Exclusion Law

Exclusion from Medicare and Medicaid (and all Federally funded health programs) is a serious penalty.

The Department of Health and Human Services, Departmental Appeals Board, Civil Remedies Division, publishes its decisions, and from these it is possible to ferret out a few rules of the road.

There is a great variety of cases leading to exclusion.  A surprising number involve fines against convenience stores that sell cigarettes to minors.  Many concern doctors or registered nurses who are excluded from Medicare and Medicaid because of loss or suspension of their license in the state where they work.  A number of cases involve health care providers who argue the number of years for exclusion is too great.

Sadly, there are all too many cases of Skilled Nursing Facilities being fined or shut down because of abuse of their patients, usually helpless elders.  It was a shock to see how many suppliers of medical equipment are kicked out of the program because on the day an inspector showed up, they were not open during their posted hours.

The harshest penalties come from those excluded because of being convicted of a felony.  These include actions such as “unlawful manufacture, distribution, prescription, or dispensing of a controlled substance” Baldwin Ihenacho, DAB CR4002 (2015); five years exclusion for “criminal sale of a prescription for a controlled substance” (the narcotic PercocetShaikh M. Hasan, M.D., DAB CR3663 (2015) or forging prescriptions for narcotics Marcie A. Conlon, DAB CR3338 (2014) or “unlawfully writing multiple prescriptions for Oxycodone in exchange for direct cash payments of $200 per prescription.” Jose C. Menendez Campos, M.D., DAB CR2923 (2013).

From these various cases, it is possible to derive a number of lessons regarding the administrative law and how it is applied to the facts.

Nolo Contendere

A plea and acceptance by the court of nolo contendere to an offense qualifies as “convicted” within the meaning of section 1128 of the Act, thus triggering mandatory exclusion.  Gustavo E. Borjas, DAB CR3334 (2014) (solicitation to purchase cocaine)

“Good Faith” Billing Mistakes or Reliance on Billing Expert

No excuse allowed.  Proof of culpability is not needed to justify revocation under 42 C.F.R. Sec 424.535(a)(8).  Louis J. Gaefke, D.P.M., DAB No. 24554 at 5-6 (2013).  “On its face 42 C.F.R. § 424.535(a)(8) does not distinguish between false claims that are filed accidentally and those that are fraudulent or filed with willful disregard of their truth.”  Access Foot Care, Inc./Robert Metnick, D.P.M., DAB CR4113, at 3, (2015).

Community Service and Character References

Some attempt to get their penalties reduced by showing they are well respected, or service special communities.  No go.  This information is irrelevant.  See George John Schulte, DAB CR3667 at 3, (2015) “The regulations require me to exclude irrelevant or immaterial evidence from the record.  . . .  the only issues I may decide in this case are whether the IG had a basis for excluding Petitioner and, if so, whether the length of exclusion imposed is not unreasonable. . . .  letters concerning Petitioner’s character, are not relevant.” See also Dinesh R. Patel, M.D., DAB CR3355, at 2, (2014) (community service of doctor is not relevant).

Payment of Restitution

Many bring up that they have paid restitution for the problem, and suggest this is a mitigating factor.  No go. “[R]egulations direct me to consider the entire amount of financial loss ‘regardless of whether full or partial restitution has been made.’ 42 C.F.R. § 1001.102(b)(1).”  Donald Kent Blaine, DAB CR3427, at 3, (2014).


Documents containing hearsay may be included in hearings, which are not bound by Federal Rules of Evidence.  There is no automatic hearsay exclusion rule. Karen R. Morgan, DAB CR3331, at 2, (2014).

Mitigating Factors

The wrong-doer has passed away; the company paid restitution; the company needs to continue operating in order to pay off the penalty.   None of these are considered mitigating factors. 42 C.F.R. § 1001.102(c).” Kirpa, LLC, DAB CR3247, at 4, (2014) (emphasis added) 

There are a number of interesting features in the litigation of the Departmental Appeals Board.   This blog post was meant to give you a taste of a few interesting features in this unique environment.

