Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Barry Ray, M.D.
(NPI: 1083785232)
(PTAN: 093671, 093671C8X, 093671CNY, and 093671DNT),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-661
Decision No. CR3655

Date: February 20, 2015

DECISION

The Centers for Medicare & Medicaid Services (CMS), acting through its administrative
contractor, Novitas Solutions, Inc. (Novitas), either denied the enrollment application that
Petitioner, Barry Ray, M.D., submitted to reactivate his Medicare billing privileges or
revoked Petitioner’s billing privileges. CMS’s action was based on Petitioner’s felony
conviction for possessing illegal ammunition within 10 years preceding enrollment or
revalidation. Petitioner requested a hearing before an administrative law judge (ALJ).
For the reasons stated below, I reverse CMS’s denial/revocation.

I. Background and Procedural History

Petitioner is a physician licensed in the state of New Jersey. CMS Exhibit (Ex.) 2. On
March 14, 2011, Petitioner pled guilty to the fourth degree crime in New Jersey of illegal
possession of dum-dum bullets (N.J. Rev. Stat. § 2C: 39-3(f)). CMS Ex. 1, at 74. On
December 13, 2011, the Superior Court of New Jersey, Monmouth County, entered a
Judgment of Conviction against Petitioner based on his guilty plea and sentenced
Petitioner to a suspended 18-month term in prison. CMS Ex. 1, at 74. The court also
ordered that Petitioner be: prohibited from writing prescriptions for ten years; subject to
random drug screening for five years; and required to obtain psychiatric or psychological
treatment for as long as ordered by the New Jersey State Board of Medical Examiners
(Medical Board). CMS Ex. 1, at 74. Petitioner also had to pay fines and penalties in the
amount of $155. CMS Ex. 1, at 75.

Based on his arrest, on September 14, 2010, Petitioner voluntarily consented to an interim
surrender of his medical license in New Jersey. CMS Ex. 2, at 1. Following his
conviction, on April 12, 2012, the Medical Board reinstated Petitioner’s medical license,
but ordered the following contingencies: suspension of Petitioner’s license for four
years, retroactive to September 14, 2010, two years of which was an active suspension
and two years was stayed (i.e., probation); completion of a variety of remedial classes;
continued enrollment in the Professional Assistance Program of New Jersey, including
“Ta]bsolute abstinence from psychoactive substances,” regular attendance at Alcoholics
Anonymous meetings, random drug testing, continued psychiatric treatment, and face-to-
face meetings with Professional Assistance Program personnel; and, with limited
exceptions, a ten-year restriction on prescription writing privileges. CMS Ex. 2, at 3-7.

On April 16, 2013, Petitioner signed a Medicare enrollment application (Form CMS-
8551) and submitted it to Novitas seeking reactivation of his Medicare billing privileges.'
CMS Ex. 1, at 15-41. In response to a question on the application as to whether
Petitioner had ever had a final adverse legal action imposed against him, Petitioner
responded that he received a fine for possession of prohibited ammunition, but did not
mention the suspension of his medical license. CMS Ex. 1, at 28. After receiving the
application, Novitas requested additional information from Petitioner related to his
criminal conviction. CMS Ex. 1, at 42. Petitioner responded by submitting a copy of the
Judgment of Conviction in the case. CMS Ex. 1, at 74-76. Petitioner explained in a
written statement that he inherited the illegal ammunition along with firearms from his
father, a former law enforcement officer who used the dum-dum bullets in his service
weapon. CMS Ex. 1, at 73. Petitioner elaborated that the dum-dum ammunition is legal
in Pennsylvania (the state in which Petitioner’s father resided), but that he had not
realized it was illegal in New Jersey. CMS Ex. 1, at 73. Petitioner stated that the final
resolution to his criminal case was a $157 fine. CMS Ex. 1, at 73.

On June 11, 2013, Novitas issued two initial determination letters in which Novitas
denied Petitioner’s reactivation enrollment application and/or revoked his billing

' The record does not include any information related to Petitioner’s initial enrollment in
the Medicare program or the date and reason Petitioner’s Medicare billing privileges
were deactivated.
privileges. One letter indicated that Novitas based the denial on 42 C.F.R.
§ 424.530(a)(3) stating the following:

Barry Ray was, within the 10 years preceding enrollment or
revalidation of enrollment, convicted of a Federal or State
felony offense that CMS has determined to be detrimental to
the best interests of the program and its beneficiaries.

CMS Ex. 1, at 77. The second letter indicated that Novitas denied Petitioner’s enrollment
application under 42 C.F.R. § 424.530(a)(1) for failing to meet enrollment requirements,
but also indicated that Petitioner’s billing privileges were being revoked due to an
adverse legal action. Request for Hearing (RFH), Enclosure B.

On July 23, 2013, Petitioner filed, through counsel, a timely request for reconsideration
in which he disputed that his conviction was a basis to deny his enrollment application,
although in doing so, Petitioner quoted the revocation provision in 42 C.F.R.

§ 424.535(a)(3) at length. CMS Ex. 1, at 10-13. On August 26, 2013, Petitioner
submitted supplemental information to further support his reconsideration request. CMS
Ex. 1, at 7-9.

On December 11, 2013, a Novitas hearing officer issued a reconsidered determination
entitled “Revocation of Medicare Billing Number” in which she upheld the denial of
Petitioner’s enrollment application based on 42 C.F.R. § 424.530(a)(3). CMS Ex. 1, at 1-
4. The Novitas hearing officer factually premised the denial “on a September 22, 2011
guilty plea to possession of dum dum bullets, a fourth degree felony.” CMS Ex. 1, at 2.
In response to Petitioner’s arguments in his reconsideration request, the Novitas hearing
officer stated: “Novitas Solutions is unable to process the application to enroll Barry
Ray, MD, as he is within 10 years of his felony conviction. This is regardless of the
seriousness of a fourth degree crime, nonetheless a felony.” CMS Ex. 1, at 2.

On February 6, 2014, Petitioner filed, through counsel, a RFH with two enclosures (RFH
Enclosures A and B) in which he sought review of the revocation of his Medicare billing
number, although Petitioner cited the regulations related to the denial of an enrollment
application. In response to my February 27, 2014 Acknowledgment and Pre-Hearing
Order (Order), CMS filed a Pre-Hearing Brief and Motion for Summary Disposition
(CMS Br.) and two exhibits (CMS Exs. | and 2). Petitioner submitted a brief in
opposition to CMS’s Motion for Summary Judgment (P. Br.) and did not file any
exhibits. CMS filed a reply brief (CMS Reply Br.), to which Petitioner filed an objection
(P. Objection).
After considering the parties’ submissions, I made a number of rulings. I admitted CMS
Exs. | and 2 into the record without objection from Petitioner.’ I also denied CMS’s
motion for summary judgment. Finally, I denied Petitioner’s objection to the CMS reply
brief because the regulations authorize a party to file “a rebuttal statement” within 20
days of the filing of a brief by the other party. 42 C.F.R. § 498.17(b).

also decided to remand this case to CMS to consider new issues. Specifically, I wanted
CMS to clarify whether it was denying Petitioner’s reactivation enrollment application or
revoking his billing privileges. Although citation and discussion of denial of the
enrollment application appeared more often, revocation is present in most of the
documents as well. CMS’s action was particularly unclear because the mere denial of a
reactivation application simply means that Petitioner would remain deactivated, but
potentially able to bill for services rendered while deactivated after later being
reactivated.’ Therefore, CMS’s position, that Petitioner was convicted of a felony
detrimental to the Medicare program and its beneficiaries, would make it more likely that
CMS revoked rather than denied reactivation. Perhaps CMS did both, but the hearing
officer failed to cite the revocation regulation in the reconsidered determination. In any
event, I remanded this case for CMS to definitively clarify which action it had taken.

Because CMS had applied the denial regulations (42 C.F.R. § 424.530(a)(3)) in the
reconsidered determination, I also remanded this case for CMS to consider an issue it
failed to consider in the reconsidered determination. Specifically, CMS “considers the
severity of the underlying offense” before denying an enrollment application under

42 C.F.R. § 424.530(a)(3). However, in this case, CMS failed to consider the severity of
the underlying offense before apparently denying Petitioner’s enrollment application.
Specifically, in response to Petitioner’s arguments as to severity, the hearing officer
stated:

> CMS’s Ex. 1 is composed of numerous documents totaling 79 pages in length. Review
of this case has been made difficult because CMS did not assign separate exhibit numbers
to each discrete document in CMS Ex. 1.

> Medicare Program Integrity Manual § 15.27.1.2 states that “[i]f the contractor approves
a provider or supplier’s reactivation application or reactivation certification package
(RCP), the reactivation effective date shall be the provider or supplier’s date of
deactivation. (If the contractor determines that the provider or supplier fell out of — yet
came back into- compliance with enrollment requirements during the period of
deactivation, it shall contact its PEOG BFL for guidance as to how the situation should be
handled.)
The Hearing Officer (HO) has reviewed all of the
documentation. Novitas Solutions is unable to process the
application to enroll [Petitioner] as he is within 10 years of
his felony conviction. This is regardless of the seriousness
of a fourth degree crime, nonetheless a felony.

CMS Ex. 1, at 2 (emphasis added). I considered it error for the hearing officer to
expressly refuse to consider the severity of the offense because, if CMS was denying the
enrollment application, the regulations required CMS to consider the severity of the
offense. Therefore, I thought it necessary for CMS to consider this new issue as required
by the regulations. Further, after reviewing the record, I believed that CMS would have
to reevaluate its determination in this case, so I specifically ordered CMS to render a new
determination.

