraud.

3. Petitioner was convicted of a felony that was not committed in connection with the delivery of a health care item or service.

In order for the IG to exclude Petitioner under 42 U.S.C. § 1320a-7(a)(3), the felony offense that was the basis of Petitioner’s conviction must have been for conduct “in connection with the delivery of a health care item or service.”  While the phrase is broad and has thus been interpreted broadly, it still serves to act as a limitation or boundary on the scope of the mandatory exclusion provision.  See Kabins v. Sebelius, No. 2:11-cv-01742-JCM-RJJ, 2012 WL 4498295 (D. Nev. Sept. 28, 2012). Not all felonies committed by a provider or supplier related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct are subject to mandatory exclusion – only those that are committed “in connection with” “the delivery of a health care item or service.” 

Petitioner disputes that her conviction is one requiring exclusion arguing that the offense was not committed in connection with the delivery of a health care item or service.  P. Br.at 2-3.  More specifically, Petitioner argues that while the Statement of Facts describes that Petitioner “improperly used moneys from her personal and business accounts that could have been used to pay taxes,” Petitioner did not make any “false or fraudulent representations to the Internal Revenue Service related to her continued delivery of health care items or services.”  Id. 

There have been a number of cases that have analyzed and determined whether a particular offense was committed in connection with the delivery of a health care item or service in the context of 1128(a)(3) as well as in the context of two other mandatory exclusion provisions – both of which also have similar or identical limitations on their application.  See 42 U.S.C. § 1320a-7(a)(1)-(3).  In most, if not all, the inquiry is highly fact-specific and guided by the following interpretive standard articulation:  to be “in

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connection with” the delivery of a health care item or service, there only needs to be a nexus or “common sense connection” between the circumstances of the offense and the delivery of a health care item or service.  See, e.g., W. Scott Harkonen, M.D., DAB No. 2485 at 7 (2012) (citing Ellen L. Morand, DAB No. 2436 at 9 (2012)); Charice D. Curtis, DAB No. 2430 at 5 (2011). 

A review of section 1128(a)(2) of the Act, which includes the identical limitation, further offers additional insight on Congress’s intended usage of the phrase.As indicated in various decisions reviewing the legislative history pertaining to exclusion:{{br}}{{br}} {{p style="margin-left:100px;"}}it was specifically intended to protect federal programs from untrustworthy individuals and to “provide a clear and strong deterrent against the commission of criminal acts.” S. Rep. 100–109, at 5 (1987), reprinted in 1987 U.S.C.C.A.N. 682, 686.{{/p}} {{p}}Morgan v. Sebelius, 694 F.3d 535, 538 (4th Cir. 2012) (footnote omitted); see also Manocchio v. Kusserow, 961 F.2d 1539, 1541-1542 (11th Cir. 1992).  And yet not all felonies – though they could be viewed equally indicative of a lack of trustworthiness on behalf of the perpetrator – fall within the scope of Section 1128(a)(3) or the other mandatory exclusion provisions.  Trustworthiness cannot therefore be the sole interpretative guide in determining the scope of the “in connection with delivery” requirement.{{/p}}  It provides that “[a]ny individual or entity that has been convicted, under Federal or State law, of a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service” must be excluded.  It is not sufficient that the criminal offense relate to neglect or abuse of patients – it must also be in connection with the delivery of a health care item or service.  See, e.g., Carolyn Westin, DAB 1381 (1993) aff’d Westin v. Shalala, 845 F. Supp. 1446 (D. Kan. 1994); Corey V. Penner, CR1553 (2007).Yet by the very fact that someone is defined as a patient, the individual must be either awaiting, receiving, or already in receipt of the delivery of a health care item or service.  As such, if the inherent relatedness that exists between an offense with a patient victim and the delivery of a health care item or service were enough to satisfy “the in connection with delivery” standard, then the phrase “in connection with the delivery of a health care item or service” would be superfluous and in contradiction of the statutory interpretation canon against surplusage.  Put differently, if the fact that every patient is the recipient of health care delivery chain is sufficient to satisfy the “in connection with” requirement, then the “in connection with” requirement is wholly redundant and

