Walter N. Simmons, M.D., DAB CR6177 (2022)

DECISION

Petitioner, Walter N. Simmons, M.D., was convicted of wrongful use of a unique health identifier in violation of 42 U.S.C. § 1320d-6(a)(1) and (b)(1).  Petitioner wrote prescriptions for compounded drugs for three TRICARE¹ beneficiaries.  Petitioner sent the prescriptions to business associates who used the prescriptions in a scheme to defraud the TRICARE program.  Based on this conviction, the Inspector General (IG) has excluded Petitioner for eight years from participating in Medicare, Medicaid, and all federal health care programs, as authorized by section 1128(b)(1) of the Social Security Act (Act) (42 U.S.C. § 1320a-7(b)(1)).²

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Petitioner seeks review of the IG’s decision to exclude him.  Petitioner argues that his conviction is not one described in section 1128(b)(1) of the Act.  Additionally, Petitioner argues that an eight-year exclusion is unreasonable.  For the reasons discussed below, I affirm that the IG is authorized to exclude Petitioner.  I find that the IG did not prove one of the three aggravating factors on which she relied in setting the length of the exclusion.  For that reason, I find that an eight-year exclusion is not reasonable.  Rather, I find that a six-year exclusion is reasonable.

I.  Background and Procedural History

Petitioner is a medical doctor who founded a company to manage long-term health care for seniors.  Petitioner’s Brief (P. Br.) at 2.  Richard Cesario and John Cooper owned a pharmaceutical marketing company named CMGRX.  Id.; see also IG Ex. 8 at 3-4.  Cesario and Cooper agreed to invest in Petitioner’s company.  P. Br. at 3.  Between November 17, 2014 and March 26, 2015, Cesario and Cooper, through CMGRX, loaned Petitioner’s company $527,892.61.  Id. at 4; see also P. Ex. 3 at 1.

In or around September of 2014, Cesario and Cooper asked Petitioner to write prescriptions for compounded pain medications for three TRICARE beneficiaries.  P. Br. at 3.  CMGRX provided Petitioner with the unique health identifiers of the TRICARE beneficiaries.  Id.  After speaking with the TRICARE beneficiaries by telephone, Petitioner wrote the prescriptions and faxed them to CMGRX.  Id.  CMGRX arranged for its affiliated pharmacies to fill the prescriptions and the pharmacies billed TRICARE.  Id.

On or about May 19, 2015, Petitioner and another individual filed a Qui Tam complaint in the U.S. District Court for the Southern District of Texas.  P. Ex. 4.  The complaint alleged that Cesario, Cooper, CMGRX, and several pharmacies violated the False Claims Act by “engaging in a scheme to improperly offer, pay and/or receive compensation for the purpose of inducing the ordering or prescription of compounded drugs and other healthcare services for which reimbursement was sought from federal healthcare programs, specifically the TRICARE Program.”  Id. at 2 (¶ 3).

On or about February 18, 2016, a federal grand jury in the Northern District of Texas (grand jury) indicted Cesario and Cooper.  P. Ex. 6.  According to Petitioner, the indictment “relied heavily” on the Qui Tam complaint he had filed and on information he and the other relator provided to the Assistant U.S. Attorneys and other federal investigators.  P. Br. at 6.  Under Count 1, the indictment charged that Cesario and Cooper,

together with coconspirators who are not named in this Indictment . . . did knowingly and willfully combine, conspire, confederate, and agree with each other and with others . . . to violate 18 U.S.C. § 1347, that is, to devise and to

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execute a scheme and artifice to defraud a health care benefit program . . . that is TRICARE, and to obtain by means of materially false and fraudulent pretenses, representations, and promises, money and property owned by TRICARE, in connection with the delivery of, and payment for, health care benefits, items, and services.

P. Ex. 6 at 4 (¶ 13).  The indictment further alleged that the purpose of the conspiracy was for the “coconspirators to unlawfully enrich themselves through the submission of claims . . . for compounded drugs prescribed to TRICARE beneficiaries, which prescriptions had been induced by kickbacks paid to the prescribing physicians, and by kickbacks paid, or promised to be paid, to TRICARE beneficiaries, and to conceal those facts from TRICARE . . . .”  Id. (¶ 14).  In addition to conspiracy to commit health care fraud, the indictment charged Cesario and Cooper with multiple counts of paying and receiving kickbacks in violation of 42 U.S.C. § 1320a-7b(b)(1) and (b)(2).  Id. at 11 (¶ 35), 13 (¶ 39).

On or about October 4, 2016, the grand jury returned a superseding indictment.  IG Ex. 8.  The superseding indictment was substantially similar to the original indictment, except that it named Petitioner and nine other individuals as coconspirators with Cesario and Cooper.  Id.  On or about January 9, 2018, the grand jury returned a second superseding indictment.  IG Ex. 6.  The second superseding indictment similarly charged Petitioner, Cesario, Cooper, and others with conspiracy to commit health care fraud.  Id.

According to Petitioner, Cesario and several other defendants pleaded guilty to “major felonies” and were incarcerated.  P. Br. at 7.  According to Petitioner, “[a]s part of their guilty pleas and to improve their sentences, they agreed to cooperate with the federal government and to testify about the [d]efendants who had not pled guilty, including about [Petitioner].”  Id.

In late 2019, Cooper, Petitioner, and four other named defendants were tried by a jury in the United States District Court for the Northern District of Texas (federal district court).  P. Br. at 7; see also P. Ex. 8 at 1.  The jury convicted Cooper of conspiracy to commit health care fraud and a number of kickback-related crimes.  P. Ex. 8 at 1.  The jury could not reach a verdict as to Petitioner.  Id. at 3; see also P. Br. at 7.  Cooper appealed the jury’s verdict to the U.S. Court of Appeals for the Fifth Circuit.  See P. Ex. 9.