However, subsequent to the remand order, the Departmental Appeals Board (DAB)
questioned ALJs’ authority to remand cases under 42 C.F.R. § 498.56(d) for CMS to
consider new issues, and indicated that whether CMS denied or revoked a supplier is not
an issue. At the least, the DAB believes such remand authority is extremely narrow and
indicated that ALJs should issue decisions rather than remand cases. This came after a
recent line of DAB cases signaling that the DAB now narrowly interprets the regulations
governing proceedings involving supplier enrollment and revocation cases. * In an effort

* Supplier enrollment and revocation cases often involve initial and reconsidered
determinations that have ambiguous findings, technical legal defects, and/or fail to fully
consider the evidence involved in the case. This is possibly due to the fact that non-
attorney contractors are largely responsible for issuing these determinations. It may not
be until the hearing level that CMS counsel or an ALJ discovers various problems wit
these determinations. Previously, the DAB has permitted CMS counsel to clarify the
reasons or assert new reasons for a determination in de novo proceedings before an ALJ.
Fady Fayad, DAB No. 2266, at 10-11 (2008), aff'd Fayad v. Sebelius, 803 F.Supp. 2d
699 (E.D. Mich. 2011); see also Dinesh Patel, M.D., DAB No. 2551, at 8 (2013); Luis E.
Zepeda, MD, DAB CR2895, at 12-14 (2013) (ALJ interpreting Fayvad to permit CMS to
change the basis for revocation at the hearing stage of the appeals process). Further, the
procedural regulations in 42 C.F.R. Part 498, unlike the procedural regulations in

42 C.F.R. Part 1005, contemplate that ALJs will have an active role in cases to ensure
that they are fully and correctly decided. For example, while suppliers are precluded
from submitting new evidence to an ALJ, an ALJ still has the authority and duty, to “fully
inquire into all matters at issue,” and “[i]f the ALJ believes that there is relevant and
material evidence available which has not been presented at the hearing, he may, at any
time before mailing of notice of the decision, reopen the hearing to receive that
evidence.” 42 C.F.R. § 498.60(b). To assist in complying with this duty, the regulations

to comply with the DAB’s articulated concerns over remands and its expressed interest in
ALJs issuing decisions rather than remands, I exercised my authority under 42 C.F.R.

§ 498.56(d) to reassume jurisdiction over this case to issue a decision. In doing so, I gave
the parties an opportunity to file comments or objections. The parties sought additional
time to discuss settlement or submit its comments, which I granted. However, the parties
ultimately decided not to settle this case or submit anything further.

Neither party in this case submitted written direct testimony for any proposed witnesses.
Order § 8. Consequently, there are no witnesses for the parties to cross-examine at a
hearing. Order 9-10. Therefore, I issue this decision on the basis of the written
record. Marcus Singel, D.P.M., DAB No. 2609, at 5-6 (2014).

II. Issue

Whether CMS has a legitimate basis to deny Petitioner’s enrollment application seeking
reactivation of billing privileges under 42 C.F.R. § 424.530(a)(3) and/or revoke
Petitioner’s Medicare billing privileges under 42 C.F.R. § 424.535(a)(3) based on
Petitioner’s conviction for a fourth degree crime of illegally possessing dum-dum bullets.

authorize an ALJ, on his own motion, to “issue subpoenas if they are reasonably
necessary for the full presentation of the case.” 42 C.F.R. § 498.58(a). As a basic rule,
an ALJ may, on his own motion, “provide a hearing on new issues that impinge the rights
of the affected party.” 42 C.F.R. § 498.56(a)(1). Although the regulations, which are
ambiguous, may restrict an ALJ from considering new issues in supplier enrollment
cases, 42 C.F.R. § 498.56(a)(2), those regulations permit an ALJ on his own motion to
remand a case for CMS to consider the new issue and render a new determination.

42 C.F.R. § 498.56(a)(2), (d). If ordered to render a new determination, CMS would
necessarily be at liberty to consider issues beyond those in the remand order because the
supplier would then have notice of those matters and be able to dispute them through the
appeal process. The DAB has recently cast doubt on the authority of ALJs to issue such
remands; however, the DAB indicated that the ambiguous nature of the regulatory text in
42 C.F.R. § 498.56(a)(2) makes the application of that provision unclear. Until recently,
ALJs could remand supplier enrollment cases to CMS. See Victor Alvarez, M.D., DAB
No. 2325, at 11-12 (2010) (“we conclude that the ALJ appropriately remanded the case
for reconsideration.”). However, the DAB has adopted a more restrictive reading of
those regulations and, based on that new reading, I render this decision based solely on a
review of the issues in the reconsidered determination that CMS issued.
Il. Jurisdiction

I have jurisdiction to decide this issue. 42 C.F.R. §§ 498.3(b)(17), 498.5(1)(2); see also
42 U.S.C. § 1395cc(j)(8).

IV. Findings or Fact, Conclusions of Law, and Analysis>

As a physician, Petitioner is a supplier for purposes of the Medicare program. See

42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of Supplier), 410.20(b)(1). In
order to participate in the Medicare program as a supplier, individuals must meet certain
criteria to enroll and receive billing privileges. 42 C.F.R. §§ 424.505, 424.510. CMS
may deny enrollment for any reason stated in 42 C.F.R. § 424.530.

After being enrolled, CMS may deactivate Medicare billing privileges for a variety of
reasons. 42 C.F.R. § 424.540(a). Deactivation is an action that is meant to protect the
supplier from misuse of the supplier’s billing number and the Medicare Trust Fund from
making overpayments. 42 C.F.R. § 424.540(c). However, “deactivation of Medicare
billing privileges does not have any effect on a. . . supplier’s participation agreement or
any condition of participation.” 42 C.F.R. § 424.540(c); see also 42 C.F.R. § 424.502
(“Deactivate means that the . . . supplier’s billing privileges were stopped, but can be
restored upon submission of updated information.”). In certain circumstances, the
regulations require a deactivated supplier to submit a new enrollment application to
reactivate the supplier’s Medicare billing privileges. 42 C.F.R. § 424.540(b)(1).

CMS may also revoke the Medicare billing privileges of an enrolled supplier.
“Revoke/Revocation means that the . . . supplier’s billing privileges are terminated.”
42 C.F.R. § 424.502. CMS may revoke billing privileges for any reason stated in
42 CFR. § 424.535.

One of the specific reasons to deny enrollment or revoke Medicare billing privileges is
when a supplier is: (1) convicted of a federal or state felony offense; (2) within ten years
preceding enrollment or revalidation of enrollment; and (3) the felony offense is one that
CMS has determined to be detrimental to the best interests of the program and its
beneficiaries. 42 C.F.R. §§ 424.530(a)(3), 424.535(a)(3). The regulations provide for a
non-exhaustive list of the types of felony offenses that CMS considers detrimental to the
best interests of the program and its beneficiaries. 42 C.F.R. §§ 424.530(a)(3)(i)(A)-(D),
424.535(a)(3)(i)(A)-(D). Relevant to the current case, it is detrimental to the best
interests of the program and its beneficiaries for a supplier to be convicted of “[a]ny

> My findings of fact and conclusions of law are in bold and italics.
felony that placed the Medicare program or its beneficiaries at immediate risk (such as a
malpractice suit that results in a conviction of criminal neglect or misconduct).”
42 C.F.R. §§ 424.530(a)(3)(i)(C), 424.535(a)(3)(i)(C).

I. On September 22, 2011, Petitioner pled guilty to the fourth degree crime in
New Jersey of illegal possession of dum-dum bullets (N.J. Rev. Stat. § 2C:
39-3(f)) and, on December 13, 2011, the Superior Court of New Jersey,
Monmouth County, entered a Judgment of Conviction against Petitioner
based on his guilty plea.

On August 27, 2010, Petitioner was arrested and charged with a number of offenses,
including possession of dum-dum (i.e., hollow point) bullets. CMS Ex. 1, at 74. On
February 7, 2011, Petitioner was indicted on those charges. CMS Ex. 1, at 74; CMS Ex.
2, at 1-2. On September 22, 2011, Petitioner pled guilty to the fourth degree crime in
New Jersey of illegal possession of dum-dum bullets (N.J. Rev. Stat. § 2C: 39-3(f)).
CMS Ex. 1, at 74. On December 13, 2011, the Superior Court of New Jersey, Monmouth
County, entered a Judgment of Conviction against Petitioner based on his guilty plea and
sentenced Petitioner to a suspended 18-month term in prison. CMS Ex. 1, at 74-76. The
court also ordered that Petitioner be: prohibited from writing prescriptions for ten years;
subject to random drug screening for five years; and required to obtain psychiatric or
psychological treatment for as long as ordered by the Medical Board. CMS Ex. 1, at 74.
Further, the court ordered Petitioner to pay total fines and penalties of $155. CMS Ex. 1,
at 75. The court dismissed the other charges against Petitioner. CMS Ex. 1, at 74; see
also CMS Ex. 2, at 2.

2. Petitioner, having been convicted of committing a fourth degree crime in
New Jersey, has been convicted of a felony for purposes of 42 C.F.R.
§§ 424.530(a)(3) and 424.535(a)(3).

Petitioner argues that New Jersey’s criminal statutes do not classify crimes as felonies.
See N.J. Rev. Stat. § 2C: 1-4(a) (establishing crimes as first degree through fourth
degree). Petitioner was convicted under N.J. Rev. Stat. § 2C: 39-3(f), which states that a
person violating the provisions of that statute “‘is guilty of a crime in the fourth degree.”
New Jersey law states that “high misdemeanors” are crimes in the first through third
degrees and “the term ‘misdemeanor’ shall mean all crimes.” N.J. Rev. Stat. § 2C:
1-4(d).

