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                              Pacific Diagnostic, Inc., DAB CR6372 (2023)
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Pacific Diagnostic, Inc., DAB CR6372 (2023)








  
  
    

  
      
Department of Health and Human Services 
    DEPARTMENTAL APPEALS BOARD
          Civil Remedies Division





Pacific Diagnostic, Inc.
(NPI: 1679228316),
Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-23-416Decision No. CR6372October 13, 2023

        
              
    

      DECISION

The Centers for Medicare & Medicaid Services (CMS), through its Medicare administrative contractor, Palmetto GBA (Palmetto), denied the Medicare enrollment application of Pacific Diagnostics, Inc., d/b/a Oceanside Rx (Petitioner), a supplier of Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) pursuant to 42 C.F.R. § 424.530(a)(5), based on its failure to meet conditions of enrollment found at 42 C.F.R. § 424.57.  This decision affirms the denial of Petitioner’s Medicare enrollment application by Palmetto because Petitioner did not meet the requisite conditions of enrollment.

I.    Background and Procedural History

On October 14, 2022, Petitioner submitted a Medicare enrollment application to enroll as supplier of DMEPOS products.  CMS Ex. 3.  Petitioner’s application was denied by Palmetto on December 1, 2022.  CMS. Ex. 7.  On March 28, 2023, Palmetto issued a reconsidered determination, which decided unfavorably on Petitioner’s reconsideration request.  CMS Ex. 1.  Petitioner timely requested a hearing before an administrative law judge on April 20, 2023.  The case was assigned to me, and the Civil Remedies Division

Page 2

issued my Acknowledgment and Standing Prehearing Order dated April 21, 2023 (Prehearing Order).  The Prehearing Order directed each party to file a prehearing exchange consisting of a brief and any supporting documents.  Prehearing Order ¶ 6.  CMS filed a brief (CMS Br.), including a motion for summary judgment, and eight proposed exhibits (CMS Exs. 1-8).  Petitioner filed a brief and opposition to motion for summary judgment (P. Br.).  Petitioner did not file any exhibits, but joined and adopted CMS Exs. 1-7.  Absent objection, CMS Exs. 1-8 are admitted into evidence.

Neither party proposed witnesses.  Therefore, no hearing is necessary, and this matter will be decided based upon the written record, without regard to whether the standards for summary judgment are met.  Prehearing Order ¶ 12; Civil Remedies Division Procedures ¶ 19(d).

II.    Jurisdiction

This tribunal has the authority to hear and decide this matter.  42 U.S.C. § 1395cc(j)(8); 42 C.F.R. §§ 424.545(a), 498.1(g), 498.3(b)(17), 498.5(*l*)(2).

III.    Issue

Whether CMS has a legitimate basis to deny Petitioner’s Medicare enrollment as a DMEPOS supplier under 42 C.F.R. § 424.530(a)(5).

IV.    Legal Authorities

To receive Medicare payments for items furnished to a Medicare-eligible beneficiary, a supplier, such as Petitioner, must be enrolled in the Medicare program and must have a supplier number issued by the Secretary of Health and Human Services.  Social Security Act § 1834(j)(1)(A); 42 C.F.R. § 424.505.  To obtain and maintain that number, the supplier must be operational and in compliance with the supplier enrollment standards set forth in 42 C.F.R. § 424.57(c).  CMS may deny the DMEPOS supplier billing privileges if it fails to meet these standards.  42 C.F.R. § 424.530(a)(1), (5).

A DMEPOS supplier must maintain a physical facility on an appropriate site.  Among other requirements, the location must be accessible to the public, Medicare beneficiaries, CMS, CMS contractors, and agents of CMS and CMS contractors.  The facility must be staffed during posted hours of operation, with a visible sign which posts the hours of operation.  42 C.F.R. § 424.57(c)(7).

CMS may conduct on-site reviews to determine compliance with Medicare enrollment requirements.  42 C.F.R. § 424.517(a).  The regulations provide that CMS may deny an application for enrollment in the Medicare program if it is determined that the provider or supplier is not operational to furnish Medicare covered items or services or if the supplier

Page 3

otherwise fails to satisfy any Medicare enrollment requirement.  42 C.F.R. § 454.530(a)(5).