In its decision, the Fifth Circuit described the conduct for which Cooper was convicted as follows:

CMGRX paid TRICARE beneficiaries to order certain substances.  CMGRX paid doctors to prescribe the substances to the beneficiaries.  TRICARE paid the pharmacies that

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provided the substances, and the pharmacies paid a portion of those funds to CMGRX.  So, everyone involved in the scheme received money, except for TRICARE, who paid.  And Cooper was intimately involved throughout the entire scheme.  Among other things, Cooper:  (1) helped recruit doctors, employees, and pharmacies; (2) negotiated the amount of funds pharmacies would kick back to CMGRX; (3) calculated the amount CMGRX would pay beneficiaries and doctors; (4) helped fund the nonprofit entity and control who it paid; (5) oversaw prescription formulas to help maximize CMGRX revenue; and (6) shared in CMGRX profits.

P. Ex. 9 at 2.  The Fifth Circuit reversed Cooper’s conviction as to the counts charging him with paying illegal kickbacks to TRICARE beneficiaries.  Id. at 3-8.  The court affirmed Cooper’s convictions for conspiracy to commit health care fraud and for receiving kickbacks.  Id. at 8-12.

After the jury failed to convict Petitioner of conspiracy to commit health care fraud, the grand jury returned a third superseding indictment, which was filed on or about June 2, 2020.  IG Ex. 7.  The third superseding indictment again charged that Petitioner conspired “with R.C., J.C., A.B., and others known to the grand jury” to defraud TRICARE.  Id. at 2.  The conduct alleged was substantially similar to the conduct alleged in the previous indictments.

Finally, on or about March 10, 2021, the U.S. Attorney filed a superseding information charging Petitioner with three counts of wrongful use of a unique health identifier in violation of 42 U.S.C. § 1320d-6(a)(1) and (b)(1).  IG Ex. 9.  On or about the same date, Petitioner executed a plea agreement in which he agreed to plead guilty to the offenses charged in the superseding information.  IG Ex. 2.  At the time he executed the plea agreement, Petitioner also executed a Factual Resume, in which he stipulated to certain facts in support of the plea agreement.  IG Ex. 3.  Among those stipulations was the following:  “[Petitioner] admits and agrees that his uses of the unique health identifiers . . . were in violation of Title 42, United States Code, Chapter 7, Subchapter XI, Part C, in that the prescriptions [Petitioner] wrote . . . were used by Cooper and other individuals (not [Petitioner]) to commit health care fraud and violations of the federal Anti-Kickback Statute.”  Id. at 3 (¶ 4).

On or about July 8, 2021, the federal district court accepted Petitioner’s guilty plea and adjudicated him guilty of three counts of unlawful use of a unique health care identifier as charged in the information.  IG Ex. 5 at 1.³  The court dismissed Count 1 of the

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superseding indictment, second superseding indictment, and third superseding indictment, each of which charged that Petitioner conspired with Cesario, Cooper, and others to defraud TRICARE.  Id.; see also IG Exs. 6, 7, 8.  The court sentenced Petitioner to nine months’ incarceration and to pay restitution of $527,892.61 to the Defense Health Agency.⁴  IG Ex. 5 at 2, 5-6.

By letter dated February 28, 2022, the IG notified Petitioner that he was being excluded from participating in Medicare, Medicaid, and all federal health care programs pursuant to section 1128(b)(1) of the Act for a period of eight years.  IG Ex. 1.  The IG stated that the exclusion was based on Petitioner’s conviction of a criminal offense in connection with fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct that was connected to the delivery of a health care item or service as described in section 1128(b)(1) of the Act.  Id.

Petitioner timely requested a hearing before an administrative law judge and the case was assigned to me.  On May 31, 2022, I held a telephone prehearing conference, the substance of which is summarized in my June 1, 2022 Order and Schedule for Filing Briefs and Documentary Evidence (Briefing Order).  See 42 C.F.R. § 1005.8.  Among other things, I directed the parties to file short-form briefs.  Briefing Order ¶ 7.b.  In accordance with the Briefing Order, the IG filed a brief (IG Br.) and 11 exhibits (IG Exs. 1-11).  Petitioner filed a brief and 15 exhibits (P. Exs. 1-15).⁵  The IG filed a reply brief (IG Reply).  Neither party objected to any of the proposed exhibits.  Accordingly, in the absence of objection, I admit IG Exs. 1-11 and P. Exs. 1-15 into the record.  42 C.F.R. § 1005.8(c); Briefing Order ¶ 8; Civil Remedies Division Procedures § 14(e).

The parties agree that this case does not require an in-person hearing.  IG Br. at 13; P. Br. at 22.  I therefore decide this case based on the written record.

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II.  Issues

The issues I must address are whether the IG had a basis for excluding Petitioner and whether the length of the exclusion is unreasonable.  Act § 1128(b)(1), (c)(3)(D) (42 U.S.C. § 1320a-7(b)(1), (c)(3)(D)); 42 C.F.R. § 1001.2007(a)(1).

III.  Jurisdiction

I have jurisdiction to adjudicate this case.  Act § 1128(f)(1) (42 U.S.C. § 1320a-7(f)(1)); 42 C.F.R. § 1005.2.

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

My findings of fact and conclusions of law are set forth in italics and bold font.

