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                              Global MD Systems Inc., DAB CR6178 (2022)
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Global MD Systems Inc., DAB CR6178 (2022)








  
  
    

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





Global MD Systems Inc.
(NPI: 1194755926 / PTAN: 5067910001),
Petitioner,

v.

Centers for Medicare and Medicaid Services
Docket No. C-22-472Decision No. 6178October 20, 2022

        
              
    

      DECISION

Petitioner, Global MD Systems, Inc. (GMS), challenges the reconsidered determination by the Centers for Medicare & Medicaid Services (CMS) to revoke its Medicare enrollment and billing privileges.  CMS took this action pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(d)(11), and 424.57(e)(1) because Petitioner did not comply with the enrollment requirements for its supplier type at 42 C.F.R. § 424.57(c)(21) and 424.57(c)(26).  I find there was a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges and uphold CMS’s determination for the reasons stated below.

I.   Background and Procedural History

Petitioner was enrolled in the Medicare program as a supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS).  CMS Exhibit (Ex.) 1 at 35.  Under the provisions of 42 C.F.R. § 424.57(c), a DMEPOS supplier must meet certain specified standards, including, as relevant herein, providing CMS, upon request, any information required by the Medicare statute and implementing regulations and meeting the surety bond requirements specified in 42 C.F.R. § 424.57(d).  42 C.F.R.

Page 2

§ 424.57(c)(21) and 424.57(c)(26).  On March 15, 2022, Petitioner was notified that its Medicare privileges were being revoked effective April 26, 2021, because of its failure to maintain general liability insurance, failure to provide requested information regarding surety bond coverage, and failure to meet surety bond requirements, as required by 42 C.F.R. § 424.57(c)(10), 424.57(c)(21) and 424.57(c)(26).  CMS Ex. 1 at 35-36.  A two-year re-enrollment bar was also imposed, pursuant to 42 C.F.R. § 424.535(c).  Petitioner filed a request for reconsideration on March 22, 2022, asserting that its general liability insurance policy was in effect and had not been cancelled.  CMS Ex. 1 at 7-38; *see* CMS Ex. 1 at 11, 19, 25, 31.  Proof of coverage was also submitted.  CMS Ex. 1 at 13, 16, 21, 27, and 33.  In a reconsidered determination dated April 21, 2022, GMS was found to be compliant with 42 C.F.R. § 424.57(c)(10), governing comprehensive liability insurance.  CMS Ex. 1 at 3.  However, Petitioner was found to be out of compliance with 42 C.F.R. § 424.57(c)(21) and 424.57(c)(26) because it failed to submit documentation that it either replenished the previous bond or obtained a new surety bond.  CMS Ex. 1 at 3-4.  As a result, the revocation of its Medicare enrollment and the two-year re-enrollment bar were upheld.  *Id*. at 4.  Petitioner filed a timely request for an administrative law judge (ALJ) hearing on April 22, 2022.

On April 25, 2022, Judge Sickendick issued an Acknowledgment and a Standing Order, which directed the parties to file their respective pre-hearing exchanges.1  CMS filed a Combined Pre-Hearing Brief and Motion and Memorandum in Support of Summary Judgment (CMS Br.) and two proposed exhibits (CMS Exs. 1-2).  Petitioner filed a Pre-Hearing Brief and Memorandum in Opposition to Centers for Medicare and Medicaid Services’ Motion for Summary Judgment (P. Br.) and three proposed exhibits (P. Exs. 1-3).  CMS then submitted a Reply in Support of Summary Judgment.

CMS has objected to the admission of Petitioner’s proposed exhibits 1-3 on the basis that there is no showing of good cause to submit new evidence.  Petitioner’s proposed exhibits 1 through 3 consist of records which were not submitted with the request for reconsideration.  Under the provisions of 42 C.F.R. § 498.56(e)(1), I must examine new documentary evidence that is offered by a provider or supplier and determine whether good cause exists for submitting that evidence for the first time at the ALJ level.  If I do not find good cause for submitting the evidence for the first time at the ALJ level, I must exclude the evidence from the proceeding and may not consider it in reaching a decision. 42 C.F.R. § 498.56(e)(2)(ii).

