Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Fireside Lodge Retirement Center, Inc.,
(CCN: 67-5147),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-526
Decision No. CR4715

Date: September 28, 2016

DECISION

Petitioner, Fireside Lodge Retirement Center, Inc., is a long-term care facility located in
Fort Worth, Texas, that participates in the Medicare program. Based on a survey
completed August 26, 2014, the Centers for Medicare & Medicaid Services (CMS)
determined that the facility was not in substantial compliance with multiple Medicare
requirements, including those that require the facility to report and investigate
unexplained injuries and those that require the facility to treat pressure sores properly.
CMS also determined that the facility’s deficiencies posed immediate jeopardy to
resident health and safety and has imposed civil money penalties (CMPs) of $6,150 per
day for seven days of immediate jeopardy ($43,050) and $800 per day for 30 days of
substantial noncompliance that was not immediate jeopardy ($24,000). Petitioner
appeals, and CMS has moved for summary judgment, which Petitioner opposes.

I grant CMS’s motion.

As discussed below, the undisputed evidence establishes that: from August 20 through
September 25, 2014, the facility was not in substantial compliance with Medicare
program requirements; from August 20 through 26, those deficiencies posed immediate
jeopardy to resident health and safety; and the penalties imposed are reasonable.

Background

The Social Security Act (Act) sets forth requirements for nursing facilities to participate
in the Medicare program and authorizes the Secretary of Health and Human Services to
promulgate regulations implementing those statutory provisions. Act § 1819. The
Secretary’s regulations are found at 42 C.F.R. Part 483. To participate in the Medicare
program, a nursing facility must maintain substantial compliance with program
requirements. To be in substantial compliance, a facility’s deficiencies may pose no
greater risk to resident health and safety than “the potential for causing minimal harm.”
42 CFR. § 488.301.

The Secretary contracts with state survey agencies to survey skilled nursing facilities in
order to determine whether they are in substantial compliance. Act § 1864(a); 42 C.F.R.
§ 488.20. Each facility must be surveyed annually, with no more than fifteen months
elapsing between surveys, and must be surveyed more often, if necessary, to ensure that
identified deficiencies are corrected. Act § 1819(g)(2)(A); 42 C.F.R. §§ 488.20(a);
488.308. The state agency must also investigate all complaints. Act § 1819(g)(4).

In this case, on August 26, 2014, surveyors from the Texas Department of Aging and
Disability Services (state agency) completed the facility’s annual recertification survey.
Based on their findings, CMS determined that the facility did not comply substantially
with the following program requirements:

e 42C.F.R. § 483.13(c) (Tag F224 — staff treatment of residents: prohibit neglect)
at scope and severity level L (widespread substantial noncompliance that poses
immediate jeopardy to resident health and safety);

' On August 19, 2014, the state agency also completed the facility’s annual life safety
code (LSC) survey, citing deficiencies at scope and severity levels D (one deficiency) and
F (three deficiencies). CMS Ex. 2 at 5; see CMS Ex. 2 at 9. In its hearing request,
Petitioner challenged the LSC findings. Thereafter, CMS submitted no evidence and
made no arguments with respect to the LSC survey. Referring to the LSC and some of
the health deficiencies, CMS nevertheless argues that its determinations “on the
unchallenged deficiencies are final and binding.” CMS Motion for Summary Judgment
(MSJ) at 16-17. I agree that the LSC survey is off the table, but CMS — not Petitioner — is
responsible for that. Because it came forward with no evidence, not even a statement of
deficiencies, CMS has not met its prima facie burden with respect to the LSC survey.

See Evergreene Nursing Care Ctr., DAB No. 2069 at 7-8 (2007). Nevertheless, as the
following discussion establishes, the deficiencies cited under 42 C.F.R. §§ 483.13(c),
483.25(c), and 483.75, by themselves, justify the penalties imposed.
e 42 CFR. § 483.13(c)(1)(ii)-(iii) and 483.13(c)(2)-(4) (Tag F225 — staff treatment
of residents: investigate and report allegations of abuse) at scope and severity
level L;

e 42 C.F.R. § 483.13(c) (Tag F226 — policies to prohibit abuse and neglect) at scope
and severity level L;

e 42 C.F.R. § 483.25(c) (Tag F314 — quality of care: pressure sores) at scope and
severity level H (pattern of substantial noncompliance that causes actual harm);

© 42C.F.R. § 483.25(h) (Tag F323 — quality of care: accident prevention) at scope
and severity level E (pattern of substantial noncompliance that causes no actual
harm with the potential for more than minimal harm);

e 42C.F.R. § 483.35(i) (Tag F371 — dietary services: sanitary conditions) at scope
and severity level F (widespread substantial noncompliance that causes no actual
harm with the potential for more than minimal harm);

e 42C.F.R. § 483.60(b), (d), and (e) (Tag F431 — pharmacy services/consultation,
labeling, and storage) at scope and severity level F;

e 42 C.F.R. § 483.70(h) (Tag F465 — physical environment: other environmental
conditions) at scope and severity level F;

© 42 C.F.R. § 483.70(h)(4) (Tag F469 — physical environment: other environmental
conditions — pest control) at scope and severity level F; and

e 42C.F.R. § 483.75 (Tag F490 — administration) at scope and severity level L;
CMS Ex. 2 at 5; CMS Ex. 7.

Thereafter, CMS determined that, as of August 27, the facility’s deficiencies no longer
posed immediate jeopardy, and, as of September 26, the facility returned to substantial
compliance. CMS has imposed against the facility penalties of $6,150 per day for seven
days of substantial noncompliance that posed immediate jeopardy to resident health and
safety (August 20 — 26) and $800 per day for 30 days of substantial noncompliance that
did not pose immediate jeopardy (August 27 — September 25), for penalties totaling
$67,050. CMS Ex. 2 at 1-4.

CMS now moves for summary judgment. Petitioner opposes. The parties filed initial
briefs (CMS Br.; P. Br.) and proposed exhibits. With its brief, CMS submitted 11
exhibits (CMS Exs. 1-11). Petitioner submitted 6 exhibits (P. Exs. 1-6). CMS
subsequently filed a motion for summary judgment (CMS MSJ) and Petitioner filed a
response (P. Response).

Issues
As a threshold matter, I consider whether summary judgment is appropriate.
On the merits, the issues are:

1. From August 20 through September 25, 2014, was the facility in substantial
compliance with the Medicare program requirements;

2. If, from August 20 through 26, 2014, the facility was not in substantial
compliance, did its deficiencies then pose immediate jeopardy to resident health
and safety; and

3. If the facility was not in substantial compliance, are the penalties imposed ($6,150
per day for seven days and $800 per day for 30 days) reasonable.

Discussion

Summary judgment. Summary judgment is appropriate if a case presents no genuine
issue of material fact, and the moving party is entitled to judgment as a matter of law.
Bartley Healthcare Nursing and Rehab., DAB No. 2539 at 3 (2013), citing Celotex Corp.
v. Catrett, 477 U.S. 317, 322-25 (1986); Ill. Knights Templar Home, DAB No. 2274 at 3-
4 (2009), and cases cited therein.

The moving party may show the absence of a genuine factual dispute by presenting
evidence so one-sided that it must prevail as a matter of law or by showing that the non-
moving party has presented no evidence “sufficient to establish the existence of an
element essential to [that party’s] case, and on which [that party] will bear the burden of
proof at trial.” Livingston Care Ctr. v. Dep’t of Health & Human Srvs., 388 F.3d 168,
173 (6th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)). To
avoid summary judgment, the non-moving party must then act affirmatively by tendering
evidence of specific facts showing that a dispute exists. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 n.11 (1986); see also Vandalia Park, DAB No.
1939 (2004); Lebanon Nursing & Rehab. Ctr., DAB No. 1918 (2004). The non-moving
party may not simply rely on denials, but must furnish admissible evidence of a dispute
concerning a material fact. J//. Knights Templar Home, DAB No. 2274 at 4; Livingston
Care Ctr., DAB No. 1871 at 5 (2003).

In examining the evidence for purposes of determining the appropriateness of summary
judgment, I must draw all reasonable inferences in the light most favorable to the non-
moving party. Brightview Care Ctr., DAB No. 2132 at 2, 9 (2007); Livingston Care Ctr.,
388 F.3d at 172; Guardian Health Care Ctr., DAB No. 1943 at 8 (2004); but see
Brightview, DAB No. 2132 at 10 (entry of summary judgment upheld where inferences
and views of non-moving party are not reasonable). However, drawing factual inferences
in the light most favorable to the non-moving party does not require that I accept the non-
moving party’s legal conclusions. Cf Guardian Health Care Ctr., DAB No. 1943 at 11
(“A dispute over the conclusion to be drawn from applying relevant legal criteria to
undisputed facts does not preclude summary judgment if the record is sufficiently
developed and there is only one reasonable conclusion that can be drawn from those
facts.”).

I. CMS is entitled to summary judgment because the undisputed evidence
establishes that, contrary to regulatory requirements and the facility’s own
policies for preventing resident mistreatment, neglect, and abuse, its
administration and staff did not report or investigate a resident’s
unexplained fracture. The facility was therefore not in substantial
compliance with 42 C.F.R. § 483.13(c).”

Program requirements: Facilities must develop and implement written policies and
procedures that prohibit mistreatment, neglect, and abuse of residents. 42 C.F.R.

§ 483.13(c). Among other requirements, it must ensure that all alleged violations
involving mistreatment, neglect, and abuse — including injuries of unknown source — are
reported immediately to the facility administrator and appropriate state officials. The
facility must have evidence that all alleged violations are thoroughly investigated, and it
must prevent potential abuse while the investigation is in progress. The results of all
investigations must be reported to the administrator (or designated representative) and to
the appropriate state officials within 5 working days of the incident. If the violation is
verified, the facility must take appropriate corrective action. 42 C.F.R. § 483.13(c)(2),
(3), and (4).