A.  The IG is authorized to exclude Petitioner pursuant to section 1128(b)(1) of the Act because he was convicted of a misdemeanor criminal offense related to fraud that was connected to the delivery of a health care item or service.

Section 1128 of the Act authorizes the Secretary of the Department of Health and Human Services (Secretary) to exclude certain individuals from participating in federal health care programs, as defined in section 1128B(f) of the Act.  Act § 1128 (42 U.S.C. § 1320a-7).  Section 1128(b)(1) of the Act authorizes the Secretary to exclude any individual who has been convicted of a misdemeanor offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a health care item or service or if the criminal conduct occurred with respect to any act or omission in a health care program (other than those specifically described in subsection (a)(1)).  Under section 1128(b)(1)(A), the IG must prove the following three elements by a preponderance of the evidence to demonstrate a basis for excluding Petitioner:  (1) Petitioner was convicted of a misdemeanor offense that occurred after August 21, 1996;⁶ (2) the conviction was related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct; and (3) the fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct occurred in connection with the delivery of a health care item or service or with respect to an act or omission in a health care program other than Medicare or Medicaid.  Act § 1128(b)(1).  As discussed below, the IG has met this burden.

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1.  Petitioner was convicted of a misdemeanor criminal offense after August 21, 1996.

The Act provides, in pertinent part, that an individual is convicted “when there has been a finding of guilt against the individual . . . by a Federal, State, or local court;” or “when a plea of guilty . . . by the individual . . . has been accepted by a Federal, State, or local court.”  Act § 1128(i)(2), (3) (42 U.S.C. § 1320a-7(i)(2), (3)); see also 42 C.F.R. § 1001.2 (definition of “convicted”).

Petitioner does not dispute that he was convicted of a misdemeanor criminal offense after August 21, 1996.  P. Br. at 12.  On March 10, 2021, the U.S. Attorney filed a superseding criminal information charging Petitioner with three counts of wrongful use of a unique health identifier, in violation of 42 U.S.C. § 1320d-6(a)(1) and (b)(1).⁷  IG Ex. 9.  On that same date, Petitioner signed a plea agreement in which he agreed to plead guilty to the offenses charged in the superseding information.  IG Ex. 2.  On or about July 8, 2021, Petitioner appeared in the federal district court and pleaded guilty to three counts of wrongful use of a unique health identifier, in violation of 42 U.S.C. § 1320d-6(a)(1) and (b)(1), as charged in the superseding information.  The federal district court accepted Petitioner’s guilty plea and adjudicated him guilty.  IG Ex. 5 at 1.  The court’s disposition of Petitioner’s guilty plea meets the definition of “conviction” under subsections 1128(i)(2) and (3) of the Act.

2.  The criminal offense of which Petitioner was convicted was related to fraud.

Section 1128(b)(1)(A) permits the IG to exclude an individual or entity convicted “of a criminal offense consisting of a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct” if the misdemeanor is “in connection with the delivery of a health care item or service” or if the criminal conduct occurred “with respect to any act or omission in a health care program (other than those specifically described in subsection (a)(1)).”  Act § 1128(b)(1).  As discussed below, Petitioner’s conviction was related to fraud.

Petitioner argues that the U.S. Attorney’s decision to allow Petitioner to plead guilty to three counts of wrongful use of a unique health identifier rather than re-trying him for conspiracy to commit health care fraud as charged in the superseding indictments demonstrates “that there was no evidence that [Petitioner] was involved in any conspiracy . . . to commit healthcare fraud.”  P. Br. at 13.  Petitioner’s point appears to be that

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because the count of the superseding indictment charging Petitioner with conspiracy was dismissed, Petitioner’s conviction is unrelated to fraud.  This contention fundamentally misunderstands the broad scope of the exclusion statute.

Exclusion pursuant to section 1128(b)(1) does not require that fraud be an explicit element of the crime for which an individual is convicted.  Rather, the statute requires only that the conviction be “related to” fraud.  Appellate decisions of the Departmental Appeals Board (DAB) have often reiterated that section 1128’s references to offenses “relating to” a specified crime such as fraud, theft, or patient abuse (or “related to the delivery of” a Medicare item or service) require only a “common sense connection” or “nexus” between the offense and the crimes or actions named in the statute.  See, e.g., Melissa Michelle Phalora, DAB No. 2772 at 8 (2017) (citations omitted).  The United States Court of Appeals for the District of Columbia affirmed this interpretation in Friedman et al. v. Sebelius, 686 F.3d 813 (D.C. Cir. 2012), affirming in part and remanding in part Paul D. Goldenheim, M.D., et al., DAB No. 2268 at 12 (2009).  In that case, the D.C. Circuit held that section 1128(b)(1) “unambiguously authorizes . . . exclusion of an individual whose conviction was for conduct factually related to fraud.”  686 F.3d at 820.

Petitioner contends that the factual resume supporting his guilty plea proves that the offenses for which he was convicted were not related to fraud.  P. Br. at 13.  He cites to paragraph 4 of the factual resume, which provides, in part:  “[T]he prescriptions [Petitioner] wrote for L.M., D.P.[,] and J.E., were used by Cooper and other individuals (not [Petitioner]) to commit health care fraud . . . .”  IG Ex. 3 at 3 (¶ 4) (emphasis in P. Br. at 13).  He contends that he “was not aware of the healthcare fraud committed by [Cesario and Cooper] until April of 2015” and, accordingly, could not “be part of a fraud if he is not even aware of it and did not agree to take part in it.”  On this basis, Petitioner suggests that the IG cannot exclude him based on the fraudulent conduct of others.  P. Br. at 14.  However, this argument is foreclosed by the Goldenheim decision, which explained, “there is no requirement that [a petitioner has] been convicted of fraud to be excluded under section 1128(b)(1)[;]” accordingly, the “argument that the [IG has] wrongly imputed to [the petitioner] the fraudulent intent and conduct of other[s] . . . provides no basis to reverse the exclusion[].”  DAB No. 2268 at 12 n.8. 