V.    Findings of Fact

Petitioner is a California-based company specializing in supplying DMEPOS products.  On October 14, 2022, Petitioner submitted an application to enroll in the Medicare program as a DMEPOS supplier.  CMS Ex. 3.  On the enrollment application, Petitioner listed its physical address as 3142 Vista Way, Unit 102, Oceanside, California 92056-3627.  CMS Ex. 3 at 11.  Petitioner listed its hours of operation as Monday through Friday, open from 8:00 a.m. until 4:00 p.m. and indicated it was available to the public 40 hours a week.  CMS Ex. 3 at 11.
	By letter dated October 25, 2022, Palmetto 1 acknowledged receiving Petitioner’s Medicare enrollment application; however, Palmetto stated the application was incomplete and requested that Petitioner submit the pharmacist’s license.  CMS Ex. 4.  Petitioner submitted the requisite information to Palmetto on the same date.  CMS Ex. 5 at 3.
	On October 20, 2022, a contractor for Palmetto attempted an on-site verification survey at 3142 Vista Way, Unit 102, Oceanside, California 92056-3627 at approximately 1:45 p.m.  CMS Ex. 6 at 1.  The site inspector took pictures of the building address confirm that it was the correct location for Petitioner’s business, as well as a sign on the door that listed the business name.  CMS Ex. 6 at 4, 5.  The site inspector noted that the business was closed and locked.  CMS Ex. 6 at 17.  The site inspector also noted that there was a sign on the door indicating that the business would be closed until November 1, 2022, due to a change in staff.  CMS Ex, 6 at 17.  The following day on October 21, 2022, the site inspector attempted a second on-site verification survey at the same location at approximately 3:46 p.m.  CMS Ex. 6.  The site inspector again noted that Petitioner’s business was closed, and the same note remained on the door indicating that the business would remain closed until November 1, 2022.
	By letter dated December 1, 2022, Palmetto notified Petitioner that its application for enrollment was denied because it did not meet the conditions of enrollment or the requirements to qualify as a DMEPOS supplier pursuant to 42 C.F.R. §§ 405.800, 424.57, and 498.22.  CMS Ex. 2 at 3.  The letter stated that, pursuant to 42 C.F.R. § 424.530(a)(5), Petitioner was noncompliant with enrollment requirements,Page 4

explaining that “[d]uring an attempt to conduct a site inspection at [Petitioner’s] facility on October 20, 2022, and October 21, 2022, it was discovered the business is closed not open to the public.”  *Id*.  CMS was unable to conduct an on-site visit to verify Petitioner’s compliance, as required by 42 C.F.R. § 424.57(c)(8).  The letter advised that Petitioner could submit a reconsideration request in response to the denial of enrollment.  CMS Ex. 2 at 4.
	Petitioner submitted a reconsideration request on January 27, 2023.  CMS Ex. 2.  In the reconsideration request Petitioner explained that the pharmacist-in-charge quit, and her last day was October 19, 2022.  CMS Ex. 2 at 2.  The pharmacy remained closed until the new pharmacist started on November 1, 2022.  Petitioner also explained that it would be against state law to operate the location without a licensed pharmacist because there were prescription medications in stock.  CMS Ex. 2 at 2.
	By letter dated March 28, 2023, Palmetto informed Petitioner that the request for reconsideration was denied.  CMS Ex. 1 at 2.  The reconsideration decision affirmed that the site inspector was unable to complete on-site visits because Petitioner’s business was closed.  CMS Ex. 1 at 4.VI.   Analysis and Conclusions of Law

