Myers v. Secretary of Health and Human Services

• Citation: 893 F.2d 840
• Decision Date: 11 January 1990
• Docket Number: No. 89-5337,89-5337
• Parties: , Medicare&Medicaid Gu 38,344 Lawson H. MYERS, III; Millie Boaz Myers; Robert W. Simms, Co-Executors of the Estate of Lawson H. Myers, Jr.; and Boaz Hospital Supply Company, Inc., Plaintiffs-Appellants, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 840

893 F.2d 840

28 Soc.Sec.Rep.Ser. 265, Medicare&Medicaid Gu 38,344

Lawson H. MYERS, III; Millie Boaz Myers; Robert W. Simms Co-Executors of the Estate of Lawson H. Myers Jr.; and Boaz Hospital Supply Company Inc., Plaintiffs-Appellants, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellee.

No. 89-5337.

United States Court of Appeals Sixth Circuit.

Argued Nov. 30, 1989.

Decided Jan. 11, 1990.

E.W. Rivers (argued), Paducah, Ky., for plaintiffs-appellants.

Joseph M. Whittle, U.S. Atty., Michael F. Spalding, Asst. U.S. Atty., Louisville, Ky., Bruce Granger, F. Richard Waitsman (argued), Dept. of Health and Human Services, Office of General Counsel, Atlanta, Ga., for defendant-appellee.

Before: MILBURN and GUY, Circuit Judges; and LIVELY, Senior Circuit Judge.

MILBURN, Circuit Judge.

Lawson H. Myers, III, Millie Boaz Myers, Robert W. Simms, and Boaz Hospital Supply Company, Inc. ("appellants") appeal the judgment of the district court dismissing their action challenging the decision of the Secretary of Health and Human Services ("Secretary") to exclude all items and services provided by appellants from coverage under the Medicare program for a period of two years. For the reasons that follow, we affirm.

I.

Appellants were in the business of providing medical supplies and services in the Commonwealth of Kentucky, and utilized the Medicare program to collect payments. On May 11, 1978, appellants were indicted in the United States District Court for the Western District of Kentucky on 170 counts of violating Title XVIII of the Social Security Act, 42 U.S.C. Sec. 1395nn. ¹ The indictment charged appellants with knowingly and willfully making and causing to be made false, fictitious, and fraudulent statements and representations of material facts in applications for payment under the Medicare program.

On June 29, 1978, the individual appellants changed their plea from not guilty to nolo contendere to 22 counts in the indictment. The corporation also pleaded nolo contendere to one count and was fined $500, with a nolle prosequi entered as to all other counts. The individual appellants were sentenced to one year as to each of the 22 counts, with a nolle prosequi entered as to all other counts. However, the sentences were suspended, and the individual appellants were placed on probation for two years and fined $2,000.

On August 29, 1979, appellants were notified by the Health Care Financing Administration ("HCFA") of a proposal to exclude them from participation in the Medicare program for a period of two years. Appellants were informed that the action was proposed because they had "knowingly made or caused to be made false statements and misrepresentations of material facts in application for the payment of Medicare benefits for the purpose of causing payments to be made under Title XVIII of the [Social Security] Act." The proposed exclusion was authorized by section 1862(d)(1)(A) of the Act, 42 U.S.C. Sec. 1395y(d)(1)(A). ² Appellants were notified on November 4, 1980, of the HCFA's determination to exclude all items and services provided by them from coverage under the Medicare program for a period of two years.

On November 14, 1980, appellants requested a hearing on the HCFA's decision to exclude them from the Medicare program. A hearing was held before an administrative law judge ("ALJ") on April 22, 1981, at which Robert Foster, an HCFA employee, and appellant Lawson H. Myers, III, testified. Lawson Myers, Jr., did not testify and did not submit an affidavit. On December 1, 1981, the ALJ issued a decision affirming the HCFA's determination to exclude appellants from the Medicare program for a period of two years. On February 6, 1986, the Appeals Council affirmed the two-year suspension, finding the ALJ's decision was supported by substantial evidence.

On April 2, 1986, appellants filed this action in the district court to obtain judicial review of the Secretary's decision. ³ The secretary moved to dismiss the action as moot since the two-year exclusion had expired and appellants could be readmitted to the Medicare Program by reapplying. On December 31, 1986, the district court denied the Secretary's motion, rejected the magistrate's recommendation of dismissal, and recommitted the case to the magistrate for a recommendation on the merits of the case.

On June 14, 1988, the magistrate recommended the action be dismissed because the Secretary's decision was supported by substantial evidence. On August 31, 1988, the district court issued an opinion and order adopting the magistrate's recommendation and dismissing the case. Appellants filed a motion for reconsideration, which the district court overruled by an order entered on January 17, 1989. This timely appeal followed.