Similarly, many appellate decisions of the DAB have concluded that “an offense could be related even if the individual did not personally engage in the scheme or was not aware of the scheme. . . .”  Scott D. Augustine, DAB No. 2043 (2006) (2006 WL 2751080 at *3) (emphasis added) (citing Lyle Kai, R.Ph., DAB No. 1979 (2005), aff’d sub nom. Kai v. Leavitt, Civ. No. 05‑00514 (D. Haw. 2006)).  The Kai decision held, “[T]he exclusion statute does not require any knowledge on the part of a petitioner of the relationship between the offense and the program but only that the factual relationship between the offense and the program exist.”  DAB No. 1979 (2005 WL 1540186 at *4) (citing Robert C. Greenwood, DAB No. 1423 at 5 (1993)); see also Ian C. Klein, D.P.M., DAB CR177

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at 5, 7 (1992) (contention that petitioner “was not the party who actually committed the act” was “irrelevant”).⁸  As such, Petitioner’s arguments that he did not himself engage in fraud or know of the scheme do not eliminate the basis for his exclusion.

Moreover, and contrary to Petitioner’s argument, I find the factual resume supporting Petitioner’s plea agreement demonstrates on its face that there is a nexus between Petitioner’s convictions and fraud.  Petitioner stipulated that the prescriptions he wrote were used in Cesario and Cooper’s fraud scheme.  IG Ex. 3 at 3 (¶ 4).  That is more than sufficient to demonstrate that the convictions are factually related to fraud within the meaning of section 1128(b)(1).

And, if the factual resume did not itself establish that Petitioner’s criminal conduct was factually related to fraud, I would be authorized to consider the facts laid out in the superseding indictments, notwithstanding Petitioner’s argument that the IG cannot exclude him based on “unproven accusations.”  See P. Br. at 14. Numerous appellate decisions have held that the basis for the federal exclusion authority need not appear in the charges or associated court documents, but may be demonstrated by extrinsic evidence of the underlying facts and circumstances of the offense.  See, e.g., Narendra M. Patel, M.D., DAB No. 1736 (2000) (2000 WL 1063716 at *7) (and cases there cited), aff’d, Patel v. Thompson, 319 F.3d 1317 (11th Cir. 2003).  Therefore, Petitioner is wrong when he argues that I may not rely on facts alleged in the superseding indictments to determine whether his conviction for wrongful disclosure of unique health identifiers is related to fraud.

Petitioner is equally incorrect to suggest that the superseding indictments are no more than “unproven accusations.”  P. Br. at 14.  As Petitioner himself admits, his codefendant Cooper was convicted of conspiracy to commit health care fraud and Cooper’s conviction was upheld on appeal.  P. Br. at 7; see also P. Exs. 8, 9.  Thus, the United States established beyond a reasonable doubt that Cooper conspired with others to defraud TRICARE.  See P. Ex. 9 at 9.  And in the factual resume, Petitioner stipulated that the prescriptions he wrote were used by Cooper and others to commit health care fraud.  IG Ex. 4.

For all these reasons, I find that there is a nexus or common sense connection between Petitioner’s criminal conduct giving rise to his misdemeanor conviction and fraud.

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3.  The misdemeanor criminal offense of misusing a unique health identifier was connected to the delivery of a health care item or service.

Section 1128(b)(1) of the Act requires that Petitioner’s offense be committed in connection with the delivery of a health care item or service.  Appellate decisions of the DAB have held that the phrase “in connection with the delivery of a health care item or service” is broad and requires the same common sense nexus which is required for an offense to be “related to the delivery of an item or service” under section 1128(a)(1) of the Act.  Kenneth M. Behr, DAB No. 1997 (2005) (2005 WL 2835001 at *4 n.5).  Such a connection is present when the offense occurs “in the context of an individual’s participation in the chain of delivery of health care items or services.”  Id. at 9.  This includes offenses which could not have been accomplished but for an individual’s position in the chain of delivery.  See Erik D. DeSimone, R.Ph., DAB No. 1932 (2004) (2004 WL 1764746 at *3).  Writing prescriptions for compounded medications is part of the chain of delivery for health care items and services.  I therefore conclude that Petitioner’s offense was related to the delivery of health care items or services.  Accordingly, I conclude that all elements required to support a permissive exclusion pursuant to section 1128(b)(1) of the Act are present and the IG had a basis to exclude Petitioner.  I next consider whether an eight-year exclusion is reasonable.

B.  The eight-year exclusion imposed by the IG falls outside a reasonable range.

Section 1128(c)(3)(D) of the Act provides that an exclusion imposed under section 1128(b)(1) of the Act will be for a period of three years, unless the Secretary determines in accordance with published regulations that a shorter period is appropriate because of mitigating circumstances, or that a longer period is appropriate because of aggravating circumstances.  42 C.F.R. § 1001.201(b).  Authorized aggravating and mitigating factors are listed in 42 C.F.R. § 1001.201(b)(2) and (3).  Only the mitigating factors authorized by 42 C.F.R. § 1001.201(b)(3) may be considered to reduce the period of exclusion.  A mitigating factor may justify a reduction in the three-year period of exclusion, but the regulations do not state that it must result in a downward adjustment or how significant such an adjustment should be.  42 C.F.R. § 1001.201(b)(3) (emphasis supplied).