Petitioner argues that good cause exists for several reasons.  It initially asserts that “GMS’ President and authorized representative, Naveen Nandakumar, overlooked CMS’ finding related to GMS’ surety bond.  Mr. Nadakumar was not represented by counsel when this occurred.  P Ex. 1, 2, and 3.  This was “merely an administrative oversight by an unrepresented individual.”  P. Br. at 7.  A similar statement was contained in the

Page 3

Request for Hearing, where Petitioner stated it did not provide a response to the surety bond issues because “I had believed that the lapsed liability insurance policy was the only concern.”  Request for Hearing.  However, the suggestion that this was a minor lapse by an unsophisticated, unrepresented individual is at odds with the facts and the law.  Mr. Nandakumar is identified as the President and authorized representative of GMS, positions which presumably involve regular oversight of Medicare compliance requirements and notifications.  Furthermore, the Departmental Appeals Board (Board) has stated that when a supplier fails to submit all of its documentary evidence to the Medicare hearing officer, the fact that it was not represented by counsel is “insufficient by itself to show good cause.  Moreover, the regulations do not contain any exception for the ALJ to consider evidence for the first time simply because a party chose not to be represented by counsel during the reconsideration process.”  *A To Z DME, LLC*, DAB No. 2303 at 11 (2010).

Petitioner does not assert, nor does the record support, any suggestion that the notice dated March 15, 2022 was, in any way, confusing or vague in its identification of the reasons for the revocation or the requirements for appealing the revocation.  In clearly identified paragraphs, in identical fonts and format, Palmetto GBA, the Medicare administrative contractor, set forth the three bases for revocation.  CMS Ex. 1 at 35-36.  “42 C.F.R. § 424.57(c)(10),” “42 C.F.R. § 424.57(c)(21),” and “42 C.F.R. § 424.57(c)(26)” are all set out, in bold, as the supplier standards with which Petitioner was not in compliance.  *Id*.  It is difficult to imagine reading that document and not understanding that there were three violations cited as the bases for the revocation, particularly when the recipient is the President and authorized representative of a Medicare supplier.

The notice also clearly states that:

if you have additional information that you would like a Hearing Officer to consider during the reconsideration, or, if necessary, an Administrative Law Judge (ALJ) to consider during a hearing, you must submit that information with your request for reconsideration.  This is your only opportunity to submit information during the administrative appeals process unless an ALJ allows additional information to be submitted.

CMS Ex. 1 at 37-38.  There is nothing in this language that could be characterized as unclear or confusing.  As the Board stated,

Medicare providers and suppliers, as participants in the program, have a duty to familiarize themselves with Medicare requirements.”  *Francis J. Cinelli, Sr., D.O.*, DAB No. 2834, at 10 (2017) (citing *Gulf South Medical*, DAB No. 2400, at 9

Page 4

(2011); *John Hartman, D.O.*, DAB No. 2564, at 3 (2014) (quoting *Heckler v. Cmty. Health Servs. of Crawford County, Inc*., 467 U.S. 51, 63 (1984) (“those who deal with the government are expected to know the law[.]”)); *see also* *Thomas M. Horras and Christine Richards*, DAB No. 2015, at 34 (2006) (officer and principal of provider had responsibility to be aware of and adhere to applicable law and regulations), *aff’d*, *Horras v. Leavitt*, 495 F.3d 894 (8th Cir. 2007)).

*Meadowmere Emergency Physicians, PLLC,* DAB No. 2881 at 11-12 (2018).  Thus, I do not find the above circumstances to constitute good cause.

Petitioner next argues that “[g]ood cause to admit new evidence exists where the evidence establishes that the entire basis for revocation was improper, and failure to admit evidence under these circumstances is in contravention to the purpose of the Medicare enrollment regulations.”  P. Br. at 8.  No authority was cited for this proposition, and I do not find it to be a persuasive argument to establish good cause.  The proposed exhibits from Petitioner were in existence at the time it requested reconsideration.  There is no apparent reason why they could not have been provided at that time.  A provider or supplier is required to be able to demonstrate that it meets enrollment requirements and to produce the documents necessary to show it is in compliance with enrollment requirements.  42 C.F.R. § 424.545(c).  As a result, I do not find Petitioner’s argument to be good cause for submitting that evidence for the first time at the ALJ level.  As such, I sustain the objections of CMS to Petitioner’s proposed exhibits 1-3, which are excluded from these proceedings and are not considered in reaching a decision, pursuant to the provisions of 42 C.F.R. § 498.56(e)(2)(ii) and § E. of the Standing Order.