The DAB has previously concluded that a New Jersey crime in the third degree is a
felony for purposes of supplier enrollment and revocation cases. Amir Tadros, DAB No.
2550, at 6-7 (2013). This decision was based on New Jersey case law establishing the
principle that any New Jersey offense punishable by more than one year in state prison is
the equivalent of a common law felony. Jd. at 7.
Although a fourth degree crime in New Jersey is statutorily considered a “misdemeanor,”
New Jersey courts have consistently interpreted a fourth degree crime to be a felony
when a crime needs to be categorized for purposes outside the scope of the state criminal
statutes. In the Matter of Rettschlag, 2008 WL 1787466 (N.J. Super. App. Div. Apr. 22,
2008); Zaborowski v. N.J. Div. of State Police, 2007 WL 935603 (N.J. Super. App. Div.
Mar. 30, 2007); see also Serio v. Allstate Ins. Co., 509 A.2d 273, 277 n.1 (1986). This is
because a person convicted of a fourth degree crime in New Jersey may be sentenced to
imprisonment for a term not to exceed 18 months. N.J. Rev. Stat. § 2C: 43-6(4).
Significantly, the United States Court of Appeals for the Third Circuit has accepted the
New Jersey courts’ determination that a fourth degree crime is properly categorized as a
felony. See Philadelphia Indemnity Ins. Co. v. Healy, 156 F.App’x 472, 476 (3d Cir.
2005).

Therefore, consistent with the cases cited above, I conclude that Petitioner was convicted
of a felony for purposes of 42 U.S.C. §§ 424.530(a)(3) and 424.535(a)(3).

3. Petitioner was convicted of a felony offense within 10 years preceding
enrollment or revalidation of enrollment.

On December 13, 2011, the Superior Court of New Jersey, Monmouth County, entered a
Judgment of Conviction against Petitioner for illegal possession of dum-dum bullets.
CMS Ex. 1, at 74-76. As explained above, this was a felony offense. On April 16, 2013,
Petitioner signed a Medicare enrollment application (Form CMS-8551) and submitted it
to Novitas seeking reactivation of his Medicare billing privileges. CMS Ex. 1, at 15-41.
On June 11, 2013, Novitas issued two initial determination letters in which it denied
Petitioner’s enrollment application and/or revoked his billing privileges. On December
11, 2013, a Novitas hearing officer issued a reconsidered determination entitled
“Revocation of Medicare Billing Number” in which she upheld the denial of Petitioner’s
enrollment application based on 42 C.F.R. § 424.530(a)(3). CMS Ex. 1, at 1-4.

CMS asserts that Petitioner was convicted of a felony offense within 10 years of his
reactivation application, noting that the regulations require, in certain instances, that a
deactivated supplier must file an enrollment application to be reactivated. See CMS Br.
at 1, 4-5. Petitioner’s brief does not dispute this issue.

I conclude that whether CMS denied Petitioner’s reactivation enrollment application or
revoked his Medicare billing privileges, it was done within ten years of the date
preceding Petitioner’s filing of his enrollment application for reactivation. CMS’s action
was precipitated by a review of Petitioner’s enrollment application, thus making the
action CMS took part of the enrollment process. Ahmed v. Sebelius, 710 F. Supp. 2d 167,
176-177 (D. Mass. 2010); Robert F. Tzeng, M.D., DAB No. 2169, at 8-12 (2008).
10

4. Petitioner was not convicted of a felony that CMS had determined is
detrimental to the best interests of the Medicare program or its beneficiaries
under 42 C.F.R. § 424.530(a)(3)(i)(©) or 42 C.F.R. § 424.535(a)(3)(i)(C).

CMS denied Petitioner’s reactivation enrollment application and/or revoked his Medicare
billing privileges based on his conviction of a fourth degree crime in New Jersey of
possessing dum-dum bullets. CMS Ex. 1, at 1-3. The reconsidered determination states
that Petitioner, “within the 10 years preceding enrollment, or revalidation of enrollment,

was convicted of a Federal or State felony of

fense that CMS has determined to be

detrimental to the best interests of the program and its beneficiaries to continue

enrollment,” but did not specify whether this

felony is one of those listed in the

regulations at 42 C.F.R. §§ 424.530(a)(3)(i)(A)-(D), 424.535(a)(3)(i)(A)-(D). CMS Ex.

1, at 1. The determination also failed to prov:
would be detrimental to the best interests of t

ide any explanation as to why the felony
e program or its beneficiaries.

In this proceeding, CMS argues that “‘Petitioner’s crime falls within the category set forth
in [42 C.F.R §] 424.530(a)(3)(i)(C), which sets forth a broad category of offense of ‘[a]ny
felony that placed the Medicare program or its beneficiaries at immediate risk (such as a
malpractice suit that results in a conviction of criminal neglect or misconduct).’”

CMS Br. at 10. As support, CMS cites a number of sources on the internet about dum-
dum bullets and the number of deaths through gunfire in the United States. CMS Br.

at 11. Although CMS provided that information in its brief, CMS only did so “for the
sake of argument,” because “CMS contends that it is beyond the scope of the ALJ’s
authority to look behind CMS’s determination that the felony placed the program or its
beneficiaries at risk... .”. CMS Br. at 11.

Petitioner disputes that his conviction for possession of dum-dum bullets created an
immediate risk to the Medicare program or its beneficiaries. Petitioner asserts that the
example of an immediate risk provided in the regulations (i.e., conviction for criminal
neglect or misconduct related to malpractice) is clear; however, CMS has “failed to show
how or why possession of Dum Dum ammunition creates an ‘immediate risk.’” P. Br.

at 11. Petitioner asserts that “[t]he record is totally devoid of any evidence that petitioner
used or intended to use the ammunition, let alone use it in a manner th[at] would place
beneficiaries at risk.” Jd. Petitioner claims that: “the Dum Dum ammunition was
contained in its original packaging and within a box of his late father’s belongings
(unbeknownst to the petitioner). The ammunition was not found in a pistol’s chamber or
magazine, nor was the conviction the result of a reduced plea to a gun violence charge.”
P. Br. at 12. Petitioner also disputes the internet sources CMS cited in its brief
concerning gun violence for a variety of reasons. P. Br. at 12-13. Finally, Petitioner
makes the point that New Jersey does not categorically prohibit possession of dum-dum
bullets and that:

11

Petitioner was not convicted of any offense involving the
possession, use, or discharge of a weapon; it was possession
of ammunition only. In the case of petitioner, once he pled
guilty to the 4" degree offense, the police returned to him the
very ammunition for which he pled guilty to possessing.

P. Br. at 13.

ALJ review of denials and revocations under 42 C.F.R. §§ 424.530(a)(3) and
424.535(a)(3) appear to be different than denials or revocations based on other grounds
because sections 424.530(a)(3) and 424.535(a)(3) state that CMS may deny or revoke if
the supplier was convicted of a felony “that CMS has determined” to be detrimental to
the best interests of the Medicare program and program beneficiaries. Further, it is worth
noting that those sections set forth a non-exhaustive list of four general classes of
offenses that are detrimental to the program and beneficiaries (felony crimes against
persons, financial crimes, any felony that placed the Medicare program or its
beneficiaries at immediate risk, and any felonies that would result in mandatory exclusion
under section 1128(a) of the Social Security Act). Three of these general categories in
the regulation provide specific examples of offenses that are detrimental to the program
and its beneficiaries.

As an initial matter, it has been long settled that CMS has discretion to deny or revoke a
supplier and that discretionary decision is not reviewable. Letantia Bussell, M.D., DAB
No. 2196, at 13 (2008) (“the right to review of CMS’s determination by an ALJ serves to
determine whether CMS had the authority to revoke . . . not to substitute the ALJ’s
discretion about whether to revoke.”). Rather, “[t]he ALJ’s review of CMS’s revocation
...is thus limited to whether CMS had established a legal basis for its actions.” Id.
Review of CMS’s discretionary act to deny or revoke must be distinguished from CMS’s
determination that a felony offense committed by a supplier is detrimental to the program
and its beneficiaries. See Fady Fayad, M.D., DAB No. 2266, at 16 (2009), aff'd Fayad v.
Sebelius, 803 F.Supp. 2d. 699, 704 (E.D. Mich. 2011).

Review of cases involving sections 424.530(a)(3) and 424.535(a)(3) reveals that a
different analysis is utilized depending on whether the crime for which a supplier was
convicted (1) is specifically listed in the regulations, (2) is similar to a crime listed in the
regulations, or (3) has been determined to be detrimental through a case-by-case analysis.
The DAB has recognized three different levels of review that may take place when CMS
denies or revokes a supplier under 42 C.F.R. §§ 424.530(a)(3) and 424.535(a)(3).

The most deferential standard is applied when CMS takes such action against a supplier
who was convicted of a crime specifically listed as an example of a crime that is
considered to be detrimental to the Medicare program and its beneficiaries. Such crimes
are detrimental per se. Bussell, DAB No. 2196, at 9 (“When section 424.535(a)(3) is
12

considered in the context of the preamble, it is clear that CMS has determined that
income tax evasion by a provider is detrimental per se to the program and its
beneficiaries.”). This is because the regulations, which were published through the notice
and comment rulemaking procedure, embody the types of crimes that the Secretary of
Health and Human Services (Secretary) has determined are detrimental to the program
and its beneficiaries. /d. at 12. Significantly, “[o]nce the Secretary . . . has exercised that
authority by regulation as to a class of felonies, an ALJ cannot revisit that determination
in an individual case where the conviction of an offense in the class is undisputed.” Jd. at
13 n.13.

The second most deferential level of review involves cases where a supplier has been
convicted of a felony that is a similar one to the listed examples in the regulations.
However, because the felony is not specifically mentioned in the regulatory list of crimes
considered to be detrimental per se to the program or its beneficiaries, an ALJ reviewing
such a case must look to circumstances surrounding the conviction to determine if the
felony conviction is similar to one of the offenses listed in the regulations.

Moreover, the ALJ committed no error when he considered
the conduct and circumstances underlying Petitioner’s guilty
plea in deciding whether Petitioner’s offense was similar to
insurance fraud. The regulations prescribe no method or
criteria for judging whether an offense is similar to one of the
financial crimes named in section 424.535(a)(3)(i)(B).
Absent explicit regulatory guidance to the contrary, and given
section 424.535(a)(3)’s remedial purpose to protect the
Medicare program and beneficiaries from disreputable actors,
it is reasonable to conclude that a supplier’s offense of
conviction is similar to a financial crime when the facts and
circumstances that are admitted to be the basis for the
conviction would appear to satisfy one or more elements of a
named financial crime.