1.  The IG alleged three aggravating factors supporting an exclusion period beyond the three-year benchmark; but the IG proved only two aggravating factors.

The regulations establish aggravating factors that the IG may consider to lengthen the period of exclusion beyond the three-year benchmark for a permissive exclusion.  42 C.F.R. § 1001.201(b)(2).  In this case, the IG’s notice letter advised Petitioner of three aggravating factors that justified excluding him for more than three years.  IG Ex. 1 at 2.

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These factors are listed in 42 C.F.R. § 1001.201(b)(2)(i), (iv), and (vii).  The IG has the burden to prove the existence of any aggravating factor by a preponderance of the evidence.  42 C.F.R. § 1005.15(b)(2), (d).  Some downward reduction in the period of exclusion is required if the IG fails to prove one of the alleged aggravating factors.  Gary Alan Katz, R.Ph., DAB No. 1842 (2002) (2002 WL 2031575 at *8).

a.  The acts that resulted in Petitioner’s conviction caused a loss of $50,000 or more to a government agency or program.

The IG argues that the acts resulting in Petitioner’s conviction caused financial loss to a government agency or program of over $50,000.  See 42 C.F.R. § 1001.201(b)(2)(i).  The IG relies on the fact that the federal district court sentenced Petitioner to pay $527,891.61 in restitution to the Defense Health Agency as a measure of the losses caused by Petitioner’s criminal conduct.  IG Br. at 10; see also IG Ex. 4 at 2.  This is the amount of restitution Petitioner agreed to pay as part of his plea agreement.  IG Ex. 2 at 4 (¶ 7).

Petitioner does not dispute that he paid restitution but he argues that the amount ordered as restitution does not correspond to any actual loss by a government agency.  P. Br. 18-19.  Instead, Petitioner argues that the amount is attributable to the loans Cesario and Cooper made to Petitioner’s business.  Id. at 19.  Petitioner’s arguments that his actions did not cause a loss to TRICARE and, even if there was a loss, the restitution order is not an accurate measure, amount to collateral attacks on his conviction.  See Yolanda Hamilton, M.D., DAB No. 3061 at 13 (2022).  Such collateral attacks are not permitted.  42 C.F.R. § 1001.2007(d).

Contrary to Petitioner’s arguments, I find that TRICARE, a government health care program, incurred an enormous financial loss due to the fraud scheme to which Petitioner’s criminal conviction relates.  The second superseding indictment charged under Count 1 (conspiracy to commit health care fraud) that the defendants and coconspirators caused TRICARE to lose more than $100 million.  IG Ex. 6 at 16 (¶ 49).  Petitioner’s codefendant Cooper was convicted of Count 1.  P. Ex. 8 at 1.  Petitioner’s argument that the dollar amount he paid in restitution does not precisely match the amount of loss charged in the second superseding indictment is irrelevant.  In setting the amount of restitution for which Petitioner would be responsible, the U.S. Attorney could reasonably determine that the funds Cesario and Cooper loaned to Petitioner were derived from their fraudulent scheme.⁹

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Restitution has long been considered a reasonable measure of program losses.  See, e.g., Laura Leyva, DAB No. 2704 at 9 (2016), aff’d, Leyva v. Price, No. 8:16-CV-1986-T-27AEP, 2017 WL 2880125 (M.D. Fla. Apr. 24, 2017).  Petitioner’s arguments to the contrary do not convince me otherwise.  Thus, as measured by the restitution for which he was held responsible, Petitioner’s actions resulted in program losses more than ten times greater than the $50,000 threshold for aggravation.  Because the financial losses were so far above the threshold amount for aggravation, the IG may justify a significant increase in Petitioner’s period of exclusion.  Juan de Leon, Jr., DAB No. 2533 at 5 (2013); see also Sushil Aniruddh Sheth, M.D., DAB No. 2491 at 7 (2012), appeal dismissed, Sheth v. Sebelius, No. 13-cv-00448 (BJR) (D.D.C. Oct. 22, 2013), aff’d, Sheth v. Burwell, No. 14‑5179, 2015 WL 3372286 (D.C. Cir. May 7, 2015); Jeremy Robinson, DAB No. 1905 at 12 (2004) (2004 WL 230865 at *8); Donald A. Burstein, Ph.D., DAB No. 1865 at 12 (2003) (2003 WL 1055659 at *7).

 

b.  The sentence imposed against Petitioner included a period of incarceration.

The IG asserted that Petitioner’s criminal conviction resulted in a sentence of incarceration.  IG Br. at 10; see also IG Ex. 5 at 2; 42 C.F.R. § 1001.201(b)(2)(iv).  The record shows that the federal district court sentenced Petitioner to nine months’ incarceration.  IG Ex. 5 at 2.  Petitioner does not dispute that he was incarcerated.  P. Br. at 19.  However, Petitioner points out that he served only 96 days, and not the full nine months.  Id. at 20.  The aggravating factor does not depend on the length of the period of incarceration, however.  For example, the appellate decision in Angelo D. Calabrese, M.D., observed that “incarceration of any length would constitute an aggravating factor.”  DAB No. 2744 at 7 (2016).  Indeed, other appellate decisions of the DAB have held that even alternative forms of incarceration may represent an aggravating factor.  See, e.g., Stacy Ann Battle, D.D.S., and Stacy Ann Battle, D.D.S., P.C., DAB No. 1843 at 7 (2002) (2002 WL 2031576 at *4) (stating that placement in a halfway house constituted incarceration, and that four months in a halfway house, followed by four months of home confinement, justified lengthening the exclusion period); Jason Hollady, M.D., a/k/a Jason Lynn Hollady, DAB No. 1855 at 12 (2002) (2002 WL 31599187 at *8) (characterizing a nine-month incarceration that included a period of work release as “more than a token incarceration and, in that sense, relatively substantial”).  Therefore, Petitioner’s incarceration, even for 96 days, establishes the presence of this aggravating factor. 