Facility policies. The facility had in place written policies and procedures for preventing
abuse and neglect and for investigating grievances and complaints. Consistent with the
regulations, those policies require that all injuries of unknown source be “promptly and
thoroughly investigated by facility management.” CMS Ex. 5 at 4.

According to the policies, the facility’s assistant administrator (or designee) is in charge
of investigating injuries of unknown source and all other allegations, grievances, and

> My findings of fact and conclusions of law are set forth, in bold and italics, as captions
in the discussion section of this decision.
complaints. Among other requirements, the investigators must, at a minimum: review
the resident’s medical record; interview the person reporting the incident, any witnesses,
the resident herself (as appropriate), her roommate (as appropriate), her attending
physician (as appropriate), staff members on all shifts who had contact with the resident
during the 48-hour period prior to the time of the incident, and family members who had
contact with the resident during the 48-to-72-hour period prior to the incident; the
investigator must review all events preceding the incident. CMS Ex. 5 at 4. Witness
reports must be reduced to writing, signed by the witness, and dated. CMS Ex. 5 at 5.

The investigator-in-charge must notify “the ombudsman” that the investigation is being
conducted and invite him/her to participate. If the ombudsman declines, that fact should
be noted in the investigation record. The ombudsman must be notified of the
investigation’s results and of any corrective actions. The investigator must compile a
written report of the results of the investigation and provide the facility administrator
with a report within five working days of the incident. The administrator must report the
results to the state agency within five days of the reported incident. CMS Ex. 5 at 5.

Resident 13 (R13). R13 was a 99-year-old woman suffering from heart failure,
Alzheimer’s disease, anxiety, and a psychotic disorder. CMS Ex. 3 at 1, 49. She was at
high risk for falls and used a wheelchair for mobility. CMS Ex. 3 at 7, 15; P. Ex. 1 at 14.
From the time of her admission (June 2012), she had apparently been receiving hospice
care. P. Ex. | at 15.

A nursing note, entered at 1:38 p.m. on June 17, 2014, reports that R13 complained of
right knee and leg pain. She had 2+ pitting edema, which describes moderate swelling.
The nurse notified the resident’s physician and her grandson. R13 underwent x-rays and
a venous dopplar study. CMS Ex. 3 at 4, 11, 30; P. Ex. 1 at 7. The x-ray showed a tibial
compression fracture of the right knee (i.e., a break in the bone that disrupts osseous
tissue and collapses the affected bone). CMS Ex. 3 at 14; CMS Ex. 7 at 5. Her physician
referred her to an orthopedist. CMS Ex. 3 at 11. A nursing note dated June 19 again
describes 2+ pitting edema and bruising to the right knee. The resident complained of
pain when turned and repositioned. CMS Ex. 3 at 30; P. Ex. | at 7.

R13’s fracture was not mentioned in the facility’s resident incident worksheets. CMS Ex.
3 at 17-19. The facility did not report or investigate. CMS Ex. 8 at 3 (LeBlanc Decl. §
3). The facility’s assistant administrator, who, as the designated “abuse coordinator,”
was responsible for investigating injuries of unknown source, told the surveyors that she
had not investigated because no one reported the injury to her. (“I can’t investigate if I’m
not aware of the incident.”) CMS Ex. 5 at 4; CMS Ex. 6 at 1; CMS Ex. 8 at 4 (LeBlanc
Decl. § 3).
Petitioner disputes none of this but points out that R13 was at risk for “spontaneous
fractures” as well as falls and argues that “[i]t is not illogical to surmise” that she
sustained the fracture “spontaneously during a routine transfer before or after breakfast . .
..” P. Reply at 15; see P. Ex. 2 at 3 (Maxvill Decl.) (attending physician opining that, in
the absence of evidence of improper care or force, R13 could have sustained a
spontaneous fracture).

On the other hand, Petitioner also quotes research suggesting that R13’s fracture was
likely not “spontaneous”: “In the geriatric population, osteoporosis is a well[-]
documented cause of spontaneous fractures of the hip and vertebra, but not of non-hip leg
fractures.” P. Br. at 12 (emphasis added), quoting an article from a publication of the
Wisconsin Medical Directors Association, Disuse Osteoporosis in the Nursing Home
Setting; see also P. Br. at 12, quoting Kane and Goodwin, Elder Mistreatment: Abuse,
Neglect and Exploitation in an Aging America at 347 (National Academies Press 2002)
(“Two types of bone fractures are known to occur spontaneously: vertebral fractures in
osteoporotic older women, and hip fractures.”).

But the question is not whether R13, in fact, suffered a spontaneous fracture (which we
will never know because the facility did not investigate her injury). The question is
whether facility staff followed the regulations and the facility’s own policies requiring
them to report and investigate this very serious injury of unknown source. Her injuries
could have been caused by an unreported fall (for which she was at risk) or by her knee
hitting something as she was wheeled around a corner; it could have been caused by
rough handling; or, as Petitioner speculates, it might have been caused by a “routine
transfer.” P. Br. at 11. Given her age and fragility, “routine” handling might not have
been sufficient to keep her safe. If so, her care plan could have included instructions to
staff to exercise extra care in handling her. As Petitioner’s articles point out, “[i]t is very
important for both nurses and nursing assistants to be aware of the softness and fragility
of bones, particularly leg bones, in their immobile nursing home population, and to be as
gentle as possible when providing care.” P. Br. at 14, quoting Disuse Osteoporosis in the
Nursing Home Setting.

I reject Petitioner’s argument that this incident represents a random, isolated episode that
does not put the facility out of substantial compliance with section 483.13(c). The
Departmental Appeals Board has repeatedly emphasized that, in considering a facility’s
compliance with section 483.13(c), the focus “is not simply on the number or nature of
the instances of neglect (i.e., failure to provide necessary care or services) but on whether
the facts . . . surrounding such instance(s) demonstrate an underlying breakdown in the
facility’s implementation of the provisions of an anti-neglect policy.” Oceanside Nursing
& Rehab. Ctr., DAB No. 2382 at 11 (2011); see Columbus Nursing & Rehab. Ctr., DAB
No. 2247 at 27 (2009) (holding that CMS need not show multiple incidents of abuse in
order to cite noncompliance under section 483.13; instead, the question is “whether the

circumstances presented, viewed as a whole, demonstrate a systemic problem in
implementing policies and procedures.”). Here, multiple staff at all levels must have
known about R13’s serious injury. Yet, it seems that no staff member considered
reporting or investigating the incident. This establishes that the facility had a systemic
problem in implementing its policies and procedures.

Petitioner also seems under the misapprehension that the facility need not report incidents
unless it determines that they constitute abuse or neglect. I see no evidence to support
Petitioner’s suggestion that facility staff considered the issue, determined that the fracture
was spontaneous, and decided that it need not be reported. Not one note mentions any
such assessment. In any event, the regulations require the facility to report and
investigate thoroughly a// injuries of unknown source. Staff do not get to pick and
choose which injuries to report. See Ill. Knights Templar Home, DAB No. 2369 at 11, 12
(2011); Britthaven, Inc., DAB No. 2018 at 15 (2006), citing Cedar View Good
Samaritan, DAB No. 1897 at 11 (2003). In J/linois Knights Templar, the Board, quoting
ALJ Kessel’s earlier opinion, noted good reasons for this reporting requirement:
requiring the facility to report the allegations “assures that a neutral third party (the State)
will be apprised of the allegations and will be in a position to take protective action if
necessary.” DAB No. 2369 at 12-13, quoting DAB CR2203 at 10 (2010).

R13 suffered a serious injury of unknown source, and the facility failed to report or
investigate. The facility was therefore not in substantial compliance with 42 C.F.R.
§ 483.13(c).

2. CMS is entitled to summary judgment because it came forward with evidence
establishing that facility staff did not adequately assess or treat a resident’s
pressure sore, and Petitioner tendered no evidence disputing the facts
underlying CMS’s conclusions. The undisputed evidence therefore
establishes that the facility was not in substantial compliance with 42 C.F.R.
§ 483.25(c).

Program requirements. Under the statute and the “quality of care” regulation, each
resident must receive, and the facility must provide, the necessary care and services to
allow a resident to attain or maintain the highest practicable physical, mental, and
psychosocial well-being, in accordance with the resident’s comprehensive assessment
and plan of care. Act § 1819(b); 42 C.F.R. § 483.25. To this end, the facility must
(among other requirements) ensure that a resident who enters the facility without pressure
sores does not develop them unless his/her clinical condition shows that they were
unavoidable, based on the resident’s comprehensive assessment. 42 C.F.R.

§ 483.25(c)(1). If the resident already has pressure sores, the facility must ensure that
he/she receives the treatment and services necessary to promote healing, prevent
infection, and prevent new sores from developing. 42 C.F.R. § 483.25(c)(2).
In assessing the facility’s compliance with this requirement, the relevant question is: did
the facility “take all necessary precautions” to promote healing, prevent infection, and
prevent new sores from developing. If it did so, and the resident develops sores anyway,
I could find no deficiency. But if the evidence establishes that the facility fell short of
taking all necessary precautions, it has violated the regulation. Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300 at 13-14 (2010), aff'd, Senior Rehab. & Skilled Nursing Ctr.
v. HHS, No. 10-60241 (Dec. 20, 2010); Koester Pavilion, DAB No. 1750 at 32 (2000).

Resident 2 (R2). R2 was an 84-year-old woman admitted to the facility on November 5,
2011, suffering from Alzheimer’s disease, hypertension, arthritis, osteoporosis,
depression, and cataracts. CMS Ex. 4 at 1, 8, 22-23; CMS Ex. 9 at 2 (Hooks Decl.). She
was severely cognitively impaired and depended on staff for all activities of daily living.
CMS Ex. 4 at 12, 15-16, 19; CMS Ex. 9 at 2, 3 (Hooks Decl.). She used a wheelchair for
mobility and was completely incontinent of bladder and bowel. CMS Ex. 4 at 20-21.

