What is the Scope of a Mandatory Exclusion Brought Under Section 1128(a)(4) of the Social Security Act (Act)?
(December 22nd, 2020): The Department of Health and Human Services (HHS), Office of Inspector General (OIG) exercises both mandatory and permissive exclusion authority with respect to Federal health care programs. In a recent New York case, the OIG was required by law to mandatorily exclude an individual for a minimum of five years due to her recent prosecution and guilty plea to a State felony in a controlled substances diversion case. While the facts in this case are relatively routine, there are a number of important points that are addressed in the petitioner’s appeal of the OIG exclusion action. This article examines those points.
I. Background Facts:
“[a] person is guilty of criminal possession of a controlled substance in the fourth degree when he knowingly and unlawfully possesses…one or more preparations, compounds, mixtures, or substances containing a narcotic drug and said preparations, compounds, mixtures, or substances are of an aggregate weight of one-eighth ounce or more.” 
II. Impact of a State Conviction on an Individual’s Exclusion Status:
Mandatory Exclusion Provisions
Social Security Act Section
42 U.S.C. Section
Conviction of Program-Related Crimes. Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under subchapter XVIII or under any State health care program.
Conviction Relating to Patient Abuse. Any 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
Felony Conviction Relating to Health Care Fraud. Any individual or entity that has 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 (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, 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.
Felony Conviction Relating to a Controlled Substance. Any individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law, of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.
Conviction of Two Mandatory Exclusion Offenses.
Conviction on Three or More Occasions of Mandatory Exclusion Offenses.
Failure to Meet its Obligations Under the Physician Shortage Area Scholarship Program or repay Health Education Assistance Loans (HEAL).
III. Collateral Attacks on an Underlying Conviction are Not Permitted:
“(d) When the exclusion is based on the existence of a criminal conviction or a civil judgment imposing liability by Federal, State or local court, a determination by another Government agency, or any other prior determination where the facts were adjudicated and a final decision was made, the basis for the underlying conviction, civil judgment or determination is not reviewable and the individual or entity may not collaterally attack it either on substantive or procedural grounds in this appeal.”
IV. What Does it Mean for a Conviction to be Related to the Manufacture, Distribution, Prescription, or Dispensing of a Controlled Substance?
In presenting her case, the Petitioner also argued that her felony plea and conviction for possession of a controlled substance did not constitute a ”felony related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.” The ALJ hearing this case disagreed with the Petitioner’s position in this regard and upheld the exclusion action taken by the OIG. In taking this action, the OIG predicated the exclusion on the fact that the Petitioner’s conviction related to the unlawful prescription and dispensing of a controlled substance, one of elements laid out under section 1128(a)(4).
V. The OIG’s Delay in Imposing a Mandatory Exclusion Action is of no Consequence and Presents no Defense for Petitioner:
As the ALJ decision reflects, the Petitioner allegedly falsified the prescriptions for controlled substances during the period April 2009 through December 2010. Her conduct resulted in her conviction in May 2011 but the OIG allegedly did not notify Petitioner of her exclusion from the Medicare, Medicaid and other Federal health care program until August 2015. Petitioner argued that the effective date of her exclusion should be moved to an earlier date. In response, the OIG argued that “there is no statutory or regulatory requirement to impose exclusion within a specific timeframe following conviction, and that in any case, [the ALJ has] no authority to adjust the effective date of Petitioner’s exclusion.” While sympathetic to the Petitioner’s position, the ALJ noted that under the Social Security Act, he has no authority to modify the effective date of an exclusion imposed by the OIG.
VI. The Standard of Review Applied by the Departmental Appeals Board (DAB) Makes it Difficult to Overturn an ALJ Decision:
When reviewing an ALJ decision, the standard of review that the DAB must apply is whether the ALJ decision is supported by substantial evidence in the record as a whole. You may ask “What constitutes substantial evidence? As it turns out, meeting this standard isn’t difficult for the government. Substantial evidence has been defined as “more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”
VII. Final Thoughts Regarding Section 1128(a)(4):
Individuals and entities should expect the OIG to interpret its mandatory exclusion obligations broadly under Section 1128(a). Moreover, on appeal a Petitioner will likely find that administrative panels will look for any common sense connection between an individual’s criminal conduct and the exclusion statute.
 For a detailed look into the OIG exclusion process, please see our article, “A Provider’s Guide to OIG Exclusions,” by Paul Weidenfeld.
“(h) The standard of review on a disputed issue of fact is whether the initial decision is supported by substantial evidence on the whole record. The standard of review on a disputed issue of law is whether the initial decision is erroneous.”