Abdul Razzaque Ahmed, M.D., DAB No. 2261, at 11 (2009), aff'd Ahmed v. Sebelius, 710
F.Supp. 2d 167 (D. Mass. 2010). However, even if a criminal offense is not similar to
one of the listed crimes in the regulations, it still may be found to be detrimental to the
program and program beneficiaries if it is one that falls into one of the four general
categories of crimes listed in the regulations (e.g., felony crimes against persons,
financial crimes, any felony that placed the Medicare program or its beneficiaries at
immediate risk, and any felonies that would result in mandatory exclusion under section
1128(a) of the Social Security Act).

13

[E]ven if Petitioner’s felony offense was not similar to one of
the crimes named in the regulation, CMS would not
necessarily be precluded from finding that it was a financial
crime. Financial crimes, the regulation states, are crimes
“such as extortion, embezzlement, income tax fraud,
insurance fraud and other similar crimes” (emphasis added).
The words “such as” imply that the subsequent list of
illustrative crimes, including crimes similar to those named in
the list, are not the only set of crimes that may be considered
“financial.”

Ahmed, DAB No. 2261, at 10. If an analysis of the basis of a guilty plea confirms that
the felony for which a supplier was convicted is similar to one of the general categories
of crimes in the regulatory list, then that supplier was convicted of crime that is
detrimental to the program and program beneficiaries. Jd. at 12 (“Here, there is no
dispute that Petitioner’s offense is detrimental to Medicare if, in fact, it is a financial
crime within the meaning of section 424.535(a)(3)(i)(B).”).

The final type of review involves cases in which CMS has determined, on a case-by-case
basis, that an individual was convicted of an offense that CMS determines to be
detrimental to the best interests of the program and its beneficiaries. CMS is permitted to
make such individualized analyses (Fayad v. Sebelius, 803 F.Supp. 2d. 699, 704 (E.D.
Mich. 2011); however, “the administrative burden of doing so would be substantial.”
Bussell, DAB No. 2196, at 12-13.

As indicated above, CMS argues in this case that an ALJ may only conduct the most
minimal review (i.e., must uphold a denial or revocation under 42 C.F.R.

§§ 424.530(a)(3) and 424.535(a)(3) so long as Petitioner has committed a felony and
CMS’s reconsidered determination states that CMS has determined this felony to be
detrimental to the best interests of the program and program beneficiaries). However,
CMS cites no case showing that the DAB has endorsed such a narrow view of its
authority to review denials or revocations under 42 C.F.R. §§ 424.530(a)(3) and
424.535(a)(3). Petitioner argued in response that CMS has misinterpreted Bussel/ in an
attempt to “handcuff the ALJ.” P. Br. at 8-9.

The DAB has stated the following on this issue:

The ALJ held that CMS’s determination that Petitioner’s
felony was detrimental to Medicare was beyond the scope of
his review. .... We find it unnecessary to examine that
jurisdictional statement because Petitioner does not dispute
that his conspiracy offense was detrimental to the best
interests of Medicare. In any event, we would affirm CMS’s
14

determination that Petitioner’s crime was detrimental to
Medicare because it evidenced a lack of trustworthiness in his
dealings with the federal government. The record indicates
that Petitioner assisted in the submission of six to 24 false
medical waivers, suggesting deep involvement in the
conspiracy. .... CMS could reasonably infer from
Petitioner’s willingness to assist in the submission of false
medical information on federal immigration forms that he
posed a threat to the Medicare program.

Fady Fayad, M.D., DAB No. 2266, at 16-17 (citations omitted).

CMS cites no authority that expressly states that I should abdicate review of CMS’s
determination of whether a criminal offense is detrimental to the best interests of the
program or its beneficiaries. To the contrary, the DAB, as discussed above, has laid out
precise rules for considering whether a felony conviction meets or is similar to one of the
types of felonies provided in the regulations. It would be inconsistent for the DAB to
provide for review and analysis when a felony is allegedly the same or similar to one
listed in the regulation, but find there is no review when CMS makes a determination on
a case-by-case basis. Otherwise, CMS could make all its determinations on a case-by-
case basis and effectively foreclose any ALJ or DAB review whatsoever.

Further, CMS’s argument also overlooks that suppliers who have been denied enrollment
have a statutory right to a hearing to dispute the denial. 42 U.S.C. § 1395cc(j)(8). The
regulations expressly state that suppliers have a right to seek ALJ and DAB review of the
denial of enrollment or revocation of billing privileges. 42 C.F.R. §§ 498.3(b)(17),
498.5(1)(2)-(3). Based on this authority, it would seem unlikely that the Secretary would
make unreviewable an element of CMS’s basis for denying enrollment, as that would
appear to contradict the statute that provides hearing rights. If the Secretary had done so,
the Secretary would likely have stated this clearly in the Federal Register notice
publishing 42 C.F.R. §§ 424.530(a)(3) and 424.535(a)(3). However, no such statement
appears. 71 Fed. Reg. 20,754, 20,760, 20,766, 20,768 (Apr. 21, 2006).°

® A recent regulatory amendment provides that CMS may revoke billing privileges of a
supplier when “CMS determines that the provider or supplier has a pattern or practice of
submitting claims that fail to meet Medicare requirements.” 79 Fed. Reg. 72,500, 72,532
(Dec. 5, 2014) (to be codified at 42 C.F.R. § 424.535(a)(8)(ii)).. Unanswered in the
preamble to the final rule is whether the use of the phrase “CMS determines” in this
regulation means that neither an ALJ nor the DAB could review whether the record
actually showed a pattern or practice of submitting claims that failed to meet Medicare
requirements. Would, as CMS argues in this case, an ALJ and the DAB merely need to
15

The DAB has indicated that it is the ALJ’s responsibility to ascertain whether CMS had a
legal basis (i.e., authority) for the denial or revocation. Bussell, DAB No. 2196, at 13.
This review includes determining whether CMS properly applied the facts of a case to the
regulatory provision in question and not simply looking at whether the reconsidered
determination states, formulaically, that it has determined that the offense in question is
detrimental to the best interests of the program and program beneficiaries. In the Fayad
quote above, the DAB indicated that it would have upheld CMS’s case-by-case
detrimental determination because it could reasonably infer the reason that CMS would
have decided that the crime in question was detrimental to best interests of the program
and its beneficiaries. DAB No. 2266, at 17. Although this language is dictum, in the
absence of controlling authority, a reasonableness test appears most appropriate when
reviewing a denial or revocation made on a case-by-case basis. Such a test is still
deferential, but provides basic, meaningful review. Cf Fayad, 803 F.Supp. 2d. at 704
(upholding CMS’s case-by-case detrimental determination because it was a reasonable
interpretation of 42 C.F.R. § 424.535(a)(3) that is supported by the record).

Below I consider whether CMS had a legal basis for its denial or revocation of Petitioner
based on the DAB’s methods for conducting such review.

a. Petitioner was not convicted of a criminal offense that is per se
detrimental to the best interests of the Medicare program or its
beneficiaries.

As stated above, CMS argues that Petitioner’s criminal offense was one that CMS
determined to be detrimental to the best interests of the Medicare program and its
beneficiaries because it was one that placed the Medicare program or its beneficiaries at
an immediate risk. 42 C.F.R. §§ 424.530(a)(3)(i)(C), 424.535(a)(3)(i)(C). Petitioner
disputes that his conviction for possessing dum-dum bullets is enumerated in the
regulations as a conviction that is per se detrimental to the Medicare program and its
beneficiaries. Although CMS argues that Petitioner’s felony offense was for a crime that
poses an immediate risk to the program and program beneficiaries, CMS agrees that
“Petitioner’s felony is not one of those specified in the regulation ... .” CMS Br.

at 10n.4.

confirm that the reconsidered determination says, without explanation, that CMS made
such a determination in order to uphold the revocation? Since the phrase “CMS
determines” could potentially be added to every basis for denial or revocation in the
regulations, the interpretation of this phrase could significantly impact the rights of
suppliers to obtain meaningful review of CMS’s denials and revocations.
16

I agree with both parties that Petitioner’s conviction is not expressly listed in 42 C.F.R.
§§ 424.530(a)(3) and 424.535(a)(3) and is not one that specifically implicates an
immediate risk to the program or a beneficiary.’ Therefore, I cannot conclude that
Petitioner was convicted of an offense that is per se detrimental to the Medicare program
or its beneficiaries.

b. The record does not support the conclusion that Petitioner’s criminal
offense should be categorized as one that placed the Medicare
program or its beneficiaries at an immediate risk nor is it similar to
the regulatory example of a criminal offense that placed the program
or program beneficiaries at an immediate risk.

Although Petitioner’s crime is not one that is per se detrimental to the Medicare program
or its beneficiaries, it is necessary to consider whether it generally fits under the category
of a criminal offense that placed the Medicare program or its beneficiaries at an
immediate risk. As indicated above, the DAB has endorsed looking at the circumstances
surrounding the guilty plea and the conviction in cases where a criminal offense is not
considered per se detrimental. Ahmed, DAB No. 2261, at 11.