According to a December 18, 2013 assessment, R2 was then at mild risk of developing a
pressure sore. By March 17, 2014, she was at high risk. CMS Ex. 9 at 3 (Hooks Decl.).
A July 8, 2014 entry to her care plan documents a stage 2 pressure ulcer on her left
buttock. CMS Ex. 4 at 51, see CMS Ex. 4 at 29-30; CMS Ex. 9 at 3 (Hooks Decl.).

Care plan entries dated July 28 and August 13, 2014, include no assessment or staging
information. CMS Ex. 4 at 51. Inconsistent with the care plan entry, R2’s skin
assessment flow sheet entries, dated July 8, July 17, and July 23, 2014, document a stage
J pressure sore with granulation. CMS Ex. 4 at 49; CMS Ex. 9 at 3 (Hooks Decl.). Flow
sheet entries dated August 7 and 13 do not indicate a stage. CMS Ex. 4 at 49. Each entry
is virtually identical until August 7 (when the wound width appeared to decline — from
1.5 cm to 1.0 cm) and August 13 (when the wound width is greater than it had ever been,
going from 1.0 to 4 cm.); the entries do not reflect any deterioration. /d.; CMS Ex. 7 at
29; CMS Ex. 9 at 3 (Hooks Decl.).

A physician order, dated August 13, 2014, instructed staff to cleanse the left inner
buttock with wound cleaner, pat dry, pack the wound bed with Therahoney sheet (a moist
medium that helps remove dead tissue), cover the wound with Maxorb (an absorbent
wound dressing), and secure with Exuderm sacrum dressing every two days and as
needed. CMS Ex. 4 at 50; see CMS Ex. 4 at 51; CMS Ex. 9 at 3 (Hooks Decl.).

On August 19, 2014, Surveyor Sheila Hooks, R.N., observed a licensed vocational nurse
(LVN) treating R2’s pressure ulcer, which was “unstageable” because yellow slough
(dead tissue in the process of separating from viable tissue) obscured the wound. CMS
Ex. 9 at 3-4 (Hooks Decl.). Surveyor Hooks describes the wound: “The pressure ulcer
had yellow slough . . . inside the wound bed and the edges had a dried appearance. The
center of the pressure ulcer bed had a black discoloration. The right side of the wound
bed had a dried-brown discoloration.” CMS Ex. 9 at 4.

10

Surveyor Hooks describes the treatment the LVN provided: she measured the wound as
4cmx 4 cm, but did not measure its depth. She took a Therahoney sheet, folded it into a
small square, and applied it to the pressure ulcer bed. “The wound bed sank, and the
outer edges of the bed separated around the pressure ulcer.” The LVN did not pack the
wound, which left an empty space. She covered the wound with Maxorb and applied
Optifoam Adhesive dressing (another highly absorbent dressing). CMS Ex. 9 at 4
(Hooks Decl.). Surveyor Hooks explains that the LVN did not follow the physician order
because she did not pack the wound bed with the Therahoney wound dressing. The LVN
should have pushed the dressing under the edges of the wound bed so there would be no
empty space. CMS Ex. 9 at 4.°

When questioned, the LVN admitted that she had not assessed the wound for
“undermining” or “tunneling,” but claimed that “hospice” does those measurements.
CMS Ex. 9 at 4 (Hooks Decl.).

Surveyor Hooks also reviewed R2’s nutritional assessment and found that staff had not
recommended any treatment for her pressure ulcer. CMS Ex. 9 at 4 (Hooks Decl.).
Indeed, R2’s nutritional assessment does not even mention a pressure ulcer. The
document, which is dated July 15, 2014 (one week after the sore was first reported),
marks her “Decubiti/Skin Condition” as “clear.” CMS Ex. 4 at 53. (See The Windsor
Place, DAB No. 2209 at 8 (2008) (indicating that the development of pressure sores
affects nutritional needs).

Petitioner tendered no evidence suggesting a dispute concerning any of these facts. The
undisputed facts thus establish that facility staff failed to follow the physician order for
treating R2’s pressure sore, and they simply ignored that pressure sore when assessing
her nutritional needs. The facility therefore failed to ensure that R2 received the
treatment and services needed to promote healing, prevent infection, and prevent new
sores from developing, which put it out of substantial compliance with 42 C.F.R.

§ 483.25(c).

3. CMS is entitled to summary judgment because the undisputed evidence
establishes that the facility was not administered in a manner that enabled it
to use its resources effectively and efficiently to attain or maintain the
highest practicable physical, mental, and psychosocial well-being of each
resident. The facility was therefore not in substantial compliance with 42
CF.R. § 483.75.

> Packing the wound helps it heal from the inside out. Without the packing, a wound
might close at the top without healing the deeper areas.
11

Program requirements. The facility must be administered in a manner that enables it to
use its resources effectively and efficiently to attain or maintain the highest practicable
physical, mental, and psychosocial well-being of each resident. 42 C.F.R. § 483.75.

A finding of substantial noncompliance in the facility’s administration may derive from
findings of substantial noncompliance in other areas.

[W]here a facility has been shown to be so out of compliance
with program requirements that its residents have been
placed in immediate jeopardy, the facility was not
administered in a manner that used its resources effectively to
attain the highest practicable physical, mental, and
psychosocial well-being of each resident.

Asbury Ctr. at Johnson City, DAB No. 1815 at 11 (2002); Odd Fellow & Rebekah Health
Care Facility, DAB No. 1839 at 7 (2002); Stone Cnty. Nursing & Rehab. Ctr., DAB No.
2276 at 15-16 (2009). As discussed below, I find that the facility’s deficiencies posed
immediate jeopardy to resident health and safety, which, by itself, justifies the finding
that the facility was not in substantial compliance with 42 C.F.R. § 483.75.

Moreover, as the above discussion establishes, facility staff were not aware of (or
disregarded) their responsibilities to report to the administration all injuries of unknown
origin, which suggests that they were inadequately trained and supervised, for which the
facility administration is accountable. Further, reporting such incidents to the state
agency is an administrative responsibility.

The facility was therefore not administered in a manner that used its resources effectively
to attain or maintain the highest practicable physical, mental, and psychosocial well-
being of its residents and was not in substantial compliance with 42 C.F.R. § 483.75.

4. CMS’s determination that, from August 20 through 26, 2014, the facility’s
substantial noncompliance posed immediate jeopardy to resident health and
safety is not clearly erroneous.

Immediate jeopardy. Immediate jeopardy exists if a facility’s noncompliance has caused
or is likely to cause “serious injury, harm, impairment, or death to a resident.” 42 C.F.R.
§ 488.301. CMS’s determination as to the level of a facility’s noncompliance (which
would include an immediate jeopardy finding) must be upheld unless it is “clearly
erroneous.” 42 C.F.R. § 498.60(c). The Board has observed repeatedly that the “clearly
erroneous” standard imposes on facilities a “heavy burden” to show no immediate
jeopardy and has sustained determinations of immediate jeopardy where CMS presented
evidence “from which ‘[o]ne could reasonably conclude’ that immediate jeopardy
exists.” Barbourville Nursing Home, DAB No. 1931 at 27-28 (2004), citing Koester
12

Pavilion, DAB No. 1750 (2000); Daughters of Miriam Ctr., DAB No. 2067 at 7, 9
(2007).

Disregarding the possible cause of her injury meant that the facility did not know how to
prevent its recurrence, which put R13 at ongoing risk of another serious injury.
Moreover, that management and staff did not know how to respond to an unexplained
injury (or opted not to respond) leaves residents unprotected from potential abuse or
neglect, a dangerous situation for frail and vulnerable residents. See Rosewood Care Ctr.
at Swansea, DAB No. 2721 at 12-13 (2016), citing Rosewood Care Ctr. of Swansea,
DAB CR4408 at 8 (2005).

Because the facility’s deficiencies were likely to cause serious harm to vulnerable facility
residents, CMS’s determination that the deficiencies posed immediate jeopardy to
resident health and safety is not clearly erroneous.

5. The penalties imposed are reasonable.

To determine whether a civil money penalty is reasonable, I apply the factors listed in 42
C.F.R. § 488.438(f): (1) the facility’s history of noncompliance; (2) the facility’s
financial condition; (3) factors specified in 42 C.F.R. § 488.404; and (4) the facility’s
degree of culpability, which includes neglect, indifference, or disregard for resident care,
comfort or safety. The absence of culpability is not a mitigating factor. The factors in 42
C.F.R. § 488.404 include: (1) the scope and severity of the deficiency; (2) the
relationship of the deficiency to other deficiencies resulting in noncompliance; and (3)
the facility’s prior history of noncompliance in general and specifically with reference to
the cited deficiencies.

I consider whether the evidence supports a finding that the amount of the CMP is at a
level reasonably related to an effort to produce corrective action by a provider with the
kind of deficiencies found, and in light of the section 488.438(f) factors. I am neither
bound to defer to CMS’s factual assertions nor free to make a wholly independent choice
of remedies without regard for CMS’s discretion. Barn Hill Care Ctr., DAB No. 1848 at
21 (2002); Cmty. Nursing Home, DAB No. 1807 at 22 et seg. (2002); Emerald Oaks,
DAB No. 1800 at 9 (2001); CarePlex of Silver Spring, DAB No. 1638 at 8 (1999).

Here, CMS imposes penalties of $6,150 per day for each day of immediate jeopardy,
which is in the mid-range for a per day CMP ($3,050 to $10,000). 42 C.F.R.

§§ 488.408(e)(1)(iii); 488.438(a)(1)(i). For the period of substantial noncompliance that
was not immediate jeopardy, CMS imposes a penalty of $800 per day, which is at the
lower end of the applicable penalty range ($50 to $3,000). 42 C.F.R. § 488.408(d)(1)(iii);
488.438(a)(1)(ii). Considering the relevant factors, these penalties are reasonable.