John Balko & Associates d/b/a Senior Healthcare Associates v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services

John Balko & Associates operates Senior Healthcare Associates (SHA)and is located in Hermitage, Pennsylvania.    The company was audited and received a demand letter for approximately $680,000 dollars.  The case went through a number of appeals and eventually the Medicare Appeals Council (MAC) ruling was appealed for review by a Federal District Court.

This is a case filed April 30, 2012 in the United States District Court for the Western District of Pennsylvania.  (The PACER number is Case 2:12-cv-00572-AJS)  The case went through several stages prior to being appealed.  (See figure.)


Source: Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment, files 12/28/2012, and Barraclough analysis.

A number of arguments were made that established clearly that the statistical work was faulty, and from a scientific point of view was completely invalid.

BALKO_ARGUMENTS_1.001BALKO_ARGUMENTS_2.001Arthur J. Schwab the United States District Judge wrote in his opinion “Balko is not entitled to the best possible statistical sample of claims that it submitted . . . Instead, Balko is only entitled to a statistically valid random sample.”  (Memorandum Opinion, p. 23.)

Question:  Is a “statistical valid random sample” one that is so poor that it lacks any scientific credibility?

What has happened in this case does not bode well for health care providers.   Here, statistical work that is demonstrably faulty and inferior and definitely not scientifically valid has been signed off on by the Medicare Appeals Council (MAC), and by the Federal Court that reviewed the case.

This type of sloppy scientific work never would be accepted in any other type of case before a Federal Court in which scientific evidence is evaluated in conformity with Rule 702 “Testimony by Expert Witnesses” of the Federal Rules of Evidence.   The question is why is this type of poor and inadequate scientific work OK for audits of health care providers but not OK anywhere else?

Barraclough NY LLC supplies experts for litigation support in Medicare and Medicaid appeals cases.

Documents reviewed:

John Balko & Associates d/b/a Senior Healthcare Associates, Plaintiff, v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services, defendant. United States District Court for the Western District of Pennsylvania.  Case 2:12-cv-00572-AJS.

  1. Complaint (Filed 04/30/12)
  2. Answer to Complaint (Filed 08/20/2012)
  3. Brief in Support of Motion [for Summary Judgment] (Filed 11/15/2012)
  4. Brief in Opposition to Motion (Filed 12/04/12)
  5. Concise Statement of Material Facts (filed 11/16/12)
  6. Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment (Filed 12/28/2012)
  7. Judgment (Filed 04/08/14)
  8. Opinion of the Court (Filed 02/12/2014)

Note: There is another write-up of this ruling by Paige Fillingame at King & Spalding LLP with a free link to the ruling.


In Statistical Extrapolations, “Precision Not Required” by Medicare Appeals Council (MAC)

The case of Michael King, M.D. and Kinston Medical Specialists, P.A. before the Department of Health and Human Services, Departmental Appeals Board, Medicare Appeals Council (MAC), Docket M-10-321 offers one of the most distressing cases of acceptance of an unreliable statistical extrapolation.


 Of particular note in this case is how the precision changed as the case moved from the original sampling through the Qualified Independent Contractor QIC reconsideration until after the Administrative Law Judge (ALJ) decision.

MAC_KING_PRECISION.001Another way to see this is to examine the range of precision allowed by the MPIM and that accepted in this case by the MAC.

MAC_KING_PRECISION_RANGE.001At Barraclough, we have been involved in a number of Medicare appeals, and unfortunately, we must report to you that this case is not atypical.

In our view, the type of statistical work routinely accepted by the Medicare Appeals Council (MAC) does not meet Federal Evidence Standards Rule 702Testimony by Expert Witnesses“.

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

So here is our question:  Is =/- 40% a case of “reliably applied”?