It is undisputed that the pharmacy at 3142 Vista Way, Unit 102, Oceanside, CA was closed on October 20 and 21, 2022, when the site inspector attempted to complete an on-site review.  Pet. Hrg. Req.  However, Petitioner argues that the reason for the closure of the pharmacy and the extenuating circumstances should be considered in CMS’s determination.  Pet. Hrg. Req.  Petitioner states that the pharmacy was closed on the days of the attempted on-site visits because the pharmacist-in-charge quit without providing notice during the same week as the site visit and the pharmacist’s last day was October 19, 2022.  P. Br. at 2; CMS Ex. 2 at 2.  The new pharmacist-in-charge was scheduled to begin on November 1, 2022.  In order to alert the public to the closure, Petitioner posted a note on the door of the pharmacy explaining that it would reopen for business on November 1, 2022.  The site inspector confirmed the presence and content of the note on both attempted site visits.  CMS Ex. 6 at 17.  However, the Board has ruled that a temporary sign left by staff does not constitute compliance with the accessibility and staffing requirements set forth in 42 C.F.R. § 424.57(c)(7).  *See* *Ita Udeobong*, DAB No. 2324 at 7 (2010).  As the Board has held, a supplier who is “temporarily closed during its posted hours of operation” will be found to be out of compliance with 42 C.F.R. § 424.57(c)(7).  *Complete Home Care, Inc.*, DAB No. 2525 at 5 (2013).

Pursuant to 42 C.F.R. § 424.530(a)(5), CMS has the authority to deny a Medicare enrollment application if a provider or supplier is not operational to furnish Medicare covered items or services or if the supplier otherwise fails to satisfy any Medicare enrollment requirement.  Operational means the provider or supplier has a qualified

Page 5

physical practice location, is open to the public for the purpose of providing health care related services, is prepared to submit valid Medicare claims, and is properly staffed, equipped, and stocked (as applicable, based on the type of facility or organization, provider or supplier specialty, or the services or items being rendered), to furnish these items or services.  42 C.F.R. § 424.502.  In this case, Petitioner was not operational on the two days that the site inspector attempted to complete on-site verification surveys.  As a result, the site inspector was unable to determine whether Petitioner was in compliance with Medicare billing requirements.

Petitioner argues that CMS did not consider the extenuating circumstances when making the determination to deny its application for Medicare enrollment.  Specifically, Petitioner notes that under California law only a pharmacist is permitted to possess a key to the pharmacy where dangerous drugs and controlled substances are stored.  P. Br. at 3.  Petitioner was advised by their attorney to close the location because in the State of California it is illegal to operate a pharmacy without a pharmacist on-site.  CMS Ex. 2. While I understand the circumstances surrounding the closure of the pharmacy, the regulation gives CMS the legal authority to deny a Medicare enrollment application when an on-site review cannot be conducted, and the regulation does not provide relief for extenuating circumstances.  Additionally, Petitioner did not submit any evidence to support its claims as to why the pharmacy was not operating on the days of the on-site verification surveys.  Nor is there evidence in the record to suggest that Petitioner contacted CMS for guidance on how to proceed given the circumstances.  As noted in the reconsideration decision, Petitioner’s claims are unverifiable.  CMS Ex. 1 at 4.

Lastly, Petitioner states that Respondent violated 42 C.F.R. § 424.510(d)(6) by denying Petitioner’s enrollment application for not being operational.  P. Br. at 2.  However, Petitioner did not provide an explanation as to how CMS allegedly violated the regulation, so I am unable to address this argument.

The evidence shows that Petitioner’s pharmacy was not open to the public on the days and at the times specified in the enrollment application.  Therefore, CMS had a legitimate basis to deny Petitioner’s Medicare enrollment application.

Page 6

VII.   Conclusion

Based on the evidence set forth, CMS established a legal basis for the denial of Petitioner’s Medicare enrollment application.  Therefore, the denial of Petitioner’s Medicare enrollment application under 42 C.F.R. § 424.530(a)(5) based on failing to meet the supplier standards is affirmed.

Endnotes

1 Palmetto was the administrator for the National Supplier Clearinghouse (NSC), an entity tasked with issuing or revoking Medicare billing privileges for suppliers of DMEPOS.  Most documents appear to be issued by both Palmetto and NSC.  For clarity, this decision refers to both Palmetto and NSC as Palmetto.
  
          /s/
        Tannisha D. Bell

                      Administrative Law Judge Back to top
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