After evaluating the record in this case and applying it to the regulations, I cannot
conclude that Petitioner’s mere possession of dum-dum bullets is an offense that created
an immediate risk to the Medicare program or its beneficiaries. The record does not
indicate that Petitioner’s possession of illegal ammunition created an immediate risk to
anyone. In its brief in this case, CMS summarizes information from internet websites
concerning the number of deaths in the United States from gunfire, as well as the reason
dum-dum bullets create more damage to the human body than a regular bullet, and that
the American Medical Association believes that dum-dum bullets “heighten[] the risk of
multiple gunshot wounds and severe penetrating trauma, resulting in more critical injuries

7 CMS does not cite any DAB cases in which the felony offense committed by a supplier
or a provider was consider per se detrimental to the best interests of the program or its
beneficiaries because it placed the Medicare program or its beneficiaries at immediate
risk. However, I assume that such an offense would have to be the same as the example
provided in 42 C.F.R. §§ 424.530(a)(3)(i)(C) or 424.535(a)(3)(i)(C) (guilty of criminal
misconduct or neglect arising from malpractice) or perhaps would include language such
as the following: “A person commits an offense if he recklessly engages in conduct that
places another in imminent danger of serious bodily injury.” Tex. Penal Code Ann.

§ 22.05(a). In the present case, Petitioner’s criminal offense is neither related to criminal
misconduct or neglect arising from malpractice nor does it include an element to the
offense indicating that someone was placed in imminent danger or harm.

17

and deaths.” CMS Br. at 11. Further, The Hague Convention apparently outlawed use of
dum-dum bullets in war. CMS Br. at 12.

Petitioner objects to the information on the internet CMS cites. P. Br. at 3. Further,
Petitioner points out that one of the internet sources discusses deaths by gun violence
generally, not by dum-dum bullets. P. Br. at 11. In addition to disputing the statistics
used in the article, Petitioner points out that it is not relevant to the present case because:
“Tn the case of petitioner, however, the Dum Dum ammunition was contained in its
original packaging and within a box of his late father’s belongings (unbeknownst to the
petitioner). The ammunition was not found in a pistol’s chamber or magazine... .”

P. Br. at 11-12. Petitioner also quotes from one of the internet sources CMS cites
(Wikipedia) that indicates that dum-dum bullets are one of the most common types of
bullets used by civilians and police because there is a reduced risk of bystanders being hit
because such bullets have a reduced risk of over-penetrating or ricocheting. The
Wikipedia entry also indicates that New Jersey permits dum-dum bullets to be possessed
at an individual’s dwelling or on the individual’s land. P. Br. at 3. Petitioner sums up his
argument on this issue by stating:

CMS again misses the point as Petitioner was not convicted
of any offense involving the possession, use, or discharge of a
weapon; it was possession of ammunition only. In the case of
petitioner, once he pled guilty to the 4th degree offense, the
police returned to him the very ammunition for which he pled
guilty to possessing.

P. Br. at 13.

Without minimizing how dangerous firearms are or the damage that dum-dum bullets can
do when they hit an individual, I believe that Petitioner is correct that the internet sources
cited by CMS are not directly relevant to show that the felony offense Petitioner
committed presented an immediate risk to the Medicare program or its beneficiaries. On
its face, mere possession of illegal ammunition does not appear to create an immediate
risk to anyone, without surrounding circumstances that show there was an immediate
risk. Further, it is significant that CMS’s Wikipedia entry appears to indicate that New
Jersey is the only state in the United States to make possession of dum-dum bullets
illegal.

In reviewing the facts surrounding Petitioner’s conviction, I note that the parties did not
offer any witness testimony. However, Petitioner provided an uncontroverted statement
18

with his enrollment application regarding the circumstances surrounding his possession
of the dum-dum ammunition.® He stated:

I was convicted of possession of dum dum bullets. These are
hollow point bullets, which are prohibited under certain
circumstances. No one including law officers could indicate
what circumstances. My father was a law enforcement
officer for the Pennsylvania Game Commission for 35 years.
He used these bullets in his service weapon. When he died in
2005, all of his guns and ammunition were willed to me.
Later in 2005 I moved to New Jersey and took his guns and
ammunition. I am also an avid gun collector. All of my guns
are registered in New Jersey. Coming from Pennsylvania, it
didn’t occur to me to consider ammunition. The final
outcome of this bullet conviction was $157 fine that I paid
that day. Ironically when the guns and ammunition were
returned to me by the prosecutor’s office the same hollow
point bullets were included.

CMS Ex. 1, at 73.

The only other detailed statement concerning Petitioner’s criminal case is in the Final
Consent Order issued by the Medical Board. The relevant passages are as follows:

The Interim Consent Order was entered into following Dr.
Ray’s arrest on August 27, 2010, on charges of indiscriminant
prescribing of controlled substances (“C.D.S.”) and
possession of prohibited hollow point bullets. The arrest was
a result of an investigation in which it was revealed that Dr.
Ray was unlawfully issuing prescriptions for oxycodone
during meetings with an informant at a restaurant in Neptune,
New Jersey.

® Petitioner’s statement was included with the enrollment application he filed following
CMS’s request for more information related to his criminal conviction. CMS Ex. 1, at
43-76. Petitioner signed the certification on the enrollment application as to the truth of
the information in the application after being informed of the criminal penalties that
could be imposed for false statements. CMS Ex. 1, at 68-71. Therefore, I accept his
statement as having been certified by him, even though the actual page containing the
statement does not include his signature. See Dr. S.A. Brooks, DPM, DAB No. 2615, at
16 (2015).
19

On February 7, 2011, Dr. Ray was indicted on charges of
conspiracy to distribute C.D.S., falsification of records
relating to medical care, possession of C.D.S. (cocaine), and
possession of hollow point bullets. On December 13, 2011, a
judgment of conviction was entered as a result of a plea
agreement, in which Dr. Ray pled guilty to possession of the
illegal bullets and the conspiracy and drug charges were
dismissed. Dr. Ray was ordered to serve an eighteen month
suspended sentence (non-custodial), five years of random
urine testing, psychiatric treatment, and “Medical Board
restrictions -10 year prescription suspension: defendant to be
monitored by Medical Board,” plus miscellaneous court costs
and fees. He entered the Professional Assistance Program of
New Jersey (“P.A.P”) in October 2010, and has been
compliant with treatment for cocaine and opiate abuse. He
attends psychiatric therapy with James P. O’Neill, M.D., as
well as meetings with Louis E. Baxter, M.D., Executive
Medical Director of P.A.P.

On February 22, 2012, Dr. Ray appeared with Alton D.
Kenney, Esq., and David I. Canavan, M.D., of P.A.P., before
a Preliminary Evaluation Committee of the Board to discuss
his request for reinstatement of licensure. Proofs submitted to
the Board by the P.A.P. on Dr. Ray’s behalf, along with
testimony by Dr. Ray and Dr. Canavan, demonstrated that
since entering P.A.P., he has had no instances of drug abuse
and has complied with all requirements of P.A.P. treatment
and monitoring. Dr. Ray acknowledged his responsibility and
error in unlawfully writing prescriptions for several
acquaintances without having performed proper physical
examinations or maintaining proper patient records.

However, [he] believes that he is now effectively resolving
the personal psychiatric issues that led him to engage in such
behavior in the first place. Upon reinstatement, Dr. Ray will
seek to return to a strictly hospital-based anesthesiology
practice and continue with P.A.P. monitoring. The
Committee was satisfied that Dr. Ray’s misconduct was not
likely to recur.

CMS Ex. 2, at 1-3.
20

The judgment of conviction entered against Petitioner confirms the Final Consent Order’s
assertions that Petitioner had been charged with a variety of offenses related to controlled
substances and alteration of medical records, in addition to the charge of possessing dum-
dum bullets. It also confirms that Petitioner was only convicted of the charge related to

the dum-dum bullets. CMS Ex. 1, at 74.

These three documents referenced above are the only ones in the record that provide
information as to the circumstances surrounding the plea and conviction. Based on the
facts stated in the record, along with a review of the statute Petitioner was convicted of
violating (N.J. Rev. Stat. § 2C: 39-3(f)), I conclude that the offense Petitioner was
convicted of committing (illegal possession of dum-dum bullets) did not create an
immediate risk to the Medicare program or its beneficiaries. Without any evidence that
Petitioner’s conviction was related to a situation where individuals were put at risk, (such
as illegally carrying a firearm in public with the dum-dum bullets loaded in it), any risk to
the program or program beneficiaries was, at best, theoretical, rather than immediate.

The example in 42 C.F.R. §§ 424.530(a)(3)(i)(C) and 424.535(a)(3)(i)(C) of an
immediate risk is of a supplier who committed medical malpractice that ultimately results
in a conviction for criminal misconduct or neglect. The risk based on the offense for
which Petitioner was convicted is significantly more remote than that example.
Therefore, I conclude that Petitioner was not convicted of an offense that placed the
Medicare program or its beneficiaries at immediate risk.

c. There is no evidence that CMS conducted a case-by-case assessment
that Petitioner’s felony offense was detrimental to the best interests of
the Medicare program or its beneficiaries and CMS does not assert it
made one.

As discussed above, the regulatory list of offenses that CMS has determined to be
detrimental to the best interests of the Medicare program and its beneficiaries is not
exhaustive. CMS may deny or revoke a supplier by making a case-by-case evaluation of
the felony offense to determine whether it is detrimental to the best interests of the
Medicare program or its beneficiaries.

In the present case, CMS does not argue it made a case-by-case analysis in the present
matter. Rather, CMS argues that its determination as to whether Petitioner’s felony
offense was detrimental to the best interests of the Medicare program and its beneficiaries
is unreviewable. In the alternative, CMS argues that the denial or revocation should be
upheld because Petitioner’s felony offense could be categorized as one that CMS has
determined, through rulemaking, to be detrimental to the best interests of the program
and its beneficiaries. Having rejected those arguments above, I consider whether CMS’s
denial or revocation can be upheld as a case-by-case determination that Petitioner’s
felony offense is detrimental to the best interests of the program or its beneficiaries.
21

The initial determination in this case merely makes a conclusory statement:

Barry Ray was, within the 10 years preceding enrollment or
revalidation of enrollment, convicted of a Federal or State
felony offense that CMS has determined to be detrimental to
the best interests of the program and its beneficiaries.

