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In re Suspension or Revocation of the License Issued to Zahl

April 26, 2006

IN THE MATTER OF THE SUSPENSION OR REVOCATION OF THE LICENSE ISSUED TO KENNETH ZAHL, M.D. LICENSE NO. MA56413 TO PRACTICE MEDICINE AND SURGERY IN THE STATE OF NEW JERSEY


SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Kenneth Zahl is a board-certified anesthesiologist. Over a number of years and under varying circumstances Zahl over-billed Medicare, retained duplicate payments from his patient's insurance company, made misrepresentations to is own disability carrier, and inserted his colleagues' names into patient records for patients they did not treat. In the summer of 1999, the Attorney General filed an eight-count complaint against Zahl with the New Jersey State Board of Medical Examiners. The Board transferred the case to the Office of Administrative Law. An Administrative Law Judge (ALJ) ordered the revocation of Zahl's medical license, fined him $35,000 in civil penalties, required Zahl to reimburse an insurance carrier for $1,700 and assessed the State's litigation costs against Zahl. The Board affirmed, finding that Zahl had willfully engaged in numerous dishonest acts over the course of years, including Medicare and insurance fraud and maintaining improper patient records. The Board also ordered Zahl to pay costs totaling $232,694.36, which includes investigative costs, expert witness fees, transcript fees, and attorneys' fees.

On Zahl's appeal, the Appellate Division affirmed the Board's factual findings but remanded the matter for reconsideration of the license revocation penalty. This Court granted the Board's petition for certification.

HELD: The Board was within the bounds of its statutory authority and discretion in concluding that the panoply of dishonest acts committed by Zahl warrants the revocation of his license.

1. The Medical Practices Act (MPA) vests the Board with broad authority to regulate the practice of medicine in the State. The Uniform Enforcement Act (UEA) was enacted to create uniform standards for disciplinary proceedings by professional and occupational licensing boards. The UEA, which works in tandem with the MPA, also grants the Board disciplinary powers over medical licensees which include the power to revoke the medical license of a physician on proof that the physician committed certain acts of misconduct. (pp. 15-16)

2. Our appellate review of an agency's choice of sanction is limited. The Court will modify a sanction only when necessary to bring the agency's action into conformity with its delegated authority. It can interpose its views only where it is satisfied that the agency has mistakenly exercised its discretion or misperceived its own statutory authority. The test in reviewing administrative sanctions is whether such punishment is so disproportionate to the offense, in light of all the circumstances, as to be shocking to one's sense of fairness. (pp. 17-18)

3. Applying those principles of deference to the facts of this appeal, we hold that the Board was within the bounds of its discretion in concluding that the panoply of dishonest acts committed by Zahl warrants the revocation of his license. Under N.J.S.A. 45:1-21(b), dishonesty is a sufficient basis to justify license revocation. (pp. 18-19)

4. Because an occupational license is a property right, albeit one that is subject to substantial government regulation, the Board, when exercising its disciplinary authority, must consider mitigating factors. The Board afforded Zahl a hearing at which numerous witnesses offered mitigating testimony on Zahl's behalf. The Board considered the evidence and found that evidence did not alter the fact that Zahl's misconduct shows him to be a fundamentally corrupt and dishonest licensee, that Zahl's dishonest and deceptive conduct was so extreme as to be inimical to the practice of medicine, necessitating the revocation of his license. (pp. 20-22)

5. Zahl argues that because the Board did not adequately consider the lack of patient harm, the penalty of revocation is disproportionate to his misconduct. The Board did not rest its penalty determination on Zahl's fraudulent conduct in a vacuum. The Board stated that it was affording particular deference to the ALJ's credibility judgment in respect of Zahl's shifting and inconsistent testimony. Observing Zahl over the course of a seven-day hearing, the ALJ found that he lacked remorse and continued to exhibit a sense of entitlement to the fraudulently obtained funds. As an appellate tribunal, we, too defer to those credibility and character judgments. (p.23)

The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Board for revocation of Zahl's license.

CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE, and RIVERA-SOTO join in JUSTICE ZAZZALI's opinion.

The opinion of the court was delivered by: Justice Zazzali

Argued March 6, 2006

In this matter, the New Jersey State Board of Medical Examiners (Board) petitions the Court to restore the Board's order revoking the medical license of Kenneth Zahl. The Board found that Zahl, a physician specializing in anesthesiology, willfully engaged in numerous dishonest acts over a course of years, including Medicare and insurance fraud and maintaining improper patient records. The Appellate Division reversed the Board's penalty, concluding that license revocation is unduly harsh in view of the absence of patient harm. We hold that the Board was within the bounds of its statutory authority and discretion in revoking Zahl's license after the Board found Zahl to be a "fundamentally corrupt licensee." We therefore reverse the Appellate Division decision and reinstate the Board's order.

I.

A.

Kenneth Zahl obtained his medical degree from Columbia University Medical School in 1981. He then completed his residency in anesthesiology at the University of Pennsylvania and became a board-certified anesthesiologist in 1986, receiving additional qualifications in the specialty of pain medicine soon thereafter. In 1993, Zahl founded Ambulatory Anesthesia of New Jersey (AANJ), a pain management and anesthesiology practice of which he was the sole shareholder and officer. From 1993 to 1998, AANJ had a contract with the Ridgedale Surgical Center to provide basic anesthesia services, primarily assisting the Center with cataract removals and interlocular lens implants. During that time period, Zahl hired a series of anesthesiologists to assist him.

In the summer of 1999, the Attorney General filed a complaint against Zahl with the Board, seeking revocation of his license. The eight-count complaint alleges that Zahl committed various acts of misconduct, including "dishonesty, fraud, deception, misrepresentation, false promise or false pretense," in violation of N.J.S.A. 45:1-21(b); gross and repeated acts of negligence and malpractice, in violation of N.J.S.A. 45:1-21(c) and (d); "professional or occupational misconduct," in violation of N.J.S.A. 45:1-21(e); the creation of false patient records, in violation of N.J.S.A. 45:1-21(h) and N.J.A.C. 13:35-6.5(b); and failure to maintain good moral character, in violation of N.J.S.A. 45:9-6. None of the allegations in the complaint, however, relate to the safety or quality of patient care rendered by Zahl.

The Attorney General petitioned the Board for summary decision on all counts of the complaint, but the Board denied that motion and transferred the case to the Office of Administrative Law. An Administrative Law Judge (ALJ) ultimately ordered revocation of Zahl's medical license, which the Board affirmed. To aid us in the review of the propriety of the Board's penalty, we now set forth the details surrounding Zahl's misconduct, as alleged in the complaint and found by the ALJ and the Board.

The eight counts in the complaint relate to five general areas of wrongdoing. First, the complaint alleges that Zahl submitted eighty-eight claims with overlapping time periods to the federal Medicare program for payment of medical services he rendered in violation of federal Medicare billing guidelines. The complaint states that by ...


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