The principal issues on appeal are (1) whether a conviction pursuant to a plea of nolo contendere is admissible in an administrative proceeding; (2) whether substantial evidence supports the Secretary's decision; and (3) whether the ALJ erroneously admitted hearsay evidence.

II.

The standard of review applicable to this case is whether the Secretary's decision to exclude appellants is supported by substantial evidence. Garner v. Heckler, 745 F.2d 383, 387 (6th Cir.1984); 42 U.S.C. Sec. 405(g). Substantial evidence is defined as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938)). In our review, we do not consider the case de novo, nor resolve conflicts in the evidence, nor decide questions of credibility. Garner, 745 F.2d at 387.

A.

Appellants first argue the Secretary erred by excluding them from the Medicare program on the basis of their convictions following pleas of nolo contendere. Appellants' argument presents two issues: (1) whether a criminal conviction, after a plea of nolo contendere, is admissible evidence in an administrative proceeding pursuant to 42 U.S.C. Sec. 1395y(d)(1)(A); and (2) whether a conviction pursuant to 42 U.S.C. Sec. 1395nn is sufficient to warrant exclusion from the Medicare program under 42 U.S.C. Sec. 1395y(d)(1)(A).

Citing United States v. Graham, 325 F.2d 922, 928 (6th Cir.1963), appellants argue that neither a plea of nolo contendere nor a conviction resulting therefrom is admissible evidence to prove guilt in another proceeding. Appellants' reliance upon Graham is misplaced because the nolo contendere pleas and subsequent convictions in this case were not used to prove guilt. Rather, the nolo pleas and convictions were used to disqualify appellants from participating in the Medicare program.

Appellants argued in the district court that the Federal Rules of Evidence and the Federal Rules of Criminal Procedure make a plea of nolo contendere, and subsequent conviction, inadmissible in an administrative proceeding. Appellants argue there is a narrow exception to the rule precluding use of a conviction pursuant to a plea of nolo contendere in a subsequent proceeding which applies only where a statute or judicial rule attaches legal consequences to the fact of a conviction. Appellants concede that in such a case, courts have held there is no valid distinction between a conviction upon a plea of nolo contendere and a conviction after a guilty plea or trial. See Pearce v. United States Department of Justice, Drug Enforcement Admin., 867 F.2d 253 (6th Cir.1988); Noell v. Bensinger, 586 F.2d 554 (5th Cir.1978); Qureshi v. Immigration and Naturalization Service, 519 F.2d 1174 (5th Cir.1975); Sokoloff v. Saxbe, 501 F.2d 571, 574-75 (2d Cir.1974). In each of those cases, a statute authorized action to be taken upon the finding of a "conviction." For example, in Pearce and Noell, the Drug Enforcement Administration ("DEA") used convictions entered after pleas of nolo contendere to revoke a physician's certification of registration to dispense drugs. The DEA's action was taken pursuant to 21 U.S.C. Sec. 824(a)(2), which authorizes revocation of registration upon a finding that the registrant has been convicted of a felony. In both cases, the courts held that the term "conviction" in the statute included a conviction upon a plea of nolo contendere. Pearce, 867 F.2d at 255-56; Noell, 586 F.2d at 556-57.

Appellants argue that this case does not fit the narrow exception to the rule against subsequent use of a nolo contendere conviction because the applicable statute does not give force to the fact of any conviction. Appellants point out that section 1395y(d)(1)(A) does not authorize suspension from the Medicare program upon the finding of a conviction. Rather, appellants argue that the statute requires a finding that the appellants acted "knowingly and willfully" in submitting false Medicare claims. Thus, unlike the statute in Sokoloff and Noell, section 1395y(d)(1)(A) requires proof of facts underlying a conviction, not proof of the fact of conviction. In sum, appellants argue that since the statute does not attach legal consequences to the fact of a conviction, the nolo contendere conviction is inadmissible.

We reject appellants' argument. Although appellants do not cite Fed.R.Crim.P. 11(e)(6) or Fed.R.Evid. 410 on appeal, their argument regarding the general rule against use of a nolo contendere plea and conviction in subsequent proceedings is based on these rules. These two rules do not preclude use of a nolo contendere conviction in an administrative proceeding. First, the rules prohibit use of "a plea of nolo contendere," not a conviction pursuant to a nolo plea. Second, the rules prohibit use of a nolo plea "in any civil or criminal proceeding," not in an administrative proceeding. Moreover, at a hearing on the Secretary's determination to exclude a participant from the Medicare program pursuant to section 1395y(d)(1)(A), "[e]vidence may be received ......