CMS Ex. 1, at 77. The reconsidered determination provides a little more information but
is essentially the same conclusory statement:

Specifically, on June 11, 2013, Novitas Solutions denied your
application based on a September 22, 2011 guilty plea to
possession of dum dum bullets, a fourth degree felony.

The Hearing Officer (HO) has reviewed all of the
documentation. Novitas Solutions is unable to process the
application to enroll Barry Ray, MD, as he is within 10 years
of his felony conviction. This is regardless of the seriousness
of a fourth degree crime, nonetheless a felony.

CMS Ex. 1, at 1-2. CMS did explain why documents submitted by Petitioner with the
reconsideration request were not helpful; however, this discussion still did not include a
case-by-case analysis of the felony offense.

Iam limited to reviewing the bases for a denial or revocation as stated in the reconsidered
determination. See e.g., Neb Group of Arizona LLC, DAB No. 2573, at 7 (2014). The
regulations require that the reconsidered determination “give[] the reasons for the
determination” and “[i]f the determination is adverse, the notice specifies the conditions
or requirements of law or regulations that the affected party fails to meet... .” 42 C.F.R.
§ 498.25(a).

The reason given in the reconsidered determination in the present case for upholding the
denial/revocation was simply that Petitioner was convicted of a felony within 10 years of
his submission of an enrollment application. The reconsidered determination expressly
declined to consider the seriousness of Petitioner’s crime. It is possible that the
reconsidered determination meets the basic requirements in the regulations; however, it
does not evidence that there was a case-by-case determination that Petitioner’s felony
conviction was detrimental to the best interests of the Medicare program or its
beneficiaries. Cf Dr. S.A. Brooks, DPM, DAB No. 2615, at 11 (2015) (“In this case,
however, given the reasons for initial denial of the request and the ambiguity in the
reconsideration determination, it is not clear that any case-by-case review of Petitioners
22

claims was made.”). When the DAB indicated that making case-by-case determinations
would involve a substantial “administrative burden” (Bussell, DAB No. 2196, at 12-13),

I believe it envisioned that CMS would have to articulate some basis for that case-by-case
determination.

Although not directly implicated in this case, I find useful the Secretary’s statements in
the preamble responding to public comments concerning recent modifications to

42 C.F.R. §§ 424.530(a)(3) and 424.535(a)(3). The Secretary stated twice that not all
felony convictions will result in a denial or revocation. 79 Fed. Reg. 72,500, 72,510,
72,512 (Dec. 5, 2014). Rather, “[e]ach case will be carefully reviewed on its own merits
and . . . we will act judiciously and with reasonableness in our determinations.” Jd. at
72,510. In regard to a conviction of a non-violent firearm felony, the Secretary
responded: “The determination of whether a particular conviction will or will not result
in the revocation or denial of Medicare enrollment will depend upon the specific facts of
each individual situation.” Jd. at 72,512.

In the present case, the reconsidered determination did not consider the specific facts
related to Petitioner’s non-violent ammunition possession offense. I cannot reasonably
infer, from the facts in the record, why such an offense is detrimental to the best interests
of the Medicare program or its beneficiaries. Therefore, I cannot affirm CMS’s
denial/revocation as a case-by-case determination that Petitioner’s felony offense was
detrimental to the Medicare program and its beneficiaries.

For purposes of the present case, the serious charges against Petitioner, which Petitioner
appears to have admitted, were dismissed in the criminal case and cannot serve as a basis
to substantiate a determination that Petitioner’s felony offense is detrimental to the best
interests of the Medicare program or its beneficiaries. This is because the regulation
expressly requires that Petitioner had to be convicted of the felony offense in question in
order for it to be detrimental to the best interests of the Medicare program or its
beneficiaries.” 42 C.F.R. §§ 424.530(a)(3) and 424.535(a)(3).

° | distinguish the analysis in this case from the analysis used in exclusion cases arising
under 42 U.S.C. § 1320a-7(a) in which exclusion is based on a petitioner’s criminal
conviction. That statute uses the terms “related to,” “relating to,” and “in connection
with” to specify what the criminal offense must involve in order for it to require
exclusion (e.g., section 1320a-7(a)(1) requires that the criminal offense be related to the
delivery of an item or service under the Medicare or any state health care program). The
DAB has interpreted these terms to mean that there only needs to be a common sense
connection or nexus between the crime and underlying forbidden conduct. See e.g.,
Charice D. Curtis, DAB No. 2430, at 5 (2011). It is important to note that 42 C.F.R.

§§ 424.530(a)(3) and 424.535(a)(3) do not include the phrases “related to,” “relating to,”
23

To the extent that CMS has concerns about Petitioner serving as an enrolled supplier in
the Medicare program based on issues not directly related to the offense for which
Petitioner was convicted, I share them. However, I must issue this decision based on the
confines of the reconsidered determination; a determination that I now reverse.

V. Conclusion

I reverse CMS’s determination to deny Petitioner’s enrollment application for
reactivation and/or revoke Petitioner’s Medicare billing privileges.

/s/
Scott Anderson
Administrative Law Judge

“in connection with,” or similar signaling language. Therefore, my analysis in this case
is limited to the specific offense for which Petitioner was convicted.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.

MRMJ Enterprises, Inc. / Mark Hagood
d/b/a Maple Valley Market,

Respondent.

Docket No. C-15-722
FDA Docket No. FDA-2014-H-2242

Decision No. CR3654

Date: February 19, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, MRMJ Enterprises, Inc. / Mark Hagood d/b/a Maple Valley Market,
alleging facts and legal authority sufficient to justify imposing a civil money penalty of
$500. Respondent did not timely answer the Complaint, nor did Respondent request an
extension of time within which to file an Answer. Therefore, I enter a default judgment
against Respondent and order that Respondent pay a civil money penalty in the amount of
$500.

CTP began this case by serving a Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent’s staff unlawfully sold cigarettes
to a minor, thereby violating the Federal Food, Drug, and Cosmetic Act (Act) and its
implementing regulations, found at 21 C.F.R. pt. 1140. CTP seeks a civil money penalty
of $500.
On December 23, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days Respondent should pay the penalty, file
an answer, or request an extension of time within which to file an answer. CTP warned
Respondent that if it failed to take one of these actions within 30 days an Administrative
Law Judge (ALJ) could issue an initial decision by default ordering Respondent to pay
the full amount of the proposed penalty. 21 C.F.R. § 17.11.

Respondent has not filed an answer or any other pleading within the time prescribed.
Therefore, pursuant to 21 C.F.R. § 17.11(a), I am required to issue an initial decision by
default if the Complaint is sufficient to justify a penalty. Accordingly, I must determine
whether the allegations in the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Maple Valley Market, an establishment that sells tobacco
products and is located at 21655 Maple Valley Highway, Maple Valley,
Washington 98038. Complaint § 3.

e CTP previously initiated a civil money penalty action, CRD Docket Number C-13-
1378, FDA Docket Number FDA-2013-H-1187, against Respondent for three
violations of 21 C.F.R. pt. 1140 within a 24-month period. Specifically, those
violations included violations on May 11, 2013, when Respondent sold cigarettes
to a minor and failed to verify, by means of photographic identification, that the
tobacco purchaser was 18 years of age or older. Complaint § 10.

e The previous civil money penalty action concluded on November 25, 2013, when I
issued an Initial Decision and Default Judgment finding the Respondent liable for
the violations. The decision became final and binding on December 26, 2013.
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment conducted on June
25, 2014, FDA-commissioned inspectors documented that “a person younger than
18 years of age was able to purchase a package of Marlboro cigarettes . . . at
approximately 9:12 AM.” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). The regulations prohibit the sale of
cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).

Here, Respondent had four violations of regulations found at 21 C.F.R. pt. 1140 within a
26-month period. I imposed a civil money penalty of $500 against Respondent on
November 25, 2013, finding that Respondent previously committed three violations of
the Act. Most recently, on June 25, 2014, Respondent sold cigarettes to a person younger
than 18 years of age, in violation of 21 C.F.R. § 1140.14(a). Therefore, Respondent’s
actions constitute violations of law that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-2165)

Complainant,
v.

Waheguru Gas LLC / Singh Manjit
d/b/a Delta,

Respondent.
Docket No. C-15-643
Decision No. CR3653

Date: February 18, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Waheguru Gas LLC / Singh Manjit d/b/a Delta, at 534 Route
515, Vernon, New Jersey 07462, and by filing a copy of the complaint with the Food and
Drug Administration’s (FDA) Division of Dockets Management. The complaint alleges
that Delta unlawfully sold tobacco products to minors and failed to verify that the
purchasers were 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, Cigarettes
and Smokeless Tobacco, 21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money
penalty against Respondent Delta.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on December 16, 2014, CTP served the
complaint on Respondent Delta by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R.§ 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Delta has neither filed an answer within the time prescribed, nor requested an
extension of time within which to file an answer. Pursuant to 21 C.F.R. § 17.11, 1
assume that the facts alleged in the complaint (but not its conclusory statements) are true.
Specifically:

e At approximately 12:18 p.m. on January 4, 2014, at Respondent’s business
establishment, 534 Route 515, Vernon, New Jersey 07462, an FDA-commissioned
inspector observed that a person younger than 18 years of age was able to
purchase a package of Skoal Long Cut Classic Mint smokeless tobacco. The
inspector also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older;

e Ina warning letter dated April 3, 2014, CTP informed Respondent of the
inspector’s January 4, 2014 observations, and that such actions violate federal law,
21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that Respondent’s
failure to correct its violations could result in a civil money penalty or other
regulatory action;

e At approximately 11:29 a.m. on July 22, 2014, at Respondent’s business
establishment, 534 Route 515, Vernon, New Jersey 07462, FDA-commissioned
inspectors observed that a person younger than 18 years of age was able to
purchase a package of Marlboro cigarettes. The inspector also documented that
staff failed to verify, by means of photographic identification containing a date of
birth, that the purchaser was 18 years of age or older.