In the absence of any other objections, I admit CMS Exs. 1-2 into the record.  Neither party submitted any proposed witnesses.  As a result, a hearing for consideration of testimony is not necessary.2  *See* Standing Order § K.  I consider the record in this case to be closed and the matter is ready for a decision on the merits.

II.   Issue

Whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(d)(11), and 424.57(e)(1).

Page 5

III.   Jurisdiction

I have jurisdiction to decide this case.  42 C.F.R. §§ 498.3(b)(17), 488.5(*l*)(2); *see also*42 U.S.C. § 1395cc(j)(8).

IV.   Findings of Fact, Conclusions of Law, and Analysis3

The Social Security Act (Act) authorizes the Secretary of Health and Human Services to establish regulations for enrolling providers and suppliers in the Medicare program.  42 U.S.C. § 1395cc(j)(1)(A).  Suppliers must enroll in the Medicare program and receive a billing number in order to obtain payment for services rendered to Medicare beneficiaries.  42 C.F.R. § 424.505.  Pursuant to 42 C.F.R. §§ 424.57 and 424.505, a DMEPOS supplier, such as Petitioner, must be enrolled in the Medicare program to be reimbursed for durable medical equipment, prosthetics, orthotics, or supplies sold or rented to Medicare beneficiaries.  The regulations establish detailed requirements that suppliers must meet and maintain to enroll in Medicare and to receive and maintain Medicare billing privileges.  42 C.F.R. pt. 424, subpt. P.  DMEPOS suppliers have additional requirements imposed by 42 C.F.R. § 424.57(b) and (c).  To receive direct-billing privileges, a DMEPOS supplier must meet and maintain the Medicare application certification standards set forth in 42 C.F.R. § 424.57(c).  Those standards include the requirements to provide to CMS, upon request, any information required by the Medicare statute and implementing regulations, and to meet the surety bond requirements specified in paragraph (d) of section 424.57.  42 C.F.R. § 424.57(c)(21) and 424.57(c)(26).  42 C.F.R. § 424.57(e)(1) provides that CMS may revoke a supplier’s billing privileges if it is found not to meet the standards specified in paragraphs (b) and (c) of that section.  42 C.F.R. § 424.57(d)(11) authorizes CMS to revoke a DMEPOS supplier’s billing privileges if it fails to obtain, file timely, or maintain a surety bond.

After CMS revokes a supplier’s enrollment and billing privileges, CMS bars the supplier from re-enrolling in the Medicare program for a minimum of one year but not greater than 10 years.  42 C.F.R. § 424.535(c)(1)(i).

***1. Petitioner did not provide to CMS, upon request, information required by the Medicare statute and implementing regulations, as required by 42 C.F.R. § 424.57(c)(21).***

***2. Petitioner did not meet the surety bond requirements specified in 42 C.F.R § 424.57(d), as required by 42 C.F.R. § 424.57(c)(26).***

Page 6

***3. The evidence establishes that there is a legitimate basis to revoke Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(d)(11), and 424.57(e)(1).***

The Act establishes as a condition of participation that a DMEPOS supplier continuously maintain a surety bond:

Disclosure of Information and Surety Bond.—The Secretary shall not provide for the issuance (or renewal) of a provider number for a supplier of durable medical equipment, for purposes of payment under this part for durable medical equipment furnished by the supplier, unless the supplier provides the Secretary *on a continuing basis*–

****

(B) with a *surety bond in a form specified by the Secretary*and in an amount that is not less than $50,000 that the Secretary determines is commensurate with the volume of the billing of the supplier.

Act § 1834(a)(16)(B); 42 U.S.C. § 1395m(a)(16)(B) (emphasis added).