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c.  Petitioner’s surrender of his Utah medical license is not another adverse action within the meaning of 42 C.F.R. § 1001.201(b)(2)(vii).

Under the regulations, it is an aggravating factor if the excluded individual “has been the subject of any other adverse action by any Federal, State, or local government agency or board if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion.”  42 C.F.R. § 1001.201(b)(2)(vii).  The IG argues that Petitioner surrendered his medical license while a disciplinary proceeding was pending before the Utah Division of Occupational and Professional Licensing (Utah Licensing Division).  IG Br. at 11; see also IG Ex. 10; 42 C.F.R. § 1001.201(b)(2)(vii).  The IG offered as an exhibit a Stipulation and Order executed by Petitioner and the Utah Licensing Division which recites that Petitioner pleaded guilty to three misdemeanor violations of 42 U.S.C. § 1320d-6(a)(1) and (b)(1) in the federal district court.  IG Br. at 11; IG Ex. 10 at 3 (¶ 7.b).  On this basis, the IG contends that the aggravating factor is present in this case.  IG Br. at 11.

Petitioner agrees that he surrendered his Utah medical license.  P. Br. at 20.  However, Petitioner argues that the Stipulation and Order provides that the disposition was “not a finding of unprofessional or unlawful conduct, and it is not a disciplinary action against [Petitioner].”  Id.; see also IG Ex. 10 at 2 (¶ 6).¹⁰

The exclusion regulations do not include a definition of “adverse action.”  See 42 C.F.R. § 1001.2.  By arguing that Petitioner surrendered his license while a disciplinary proceeding was pending, the IG may be incorporating by reference the circumstance for exclusion found at 42 C.F.R. § 1001.501(a)(2).  That regulation authorizes the IG to exclude an individual who surrendered a license to provide health care “while a formal disciplinary proceeding concerning the individual’s . . . professional competence, professional performance[,] or financial integrity was pending before a State licensing authority.”  It is not clear to me that the term “adverse action” in 42 C.F.R. § 1001.201(b)(2)(vii) includes surrendering a license to provide health care.  However, even assuming for purposes of argument that a license surrender under the circumstances described in 42 C.F.R. § 1001.501(a)(2) is an adverse action for purposes of 42 C.F.R. § 1001.201(b)(2)(vii), the IG has not proven that Petitioner surrendered his license while a formal disciplinary proceeding was pending that concerned his professional competence, professional performance, or financial integrity.

Both the IG and Petitioner rely on the Stipulation and Order Petitioner executed with the Utah Licensing Division to support their arguments.  See IG Ex. 10; P. Ex. 13.  I infer from the Stipulation and Order that the Utah Licensing Division instituted some type of

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administrative proceeding against Petitioner’s license and that the Stipulation and Order represents the resolution of that matter.  Thus, I agree with the IG that “a formal . . . proceeding concerning [Petitioner’s] license . . . was pending” at the time Petitioner surrendered his license.  See 42 C.F.R. § 1001.501(a)(2); see also IG Br. at 11.  However, neither party offered a copy of the document by which the Utah Licensing Division commenced the administrative proceeding.  Further, the Stipulation and Order provides that it is not itself a disciplinary action or finding of unprofessional conduct against Petitioner.  IG Ex. 10 at 2 (¶ 6).  For these reasons I am unable to find by a preponderance of the evidence that the proceeding before the Utah Licensing Division was a disciplinary proceeding that concerned Petitioner’s professional competence, professional performance, or financial integrity.  Therefore, the IG has failed to prove this aggravating factor.

2.  Petitioner has not established any mitigating factors that could further reduce the period of exclusion. 

Where the IG has properly exercised her discretion to increase the exclusionary period, as she has done here, I may only reduce that period after considering the specific mitigating factors found at 42 C.F.R. § 1001.201(b)(3):

(i)   The individual or entity was convicted of three or fewer offenses and the entire amount of financial loss (both actual loss and reasonably expected loss) to a government agency or program or to other individuals or entities due to the acts that resulted in the conviction and similar acts is less than $5,000;

(ii)   The record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional, or physical condition, before or during the commission of the offense, that reduced the individual’s culpability; or

(iii)   The individual’s or entity’s cooperation with Federal or State officials resulted in—

(A) Others being convicted or excluded from Medicare, Medicaid or any of the other Federal health care programs, or

(B) Additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or

(C) The imposition of a civil money penalty against others; or

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(iv)   Alternative sources of the type of health care items or services furnished by the individual or entity are not available.

 

Petitioner has the burden to prove by a preponderance of the evidence that there is a mitigating factor for me to consider.  42 C.F.R. § 1005.15(b)(1).  Based on my review of the record, I conclude that Petitioner has failed to prove any mitigating factors that I am permitted to consider to reduce the period of his exclusion.

a.  Petitioner did not prove by a preponderance of the evidence that his cooperation with law enforcement resulted in others being convicted, excluded, or subject to civil money penalties. 