CMS does not argue that the facility’s history justifies a higher CMP.
13

With respect to financial condition, the facility has the burden of proving, by a
preponderance of the evidence, that paying the CMP would render it insolvent or would
compromise the health and safety of its residents. Van Duyn Home & Hosp., DAB No.
2368 (2011); Gilman Care Ctr., DAB No. 2362 (2010). To meet the standard for
lowering a CMP based on financial condition, a facility’s claims must be supported by
compelling financial documentation. In Guardian Care Nursing & Rehabilitation
Center, DAB No. 2260 (2009), for example, the facility could not even afford to
represent itself on appeal. Its Medicaid census was 90%; its annual shortfall was
$250,000; and it relied on charitable contributions for its continuing viability. The Board
nevertheless criticized the absence of financial documentation and concluded that the
facility had not established that additional resources would not be available. But see
Columbus Nursing & Rehab. Ctr., DAB No. 2505 (2013) (finding that the absence of
documentation regarding the facility’s financial condition did not preclude the ALJ from
concluding, based on witness testimony, that its financial condition justified reducing the
CMP).

Petitioner complains that it has already lost a significant amount of money and paying the
penalties imposed will cost it even more. Because of the LSC survey findings, it had to
install bathroom doors, at a cost of $5,000. Even though CMS ultimately did not deny
payments for new admissions, Petitioner maintains that the threat alone caused it to lose
admissions over a two to three month period, and, because of this and other factors, its
patient census is low. P. Ex. 3 at 3 (McGrath Decl. f§ 6, 7, 8). The facility does not have
cash on hand to pay the penalties. Nevertheless, Petitioner also concedes that it has been
able to secure financing and (except for the fall-out from the survey findings) is generally
on a secure footing financially. /d at 2,4 6. Petitioner has not shown, nor even alleged,
that paying the penalty would cause it to go out of business. The evidence therefore does
not justify lowering the CMP based on its financial condition.

Applying the remaining factors, I find that the facility’s administration and multiple staff
members disregarded facility policies when they failed to report or investigate R13’s
serious injury, for which the facility is culpable. In addressing R2’s pressure sore,
nursing staff did not follow her physician’s orders, and its dietary staff either did not
know or disregarded her serious skin condition. These are serious omissions for which
the facility is also culpable.

Conclusion

For these reasons, I grant CMS’s motion for summary judgment. The undisputed
evidence establishes that, from August 20 through September 25, 2014, the facility was
not in substantial compliance with program requirements, and, from August 20 through
14

26, its deficiencies posed immediate jeopardy to resident health and safety. The penalties
imposed — $6,150 per day for seven days of immediate jeopardy and $800 per day for 30
days of substantial compliance that did not pose immediate jeopardy — are reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


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

Francis T. Kangethe, M.D.
(NPI: 1740361328 / PTANs: 534410531, 632570012),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-457
Decision No. CR4714
Date: September 28, 2016
DECISION

The Medicare enrollment and billing privileges of Petitioner, Francis T. Kangethe, M.D.,
are revoked pursuant to 42 C.F.R. § 424.535(a)(3)(i) and (ii)(A) (2015).' Pursuant to 42
C.F.R. § 424.535(f) (2007), which was in effect at the time of Petitioner’s conviction, the
effective date of revocation is January 13, 2016, 30 days after the notice of revocation.
I. Background
Petitioner was enrolled as a supplier in the Medicare program with billing privileges.
National Government Services, Inc. (NGS), a Medicare Administrative Contractor
(MAC) for the Centers for Medicare & Medicaid Services (CMS), notified Petitioner by

letter dated December 14, 2015, that his Medicare enrollment and billing privileges were
revoked effective February 27, 2008. NGS cited 42 C.F.R. § 424.535(a)(3) as a basis for

' Citations are to the 2015 revision of the Code of Federal Regulations (C.F.R), unless
otherwise stated. Both the 2007 revision and the 2015 revision of the C.F.R. must be
applied in this case, for reasons discussed hereafter. The language of the 2007 and 2015
revisions of 42 C.F.R. § 424.535(a)(3) are substantially the same.
revocation based on Petitioner’s felony conviction within the previous ten years for
aggravated driving while under the influence of alcohol. NGS also cited 42 C.F.R.

§ 424.535(a)(9) as a basis for revocation based on Petitioner’s failure to report his
conviction within 30 days of that adverse legal action. NGS imposed a three-year bar to
re-enrollment effective January 13, 2016. CMS Exhibit (Ex.) 1 at 6-7.

On January 4, 2015, Petitioner requested reconsideration of the initial determination to
revoke his Medicare enrollment and billing privileges. Petitioner asserted that he notified
his employer and he believed it was his employer’s responsibility to report to CMS or the
MAC. CMS Ex. | at 5. On February 1, 2016, NGS upheld the revocation on
reconsideration, also citing 42 C.F.R. § 424.535(a)(3) and (9) as the bases for revoking
Petitioner’s Medicare enrollment and billing privileges. CMS Ex. | at 1.

Petitioner requested a hearing before an administrative law judge (ALJ) on March 30,
2016 (RFH). On April 8, 2016, the case was assigned to me for hearing and decision,
and an Acknowledgment and Prehearing Order (Prehearing Order) was issued at my
direction.

On May 9, 2016, CMS filed a combined prehearing brief and motion for summary
judgment with CMS Ex. 1. On May 25, 2016, Petitioner filed a prehearing brief (P. Br.).
Petitioner did not file any exhibits. CMS waived filing a reply brief. Petitioner has not
objected to my consideration of CMS Ex. 1 and it is admitted as evidence. Petitioner
submitted documents with his request for hearing that he did not mark as evidence and
file with his brief on the merits.? Some of the documents Petitioner filed with his request
for hearing are admitted as evidence as part of CMS Ex. | and it is not necessary to mark
and re-admit those documents. Petitioner also filed with his request for hearing a
character reference from the Chair of Pediatric Emergency Medicine at John Stroger
Hospital, Cook County, Illinois. The character reference is not considered and admitted
as evidence because it is not relevant to any issue that I may decide. Petitioner also
included a letter from NGS dated January 29, 2016, acknowledging receipt of Petitioner’s
request for reconsideration. The NGS letter is not admitted as evidence as there is no
dispute that Petitioner’s request for reconsideration was timely received by NGS.

> The hearing request and submitted documents are filed together as received from
Petitioner in the Departmental Appeals Board Electronic Filing System (DAB E-File),
Item # 3b.
IL. Discussion
A. Applicable Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Administration of the Part B program is through contractors, such as
NGS. Act § 1842(a) (42 U.S.C. § 1395u(a)). Payment under the program for services
rendered to Medicare-eligible beneficiaries may only be made to eligible providers of
services and suppliers.? Act §§ 1835(a) (42 U.S.C. § 1395n(a)), 1842(h)(1) (42 U.S.C.
§ 1395u(h)(1)). Petitioner, a physician, is a supplier.

The Act requires the Secretary of Health and Human Services (Secretary) to issue
regulations that establish a process for enrolling providers and suppliers in Medicare,
including the requirement to provide the right to a hearing and judicial review of certain
enrollment determinations, such as revocation of enrollment and billing privileges. Act
§ 1866(j) (42 U.S.C. § 1395cc(j)). Pursuant to 42 C.F.R. § 424.505, suppliers such as
Petitioner must be enrolled in the Medicare program and be issued a billing number to
have billing privileges and to be eligible to receive payment for services rendered to a
Medicare-eligible beneficiary.

The Secretary has delegated the authority to revoke enrollment and billing privileges to
CMS. 42 C.F.R. § 424.535. CMS or its Medicare contractor may revoke an enrolled
supplier’s Medicare enrollment and billing privileges and supplier agreement for any of
the reasons listed in 42 C.F.R. § 424.535. The effective date of the revocation is
presently controlled by 42 C.F.R. § 424.535(g).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F.R. pt. 498. 42 C.F.R. § 424.545(a). A
supplier submits a written request for reconsideration to CMS or its contractor. 42 C.F.R.

> A “supplier” furnishes services under Medicare and includes physicians or other
practitioners and facilities that are not included within the definition of the phrase
“provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A “provider of services,”
commonly shortened to “provider,” includes hospitals, critical access hospitals, skilled
nursing facilities, comprehensive outpatient rehabilitation facilities, home health
agencies, hospice programs, and a fund as described in sections 1814(g) (42 U.S.C.

§ 1395f(g)) and 1835(e) (42 U.S.C. § 1395n(e)) of the Act. Act § 1861(u) (42 U.S.C.

§ 1395x(u)). The distinction between providers and suppliers is important because they
are treated differently under the Act for some purposes.
§ 498.22(a). CMS or its contractor must give notice of: its reconsidered determination to
the supplier; the reasons for its determination; the conditions or requirements the supplier
failed to meet; and the right to an ALJ hearing. 42 C.F.R. § 498.25. If the decision on
reconsideration is unfavorable to the supplier, the supplier has the right to request a
hearing by an ALJ and further review by the Departmental Appeals Board (the Board).
Act § 1866(j)(8) (42 U.S.C. § 1395cc(j)(8)); 42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5.
A hearing on the record, also known as an oral hearing, is required under the Act unless
waived. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-51 (6th Cir. 2004).
The supplier bears the burden to demonstrate that it meets enrollment requirements with
documents and records. 42 C.F.R. § 424.545(c).

B. Issues
Whether summary judgment is appropriate;

Whether there was a basis for the revocation of Petitioner’s billing
privileges and enrollment in Medicare; and

Whether the effective date of revocation in this case may be determined by
the retroactive application of a regulation.

C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold followed by my findings of fact and analysis.
1. Summary judgment is appropriate.

CMS requested summary judgment or, in the alternative, a decision on the written record.
A supplier whose enrollment has been revoked has a right to a hearing and judicial
review. A hearing on the record is required under the Act. Act §§ 205(b), 1866 (h)(1),
(j); 42 C.F.R. §§ 498.3(b)(1), (5), (6), (8), (15), (17), 498.5; Crestview, 373 F.3d at 748-
51. A party may waive appearance at an oral hearing but must do so affirmatively in
writing. 42 C.F.R. § 498.66. In this case, Petitioner has not waived the right to oral
hearing or otherwise consented to a decision based only upon the written record, i.e., the
documentary evidence and pleadings. Accordingly, disposition on the written record
alone is not permissible, unless summary judgment is appropriate.