The surety bond requirements at 42 C.F.R. § 424.57(d), referenced in 42 C.F.R. § 424.57(c)(26), state, as relevant herein, that “beginning October 2, 2009, each Medicare-enrolled DMEPOS supplier must meet the requirements of paragraph (d),” which include “a bond that is continuous,” which “meet[s] the minimum requirements of liability coverage ($50,000),” and provides that “[t]he surety is liable for unpaid claims, CMPs [civil money penalties], or assessments that occur during the term of the bond.” 42 C.F.R. § 424.57(d)(1)(ii), (4), (5).  42 C.F.R. § 424.57(e)(1) indicates that CMS may revoke a supplier’s billing privileges if it is found not to meet the standards in paragraphs (b) and (c) of that section.

In a letter dated April 30, 2021, Petitioner was notified by CGS, a contracted carrier for CMS, that it was in receipt of a payment of $63.27 from Lexon Insurance on April 26, 2021, using funds from its surety bond.  As a result of this payment, Petitioner was advised to contact its bond company to secure additional surety bond coverage in accordance with 42 C.F.R. § 424.57(d)(5)(i)(A).  The notice warned that “[y]ou **must**, within 30 calendar days of the date of this letter, obtain and submit to the National Supplier Clearinghouse (NSC) additional surety bond coverage in the amount of $63.27 to ensure that your total coverage equals or exceeds the required $50,000 amount.  **Failure to timely do so will result in the revocation of your Medicare enrollment.”**

Page 6

CMS Ex. 1 at 54 (emphasis in original).4  In a letter dated May 4, 2021, CGS notified Petitioner that it was in receipt of a payment of $12,206.12 from Lexon Insurance on April 26, 2021, using funds from its surety bond.  Petitioner was again warned that “[y]ou **must**, within 30 calendar days of the date of this letter, obtain and submit to the National Supplier Clearinghouse (NSC) additional surety bond coverage in the amount of $12,206.12 to ensure that your total coverage equals or exceeds the required $50,000 amount.  **Failure to timely do so will result in the revocation of your Medicare enrollment.”**  CMS Ex. 1 at 52 (emphasis in original).  On May 5, 2021, CGS notified Petitioner of another payment from its surety bond funds in the amount of $12,278.77 on April 26, 2021 and the need to replenish the bond amount to the required $50,000 within 30 days of the date of the letter.  CMS Ex. 1 at 50.

Lexon Insurance Company notified Petitioner on May 5, 2021 that its DMEPOS Medicare Surety Bond was cancelled effective June 5, 2021.  CMS Ex. 1 at 47.  On March 15, 2022, Petitioner was notified that its Medicare supplier number was revoked, effective April 26, 2021.  CMS Ex. 1 at 43.

Petitioner argues initially that GMS “maintained full surety bond coverage of $50,000 in compliance with Medicare’s supplier requirements at all relevant times, and coverage at the requisite amount remains active.”  P. Br. at 7.  It asserts that “[w]ithin thirty (30) calendar days of receipt of the CGS notices of receipt of surety bond payments, on May 14, 2021, Naveen Nandakumar, President and authorized representative of GMS, secured a replacement surety bond in the amount of $50,000 from SureTec Insurance Company, with the initial term of June 5, 2021 through June 5, 2022.”  P. Br. at 4.  This argument misses the fact that the statute and the regulation require “continuous” compliance with the surety bond provisions.  The notices to Petitioner from CGS informed Petitioner that it needed to *replenish* the bond that was in existence because payout from that bond had reduced its coverage well below the required $50,000.  Even with a new surety bond effective June 5, 2021, Petitioner would not have been in compliance with the requirement to *maintain* *continuous* surety bond coverage at a value of $50,000 or greater.  The bond in effect on April 26, 2021, did not have a value of $50,000 on April 26, 2021.  At no point does Petitioner assert that it replenished the bond held by Lexon Insurance Company.  As a result, I find that Petitioner did not meet the surety bond requirements specified in 42 C.F.R § 424.57(d), as required by 42 C.F.R. § 424.57(c)(26).