Petitioner argues that he cooperated with federal officials within the meaning of 42 C.F.R. § 1001.201(b)(3)(iii).  Petitioner describes his cooperation as follows:

[Petitioner] was one of the two Qui Tam relators who brought Defendants John Cooper and Richard Cesario and others’ health care fraud and violations of the federal Anti-Kickback Statute to the attention of federal authorities.  The Qui Tam Complaint provided substantial and extraordinary help to the federal government, as well as the interview that Dr. Simmons participated in.  As a result of [Petitioner’s] extraordinary cooperation, Defendants John Cooper, Richard Cesario, [and others] were either convicted or pled guilty to felonies involving health care fraud, and civil money penalties were imposed upon each of them in addition to incarceration.  Also, the federal government seized the assets of these Defendants and recovered substantial mitigation of the damages that they caused.

P. Br. at 21-22.  Petitioner has pointed to no authority for the proposition that the filing of a Qui Tam action (from which the relators stand to share in any financial recovery by the government) qualifies as cooperation under the exclusion regulations, and I am unaware of any such authority.

However, even if the filing of a Qui Tam complaint could, under some circumstances, represent cooperation with authorities, cooperation, standing alone is not sufficient to establish the mitigating factor.  The regulations raise “a high standard . . . . Mere cooperation is not enough to establish the mitigating factor; the cooperation must result in an investigation, conviction, or report.”  Begum v. Hargan, No. 16 CV 9624, 2017 WL 5624388, at *8 (N.D. Ill. Nov. 21 2017).

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Petitioner has the burden of proof to establish any mitigating factor.  42 C.F.R. § 1005.15(b)(1).  This means that it is Petitioner’s responsibility to locate and present evidence to substantiate both that he cooperated and that his cooperation resulted in others being investigated or convicted.  See Stacey R. Gale, DAB No. 1941 (2004) (2004 WL 2102882 at *6).  The IG does not have the responsibility to prove that a mitigating factor does not apply.  Id.  As the Gale decision explained, “[T]he I.G. does not have the responsibility to substantiate under the regulation that even though Petitioner may have cooperated with a state or federal official, that cooperation did not result in additional cases being investigated.  It is entirely Petitioner’s burden to demonstrate that . . .  cooperation with a state or federal official resulted in additional cases being investigated.”  Id.  Similarly, in the present case, it is entirely Petitioner’s burden to establish that his cooperation resulted in others being convicted.  Petitioner has failed to meet that burden.

Petitioner offered no evidence beyond a copy of the Qui Tam complaint in support of his contention that his cooperation resulted in others being convicted.  P. Ex. 4.  Petitioner’s bare assertions regarding the extent of his cooperation constitute argument, not evidence.  See P. Br. at 21-22.  Petitioner chose not to offer his own testimony under oath.  Id. at 23.  Nor did Petitioner offer any statements from prosecutors or investigators detailing his alleged cooperation and the results, if any.  I therefore find that Petitioner did not prove by a preponderance of the evidence that his cooperation resulted in others being convicted, excluded, or required to pay civil money penalties as is required to establish the mitigating factor under 42 C.F.R. § 1001.201(b)(3)(iii).

b.  Petitioner’s other arguments do not concern a mitigating factor recognized by the regulations.

Petitioner argues that the length of his exclusion is arbitrary and capricious because it is inconsistent with exclusions imposed in other cases.  P. Br. at 16-17.  In particular, Petitioner compares his exclusion to a five-year exclusion upheld by an administrative law judge in Nakia Palmer, DAB CR5626 (2020).  Id. at 17.  In making this argument, Petitioner relies on the decision of the D.C. Circuit in Friedman, which was decided in 2012.  Id. at 16.  I am not persuaded by this argument.

First of all, the length of exclusions imposed in other cases is not a mitigating factor under the regulations.  Second, even after Friedman was decided, many appellate decisions of the DAB have reiterated that comparing exclusion periods is not particularly helpful in assessing whether a given exclusion is reasonable.  See, e.g., Edwin L. Fuentes, DAB No. 2988 at 14 (2020).  These decisions take that position due in part to the varying mix of factors and wide range of relevant circumstances that may need to be considered in individual cases.  Id. (citing Karim Maghareh, Ph.D. and BestCare Laboratory Services, DAB No. 2919 at 28-29 (2018), appeal docketed, Maghareh v. Azar, No. 4:19-cv-238 (S.D. Tex. Jan. 22, 2019)) (such comparisons are “not controlling and of limited

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utility”); Michael D. Dinkel, DAB No. 2445, at 22 (2012), aff’d, Dinkel v. Sec’y, United States Dep’t of Health & Human Servs., No. 6:12-cv-00748 (M.D. Fla. Dec. 13, 2013).  For the reasons outlined in the Fuentes decision, I decline to compare the length of Petitioner’s exclusion to exclusions imposed or upheld in other cases.

Petitioner argues that the length of his exclusion “should be modified downwards to either zero or a length of time that is consistent with the lack of harm to patients and lack of financial damage to any federal payors.”  P. Br. at 17-18.  I disagree.  Because I have found that the IG has a basis to exclude Petitioner pursuant to section 1128(b)(1) of the Act, the regulations prohibit me from reducing the period of exclusion to zero.  42 C.F.R. § 1005.4(c)(6).  Further, the record before me is devoid of evidence as to whether Petitioner’s conduct had any effect on patient health, whether positive or negative.  Finally, I reject Petitioner’s attempts to minimize the seriousness of his convictions by contending that neither patients nor federal programs were victimized by his conduct.

3.  Based on the presence of two aggravating factors, rather than three, and no mitigating factors, an eight-year exclusion is not reasonable; instead, I find that a six-year exclusion is reasonable.