These facts establish Respondent Delta’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387f(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.
§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of tobacco products to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations also require retailers to verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Waheguru Gas LLC / Singh Manjit d/b/a Delta. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Alexander Leonov, D.D.S.
(O.I. File No. H-14-40702-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1620
Decision No. CR3651

Date: February 13, 2015

DECISION

The Inspector General (IG) of the U.S. Department of Health and Human Services (HHS)
notified Petitioner, Alexander Leonov, D.D.S., that he was being excluded from
participation in Medicare, Medicaid, and all other federal health care programs for a
minimum period of five years under 42 U.S.C. § 1320a-7(a)(1). Petitioner requested a
hearing before an administrative law judge (ALJ) to dispute the exclusion. For the
reasons stated below, I conclude that the IG has a basis for excluding Petitioner from
program participation and that the five-year exclusion is mandated by law.

I. Background

By letter dated May 30, 2014, the IG notified Petitioner that he was being excluded from
Medicare, Medicaid, and all other federal health care programs for a period of five years,
pursuant to 42 U.S.C. § 1320a-7(a)(1). The IG advised Petitioner that the exclusion was

based on his conviction in the “Superior Court of California, County of Los Angeles, of a
criminal offense related to the delivery of an item or service under the Medicare or a
State health care program, including the performance of management or administrative
services relating to the delivery of items or services, under any such program.” IG
Exhibit (Ex.) 5.

Petitioner timely filed a request for hearing (RFH) and this case was assigned to me for
hearing and decision. On September 3, 2014, I convened a prehearing conference by
telephone, the substance of which is summarized in my Order and Schedule for Filing
Briefs and Documentary Evidence (Order), dated September 8, 2014. See 42 C.F.R.

§ 1005.6. Pursuant to the Order, the IG filed a brief (IG Br.) and five exhibits (IG Exs. 1-
5). Petitioner filed a response brief (P. Br.) with one exhibit (P. Ex. 1). The IG filed a
reply brief (IG Reply Br.).

II. Decision on the Record

Neither party objected to any of the proposed exhibits. Therefore, I admit them all into
the record. See Order 5.

Because both parties indicated that a hearing is not necessary in this case and that they
did not have any witnesses to offer, I decide this case on the basis of the written record.
IG Br. at 6; P. Br. at 4-5.

II. Issue

Whether the IG has a basis for excluding Petitioner from participating in Medicare,
Medicaid, and all other federal health care programs for five years pursuant to 42 U.S.C.
§ 1320a-7(a)(1). See 42 C.F.R. § 1001.2007(a)(1)-(2).

IV. Findings of Fact, Conclusions of Law, and Analysis’

HHS must exclude an individual from participation in Medicare, Medicaid, and all other
federally-funded health care programs if that individual “has been convicted of a criminal
offense related to the delivery of an item or service under title XVIII or under any State
health care program.” 42 U.S.C. § 1320a-7(a)(1).

' My findings of fact and conclusions of law are set forth in italics and bold font.
A. Petitioner pled no contest in a California court to one count of Paying
Unlawful Medi-Cal Remuneration, and the court adjudged him guilty of that
crime and ordered Petitioner to pay $150,000 in restitution to the California
Health Care Deposit Fund.

Petitioner is a dentist licensed to practice in the state of California. IG Ex. 1. On May 2,
2011, the California Attorney General charged Petitioner with a one count felony offense
of Paying Unlawful Medi-Cal Remuneration, in violation of section 14107.2(b) of
California’s Welfare and Institutions code. The felony complaint alleged that Petitioner
“did willfully and unlawfully offer and pay remuneration to [two named individuals] in
return for the referral of patients for which payment may be made under the Medi-Cal
Act....” IG Ex. 2.

On May 10, 2011, Petitioner signed a plea agreement in which he agreed to either plead
guilty or no contest to the charge in the felony complaint and to pay restitution in the
amount of $150,000 to the California Health Care Deposit Fund. The California
Attorney General agreed to permit Petitioner’s crime to be reduced to a misdemeanor if
Petitioner complied with all of the terms of the plea agreement. IG Ex. 3.

On May 13, 2011, Petitioner pled nolo contendere to the charge of violating section
14107.2(b) of California’s Welfare and Institutions code, and the Superior Court of
California, County of Los Angeles, found Petitioner guilty of that offense. The Superior
Court ordered restitution to be paid to the California Attorney General with the check
made payable to “California Health Care.” On May 30, 2013, the California Attorney
General agreed to reduce Petitioner’s offense to a misdemeanor and the Superior Court
ordered Petitioner to serve probation. The Superior Court noted that Petitioner had paid
$110,000 in restitution and ordered the remaining $40,000 to be paid during Petitioner’s
probation. IG Ex. 4. By August 16, 2014, Petitioner had paid $130,000 in restitution.
P. Ex. 1.

B. Petitioner was convicted of a felony for the purposes of 42 U.S.C. § 1320a-
7(a)()).

Under 42 U.S.C. § 1320a-7(a)(1), Petitioner must be “convicted of a criminal offense”
before he can be excluded. An individual is considered “convicted” when a judgment of
conviction has been entered by a federal, state, or local court or a plea of guilty or no
contest has been accepted in a federal, state, or local court. 42 U.S.C. § 1320a-7(i)(1),
(3). In the present matter, Petitioner entered a plea of no contest to a charge of violating
section 14107.2(b) of California’s Welfare and Institutions code, and the Superior Court
found Petitioner “guilty.” IG Exs. 3-4. A court record indicates that as of May 13, 2011,
the disposition of Petitioner’s case was “Convicted.” IG Ex. 4 at 1. Based on these facts
and Petitioner’s admission that he was convicted of a criminal offense (P. Br. at 1), I
conclude that Petitioner was convicted of a criminal offense.

C. Petitioner’s criminal offense of paying for the referral of Medi-Cal-eligible
patients is an offense related to the delivery of an item or service under
Medicaid, a state health care program.

An individual must be excluded from participation in any federal health care program if
the individual was convicted under federal or state law of a criminal offense related to the
delivery of an item or service under Medicare or a state health care program. 42 U.S.C.

§ 1320a-7(a)(1); 42 C.F.R § 1001.101(a). A state health care program includes a state’s
Medicaid program. 42 C.F.R. § 1001.2 (definition of State health care program). Medi-
Cal is California’s Medicaid program. See Jesusa N. Romero, M.D., DAB CR380, at 1
n.1 (1995).

The requirement that the conviction be “related to” the delivery of health care items or
services means that there only needs to be a “nexus” or “common sense connection”
between the offense and the delivery of an item or service under a relevant program. See,
e.g., James O. Boothe, DAB No. 2530, at 3 (2013). Further, “[a]n offense may be
‘related to’ the delivery of an item or service even if the offense did not directly involve
the delivery of items or services. In addition, the offense need not have actually harmed
the program in any way.” Jd. at 4 (citations omitted).

Petitioner was convicted of paying remuneration to individuals who referred patients to
him for which Medi-Cal could be billed. See IG Exs. 2-4. The IG argues the following:

As indicated by the statute under which he was convicted,
Petitioner committed the offense to obtain Medicaid patient
referrals, i.e., to get patients for whom he could provide
services and bill Medicaid. Petitioner’s offense therefore has
a common-sense connection to or nexus with the delivery o:
services under Medicaid. Indeed, this forum has repeatedly
upheld convictions under section 1128(a)(1) for violations of
the Federal anti-kickback statute (42 U.S.C. § 1320a-7b(b), at
section § 1128B(b) of the Act), which contains the same
essential language as the state statute under which Petitioner
was convicted. See, e.g., Nimesh M. Patel, D.P.M., CR325
(2014) (exclusion upheld when based on conviction of one
count in violation of 42 U.S.C. § 1320a-7b(b)(1)(B) and
18 U.S.C. § 2 — no separate counts of violating any additional
fraud statutes); Andre Benony Celestin, M.D., CR144

(2006) (exclusion upheld when based solely upon the
conviction of one count of violating the Federal anti-kickback
statute).

IG Reply Br. at 2.

Petitioner denies that there is a nexus between the crime he was convicted of committing
and the delivery of items or services under the Medi-Cal program. Petitioner’s argument
focuses on an analysis that fraud or theft must be involved in the crime in order for it to
mandate exclusion. P. Br. at 2-4. In regard to his particular crime, Petitioner asserts:

Although there is general harm by providing gratuities, it is
not a harm to the Medicaid program as long as needed
services would have been provided in the absence of the
gratuity. This is exactly the case with Dr. Leonov.

Dr. Leonov has already paid $130,000.00 out of the
$150,000.00. ([P.] Ex. 1). Dr. Leonov will be making the
final payment on May 30, 2014 and his probation will be
lifted.

P. Br. at 5-6.

I do not agree with Petitioner’s argument because it does not take into account the fact
that Petitioner’s crime only has to be “related to” the delivery of items or services. In
another case involving a conviction under section 14107.2(b) of California’s Welfare and
Institutions code, an ALJ responded thusly to arguments very similar to those Petitioner
makes in this case:

It should be noted that the California Code’s blanket
prohibition of any remuneration (whether called a kickback,
bribe, or rebate) which is paid for a Medicaid referral directly
corresponds to section 1128B(b) of the Act, which also
criminalizes soliciting or receiving payments for referrals that
lead to the furnishing of goods or services payable by
Medicaid or Medicare. This indicates that Congress, as well
as the California legislature, chose to regard all irregular
payments linked to transactions reimbursable by
Medicaid/Medicare as inimical to the integrity of such
programs.

Thus, in the instant case, there is a common-sense connection
between a criminal offense and the Medicaid program.
Clarence H. Olson, DAB CR46 (1989). I conclude that the
delivery of items under Medicaid played an essential and
integral role in Petitioner’s criminal conduct and conviction.

Asadollah Amrollahifar, Ph.D., DAB CR238, at 4 (1992).