Page 8

Petitioner was also determined to be not in compliance with the provisions of 42 C.F.R. § 424.57(c)(21), which require a DMEPOS supplier to provide to CMS, upon request, any information required by the Medicare statute and implementing regulations.  CMS Ex. 1 at 3-4.  As noted above, it was notified on three separate occasions that “[y]ou **must**, within 30 calendar days of the date of this letter, obtain and submit to the National Supplier Clearinghouse (NSC) additional surety bond coverage . . . to ensure that your total coverage equals or exceeds the required $50,000 amount.”  CMS Ex. 1 at 50, 52, 54.  Petitioner has not provided any specific argument that it did submit documentation to the NSC, as requested.  As a result, I find that Petitioner did not provide to CMS, upon request, information required by the Medicare statute and implementing regulations, as required by 42 C.F.R. § 424.57(c)(21).

Petitioner has argued that revocation is inappropriate here, characterizing the lack of compliance as “an administrative oversight by an unrepresented individual.”  P. Br. at 7.  It asserts that “[a]dministrative misunderstandings should not serve as a basis for revocation where Petitioner retained unequivocal compliance with all *substantive* Medicare requirements.”  P. Br. at 6 (emphasis added).  Implied in these arguments is the unstated position that the supplier standards which were not met were somehow trivial or insignificant.  However, the Secretary has established 30 standards that a DMEPOS supplier must certify it meets and will continue to meet in its application for a supplier number and billing privileges.  42 C.F.R. § 424.57(c)(1)-(30); *Main St. Pharmacy, LLC*, DAB No. 2349 at 2 (2010).  There is certainly no suggestion in the regulation that only some of the 30 standards are “substantive” or somehow more important than others.  To the contrary, if a DMEPOS supplier already enrolled in the Medicare program fails to comply with *any* of the requirements set forth in section 424.57(c), CMS will revoke that supplier’s billing privileges.  42 C.F.R. § 424.57(e)(1); *see also* *1866ICPayday.com, L.L.C.*, DAB No. 2289 at 13 (2009) (“[F]ailure to comply with even one supplier standard is a sufficient basis for revoking a supplier's billing privileges.”).

In reviewing a revocation determination, I am “limited to deciding whether CMS had a valid ‘legal basis’ for that action.”  *Care Pro Home Health*, *Inc.*, DAB No. 2723 at 5 (2016), citing *Letantia Bussell, M.D.*, DAB No. 2196 at 12-13 (2008) (ALJ’s review of revocation is “limited to whether CMS had established a legal basis for its actions”; once the ALJ found the “elements required for revocation were present,” the ALJ “was obliged to uphold the revocation, as are we”); and *Abdul Razzaque Ahmed, M.D.*, DAB No. 2261 at 17, 19 (2009) (“the scope of administrative review before the ALJ and the Board is limited to determining whether CMS had a sufficient legal predicate . . . for its revocation determination . . . we may not substitute our discretion for that of CMS in determining whether revocation is appropriate under all the circumstances”), *aff’d*, *Ahmed v. Sebelius*, 710 F. Supp. 2d 167 (D. Mass. 2010).  In this case, the stated basis for revocation, that of Petitioner’s failure to submit requested documentation and to maintain the required surety bond levels, is grounded in law and fact.  Accordingly, I find that CMS had a legitimate basis for revoking Petitioner’s Medicare enrollment and billing privileges, effective April

Page 9

26, 2021, pursuant to the provisions of 42 C.F.R. §§ 424.535(a)(1), 424.57(d)(11), and 424.57(e)(1).

V.   Conclusion

For the reasons explained above, I affirm the revocation of Petitioner’s Medicare enrollment and billing privileges, pursuant to 42 C.F.R. §§ 424.535(a)(1), 424.57(d)(11), and 424.57(e)(1).

Endnotes

1 This case was reassigned to me on September 16, 2022.

2 Because an in-person hearing for the purpose of consideration of testimony is not necessary, I need not rule on CMS’s motion for summary judgment.

3 My findings of fact and conclusion of law are set forth in italics and bold font.

4 “The National Supplier Clearinghouse is the single organizational entity responsible for issuing or revoking Medicare supplier billing privileges for suppliers of [DMEPOS].”  https://www.palmettogba.com/palmetto/nsc.nsf (last visited Oct. 4, 2022).  Palmetto GBA is the administrative contractor for NSC.
  
          /s/
        Mary M. Kunz

                      Administrative Law Judge Back to top
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