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unnecessary to the provision.In Section 1128(a)(4) of the Act, the fourth and final mandatory exclusion provision, Congress chose not to include a requirement that felonies relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance be related or in connection with the delivery of a health care item or service.  42 U.S. Code § 1320a–7(a)(4).  Congress’s decision not to include the “in connection with delivery” requirement in some, but not all of the mandatory exclusion provisions further demonstrates its intentionality in the inclusion of the requirement and that it have specific additive meaning to the provisions.  “In connection with” or to satisfy the “common sense connection/nexus” test must therefore require something more than simply the line that can always be drawn between the offense and health care delivery merely because the victim as a patient is, ipso facto, the intended recipient of the delivery chain of health care items and services.

Similarly then, applying the corollary to section 1128(a)(3), for a felony related to one of the enumerated financial crimes to be “in connection with the delivery of a health care item or service” there must be something more than the simple inherent relatedness that exists because the business of a health care practitioner or entity generates revenue from treating patients.  While not specifically articulated in this manner, prior Board decisions are consistent with this interpretation.  See, e.g., Benny R. Bailey, DAB No. 2935 (2019) (finding that money laundering offense was in connection with delivery of health care items because Petitioner improperly handled financial transactions with the proceeds from the dispensation of controlled substances by means of illegitimate prescriptions); Harkonen, DAB No. 2485 (finding that circumstances underlying wire fraud conviction due to false and misleading press release whose purpose was to increase pharmaceutical sales was in connection with the delivery of a health care item or service); and Kenneth M. Behr, DAB No. 1997 (2005) (finding attempted embezzlement by theft of drugs by pharmacist in connection with the delivery of a health care item or service). 

The IG argues that Petitioner’s failure to remit tax payments on behalf of employees of the Henry Polk Dental Group and The Smile Spa and the employer portion of the taxes “is related to her performance of the administration of the delivery of a health care item or service.”  IG Br. at 7-8.  I disagree.  The IG argues that Petitioner, as an owner, “exercised control over her dentistry practices that directly delivered health care item and services, and which enabled her to evade her tax obligation as an employer.”  Id. at 8-9.  While both these statements are true, it does not necessarily follow that tax evasion has a common sense connection with the delivery of a health care item or service.  Putting aside whether the circumstances pertaining to failure to pay Trust Fund related taxes and penalties are part of the felony to which Petitioner actually pleaded guilty and was convicted, as discussed above, merely running a business with revenue generation from

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the delivery health care items or services in and of itself – without more – is insufficient to satisfy the “in connection with delivery” standard.This analysis assumes that all of the facts contained in the Statement of Facts comprise the circumstances underlying Petitioner’s felony tax evasion conviction.  However, the Information to which Petitioner pleaded guilty was limited specifically to tax evasion based on her own personal income and her use of a nominee to repurchase her personal residence – none of which is connected to Petitioner’s role in operating a dental care business.  The prosecutor in the underlying matter decided not to prosecute Petitioner with respect to her lack of payment of the Trust Fund Taxes and related penalties, perhaps due to Petitioner’s lack of specific acts to evade these obligations – which differs from the specific acts she took to avoid her personal income taxes, e.g., using a nominee to repurchase her residence and entering into a sham residential lease.  The Plea Agreement further evidences that the circumstances related to Petitioner’s felony conviction specifically exclude certain tax years that solely relate to the payroll taxes while also requiring Petitioner to pay the Trust Fund Taxes and related penalties due and owing to remedy her prior non-payment.

Here, the circumstances of Petitioner’s offense are—at most—connected with the role she played in having ultimate responsibility in the chain of general business operations pertaining to payroll taxes on behalf of her employees and the matching employer portion, rather than any role Petitioner played in the chain of her dental practices’ delivery of health care items or services.  The employment related taxes that Petitioner was responsible for paying to the IRS are a percentage of each employee’s salary and are not amounts connected to the delivery chain of health care items and services.  The taxes are not to be used in delivering health care items and services to patients, and they do not impact or derive from the billing of health care items or services.  Further, there is no evidence in the record that Petitioner misrepresented anything related to the delivery of health care items or services to the IRS or otherwise falsified any records related to the delivery of health care items or services in either of her dental practices in order to evade taxes.  See, e.g., Maria Larkin DAB CR5409 (2019); Florence Peters, D.P.M., DAB CR582 (1999), rev’d on other grounds, Florence Peters, D.P.M., DAB No. 1706 (1999); and Francis Craven, DAB CR143 (1991). 