Summary judgment is not automatic upon request but is limited to certain specific
conditions. The Secretary’s regulations at 42 C.F.R. pt. 498 that establish the procedures
to be followed in adjudicating Petitioner’s case do not establish a summary judgment
procedure or recognize such a procedure. However, the Board has long accepted that
summary judgment is an acceptable procedural device in cases adjudicated pursuant to
42 C.F.R. pt. 498. See, e.g., Ill. Knights Templar Home, DAB No. 2274 at 3-4 (2009);

Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr., DAB No.
1628 at 3(1997). The Board also has recognized that the Federal Rules of Civil
Procedure do not apply in administrative adjudications such as this, but the Board has
accepted that Fed. R. Civ. P. 56 and related cases provide useful guidance for
determining whether summary judgment is appropriate. Furthermore, a summary
judgment procedure was adopted as a matter of judicial economy within my authority to
regulate the course of proceedings and made available to the parties in the litigation of
this case by my Prehearing Order, para. II.D and G. The parties were given notice of my
Prehearing Order that summary judgment is an available procedural device and that the
law as it has developed related to Fed. R. Civ. P. 56 will be applied.

Summary judgment is appropriate when there is no genuine dispute as to any issue of
material fact for adjudication and/or the moving party is entitled to judgment as a matter
of law. In determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-moving party,
drawing all reasonable inferences in that party’s favor. The party requesting summary
judgment bears the burden of showing that there are no genuine issues of material fact for
trial and/or that it is entitled to judgment as a matter of law. Generally, the non-movant
may not defeat an adequately supported summary judgment motion by relying upon the
denials in its pleadings or briefs but must furnish evidence of a dispute concerning a
material fact, i.e., a fact that would affect the outcome of the case if proven. Mission
Hosp. Reg’! Med. Ctr., DAB No. 2459 at 5 (2012) (and cases cited therein); Experts Are
Us, Inc., DAB No. 2452 at 5-6 (2012) (and cases cited therein); Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300 at 3 (2010) (and cases cited therein); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The standard for deciding a case on summary judgment and an ALJ’s decision-making in
deciding a summary judgment motion differ from that used in resolving a case after a
hearing. On summary judgment, the ALJ does not make credibility determinations,
weigh the evidence, or decide which inferences to draw from the evidence, as would be
done when finding facts after a hearing on the record. Rather, on summary judgment, the
ALJ construes the evidence in a light most favorable to the non-movant and avoids
deciding which version of the facts is more likely true. Holy Cross Vill. at Notre Dame,
Inc., DAB No. 2291 at 5 (2009). The Board also has recognized that on summary
judgment it is appropriate for the ALJ to consider whether a rational trier of fact could
find that the party’s evidence would be sufficient to meet that party’s evidentiary burden.
Dumas Nursing & Rehab., L.P., DAB No. 2347 at 5 (2010). The Secretary has not
provided in 42 C.F.R. pt. 498 for the allocation of the burden of persuasion or the
quantum of evidence required to satisfy the burden. However, the Board has provided
some persuasive analysis regarding the allocation of the burden of persuasion in cases
subject to 42 C.F.R. pt. 498. Batavia Nursing & Convalescent Ctr., DAB No. 1904
(2004), aff'd, Batavia Nursing & Convalescent Ctr. v. Thompson, 129 Fed. App’x 181
(6th Cir. 2005).
Viewing the evidence before me in a light most favorable to Petitioner and drawing all
inferences in Petitioner’s favor, I conclude that there are no genuine disputes as to any
material facts pertinent to revocation under 42 C.F.R. § 424.535(a)(3) or (9) that requires
a hearing in this case. The issues in this case raised by Petitioner related to revocation of
his Medicare enrollment and billing privileges must be resolved against him as a matter
of law. The undisputed evidence shows that there was a basis for revocation of
Petitioner’s Medicare enrollment and billing privileges. The issue of the correct effective
date must also be resolved as a matter of law and there are no factual disputes related to
that issue that require a hearing. Accordingly, summary judgment is appropriate.

2. Petitioner was convicted of a felony offense.

3. The Secretary has determined and provided by regulation that a
felony crime against a person, such as murder, rape, assault, or similar
crimes, is detrimental to the Medicare program or its beneficiaries. 42
C.F.R. § 424.535(a)(3)(ii)(A).

4. Petitioner was convicted in state court of aggravated driving under
the influence of alcohol resulting in great bodily harm to a person,
which is a felony crime against persons within the meaning of 42
C.F.R. § 424.535(a)(3)(ii)(A).

5. There is a basis for revocation of Petitioner’s Medicare enrollment
and billing privileges pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(A).

6. CMS has failed to establish a legal basis for revocation based on
Petitioner’s failure to report his conviction in 2008, as there was no
statutory or regulatory requirement to report prior to January 1, 2009.
42 C.F.R. § 424.535(a)(9) (2009); 73 Fed. Reg. 69,725, 69,939-40 (Nov.
19, 2008).

7. The issue for hearing and decision is whether there is a basis for
revocation of Petitioner's Medicare enrollment and billing privileges
and, if there is a basis for revocation, my jurisdiction does not extend
to review of whether CMS properly exercised its discretion to revoke
Petitioner’s Medicare enrollment and billing privileges.

8. CMS incorrectly determined the effective date of the revocation of
Petitioner’s Medicare enrollment and billing privileges as the date of
his conviction, by retroactively applying the 2009 revision of 42 C.F.R.
§ 424.535 to a felony conviction that occurred on February 27, 2008.
9. Petitioner’s Medicare enrollment and billing privileges are revoked
effective January 13, 2016, 30 days from the notice of the initial
determination to revoke. 42 C.F.R. § 424.535(g) (2007).

10. Ihave no authority to review CMS’s determination to impose a
three-year bar on Petitioner’s Medicare re-enrollment.

11. Pursuant to 42 C.F.R. § 424.535(c), the three-year bar to re-
enrollment runs from the effective date of revocation, but the
Secretary and CMS have discretion not to enroll a supplier convicted
of a felony determined detrimental to the best interests of Medicare or
its beneficiaries for up to ten years from the date of conviction. Act

§ 1866(b)(2)(D) (42 U.S.C. § 1395ee(b)(2)(D)); 42 C.F.R.

§ 424.530(a)(3).

a. Facts

The following material facts are not disputed. On February 27, 2008, Petitioner entered a
plea of guilty in the Circuit Court of Cook County, Illinois, to one felony count of
aggravated driving under the influence of alcohol that involved a motor vehicle accident
that was the proximate cause of great bodily harm to another in violation of 625 Ill.
Comp. Stat. 5/11-501(a)(1) and (d)(1)(C) (1995). Petitioner’s plea was accepted by the
court and he was convicted of that count. CMS Ex. 1 at 9-12; RFH at 1-2. At the time of
Petitioner’s felony conviction, he was enrolled as a Medicare supplier but Petitioner did
not report his conviction to CMS or its contractor. CMS Ex. 1 at 5; RFH at 1-2.

b. Analysis

(i.) There is a basis for the revocation of Petitioner’s
Medicare enrollment and billing privileges pursuant to 42
CFR. § 424.535(a)(3)(ii)(A).

The Act grants the Secretary authority not to enroll or to revoke the enrollment of a
provider or supplier convicted under federal or state law of a felony offense that the
Secretary determines is detrimental to the program or its beneficiaries. Act

§ 1866(b)(2)(D).

The requirements for establishing and maintaining Medicare billing privileges are found
in 42 C.F.R. pt. 424, subpt. P. As a supplier, Petitioner was responsible to meet and
maintain enrollment requirements in order to “bill either the Medicare program or its
beneficiaries for Medicare covered services or supplies.” 42 C.F.R. § 424.500. Under
the regulation in effect at the time of his conviction and currently, CMS has authority to
revoke a supplier’s billing privileges if CMS determines that the supplier, “within the 10
years preceding enrollment or revalidation of enrollment, was convicted of a Federal or
State felony offense that CMS has determined to be detrimental to the best interests of the
[Medicare] program and its beneficiaries.” 42 C.F.R. § 424.535(a)(3) (2007). Among
the types of felony offenses that CMS considers to be detrimental to the best interests of
the program and its beneficiaries are “felony crimes against persons.” 42 C.F.R.

§ 424.535(a)(3)(ii)(A) (2007) and (2015).

On December 14, 2015, NGS revoked Petitioner’s Medicare enrollment and billing
privileges citing 42 C.F.R. § 424.535(a)(3). The revocation was based on Petitioner’s
February 27, 2008 conviction in Illinois of one felony count of aggravated driving under
the influence of alcohol in violation of 625 Ill. Comp. Stat. 5/11-501(a)(1) and (d)(1)(C)
(1995). Petitioner’s offense was a felony and characterized as aggravated driving under
the influence of alcohol under the Illinois statutes because the offense involved a motor
vehicle accident that was the proximate cause of great bodily harm to another. I conclude
that the felony offense of “aggravated driving under the influence of alcohol,” an offense
that resulted in a car wreck that caused great bodily harm to another, satisfies the
requirement of 42 C.F.R. § 424.535(a)(3)(ii)(A) that the felony conviction be for a crime
against a person, such as an assault or similar crime, because Petitioner’s felony offense
caused injury to another.

It is undisputed that Petitioner’s February 27, 2008 conviction occurred within the 10
years preceding the date of the December 14, 2015 revocation notice from the Medicare
contractor NGS.