I agree with the ALJ’s reasoning in the Amrollahifar case. Petitioner’s crime involved
illegally obtaining patients for which he could bill Medi-Cal. Therefore, there is an
obvious nexus to providing services under the Medi-Cal program and Petitioner’s
criminal conduct.

The nexus in this case is strengthened by the fact that the Superior Court ordered
Petitioner to pay $150,000 to the California Health Care Deposit Fund. IG Exs. 3-4; P.
Ex. 1. Where an individual is convicted of a crime, “proof that any sentence based on
that conviction included the payment of restitution to a protected program creates a
rebuttable presumption of a nexus or common-sense connection between the conviction
and the delivery of an item or service under [that] program.” Johnnelle Johnson Bing,
DAB CR1938 at 6 (2009) (citing Alexander Nepomuceno Jamias, DAB CR1480 (2006)).
Similar to the present case, the petitioner in the Bing case had been ordered to pay
restitution to a state Medicaid program. Jd. The restitution Petitioner was ordered to pay
California’s Medi-Cal program strongly supports the conclusion of a nexus between
Petitioner’s crime and the delivery of items or services involving the Medicaid program.

D. Petitioner must be excluded for the statutory minimum of five years under
42 U.S.C. § 1320a-7(c)(3)(B).

Because I have concluded that a basis exists to exclude Petitioner pursuant to 42 U.S.C.
§ 1320a-7(a)(1), Petitioner must be excluded for a minimum period of five years.
42 US.C. § 1320a-7(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2).

V. Conclusion

For the foregoing reasons, I affirm the IG’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs for the
statutory five-year minimum period pursuant to 42 U.S.C. § 1320a-7(a)(3), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


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

Center for Tobacco Products,
(FDA No. FDA-2014-H-2208)
Complainant
v.

US Liberty Inc. / Imran Pirzada
d/b/a Loch Raven Gulf,

Respondent.
Docket No. C-15-686
Decision No. CR3649

Date: February 12, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, US Liberty Inc. / Imran Pirzada d/b/a Loch Raven Gulf, at
8623 Loch Raven Boulevard, Baltimore, MD 21286, and by filing a copy of the

complaint with tl
Management. T!
to minors and fai

¢ Food and Drug Administration’s (FDA) Division of Dockets
e complaint alleges that Loch Raven Gulf impermissibly sold cigarettes
led to verify, by means of photo identification containing a date of birth,

that the purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seg., and its implementing regulations,
21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent

Loch Raven Gulf.

As provided for i

in 21 C.F.R. §§ 17.5 and 17.7, on December 18, 2014, CTP served the

complaint on Respondent Loch Raven Gulf by United Parcel Service. In the complaint
and accompanying cover letter, CTP explained that, within 30 days, Respondent should

pay the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Loch Raven Gulf has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e At approximately 3:49 p.m. on February 26, 2014, at Respondent’s business
establishment, 8623 Loch Raven Boulevard, Baltimore, MD 21286, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
Newport Box cigarettes to a person younger than 18 years of age. The inspector
also observed that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated May 1, 2014, CTP informed Respondent of the
inspector’s February 26, 2014 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 1:36 p.m. on July 9, 2014, at Respondent’s business
establishment, 8623 Loch Raven Boulevard, Baltimore, MD 21286,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Newport Box cigarettes to a person younger than 18 years of age. The
inspectors also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older.

These facts establish Respondent Loch Raven Gulf’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years
of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent US
Liberty Inc. / Imran Pirzada d/b/a Loch Raven Gulf. Pursuant to 21 C.F.R. § 17.11(b),
this order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Dipti Patel, M.D.,
(PTAN: CA115239),
(NPI: 1891915070),
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1806
Decision No. CR3648
Date: February 12, 2015
DECISION
Petitioner, Dipti Patel, M.D., is a physician who applied to enroll in the Medicare
program. The Centers for Medicare & Medicaid Services (CMS) granted her application,
effective January 6, 2014 (with a billing date of December 7, 2013). Petitioner now
challenges that effective date. For the reasons set forth below, I find that CMS
appropriately granted Petitioner’s enrollment effective January 6, 2014.
Background
By letter dated April 16, 2014, the Medicare contractor, Noridian Healthcare Solutions,
approved Petitioner’s Medicare enrollment, effective January 6, 2014, with a billing date

of December 7, 2013. CMS Ex. 9.' Petitioner sought reconsideration to challenge that
effective date. CMS Ex. 8. Ina reconsidered determination dated June 30, 2014, the

' CMS allows physicians to bill retrospectively for up to 30 days prior to the effective
date of enrollment if certain conditions are met. 42 C.F.R. § 424.521(a)(1). In its letter
approving Petitioner’s enrollment application, the contractor refers to this retrospective
billing date as the effective date. CMS Ex. 9.
contractor denied her a new effective date, concluding that she had not provided evidence
to justify a change. CMS Ex. 10. Petitioner appealed.

In email correspondence dated December 26, 2014, Petitioner asked that this case be decided on
the record before me. CMS has submitted a brief (CMS Br.) and ten exhibits (CMS Exs.
1-10). Petitioner did not respond to CMS’s submission, but the record includes her hearing
request with one document attached (the June 30, 2014 reconsideration determination,
which is also in the record as CMS Ex. 10).

Discussion

CMS properly determined the effective date for
Petitioner’s Medicare enrollment because the evidence
establishes that she submitted her subsequently-
approved enrollment application on January 6, 2014,
and her effective date can be no earlier than the date she
filed that enrollment application.’

To receive Medicare payments for services furnished to program beneficiaries, a
Medicare supplier must be enrolled in the Medicare program. 42 C.F.R. § 424.505.
“Enrollment” is the process used by CMS and its contractors to: 1) identify the
prospective supplier; 2) validate the supplier’s eligibility to provide items or services to
Medicare beneficiaries; 3) identify and confirm a supplier’s owners and practice location;
and 4) grant the supplier Medicare billing privileges. 42 C.F.R. § 424.502. To enroll in
Medicare, a prospective supplier must complete and submit an enrollment application.
42 C.F.R. §§ 424.510(d)(1), 424.515(a). An enrollment application is either a CMS-
approved paper application or an electronic process approved by the Office of
Management and Budget. 42 C.F.R. § 424.5023

When CMS determines that a physician meets the applicable enrollment requirements, it
grants her Medicare billing privileges, which means that the practitioner can submit
claims and receive payments from Medicare for covered services provided to program
beneficiaries. For physicians, the effective date for billing privileges “is the /ater of the
date of filing” a subsequently approved enrollment application or “the date an enrolled
physician . . . first began furnishing services at a new practice location.” 42 C.F.R.

§ 424.520(d) (emphasis added). If a physician meets all program requirements, CMS
allows her to bill retrospectively for up to “30 days prior to their effective date if
circumstances precluded enrollment in advance of providing services to Medicare
beneficiaries ....” 42 C.F.R. § 424.521(a)(1).

> T make this one finding of fact/conclusion of law.

3 CMS’s electronic process is referred to as PECOS (Provider Enrollment, Chain, and
Ownership System).
Here, Petitioner maintains that she submitted her application on October 4, 2013, but
“due to the chaos” surrounding the conversion from one Medicare contractor (Palmetto)
to another (Noridian) and “CMS computer system issues,” her application was lost.
Hearing Request.’ She submits no evidence to establish that she filed an application at
that time.

The evidence establishes the following:

¢ On October 30, 2013, Petitioner sent, by certified mail, the signature pages for
CMS Forms 8551 (enrollment application for individual practitioners) and 855R
(application to reassign Medicare benefits), along with supporting documents.
The Medicare contractor received these submissions on November 4. CMS Ex. 1.

e Inan email dated November 18, 2013, the Medicare contractor acknowledged
receiving the signature pages and supporting documents, assigning them
application numbers (375640620 and 375640621). The email advised that
Petitioner’s earlier PECOS application had not been submitted. The contractor
provided a link to PECOS and directed Petitioner to “go all the way through the
application to do the FINAL SUBMISSION at the very end.” (emphasis in
original). CMS Ex. 2.

¢ On December 4, 2013, Petitioner’s office called the contractor. According to the
report of contact, the caller agreed to respond that day to the November 18 request
for information (referred to as “rfi” in the report of contact). CMS Ex. 3. No
evidence establishes that anyone did so then or at any other time. Having received
no response, on January 13, 2014, the contractor rejected the applications
(375640620 and 375640621). CMS Ex. 5.

CMS may reject a prospective supplier’s enrollment application if, within 30 calendar
days of the contractor’s request, it fails to furnish complete information. 42 C.F.R.

§ 424.525(a)(1). I have no authority to review a rejected enrollment application.

42 CFR. § 424.525(d).

e Inthe meantime, on January 6, 2014, the Medicare contractor received by mail
another CMS Form 855R, signed by Petitioner, asking to reassign her Medicare
benefits to Provider Resources Group, Inc. The contractor assigned a new
application number (39323546). CMS Ex. 4.

e By email dated February 4, 2014, the contractor acknowledged receiving the
application, but directed Petitioner to submit, within 30 calendar days, Form 8551
and some additional certification statements for Form 855R. CMS Ex. 6.

* In presenting her case at the reconsideration level, she claimed that she submitted the
application on October 3, 2013. CMS Ex. 8 at 2.
Petitioner apparently complied, and the contractor approved her enrollment,
effective January 6, 2014, with billing effective December 7, 2013. CMS Ex. 9;
see CMS Ex. 7.

Thus, the evidence in this record establishes that, on January 6, 2014, Petitioner
submitted an enrollment application that was subsequently approved. She may have
attempted to submit an earlier application but has not established that she did so
successfully. Her effective date of enrollment can be no earlier than January 6, 2014,
with a billing date of December 7, 2013.

Conclusion

Because Petitioner filed her subsequently-approved enrollment application on January 6,
2014, she was properly granted Medicare enrollment effective that date.

/s/
Carolyn Cozad Hughes
Administrative Law Judge