While employee salaries and the applicable taxes are generally paid from aggregate patient care revenue (as are all business liabilities) – though not necessarily at the start-up of a practice or during times of fewer patient visits – the patient care revenue stream is the product of the delivery chain of health care items and services and is not part of the delivery chain itself.  This is consistent with the corollary derived from review of section 1128(a)(2) of the Act above: there must be something more that connects the felony offense to the delivery of health care items and services other than the business’s generation of revenue from treating patients to satisfy the “in connection with delivery” requirement.

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The IG cites to several cases in support of its argument, but all of the cases are wholly distinguishable.  IG Br. at 6-11.  In Larkin, Petitioner was excluded for felony tax evasion where she had specifically claimed to the IRS that she had closed her home health business, but she had in fact continued delivering health care items or services under a new business name.  DAB CR5409 (2019).  The indictment in Larkin also specifically included factual elements involving Petitioner’s concealment of her continued delivery of health care items and services.  Id. at 10.  Neither of these facts are present in the current matter.  In DeSimone, Petitioner was excluded pursuant to 1128(a)(3) for theft of a drug from his pharmacy employer.  Erik DeSimone, R.Ph., DAB No. 1932 (2004).  The stolen drug otherwise would have been delivered to a patient and Petitioner accessed the drug in the course of performing his responsibilities in the delivery chain of health care items and services.  Unlike in the present matter, the circumstances underlying the felony offense therefore impacted the delivery of health care item or services and occurred while participating in the delivery chain of health care items or services.  In Fifer, Petitioner was convicted of conspiracy to commit identification fraud for unlawfully obtaining patient personal information from nursing homes and using the patient identities to purchase automobiles.  Kim Anita Fifer, DAB CR1016 (2003).  The Petitioner in Fifer thus stole information provided by the patient solely for the purpose of delivering health care items and services.  Again, this connection is not present in the current matter.

In Peters, which was overturned by the Board on appeal on other grounds and the Board did not therefore reach this issue,the Petitioner falsely represented her income from the delivery of health care items and services and falsified the business’s records to the same effect.  Florence Peters, D.P.M., DAB CR582, rev’d on other grounds, Florence Peters, D.P.M., DAB No. 1706.  There is no evidence in the current record that supports such a finding.  Finally, in Curtis, a nurse administrator of a home health company fraudulently opened a credit card account in the name of the company and used the credit card for her personal benefit and to purchase gift cards used as employee bonuses.  The Board recognized that in addition to having appropriated money that derived from the delivery of health care services, the appropriated money “could have otherwise been used to fund the provision of health care items or services.”  DAB No. 2430 at 5.  This additional factor is again not present in the current matter – the payments Petitioner failed to make to the IRS were never for the delivery of health care items or services.

In sum, the only connection that the tax evasion conviction in this case has with the delivery of a health care item or service is – at most – the fact that the tax evasion was committed by a health care provider who operates a business that treats patients.  Without some additional facts evidencing a nexus or connection, the “in connection with delivery” requirement under 42 U.S.C. § 1320a-7(a)(3) cannot be met.

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B. Whether the length of the exclusion imposed by the IG is unreasonable is moot.

Because I have concluded that the IG does not have a basis under 1128(a)(3) of the Act for excluding Petitioner from participating in Medicare, Medicaid, and all other federal health care programs, I do not reach whether the 17-year length of the exclusion imposed by the IG is unreasonable.  See 42 C.F.R. § 1001.2007(a).

VII.   Conclusion

For the foregoing reasons, I reverse the IG’s determination to exclude Petitioner from participating in Medicare, Medicaid, and all other federal health care programs for 17 years.