Petitioner’s arguments before me are of no merit. He argues that: he was overcharged as
the charge did not correlate with the facts; he had “incompetent counsel” at the time who
“encouraged him to plead” to the facts; and he had an “unblemished traffic record.”
Petitioner also attempts to minimize the extent of his victim’s injuries. RFH 2-4; P. Br. at
2. Petitioner’s arguments regarding whether or not he was actually guilty of the offense
for which he was convicted carry no weight in this proceeding. Petitioner’s arguments
amount to a collateral attack on his conviction and I have no authority to review his
conviction. Here, Petitioner is bound by the undisputed fact that he was convicted of the
charge of record. Petitioner cites no legal authority to the contrary. Whether or not the
offense of which he was convicted was a felony crime against a person within the
meaning of 42 C.F.R. § 424.535(a)(3)(ii)(A) is, given the undisputed facts, an issue of
law that must be resolved against him. The Secretary has specifically provided that if a
supplier was, within the preceding 10 years of filing an enrollment or revalidation
application, convicted of an offense that CMS has determined to be detrimental to the
best interests of the Medicare program and its beneficiaries, then the supplier’s
enrollment and billing privileges can be revoked on that basis by CMS or its contractor.
42 C.F.R. § 424.535(a)(3)(ii)(A). The offense of which Petitioner was convicted is a
felony crime against persons, one of the categories of offenses the Secretary has
determined to be detrimental to Medicare and its beneficiaries. 42 C.F.R.

§ 424.535(a)(3)(ii)(A).

Petitioner complains about the sufficiency of the notice he received in the state court, an
issue not within my authority to address. His arguments may also be considered an attack
upon the sufficiency of the notices he received from NGS and CMS, which is a matter
within my jurisdiction. RFH. I conclude based on my review that the notices of initial
and reconsidered determinations satisfied regulatory requirements. Any error in the
notices regarding citation of the state statute Petitioner violated was not prejudicial as
Petitioner was well aware of the offense of which he was convicted. Furthermore,
Petitioner has effectively exercised the rights of review available to him under the Act
and regulations. The Act and regulations accord Petitioner a right to notice and the
opportunity to have the decision to revoke his enrollment and billing privileges
reconsidered and then reviewed by an ALJ, the Board, and the courts. Act § 1866(j)(8)
(42 U.S.C. § 1395cc(j)(8)); 42 C.F.R. §§ 424.545, 498.3(b)(17), 498.5, 498.22(a), and
498.25. Petitioner was notified of the revocation; he exercised his right to
reconsideration; he has received de novo review by an ALJ; and there is no real dispute
that there is a factual and legal basis for revocation of his enrollment pursuant to 42
C.F.R. § 424.535(a)(3). Petitioner received adequate notice and there was no prejudice
due to a violation of the process due him under the Act and the Secretary’s regulations.

Accordingly, I conclude that CMS had a basis to revoke Petitioner’s enrollment and
billing privileges pursuant to 42 C.F.R. § 424.535(a)(3)(ii)(A), based on his February 27,
2008 conviction.

(ii.) There was no legal requirement for Petitioner to report
his conviction when he was convicted, and CMS cannot
retroactively apply 42 C.F.R. §§ 424.516(d)(1)(ii) and
424.535(a)(9) to revoke Petitioner’s Medicare enrollment and
billing privileges.

NGS also cited 42 C.F.R. § 424.535(a)(9) as a basis for revocation based on Petitioner’s
failure to notify CMS of his conviction within 30 days as required by 42 C.F.R.

§ 424.516(d)(1)(ii). CMS Ex. 1 at 1, 6. The current version of 42 C.F.R.

§ 424.516(d)(1)(ii) (2015) requires that a physician report to the MAC any “adverse legal
action” within 30 days of the event. Petitioner does not dispute that he failed to report his
February 2008 felony conviction to CMS or its contractor NGS. RFH at 2; CMS Ex. | at
5. However, the 2007 revision of the C.F.R., which was in effect at the time of
Petitioner’s conviction, did not include sections 424.516 or 424.535(a)(9), ora
requirement to report adverse legal actions. The requirement to report an adverse legal
10

action was added to the regulations effective January 1, 2009, with the addition of 42
C.F.R. §§ 424.516 and 424.535(a)(9). 73 Fed. Reg. 69,939-40. Specifically, 42 C.F.R.
§ 424.535(a)(9) was added effective January 1, 2009, and provides:

(9) Failure to report. The provider or supplier did not
comply with the reporting requirements specified in
§ 424.516(d)(1)(ii) and (iii) of this subpart.

42 C.F.R. § 424.535(a)(9) (2009). Prior to January 1, 2009, Medicare enrollees were
required to report any changes to the information in their enrollment application within
90 days:

(b) Reporting requirements. Following enrollment, a
provider or supplier must report to CMS any changes to the
information furnished on the enrollment application and
furnish supporting documentation within 90 calendar days of
the change, with the exception of DMEPOS suppliers which
are required to report changes of information within 30 days
as specified in § 424.57(c)(2), or a change of ownership or
control of the provider or supplier that must also be reported
within 30 calendar days. Failure to do so may result in the
deactivation or revocation of the provider or supplier’s
Medicare billing privileges.

42 C.F.R. § 424.520(b) (2007). There was no requirement to report an adverse legal
action. Section 424.520(b) (2007) was replaced by 42 C.F.R. § 424.516(d)(1)(ii),
effective January 1, 2009, and requires that “final adverse actions” be reported to CMS or
a contractor within 30 days. In the preamble to the regulation, the drafters explained:

we are adopting a new § 424.516(d) which would establish
more stringent reporting requirements for physician NPP
organizations and individual practitioners. (We proposed to
redesignate § 424.520 as § 424.516 and amend the provisions
in new § 424.516.) In addition to a change of ownership (as
currently specified in redesignated § 424.516(d)(1)(i)), we
proposed to add § 424.516(d)(1)(ii) requiring all physician
and NPP organizations and individual practitioners to notify
our designated contractor of any final adverse action within
30 days. We stated that final adverse actions include, but are
not limited to, felonies, license suspensions, and the HHS
Office of the Inspector General (OIG) exclusion or
debarment.
11

73 Fed. Reg. 69,777. The drafters specified that “a final adverse action has occurred
when the sanction is imposed and not when a supplier has exhausted all appeal rights
associated with the action itself.” Jd. The requirement for a supplier such as Petitioner to
report a “final adverse action” such as a felony conviction became effective after
Petitioner’s February 27, 2008 conviction. The MAC cited 42 C.F.R. § 424.535(a)(9) as
a basis for revocation alleging that Petitioner failed to report his conviction within 30
days as required by 42 C.F.R. § 424.516. However, there was no 42 C.F.R. § 424.516 at
the time of Petitioner’s conviction and no requirement to report within 30 days. CMS has
failed to show that there was another legal basis for revocation based upon Petitioner’s
failure to report his conviction. For the reasons discussed hereafter, CMS could not apply
42 C.F.R. §§ 424.516(d) and 424.535(a)(9) retroactively. It is not necessary for me to
examine the issue further as I have concluded that Petitioner’s conviction is a basis for
revocation under 42 C.F.R. § 424.535(a)(3).

(iii.) NGS and CMS incorrectly determined the effective date
of revocation.

In the initial determination, NGS stated that the effective date of revocation was February
27, 2008, which was the date of Petitioner’s conviction. CMS Ex. 1 at 6. The effective
date of revocation is not specifically addressed in the reconsidered determination. CMS
Ex. | at 1-3. L infer that NGS applied 42 C.F.R. § 424.535(g) (2015) to determine the
date of revocation. The regulation provides that revocation is effective 30 days after
CMS or its contractor mails the notice of the revocation determination to the provider or
supplier. An exception exists in certain cases, such as when the revocation is based on a
felony conviction, in which case the revocation is effective the date of the felony
conviction. 42 C.F.R. § 424.535(g).

In February 2008, when Petitioner was convicted, the regulation in effect provided that
“[rJevocation becomes effective within 30 days of the initial revocation notification.” 42
C.F.R. § 424.535(f) (2007). There was no provision at the time of Petitioner’s conviction
that provided that the revocation was effective the date of the felony conviction.

I conclude that the effective date of the revocation of Petitioner’s enrollment and billing
privileges should be determined under the regulatory provisions in effect on the date of
Petitioner’s February 27, 2008 conviction. It was not until January 1, 2009, that CMS
revised its regulation, providing that when revocation is based on a felony conviction, the
effective date of revocation is the date of the conviction. 42 C.F.R. § 424.535(g); 73 Fed.
Reg. 69,940. In this case, NGS retroactively applied 42 C.F.R. § 424.535(g) to determine
that the date of Petitioner’s felony conviction was the effective date of Petitioner’s
revocation. Pursuant to 42 U.S.C. § 1871(e)(1)(A) of the Act (42 U.S.C.

§ 1395hh(e)(1)(A)), the regulations of the Secretary are not applied retroactively, unless
the Secretary determines that:

12

(i) such retroactive application is necessary to comply with
statutory requirements; or

(ii) failure to apply the change retroactively would be
contrary to the public interest.

Act § 1871(e)(1)(A). CMS has not shown that the retroactive application of 42 C.F.R.
§ 424.535(g) is necessary for the Secretary to comply with any statutory requirement or
that the failure to apply the regulation retroactively would be contrary to the public
interest. I conclude that it would be contrary to law to apply the 2009 revision of 42
C.F.R. § 424.535(g) to a conviction that occurred on February 27, 2008.

Accordingly, applying 42 C.F.R. § 424.535(f) (2007), I conclude that the effective date of
Petitioner’s revocation is January 13, 2016, 30 days from the notice of the initial
determination.

When a supplier’s Medicare enrollment and billing privileges are revoked, the supplier is
barred from re-enrolling in the Medicare program for one to three years. 42 C.F.R.

§ 424.535(c) (2015). In this case, CMS determined that a three-year bar was appropriate.
There is no statutory or regulatory language establishing a right to review of the duration
of the re-enrollment bar CMS imposes. Act § 1866(j)(8) (42 U.S.C. § 1395ce(j)(8)); 42
C.F.R. §§ 424.535(c), 424.545; 498.3(b), 498.5. The Board has held that the duration of
a revoked supplier’s re-enrollment bar is not an appealable initial determination listed in
42 C.F.R. § 498.3(b) and not subject to ALJ review. Vijendra Dave, DAB No. 2672 at
10-11 (2016).