The IG has broad discretion in determining the length of an exclusion.  See, e.g., Hussein Awada, M.D., DAB No. 2788 at 6 (2017).  So long as the period of exclusion imposed by the IG is within a reasonable range, based on demonstrated criteria, I have no authority to change it.  Joann Fletcher Cash, DAB No. 1725 at 16‑17 (2000) (2000 WL 710697 at *10) (citing 57 Fed. Reg. 3298, 3321 (1992)); see also Jeremy Robinson, DAB No. 1905 at 5 (2004) (2004 WL 230865 at *3).  On the other hand, because I have found that the IG failed to prove one of the alleged aggravating factors, I must reduce the period of Petitioner’s exclusion to account for that.  Katz, DAB No. 1842 (2002 WL 2031575 at *8); see also Hollady, DAB No. 1855 (2002 WL 31599187 at *7).

Based on the record before me, I find that a six‑year exclusion falls within a reasonable range.  As described above, the record establishes the presence of two aggravating factors and does not establish the presence of any mitigating factor defined by the regulations.  See 42 C.F.R. § 1001.201(b)(2)(i), (iv), and (b)(3).

Pursuant to his guilty plea, the federal district court sentenced Petitioner to pay the Defense Health Agency $527,892.61 in restitution.  The amount of restitution is over ten times greater than the threshold for the aggravating factor.  Moreover, the fraud to which Petitioner’s criminal conviction related cost TRICARE over $100 million in losses.  The scope of the losses justifies treating this factor as an “extraordinary aggravating factor” justifying a significant increase in the length of Petitioner’s exclusion.  See Leyva, DAB No. 2704 at 10.  Given that TRICARE’s financial losses were so great and that Petitioner’s restitution was so significant, this factor justifies extending the period of exclusion by a substantial amount.

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In addition, Petitioner’s sentence included incarceration, which is an aggravating factor pursuant to 42 C.F.R. § 1001.201(b)(2)(iv).  Here, the federal district court sentenced Petitioner to incarceration for a term of nine months, pursuant to his guilty plea.  IG Ex. 5 at 2.  Petitioner’s sentence demonstrates that the federal district court found Petitioner’s conduct serious enough to warrant a period of incarceration.  While not as weighty as the aggravating factor for program losses, I nevertheless find that the factor of incarceration justifies an increase in the duration of Petitioner’s exclusion.

Given that the IG has proven two out of the three aggravating factors alleged and Petitioner has not proved any cognizable mitigating factor, I find that increasing the benchmark three-year exclusion by a further three years is reasonable.

V.  Conclusion

For the reasons stated above, I affirm the IG’s determination to exclude Petitioner from participating in Medicare, Medicaid, and all other federal health care programs for a reduced period of six years as permitted by section 1128(b)(1) and (c)(3)(D) of the Act (42 U.S.C. § 1320a-7(b)(1) and (c)(3)(D)) and 42 C.F.R. § 1001.201.

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Endnotes

¹ TRICARE is a health care program under which the United States Department of Defense provides health care coverage to military service members, retirees, and their families.  See, e.g., IG Exhibit (Ex.) 8 at 1 (¶ 1).

² The current version of the Social Security Act can be found at https://www.ssa.gov/OP_Home/ssact/ssact-toc.htm.  Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section.

³ The federal district court’s judgment was originally filed July 14, 2021.  IG Ex. 4 at 1.  The court later issued an amended judgment, filed July 26, 2021.  IG Ex. 5.  In the amended judgment, the court recommended Petitioner be incarcerated at a different correctional facility.  Compare IG Ex. 4 at 2 with IG Ex. 5 at 2. 

⁴ The Defense Health Agency is the military entity responsible for overseeing and administering TRICARE.  See, e.g.,IG Ex. 8 at 1-2 (¶ 1).  The court’s order made Petitioner liable for the restitution amount jointly and severally with Cesario, Cooper, and other named defendants.  IG Ex. 5 at 5.

⁵ P. Exs. 7 and 10-13 duplicate IG Exs. 8, 2, 3, 9, and 10, respectively.  As such, Petitioner’s duplicative exhibits are cumulative, and I could exclude them.  However, because Petitioner cites to the duplicative exhibits in his brief, I have admitted the exhibits in the interest of making a complete record.  

⁶ August 21, 1996 is the date of enactment of the Health Insurance Portability and Accountability Act of 1996.  110 Stat. 1936; see also 42 C.F.R. § 1001.101(d). 

⁷ Wrongful disclosure of a unique health identifier is a misdemeanor offense because it is punishable by a prison term of one year or less.  42 U.S.C. § 1320d-6(b)(1); see also 18 U.S.C. § 3559(a).

⁸ While the cited cases interpret the phrase “related to” as it appears in section 1128(a)(1), the same interpretation applies to section 1128(b)(1).  Goldenheim, DAB No. 2268 at 12; see also Richard E. Bohner, DAB No. 2638 at 10 (2015), aff’d, Bohner v. Burwell, No. 2:15‑cv‑4088, 2016 WL 8716339 (E.D. Pa. Dec. 2, 2016). 

⁹ It is also possible that the U.S. Attorney viewed the loan payments as a quid pro quo for Petitioner’s writing the prescriptions for which he was convicted.  Petitioner objects that he had already repaid the loan amounts, so the restitution order essentially required him to pay twice.  P. Br. at 19.  This is immaterial, however, because whether the amount is viewed as restitution or disgorgement, either can be a measure of program loss.  Goldenheim, DAB No. 2268 at 24. 

¹⁰ Petitioner also offered a copy of the Stipulation and Order as P. Ex. 13.