Petitioner advances constitutional and equitable arguments to support his position that the
revocation action should be rescinded or that his revocation should be waived because he
is the sole source of essential specialized services in a community. P. Br. at 1-3, RFH at
4,7. [have no authority to address the constitutional argument raised by Petitioner, to
grant equitable relief, or to grant Petitioner a waiver from the revocation action. US
Ultrasound, DAB No. 2302 at 8 (2010) (“Neither the ALJ nor the Board is authorized to
provide equitable relief by reimbursing or enrolling a supplier who does not meet
statutory or regulatory requirements.”). Furthermore, I am bound to follow the Act and
regulations, and I have no authority to declare statutes or regulations invalid or ultra
vires. 18661CPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (noting that “[a]n ALJ is
bound by applicable laws and regulations and may not invalidate either a law or
regulation on any ground.”).

Petitioner argues that the determination to revoke in this case fails to make a distinction
between permissive and mandatory exclusion. RFH at 3. Petitioner has confused the
authority of the Secretary to exclude persons from participating in Medicare under
section 1128 of the Act (42 U.S.C.§ 1320a-7), with the Secretary’s authority to revoke
13

billing privileges and Medicare enrollment. The Secretary delegated the authority to
impose a mandatory exclusion under section 1128 of the Act to the Inspector General of
the U.S. Department of Health and Human Services, who administers that program
pursuant to 42 C.F.R. pts. 1001 and 1005. The Secretary delegated the authority for
revoking a provider or supplier’s Medicare enrollment and billing privileges to CMS in
42 C.F.R. pt. 424. Revocation and exclusion are two separate and distinct administrative
actions enforced by two different agencies within HHS. Abdul Razzaque Ahmed, M.D.,
DAB No. 2261 at 13 (2009), aff'd, 710 F. Supp. 2d 167 (D. Mass. 2010). In the case
before me CMS has revoked Petitioner’s Medicare enrollment and billing privileges
pursuant to 42 C.F.R. § 424.535(a)(3). In the case of revocation, I have no authority to
review the exercise of discretion by CMS or its contractor to revoke when I find that
there is a basis for revocation. Abdul Razzaque Ahmed, M.D., DAB No. 2261 at 19. The
scope of my authority is limited to determining whether there is a legal basis for
revocation of Petitioner’s Medicare enrollment and billing privileges. Jd. I have
concluded that there is a basis for CMS to revoke Petitioner’s Medicare enrollment and
billing privileges pursuant to 42 C.F.R. § 424.535(a)(3).

III. Conclusion

For the foregoing reasons, I conclude that Petitioner’s Medicare enrollment and billing
privileges are revoked pursuant to 42 C.F.R. § 424.535(a)(3)(i) and (ii)(A)(2015),
effective January 13, 2016.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Center for Tobacco Products,

(FDA No. FDA-2015-H-2299)
Complainant
v.

Friends and Brothers, Inc.
d/b/a Amy’s Liquor,

Respondent.
Docket No. C-15-3078
Decision No. CR4713

Date: September 28, 2016

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
against Respondent, Friends and Brothers, Inc. d/b/a Amy’s Liquor, located at
8560 Grand River Avenue, Detroit, Michigan 48204, for five violations of the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140, within a thirty-six month period.
Specifically, CTP alleges that Amy’s Liquor violated the Act by impermissibly
selling tobacco products to minors, on three separate occasions, and failing to
verify, by means of photo identification containing a date of birth, that the
purchasers were 18 years of age or older, on three separate occasions.

Procedural History
CTP began this matter by serving an administrative complaint seeking a $5,000

civil money penalty on Respondent Amy’s Liquor, at 8560 Grand River Avenue,
Detroit, Michigan 48204, and by filing a copy of the complaint with the Food and
Drug Administration’s (FDA) Division of Dockets Management. Respondent
timely answered CTP’s complaint. In its answer, Respondent denied the

allegations and asserted that video surveil

ance showed that Respondent did not

sell a tobacco product to a minor. On August 20, 2015, Administrative Law Judge

Diane Townsend-Anderson! issued an Aci

nowledgement and Prehearing Order

(APHO) that set deadlines for the parties to file their pre-hearing exchanges.

Following two motions to extend the dea

lines that were granted, CTP filed its

pre-hearing exchange on February 11, 2016. CTP’s pre-hearing exchange
included the declarations of two witnesses. And, following another motion to
extend the deadlines that was granted, Respondent filed its pre-hearing exchange

on March 28, 2016. Respondent provide

On May 11, 2016, I held a pre-hearing con:

hearing conference, I issued an Order that
That Order also explained that during the

no witnesses of record.

erence in this case. Following the pre-
scheduled the hearing for July 13, 2016.
pre-hearing conference we discussed the

thumb drive containing video surveillance that was listed as a proposed exhibit in

Respondent’s Informal Brief, and the fact
provide

indicated that it did not oppose the thumb

that this thumb drive had not been

to the Court. During the pre-hearing conference, the CTP’s counsel

drive being entered into evidence, and

so Respondent’s counsel was to mail the t!

Order also noted that during the prehearing

umb drive to the Court for review. The
conference call, I stated that

Respondent had not provided any witnesses of record, and that CTP had provided

two witn
indicate
Timothy

that he wanted to cross examine
Shafto.

On May
propose

18, 20

esses. During the pre-hearing con

erence, Respondent’s counsel
one of CTP’s witnesses, Inspector

6, Respondent filed a motion requesting that I reconsider its
witness and exhibit list. Respondent stated that during the prehearing

conference I found that Respondent had failed to file a Witness and Exhibit List,
but that the March 28, 2016 electronic filing contained a witness and exhibit list.

On June 17, 20

6, Il issued an Order that explained that Respondent had no

witnesses because it failed to provide written direct testimony as required by

21 C.F.R. § 17.37(b), and section 9 of the

On June 20, 20
surveillance vi
Respondent di

APHO.

6, I also issued an Order requesting Respondent to provide its
leo in AVI format or inform the Court if it is unable to do so.
not comply with that Order.

' On January 14, 2016 this case was reassigned to Administrative Law Judge
Steven T. Kessel, and on April 4, 2016 this case was reassigned to me.
On July 13, 2016, a hearing was held in this case. The purpose of the hearing was
to allow Respondent to cross examine Inspector Timothy Shafto.

Following the hearing, a letter was issued at my direction that informed the parties
of how the post-hearing briefing period would occur. The letter also informed
Respondent that the Civil Remedies Division had not received the July 29, 2016
communication that, during the hearing, Respondent’s attorney stated provided
instructions on how to play the surveillance video.

In an August 1, 2016 Order, I informed the parties that the Court had received the
transcript of the hearing, and set the deadline for the parties’ post-hearing brief
submission as August 31, 2016. Both parties filed post-hearing briefs.

Analysis
I. Violations

CTP determined to impose a civil money penalty against Respondent pursuant to

e authority conferred by the Federal Food, Drug, and Cosmetic Act (Act) and
implementing regulations at Part 21 of the Code of Federal Regulations. The Act
prohibits the misbranding of tobacco products while they are held for sale after
shipment in interstate commerce. 21 U.S.C. § 331(k). FDA and its agency, CTP,
may seek civil money penalties from any person who violates the Act’s
requirements as they relate to the sale of tobacco products. 21 U.S.C. § 331(£)(9).
The sale of tobacco products to an individual who is under the age of 18 and the
failure to verify the photographic identification of an individual who is not over
the age of 26 are violations of implementing regulations. 21 C.F.R. §§ 1140.14(a),

(b)(1).

is

In its Complaint, CTP alleges that Respondent Amy’s Liquor committed five
violations of the Act and its implementing regulations within a thirty-six month
period. Amy’s Liquor filed an answer, and informal brief, that denied selling a
tobacco product to a minor. Answer; Informal Brief of Respondent.

The Complaint currently before me involves one prior complaint. The prior
complaint was settled by the parties and in settling the complaint the Respondent
admitted the violations occurred, waived the ability to contest the violations in the
future, and stated that Respondent understood that the violations may be counted
in determining the total number of violations for future enforcement actions.
Complaint; Informal Brief of Complainant. The Complaint currently before me
involves two new violations: impermissibly selling cigarettes to a minor, and
failing to verify, by means of photo identification containing a date of birth, that
the purchaser was 18 years of age or older.
CTP’s case against Respondent rests on the testimony of Mr. Shafto plus
corroborating evidence. CTP Ex. 4. Mr. Shafto is an FDA-commissioned officer
whose duties include determining whether retail outlets are unlawfully selling
tobacco products to minors. /d. at 1-2. Mr. Shafto’s inspections entail
accompanying minors who attempt to purchase tobacco products from retail
establishments such as the one operated by Respondent. Id.

Mr. Shafto testified that he went to Respondent’s place of business on March 14,
2015. CTP Ex. 4 at 2-3. Mr. Shafto averred that on March 14, 2015 he confirmed
that the minor was carrying her photographic identification, and that she did not
have tobacco products in her possession. Mr. Shafto stated that he gave the minor
the keys to the vehicle when she exited the vehicle so that she would have access
to the vehicle after the inspection. Mr. Shafto testified that the minor entered the
establishment first and went directly to the counter, and that he entered the
establishment soon after and stood where he had a clear view of the sales counter.
Mr. Shafto averred that he saw the minor purchase a package of cigarettes from an
employee of Respondent, and that the minor did not provide photographic
identification to the employee, and that the employee did not provide the minor
with a receipt after purchase. Id.

Mr. Shafto stated that the minor exited the store a few minutes before him, and
that when he returned to the vehicle the minor gave him the cigarettes, which he
saw were Newport cigarettes, and the minor confirmed that the Respondent’s
employee did not request photographic identification. CTP Ex. 4 at 3. Mr. Shafto
stated that he then labeled the cigarettes as evidence, and made photographs of the
package. Jd. at 3, 12-13. Mr. Shafto testified that shortly after the inspection he
recorded the inspection in the FDA’s Tobacco Inspection Management System.
Id. at 3.

Mr. Shafto testified that when he started the inspection the time on his iPhone was
10:43 am, and that he and the minor exited the vehicle and entered the store
between 10:43 am and 10:48 am. CTP Ex. 4 at 3. Mr. Shafto averred that he took
photographs of the Respondent’s exterior and signs from 10:48 am to 10:50 am.
Id. at 3-4, 10-11. Mr. Shafto testified that he took the first photograph of the
evidence at 10:59 am, and that the time on his iPhone was 11:10 when he
completed the inspection. Jd. at 4.

Mr. Shafto’s testimony plus the corroborating evidence consisting of photographs
of the pack of cigarettes that he obtained from the minor on March 14, 2015 are
proof that Respondent unlawfully: sold a tobacco product to a minor, and failed to
check the minor’s identification before making the sale.
Throughout the case Respondent’s counsel has asserted that video surveillance of
the time at issue shows that Respondent did not commit the violations. During the
cross examination and redirect testimony of Mr. Shafto it became evident that
while the time stamp on the video was before the time stated in the complaint the
video contained only the end of Mr. Shafto’s inspection. Mr. Shafto’s testimony
indicated that after the undercover buy occurred he returned to the car, and then
once again exited the car to take photographs of the outside of the establishment.
As soon as the surveillance video begins, you see a man leave his car and walk to
different points around the establishment and apparently take photographs of the
establishment before returning to his car. While there is evidently an issue in
determining exactly what specific time the violations occurred, the specific minute
that the violations occurred is not material in determining that the violations did in
fact occur.

In its post-hearing brief, Respondent asserts that CTP violated its due process
rights and that CTP’s actions constitute prejudice. Respondent states that CTP
requested additional video but that that additional video was already recorded over
by the time it was requested. Respondent also states that it was never informed
that Mr. Shafto saw himself in the video.

CTP’s post-hearing brief asserts that “any deficiencies with the Respondent’s
evidence should properly fall on the Respondent’s shoulders.” I agree. Further,
CTP had no duty to inform Respondent that Mr. Shafto appeared on the video.
Mr. Shafto’s testimony described the sequence of events, and Respondent
possessed the video to review to see if any of those events occurred. Additionally,
Respondent could have requested a description of Mr. Shafto, or a picture, as part
of discovery to assist in their viewing of the video. But, there is no indication in
the record that Respondent did so.

I find that these facts establish Respondent Friends and Brothers, Inc. d/b/a Amy’s
Liquor’s liability under the Act.

II. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent Amy’s Liquor is liable for a civil
money penalty not to exceed the amounts listed in FDA’s civil money penalty
regulations at 21 C.F.R. § 17.2. In its Complaint, CTP sought to impose the
maximum penalty amount, $5,000, against Respondent for five violations of the
Act and its implementing regulations within a thirty-six month period. Complaint
4 13. In its Informal Brief, CTP continues to assert that a $5,000 civil money
penalty is appropriate. Informal Brief of Complainant at 9-11.
In both its Answer and its Informal Brief, Respondent denied any obligation to pay
a civil money penalty because it did not violate the regulations.

I have found that Respondent committed at least five violations of the Act and its
implementing regulations within a thirty-six month period. When determining the
amount of a civil money penalty, I am required to take into account “the nature,
circumstances, extent and gravity of the violations and, with respect to the
violator, ability to pay, effect on ability to continue to do business, any history of
prior such violations, the degree of culpability, and such other matters as justice
may require.” 21 U.S.C. § 303(f)(5)(B). Respondent has not provided any
arguments with regards to the nature, circumstances, extent and gravity of the
violations, the Respondent’s ability to pay, the effect on Respondent’s ability to
continue to do business, any history of prior such violations, the degree of
culpability, etc. Instead, Respondent’s sole argument is that it should not have to
pay a civil money penalty because it did not commit the violations.

i. Nature, Circumstances, Extent and Gravity of the Violations

Time and again, Respondent Amy’s Liquor has failed to comply with the Act and
its implementing regulations. Over the course of the six violations discussed in
this Complaint, Respondent has admitted to four violations”, and I have found that
Respondent committed the two most recent violations; specifically Respondent
has committed: three violations of selling tobacco products to minors, and three
violations for failing to verify, by means of photo identification containing a date
of birth, that the purchasers were 18 years of age or older. The repeated inability
of Respondent to comply with federal tobacco regulations is serious in nature and
the civil money penalty amount should be set accordingly.

ii. Respondent’s Ability to Pay And Effect on Ability to do Business

There is nothing in the evidentiary record that shows Respondent’s ability to pay a
civil money penalty or shows the effect a civil money penalty will have on
Respondent’s ability to do business. Respondent had the opportunity to show an
inability to pay a $5,000 civil money penalty, and the effect that a $5,000 civil
money penalty would have on its business, but it did not do so.

iii. History of Prior Violations
The current action is the second civil money penalty action brought against

Respondent since August 29, 2014 for violations of the Act and its implementing
regulations. In the first civil money penalty action, CRD Docket Number

> Tnote that CTP’s requested CMP is based upon 5 violations.
C-14-1799, FDA Docket Number FDA-2014-H-1272, Respondent twice violated
the prohibition against selling tobacco products to persons younger than 18 years
of age, 21 C.F.R. § 1140.14(a), and twice violated the requirement that retailers
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). Respondent settled the prior complaint with CTP for an
undisclosed penalty amount.

I agree with CTP that “[t]hese repeat violations show an unwillingness or inability
to sell tobacco products in accordance with federal tobacco regulations.” Informal
Brief at 11. While Respondent has already paid a civil money penalty for its
previous violations, its continued inability to comply with the federal tobacco
regulations calls for a more severe penalty.

iv. Degree of Culpability
Respondent Amy’s Liquor admitted to four violations. Based on Respondent’s
own admissions and my finding that Respondent committed the two most recent
violations in the current complaint, I hold it fully culpable for all six violations of
the Act and its implementing regulations.

vy. Additional Mitigating Factors
Respondent has not asserted any mitigating factors.

vi. Penalty

Based on the foregoing reasoning, I find a penalty amount of $5,000 to be
appropriate under 21 U.S.C. §§ 303(f)(5)(B) and 333(£)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $5,000 against
Respondent, Friends and Brothers, Inc. d/b/a Amy’s Liquor, for five violations of
the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140, within a thirty-six month period.

/s/
Catherine Ravinski
Administrative Law Judge

> Tnote that CTP’s requested CMP is based upon 5 violations.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Lindsay Marie (Wall) Wolfe,
(OI File No. H-16-41108-9),

Petitioner,
v.
The Inspector General.
Docket No. C-16-655
Decision No. CR4712

Date: September 27, 2016

DECISION

Petitioner, Lindsay Marie Wolfe, was a licensed pharmacist in the State of Florida. She
created fictitious patient profiles in her pharmacy’s computer database and then filled the
fraudulent drug prescriptions. She gave the ill-gotten drugs to a friend and colleague in
exchange for other drugs. She was convicted of furnishing false or fraudulent
information regarding a controlled substance, a felony. Pursuant to section 1128(a)(3) of
the Social Security Act (Act), the Inspector General (IG) has excluded her from
participating in the Medicare, Medicaid, and all federal health care programs for a period
of five years.

For the reasons discussed below, I find that the IG is authorized to exclude Petitioner, and
that the statute mandates a minimum five-year exclusion.

Background
In a letter dated May 31, 2016, the IG advised Petitioner Wolfe that, because she had

been convicted of a felony offense related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct in connection with the delivery of
a health care item or service, the IG was excluding her from participating in Medicare,
Medicaid, and all federal health care programs for a period of five years. IG Exhibit
(Ex.) 1. Petitioner requested review.

The parties have submitted their written arguments (IG Br.; P. Br.). With his brief, the
IG submitted seven exhibits (IG Exs. 1-7). In the absence of any objections, I admit into
evidence IG Exs. 1-7.

The parties agree that this case does not require an in-person hearing. IG Br. at 11; P. Br.
at 2.

Discussion

Petitioner must be excluded from program participation for
a minimum of five years because she was convicted of a
felony relating to fraud and theft in connection with the
delivery of a health care item or service.'

Section 1128(a)(3) provides that an individual or entity convicted of felony fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of a health care item or service must be excluded from
participating in federal health care programs for a minimum of five years. See 42 C.F.R.
§ 1001.101(c).

Petitioner Wolfe was a licensed pharmacist, working at a CVS pharmacy. Colluding with
a friend and colleague, she created a fictitious patient profile in the pharmacy’s computer
database. Based on that profile, she filled prescriptions for narcotics (Oxycodone and
Morphine), which she supplied to her friend. In return, her friend gave her barbiturates
(Fioricet) and narcotics (Percocet). IG Ex. 3.

In an information dated February 12, 2013, she was charged with one felony count of
furnishing false or fraudulent information regarding a controlled substance, in violation
of Florida law, Fla. Stat. § 893.13. IG Ex. 4. On March 4, 2013, Petitioner Wolfe pled
guilty to the felony count. IG Ex. 5. The Florida Circuit Court sentenced her to five
years probation but withheld an adjudication of guilt. IG Ex. 7. The court warned that if
she violated the conditions of her probation, she could be adjudicated guilty and
sentenced accordingly. IG Ex. 7 at 5.

Petitioner concedes that she was convicted of a felony but points out that her crime did
not involve reimbursement claims to state or federal programs; the resulting transactions

' T make this one finding of fact/conclusion of law.
were for cash only. P. Br. at 2. But, under section 1128(a)(3), an individual is subject to
exclusion if convicted of felony fraud in connection with the delivery of a health care
item, like drugs. The section does not require federal or state program involvement.

Petitioner fabricated a patient profile in order to obtain narcotics. Her felony conviction
was thus plainly related to fraud in connection with the delivery of a health care item
(drugs), and she is therefore subject to exclusion. An exclusion brought under section
1128(a)(3) must be for a minimum period of five years. Act § 1128(c)(3)(B); 42 C.F.R.
§ 1001.2007(a)(2).

Conclusion

For these reasons, I conclude that the IG properly excluded Petitioner from participating
in Medicare, Medicaid and all federal health care programs, and I sustain the five-year
exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge