Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Twinbrook Nursing Home,
(CCN: 18-5456),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-234
Decision No. CR4762

Date: December 15, 2016

DECISION

In this case, we again consider a long-term care facility’s obligation to investigate and
report allegations of abuse made by someone whom facility staff consider unreliable.

Petitioner, Twinbrook Nursing Home, is a long-term care facility, located in Louisville,
Kentucky, that participates in the Medicare program. Based on surveys completed
August 13 (life safety code), August 22 (health), and November 5, 2013 (follow-up), the
Centers for Medicare & Medicaid Services (CMS) determined that, from August 10
through September 20, 2013, the facility was not in substantial compliance with Medicare
program requirements and that, from August 10 through 14, its deficiencies posed
immediate jeopardy to resident health and safety. CMS imposed civil money penalties
(CMPs) of $4,800 per day for five days of immediate jeopardy, followed by $200 per day
for 37 days of substantial noncompliance that was not immediate jeopardy. Petitioner
requests review but limits its appeal to the issues surrounding the finding of immediate
jeopardy.

For the reasons discussed below, I find that, from August 10 through 14, 2013, the
facility was not in substantial compliance with 42 C.F.R. § 483.13(c) and that its
deficiencies posed immediate jeopardy to resident health and safety. The penalty
imposed is reasonable.

Background

The Social Security Act (Act) sets forth requirements for nursing facility participation 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 conduct periodic surveys to
determine whether skilled nursing facilities 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. Facilities 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, surveyors from the Kentucky Cabinet for Health and Family Services (state
agency) completed life safety code (LSC) and health surveys on August 13 and 22, 2013,
respectively. CMS Exs. 4, 5. In addition to their LSC deficiencies (which apparently are
not part of this appeal),' CMS determined that the facility was not in substantial
compliance with the following program requirements:

e 42 CFR. §§ 483.13(c)(1)(ii)-(iii), (c)(2)-(4) (Tag F225) (staff treatment of
residents: investigate/report allegations of abuse), at scope and severity level J
(isolated instance of noncompliance that poses immediate jeopardy to resident
health and safety);

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

' CMS’s notice letter mentions the LSC survey deficiencies (which were not
inconsequential) but is ambiguous as to whether CMS attributed any part of the penalty to
them. CMS Ex. 2. Petitioner has not appealed the LSC findings, and neither party
addressed them in its submissions, so I do not consider them here.
© 42 C.F.R. § 483.65 (Tag F441 — infection control) at scope and severity level D
(isolated instance of noncompliance that causes no actual harm with the potential
for more than minimal harm).

CMS Exs. 2, 4.

Surveyors returned to the facility and completed a follow-up survey on November 5,
2013. Based on these findings, CMS determined that the facility returned to substantial
compliance on September 21. CMS Ex. 3.

CMS imposed against the facility CMPs of $4,800 per day for five days of immediate
jeopardy (August 10-14) and $200 per day for 37 days of substantial noncompliance that
was not immediate jeopardy (August 15 — September 20), for a total penalty of $31,400
($24,000 + 7,400 = $31,400). CMS Ex. 2.

Petitioner timely requested review, challenging the deficiencies cited at the immediate
jeopardy level (42 C.F.R. § 483.13(c)), the finding of immediate jeopardy itself, and the
penalty imposed for the period of immediate jeopardy.

The parties have filed pre-hearing briefs (CMS Br. and P. Br.) and closing briefs (CMS
Cl. Br. and P. Cl. Br.). CMS has submitted 28 exhibits (CMS Exs. 1-28); Petitioner has
submitted four exhibits (P. Exs. 1-4). In the absence of any objections, I admitted CMS
Exs. 1-28 and P. Exs 1-4 into the record. Order Following Prehearing Conference at 3
(August 23, 2016). Petitioner also submitted a motion for summary judgment, and CMS
filed a reply. I denied Petitioner’s motion, finding that Petitioner has not established that
it is entitled to judgment as a matter of law. Jd. at 2-3. The parties provided the written
direct testimony of their witnesses. Each party declined cross-examination of the other’s
witnesses, so an in-person hearing would serve no purpose, and the matter may be
decided based on the written record. Jd. at 3.

Issues

Based on the issues Petitioner did not appeal, I find that, from August 10 through
September 20, 2013, the facility was not in substantial compliance with program
requirements, and I sustain a CMP of at least $200 per day for that period.

The issues remaining are:

1. From August 10 through 14, 2013, was the facility in substantial compliance with
42 CFR. § 483.13(c) (Tags F225 and F226);
2. If, from August 10 through 14, the facility was not in substantial compliance with
section 483.13(c), did its deficiencies then pose immediate jeopardy to resident
health and safety; and

3. Is the penalty imposed ($4,800 per day) reasonable.
Discussion

1. The facility was not in substantial compliance with 42 C.F.R. § 483.13(c)
because, contrary to that regulation’s requirements and the facility’s own
policies for preventing resident mistreatment, neglect, and abuse, its staff did
not immediately report or thoroughly investigate a resident’s allegations of
possible abuse; and they made no efforts to prevent potential abuse while an
investigation was pending.”

Program requirements: “Abuse” means the willful infliction of injury, unreasonable
confinement, intimidation, or punishment with resulting physical harm, pain, or mental
anguish. 42 C.F.R. § 488.301.

Facility residents have the right to be free from verbal, sexual, physical, and mental
abuse. 42 C.F.R. § 483.413(b). To this end, a facility must develop and implement
written policies and procedures that prohibit mistreatment, neglect, and abuse of
residents. 42 C.F.R. § 483.13(c). It must ensure that all alleged violations 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
further 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 action. 42 C.F.R. § 483.13(c)(2), (3), and (4)
(Tags F225, F226).

Facility policies. The facility had in place written policies for preventing, detecting, and
reporting suspected abuse and neglect. CMS Exs, 13, 14. Consistent with the
regulations, the policies define abuse as the willful infliction of injury, unreasonable
confinement, intimidation, or punishment, with resulting physical harm, pain, or mental
anguish. CMS Ex. 14 at 1. One of those policies mandates that facility staff immediately
report to Adult Protective Services “all alleged violations and all substantiated incidents.”
Staff must then “initiate an investigation” and “take corrective action” as required. CMS
Ex. 14 at 3; see CMS Ex. 13 at 9. That ‘corrective action” includes: 1) immediately take
measures to protect the resident; 2) assess the resident for mental or physical harm; 3)

> My findings of fact and conclusions of law are set forth, in bold and italics, as captions
in the discussion section of this decision.
inform the facility administrator, director of nursing (DON), supervisor or charge nurse
on duty, and the social worker of the incident; 4) call the incident in to the Department
for Community Based Services; and 5) report alleged incidents to the Northern
Enforcement Branch of the Office of the Inspector General. CMS Ex. 14 at 3.

The policy includes a checklist form, which directs that the “supervisor on duty at the
time of the incident” follow its directions and fill it out. CMS Ex. 14 at 4.

A separate policy lists criteria to help staff identify victims of abuse. “Resident reports
abuse” is among those criteria. CMS Ex. 13 at 1 (emphasis added). The policy includes
additional procedures staff should follow when abuse is suspected: 1) notify the
supervisor who ensures the resident’s safety and immediately notifies the administrator or
DON; 2) the supervisor immediately completes an incident report and begins an
investigation, documenting his/her findings “because key evidence may be lost in first
few hours”; 3) the supervisor must follow incident reporting procedures; 4) the
documentation is safeguarded and held in the administrator’s office; 5) staff must notify
the resident’s family and physician that an investigation is taking place; 6) the
administrator or DON notifies the abuse agency as required by regulations; and 7) the
corporate vice president of quality management and clinical services educates the facility
administrators and regional staff on this policy “and ensure[s] an environment free from
abuse... .” CMS Ex. 13 at 1-2.

Elsewhere, the policy reinforces the notion that potential abuse is identified throug
(among other items) allegations of abuse, which must be immediately reported to the
supervisor, DON, and administrator. The policy requires the facility to investigate
thoroughly all allegations and to take “appropriate actions.” Investigations must be
“prompt, comprehensive, and responsive to the situation.” CMS Ex. 13 at 6. Staff must:
1) notify the attending physician and family; 2) protect the resident and immediately
suspend the alleged abuser; 3) identify the resident, assess him or her for injury or harm,
and summarize the allegation; 4) identify the accused and review that individual’s
personnel file; 5) indicate where and when the incident occurred; 6) identify witnesses
and others who know about the incident; 7) interview and obtain written statements from
individuals who may have first-hand knowledge of the incident; and 8) assess the

affected resident and intervene appropriately. CMS Ex. 13 at 6.

The policy repeats that any employee aware of an allegation of abuse must immediately
report the incident to his supervisor, the facility administrator, or DON. If reported to the
supervisor, the supervisor must immediately report the allegation to the administrator or
DON. “Failure to do so will result in disciplinary action, up to and including
termination.” The facility will report the allegations to the state agency and to local
authorities, as appropriate. It may also notify the local ombudsman, as appropriate. CMS
Ex. 13 at 7.

The incident. Resident 20 (R20) was an 83-year old woman, who had previously broken
her hip. She suffered from cellulitis, venous insufficiency, diabetes, and other disorders.
CMS Ex. 11 at 5, 7. She was totally dependent on staff for most of her activities of daily
living and, because she was unable to walk, she used a wheelchair for mobility. CMS Ex.
11 at 17-18; CMS Ex. 21. Nevertheless, her cognitive skills were intact. CMS Ex. 11 at

11-13.

According to her most recent (July 2013) assessment, R20 occasionally experienced
severe pain. CMS Ex. 11 at 22; see CMS Ex. 11 at 101.

On the first day of the survey, August 13, the state ombudsman told Surveyor Connie
Williams that R20 had asked to speak to her in private. R20 told Surveyor Williams that,
during her shower, a nurse aide had deliberately pulled her leg and hurt her. R20 also
told Surveyor Williams that, when the incident occurred, she reported it to staff and asked
that the aide no longer care for her. CMS Ex. 25 at 1 (Williams Decl. {§ 6, 8); see CMS
Ex. 24 at 2 (reporting that the nurse aide “took my leg and picked it up — jerked it a little,
a bit. I yelled, hurt”).

Surveyor Williams confirmed that R20 had earlier reported the incident to staff. Several
staff members were aware of it, but, for two or three days, they did not investigate or
even report it to the facility administrator or DON. CMS Ex. 25 at 1-2 (Williams Decl. §
9). Review of staff interviews and notes confirms that R20 complained about the nurse
aide’s behavior but that staff did not take her complaints seriously:

In notes dated August 12, 2013, the facility social worker, Judy Stone, wrote that
“yesterday” (Sunday, August 11), R20 complained that, on Saturday, “her leg
hurt” when a nurse aide lifted it from the bed. According to the note, R20 reported
that, at the time of the incident, she told the nurse, “Justin,” who talked to the
nurse aide. The nurse aide said that she didn’t know she’d hurt the resident and
would be more careful, according to the social worker’s note. The social worker
also reported that R20 told her that “[she] [was] happy.” CMS Ex. 21 at 5.

Neither the nurse aide involved, Amanda Tower, nor the nurse, Licensed Practical
Nurse (LPN) Justin Thomas, confirm this rendition of facts. They maintain that
R20 “never mentioned anything about being hurt by Amanda Tower or any other
[facility] staff member.” P. Ex. 2 (Thomas Decl. § 7); see CMS Ex. 24 at 16;

P. Ex. 3 (Tower Decl. 4 8, 9); see CMS Ex. 24 at 16.

Hours later on August 12, Social Worker Stone wrote a second note. In it, she
described a call from “LPN Ellen,” who reported that R20 “was saying that some
[nurse aide] had hurt her.” Social Worker Stone spoke to R20, who (according to
the social worker’s note) repeated her story except “this time she was in her
[wheel chair] instead of her bed.” Social Worker Stone reported the complaint to
“[DON] Kelly [Weihe],” according to the note. She told the DON that she
considered R20’s complaint an attention-seeking event attributable to her
husband’s not visiting that week. CMS Ex. 21 at 5. As noted below, DON Weihe
claims that no one told her about the allegation until August 13.

The following day (which would have been August 13, the same day R20
complained to Surveyor Williams), Social Worker Stone wrote another note,
repeating that R20 told her that she’d reported to “Justin” that her leg hurt when
the nurse aide was working with her in bed and that he spoke to the aide and “took
care of it.” According to the note, R20 said that “I am just fine.” CMS Ex. 21 at
6.

On August 13, 2013, someone from the facility interviewed LPN Justin Thomas.
According to the interview notes, LPN Thomas reported that, on “Saturday”
morning, he administered Tylenol in response to R20’s complaints of knee pain.
The Tylenol was not effective, so he gave her Lortab, which was effective. He
confirmed that the resident was showered and that she told him “I don’t like
Amanda,” but when he asked why, R20 allegedly said “never mind.” LPN
Thomas also reported that R20 “say[s] ‘oh-oh-oh,’ when you do anything with her
and that ‘we handle her with kid gloves.’”” According to LPN Thomas, he “never
suspected anything that needed reporting.” CMS Ex. 21 at 12. On August 14,
LPN Thomas provided similar information to the surveyors. CMS Ex. 24 at 16;
see P. Ex. 1; P. Ex. 2 (Thomas Decl.).

On August 13, DON Kelly Weihe filled out the facility’s checklist form, which,
according to facility policies, should have been filled out at the time of the
incident. CMS Ex. 14 at 4. She wrote that the incident occurred on August 10 but
was reported by the state surveyor on August 13. The accused staff member was
removed from the schedule pending investigation, and DON Weihe reported the
accusation to the appropriate state agencies. CMS Ex. 8 at 1. The facility
administrator also suspended Social Worker Stone. CMS Ex. 27 at 1. This is the
first suggestion that anyone reported the allegation to the administrator. See CMS
Ex. 27 at 1. A copy of DON Weihe’s report confirms that, at 9:36 p.m. on August
13, the facility finally reported the allegations to the state agency. The report says
very little except that the resident told surveyors that, over the week end, a staff
member was rough with her and hurt her leg during a shower. The resident had no
marks or bruises. CMS Ex. 7 at 1.

A short paragraph indicates that another social worker, Lou Wilson, interviewed
R20 on August 14, as part of a facility-wide plan to interview all capable residents.
The resident did not respond verbally to any question, but nodded when asked if
she felt safe, if she gets good care, if her concerns are addressed timely, and if she
feels treated kindly. CMS Ex. 21 at 17.
The surveyors interviewed Nurse Aide Amanda Tower on August 14. The nurse
aide reported that, when she rolled R20 out of bed prior to her Saturday morning
shower, the resident complained of right leg pain. According to Nurse Aide
Tower, R20 “does yell out when you roll her sometime.” The nurse aide also
acknowledged that the resident complained of pain when, in preparing the resident
for her shower, she moved R20’s right leg and that the resident said, “ouch that
hurt me,” when the nurse aide rolled her over the “hump” in the shower room.
R20 did not yell out for Justin (according to Nurse Aide Tower), although she has
lone so in the past. Nurse Aide Tower denied grabbing the resident’s leg or
telling her to shut up. CMS Ex. 24 at 16; see P. Ex. 3 (Tower Decl.).

In an August 15 interview, LPN Ellen Linker described hearing R20 allege that
staff mistreated her. LPN Linker was in R20’s room, and the resident complained
that “the other day” a nurse aide touched her leg and hurt her. R20 said that she
wanted to smack the nurse aide and that, when she yelled, the nurse aide told her
to shut up. Nurse Aide “Tressa,” who had been caring for R20 that day, told LPN
Linker that “she had been talking about this all day.” LPN Linker called Social
Worker Stone who said that R20 had “changed her story.” She asked LPNs
Linker and Nancy Murray to listen at the door while she spoke to R20, but the
nurses had a hard time hearing what was said. CMS Ex. 21 at 13. Although the
interview notes do not specify the date of this encounter, based on the social
worker’s note, it probably occurred on August 12 at 3:00 p.m. See CMS Ex. 21 at
5.

In an August 15 telephone interview, Social Worker Stone described R20’s
complaints: her leg hurt when the nurse aide lifted it off the bed; she complained
to Justin, who then talked to the nurse aide; the nurse aide apologized, telling R20
that she didn’t realize that she hurt her. According to Social Worker Stone, R20
then reported that everything was fine. She insisted that R20 never used the word
“rough.” CMS Ex. 21 at 15.

In a note dated August 21, 2013, LPN Linker again described hearing R20’s
allegations: she was in R20’s room with Nurse Aide “Tressa” when R20 told her
that the nurse aide who cared for her “the other day” hurt her leg; R20 said that
she’d yelled and wanted to hit the nurse aide but the aide told her to shut up. LPN
Linker called Social Worker Stone and reported R20’s complaint. LPN Linker
said that she would report the complaint to the DON, but Social Worker Stone told
her not to do so, that R20 was changing her story “again.” Social Worker Stone
asked LPNs Linker and Murray to stand outside the resident’s room to witness
Social Worker Stone’s conversation with R20 (presumably so that R20 would not
know they were listening in). But the nurses could not hear, so they left. CMS
Ex. 21 at 8-9. As she left work that day, LPN Linker spoke to Social Worker
Stone, who told her that she had spoken to the DON and would “take care of
everything.” CMS Ex. 21 at 9-10. Again, the note does not mention the date of
these events, but the facts align with Social Worker Stone’s August 12 note.

e Inher own note, LPN Murray confirmed much of LPN Linker’s August 21 report:
Social Worker Stone asked them to listen at the door to R20’s room; they could
not hear a lot of what was said “‘but I did hear [Social Worker] Stone ask [R20] if
she felt that [the nurse aide] hurt her” and that R20 replied “No, she was just being
rough.” CMS Ex. 21 at 11.

e Finally, the first record of anyone speaking to R20’s husband about his wife’s
allegation is dated September 11, 2013. The entry claims that he was aware of the
report because staff notified him on August 13, although no contemporaneous note
supports this. According to the report, R20’s husband was satisfied with her care
and said that his wife has a long history of exaggerating things. CMS Ex. 21 at 18.

I am frankly skeptical of Social Worker Stone’s first August 12 note, which seriously
understates R20’s August 11 allegations. CMS Ex. 21 at 5. LPN Linker subsequently
described R20’s far more serious allegations and, in her second note, Social Worker
Stone conceded that R20 “repeated” the story she had told earlier (with some changes not
related to the seriousness of the allegations). CMS Ex. 21 at 5, 13. Ultimately, the staff
notes and interviews confirm that R20 unambiguously and repeatedly complained that a
nurse aide hurt her. CMS Ex. 21 at 13 (“she had been talking about this all day,” which
should have triggered the facility’s obligation to report and investigate).

Petitioner nevertheless claims that R20 did not accuse anyone of injuring her deliberately;
rather, she complained of pain stemming from her chronic medical condition. In
Petitioner’s view, there was no allegation of abuse for facility staff to report or
investigate.

Both section 483.13(c) and the facility’s policies broadly define the types of allegations
that must be reported and investigated. A// alleged violations must be reported
immediately to the facility administrator and appropriate state officials. 42 C.F.R.

§ 483.13(c); CMS Ex. 13 at 1, 6, 7, 9; CMS Ex. 14 at 3. The pertinent question is not
whether any abuse occurred or whether the facility had reasonable cause to believe that
any abuse occurred, but whether there is an allegation that facility staff abused a resident.
Britthaven, Inc., DAB No. 2018 at 15 (2006), citing Cedar View Good Samaritan, DAB
No. 1897 at 11 (2003).

Here, on August 12, and probably as early as August 11, R20 alleged that a nurse aide
hurt her, she yelled, and the nurse aide told her to shut up. CMS Ex. 21 at 5, 8. By any
definition, this is an allegation of abuse. But until the end of the day on August 13 — after
R20 repeated her allegations to the state surveyor — facility staff did not investigate; they
10

took no steps to assure resident safety while they investigated; and they did not report the
allegation to the appropriate state agency. This puts them out of substantial compliance
with 42 C.F.R. § 483.13(c). That, when confronted by obviously skeptical staff, R20
subsequently downplayed her complaints does not relieve the facility of its obligations to
report and investigate.

Among the staff members who heard R20’s allegation, only LPN Linker recognized her
responsibilities and immediately reported the allegations to Social Worker Stone. CMS
Ex. 14 at 3. Social Worker Stone, however, was already aware of them and had
apparently determined, on her own, that the allegations were without merit. Individual
staff members are not given the option of deciding whether to report allegations. As
Judge Kessel pointed out in Somerset Place, DAB CR2164 at 3 (2010), there is an
“obvious reason” for the regulation’s categorical requirement. It assures that the
allegation will be reviewed by an unbiased fact finder rather than an employee whose
self-interest dictates that she not report.

Social Worker Stone assured LPN Linker that she would convey R20’s complaints to
DON Weihe and, in her notes and interviews, she documented that she did so. CMS Ex.
21 at 5, 9-10. DON Weihe, however, effectively denies that Social Worker Stone
reported to her. In DON Weihe’s report to the state agency, she claimed that she first
learned of the allegation from the state surveyor on August 13. CMS Ex. 8 at 1. In her
written declaration, she does not mention that Social Worker Stone or any other staff
member reported the complaints to her; she repeats that she learned of the allegations
after they were reported by the state surveyor on August 13. P. Ex. 4 at 1 (Weihe Decl.

$7.8. 9).

Obviously, only one of these claims can be true. But I need not make credibility findings
because, in either case, the individual or individuals charged with enforcing the facility’s
anti-abuse policies failed to do so, which put the facility out of substantial compliance
with section 483.13(c).

I recognize that the obligation to take seriously all allegations of potential abuse, no
matter the source, may seem excessively burdensome to facility staff. But even the least
trustworthy of residents can be abused; in fact, given their challenging personalities and
problematic behaviors, they may be more susceptible to abuse than most. That those
charged with protecting them will dismiss their allegations out-of-hand makes them even
more vulnerable.
11

2. CMS’s determination that, from August 10 through 14, 2013, the facility’s
deficiencies 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. 1962 at 11 (2005) (citing Florence Park
Care Ctr., DAB No. 1931 at 27-28 (2004), citing Koester Pavilion, DAB No. 1750
(2000)); aff'd, Barbourville Nursing Home v. U.S. Dep’t of Health & Human Servs., 174
F. App’x 932 (6th Cir. 2006); Daughters of Miriam Ctr., DAB No. 2067 at 7, 9 (2007).

Here, several facility employees — including one or two of the employees specifically
charged with implementing the facility’s anti-abuse policies — repeatedly disregarded
those policies in critical respects: reporting, protecting the resident, and investigating.
Such disregard of the measures in place to protect residents from abuse puts residents at
risk, and the situation is likely to cause serious harm. CMS’s determination that the
deficiencies posed immediate jeopardy to resident health and safety is therefore not
clearly erroneous.

3. The penalty imposed -$4,800 per day for the days of immediate jeopardy — is
reasonable.

To determine whether the CMPs are 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 above factors. I am neither bound to defer
to CMS’s factual assertions, nor free to make a wholly independent choice of remedies
12

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 seq. (2002); Emerald Oaks, DAB No. 1800
at 9 (2001); CarePlex of Silver Spring, DAB No. 1638 at 8 (1999).

Here, CMS imposed a penalty of $4,800 per day for the period of immediate jeopardy,
which is at the lower end of the per-day penalty range for situations of immediate
jeopardy ($3,050-$10,000). 42 C.F.R. §§ 488.408(e)(1)(iii); 488.438(a)(1)(i).

Except to argue that it was in substantial compliance and is therefore not subject to any
penalty, Petitioner has not specifically challenged the amount of the CMP.

CMS does not argue that the facility’s history justifies a higher CMP. Petitioner does not
claim that its financial condition affects its ability to pay.

Applying the remaining factors, at least one, and possibly two, of the individuals charged
with administering the facility’s anti-abuse policies disregarded them. They declined to
investigate, report, and protect the resident. The facility is culpable for these failings,
which justify the CMP.

Conclusion

For these reasons, | find that, from August 10 through 14, 2013, the facility was not in
substantial compliance with 42 C.F.R. § 483.13(c); that its deficiencies posed immediate
jeopardy to resident health and safety; and that the $4,800 per day penalty is reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


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

Mel E. Lucas, D.O.,
(OI File No. 7-11-40180-9),

Petitioner,
v.
The Inspector General.
Docket No. C-16-530
Decision No. CR4761
Date: December 15, 2016
DECISION

The Inspector General (IG) of the United States Department of Health and Human
Services (HHS) excluded Petitioner, Mel E. Lucas, D.O., from participation in Medicare,
Medicaid, and all other federal health care programs based on Petitioner’s misdemeanor
conviction related to fraud, theft, embezzlement, breach of fiduciary responsibility, or
other financial misconduct in connection with the delivery of any health care item or
service pursuant to section 1128(b)(1) of the Social Security Act (Act) (42 U.S.C.

§ 1320a-7(b)(1)). For the reasons discussed below, I conclude that the IG has a basis for
excluding Petitioner. I affirm the length of the two-year exclusion, effective March 20,
2016.

I. Background

In a letter dated February 29, 2016, the IG excluded Petitioner from participation in
Medicare, Medicaid, and all federal health care programs as defined in section 1128B(f)
of the Act, 42 U.S.C. § 1320a-7b(f), for a minimum period of two years, effective 20
days from the date of the letter. IG Exhibit (IG Ex.) 1. The IG explained that Petitioner’s
exclusion was based on his “conviction as defined in section 1128(i) (42 U.S.C. 1320a-
7(i)), in the United States District Court, Eastern District of Missouri, of a misdemeanor
offense related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct in connection with the delivery of any health care item or service”
pursuant to section 1128(b)(1) of the Act. IG Ex. 1 at 1. Under Section 1128(b)(1) of the
Act, the IG may exclude an individual who has been convicted of a “criminal offense
consisting of a misdemeanor 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.” ' 42 U.S.C. § 1320a-7(b)(1)(A)(i). In his February 29, 2016
letter, the IG informed Petitioner that he imposed a two-year exclusion after considering
the mitigating factor that Petitioner was convicted of three or fewer offenses and the
entire financial loss to a government program or to other individuals or entities was less
than $1,500. IG Ex. 1 at 2; see 42 C.F.R. § 1001.201(b)(3).

Petitioner, who is represented by counsel, submitted a timely request for hearing on May
4, 2016. On May 25, 2016, I presided over a telephonic pre-hearing conference, and
shortly thereafter, on May 26, 2016, I issued an Order and Schedule for Filing Briefs and
Documentary Evidence (Order) that memorialized the discussions in that conference and
provided instructions to the parties regarding filings, deadlines, and other substantive
matters.

Pursuant to my Order, the IG filed an informal brief (IG Br.) and a reply brief (IG Reply),
along with five exhibits. Petitioner filed an informal brief (P. Br.) and supplemental
informal brief, along with two exhibits.” I admit IG Exs. 1-5 and P. Exs. 1-2. Neither
party requested that I convene a hearing in person, and I am therefore deciding this case
on the merits based on the parties’ written filings.

IL. Issues

The issue in this case is whether there is a legal basis for the IG to exclude Petitioner
from participation in Medicare, Medicaid, and other federal health care programs. If I

' While there are slight differences in the wording of Section 1128 of the Act and its
codification at 42 U.S.C. § 1320a-7, the two authorities are substantively identical and I
refer to them interchangeably. I further note that the Secretary of the Department of
Health and Human Services (Secretary) has delegated to the IG the authority “to suspend
or exclude certain health care practitioners and providers of health care services from
participation in these programs.” 48 Fed. Reg. 21662 (May 13, 1983); see also 42 C.F.R.
§ 1005.1.

> Petitioner also submitted a sur-reply brief. A sur-reply is not contemplated by my
Order, and Petitioner did not submit a motion for leave to file a sur-reply brief.
Therefore, I have not accepted the sur-reply for filing. However, even if I were to accept
Petitioner’s sur-reply, it would not affect the outcome of this case.
find a legitimate basis for the exclusion, then I must consider whether a two-year
exclusion is reasonable.

Il. Jurisdiction
I have jurisdiction to adjudicate this case. 42 U.S.C. § 1320a-7(f)(1); 42 C.F.R. § 1005.2.
IV. Findings of Fact, Conclusions of Law, and Analysis®

1. Petitioner pleaded guilty to Count Two of a misdemeanor
information and admitted that he received misbranded prescription
drugs in interstate commerce in violation of 21 U.S.C.

§§ 331(0), 333(a)(1), 352(f), and 18 U.S.C. § 2, from approximately
April 2009 through approximately September 2011.

2. Petitioner was convicted of a criminal offense relating to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct.

Section 1128(b)(1)(A)(i) of the Act authorizes the Secretary to permissively exclude an
individual or entity from participation in any federal health care program under certain
circumstances, to include:

(1) Conviction relating to fraud
Any individual or entity that has been convicted for an offense
which occurred after August 21, 1996, under Federal or State
law—
(A) of a criminal offense consisting of a misdemeanor
relating to fraud, theft, embezzlement, breach of fiduciary

responsibility, or other financial misconduct--

(i) in connection with the delivery of a health care item
or service... .

42 U.S.C. § 1320a-7(b)(1). The Secretary has promulgated regulations implementing
these provisions of the Act. 42 C.F.R. § 1001.201(a). Pursuant to 42 U.S.C. § 1320a-

3 My findings of fact and conclusions of law are set forth in italics and bold font.
7(c)(3)(D), the exclusion will be for a period of three years, unless the IG determines, in
accordance with regulations, that a shorter period is appropriate because of mitigating
circumstances or that a longer period is appropriate because of aggravating
circumstances. 42 C.F.R. § 1001.201(b)(2) and (3).

The standard of proof is a preponderance of the evidence, and there may be no collateral
attack of the conviction that provides the basis of the exclusion. 42 C.F.R.

§ 1001.2007(c), (d). Petitioner bears the burden of proof and the burden of persuasion on
any affirmative defenses or mitigating factors, and the IG bears the burden on all other
issues. 42 C.F.R. § 1005.15(b), (c).

The Departmental Appeals Board (Board) has held that “section 1128(b)(1) of the Act
‘does not restrict exclusions to only offenses constituting or consisting of fraud, but
requires merely that the offense at issue be one ‘relating to fraud.’’”” Richard E. Bohner,
DAB No. 2638 at 10 (2015), aff'd, Bohner v. Burwell, Civ. A. No. 15-4088 (E.D. Pa.
Dec. 2, 2016); quoting Paul v. Goldenheim, M.D., et al., DAB No. 2268 at 10 (2009).
The U.S. Court of Appeals for the District of Columbia, in evaluating arguments that a
“strict liability” misdemeanor offense cannot form a basis for exclusion under section
1128(b)(1), remarked that section 1128(b)(1) has a “broad scope” and held that it
authorizes the Secretary to exclude from participation in federal health care programs “an
individual convicted of a misdemeanor if the conduct underlying that conviction is
factually related to fraud.” Friedman v. Sebelius, 686 F.3d 813 at 820, 824 (D.C. Cir.
2012) (emphasis added). Thus, I need not determine that Petitioner’s conviction, itself,
was for committing fraud; I need only determine that the offense was related to fraud.

The IG argues that it properly excluded Petitioner from all federal health care programs
based on his conviction for receiving misbranded prescription drugs in interstate
commerce. A superseding information filed on May 15, 2015, in the United States
District Court for the Eastern District of Missouri, and on the same day as Petitioner
entered into a written plea agreement, charged that Petitioner and an employee of his
practice, along with his practice (which was named as a separate co-defendant), violated
various federal laws. With respect to Petitioner and his employee, both were charged
with violating 21 U.S.C. §§ 331(c), 333(a)(1), 352(f), and 18 U.S.C. § 2 based on their
receipt of misbranded drugs in interstate commerce. IG Ex. 4.

On May 15, 2015, Petitioner, along with his counsel, signed a 12-page plea agreement
with the United States Attorney’s Office in which he agreed to enter a plea of guilty to
Count Two of the superseding criminal information filed that same day. Petitioner
acknowledged the elements of the offense to which he was pleading guilty, which the
plea agreement set forth as follows:

a. Defendant received prescription drugs in interstate commerce;
b. The prescription drugs were misbranded.
IG Ex. 2 at 2. Count Two of the information charged the following:

Defendants herein, received in interstate commerce a quantity of the
prescription drug Aclasta, imported from Canada, via the United Kingdom,
that was misbranded within the meaning of the Food, Drug, and Cosmetic
Act in that (a) the drug’s labeling failed to bear adequate directions for use
in that the drug’s labeling was in the Turkish or Italian language, 21 U.S.C.
§ 352(f)(1); 21 C.F.R. § 201.5, and (b) the Aclasta came from Novartis, a
foreign drug establishment located in Switzerland, and Aclasta was not
annually listed with the FDA by Novartis as one of the drugs which was
being manufactured for commercial distribution in the United States.

In violation of Title 21, United States Code, Sections 331(c), 333(a)(1),
352(f), and Title 18, United States Code, Section 2.

IG Ex. 4 at 7-8. Count Two, in describing the offense conduct committed by Petitioner
and his employee, a nurse practitioner, provided the following discussion:

10. Dr. Lucas used his Bank of America/American Express credit card to
pay for Aclasta, which was shipped by Parcel Force Worldwide (located in
the United Kingdom) to Patterson Medical.

11. In her capacity as an employee of Patterson Medical, Defendant [R.L.]
infused patients with Zoledronic Acid which was provided by Patterson
Medical under the brand name Reclast and which was approved by the
FDA. Defendant [R.L.] also infused patients with Zoledronic Acid which
was provided by Patterson Medical under the brand name Aclasta which
was not approved by the FDA.

12. On or about April 10, 2013, federal agents recovered ten boxes of
Aclasta from Patterson Medical. The word “Aclasta” was prominently
displayed on the bottles of Aclasta. The bottles also had Italian or Turkish
language on them, a clear indication that the drug was not intended for use
in the United States.

IG Ex. 4 at 7. Petitioner agreed to the following facts in his plea agreement:
1. Petitioner is a doctor of osteopathic medicine, licensed to practice in Missouri.

2. Petitioner is the owner of Patterson Medical Clinic, Inc.
3. Petitioner is the only doctor practicing at Patterson Medical Clinic.
4. Petitioner has been a participating physician in Medicare and TRICARE,*
along with several insurance companies, to include Anthem Blue Cross Blue
Shield and Blue Shield of Missouri (Blue Cross).

5. Aclasta is a brand name for Zoledronic Acid, and that brand name is not
approved by the Food and Drug Administration (FDA) for use in the United
States.

6. Aclasta may not legally be imported, prescribed, or dispensed in the United
States.

7. Reclast is the brand name for Zoledronic Acid approved by the FDA for use in
the United States.

8. Only a licensed medical practitioner may lawfully prescribe or dispense
Zoledronic Acid under the brand name Reclast.

9. Petitioner repeatedly purchased Aclasta from two online Canadian pharmacies
in or about April 2009 and in or about September 2011.

10. When Petitioner ordered Aclasta from outside of the United States, he paid
several hundred dollars less than the price of a bottle of Reclast purchased in
the United States.

11. Petitioner had the Aclasta shipped via Parcel Force Worldwide (located in the
United Kingdom) to Patterson Medical Clinic.

12. Federal agents recovered 10 boxes of Aclasta from Patterson Medical Clinic.

13. The bottles recovered from Patterson Medical by federal agents had Italian or
Turkish language on them and that was a “clear indication that the drug was
not intended for use in the United States.”

14. The Aclasta’s labeling failed to bear adequate directions for use.

IG Ex. 2 at 2-5.

Petitioner entered a plea of guilty to Count Two of the information, “Receipt of
Misbranded Prescription Drugs From Interstate Commerce,” in violation of 21 U.S.C.

§ 331(c), 21 U.S.C. § 333(a)(1), 21 U.S.C. § 352(f) and 18 U.S.C. § 2, and the remaining
counts were dismissed. IG Ex. 3 at 1. On September 2, 2015, a United States District
Judge imposed a sentence of three years of probation with various special conditions of
supervision. IG Ex. 3 at 1-2. Petitioner’s probation was terminated after one year. P.
Ex. 2.

On the same day as Petitioner entered a plea of guilty on May 15, 2015, co-defendant
R.L, his employee, entered a plea of guilty to Count Two of the information and received

* TRICARE is the health insurance program that serves active and retired military
servicemembers and their families.
a sentence of a two-year term of probation. IG Ex. 5 at 1-2. Count Two of the
indictment had charged that R.L. “infused patients with Zoledronic Acid which was
provided by Patterson Medical Clinic under the brand name Aclasta, but which was not
approved by the FDA.” IG Ex. 4 at 7.

Petitioner does not deny that he was convicted of the criminal offense addressed above,
yet he contends that he was not convicted of an offense for which exclusion is authorized.
Petitioner’s contention that the IG was not authorized to exclude him is not supported by
the relevant facts or the law, and his conviction meets the elements set forth in section
1128(b)(1)(A)(i) of the Act. By entering a plea of guilty to Count Two of the
information, Petitioner admitted that he purchased misbranded prescription drugs in
interstate commerce. Petitioner acknowledged that a drug is “misbranded if the labeling
fails to bear adequate directions for use or fails to bear adequate warnings where use of
the drug may be dangerous to the health of users. 21 U.S.C. §§ 352(f)(1), 352(£)(2).” IG
Ex. 2 at 4. He further acknowledged that he received in interstate commerce misbranded
drugs with labeling that “failed to bear adequate directions for use in that the drug’s
labeling was in the Turkish or Italian language” and that “Aclasta was not annually listed
with the FDA by Novartis as one of the drugs which was being manufactured for
commercial distribution in the United States.” IG Ex. 2 at 5. Petitioner also admitted
that he purchased misbranded drugs at a substantial discount compared to the FDA-
approved version of the drugs. IG Ex. 2 at 5.

I conclude that the IG had a basis to exclude Petitioner pursuant to section
1128(b)(1)(A)(i) of the Act. All elements required to exclude an individual under that
section of the Act are present here. Petitioner was convicted within the meaning of
1128(i) of the Act when the District Court accepted his guilty plea to Count Two of the
information filed on May 15, 2015, and Petitioner’s criminal conduct occurred well after
August 21, 1996. IG Ex. 3 at 1. Furthermore, Petitioner’s offense was in connection
with the delivery of a health care item or service, as evidenced by the fact that Petitioner
“repeatedly purchased” Aclasta for more than two years and had those shipments
delivered to and stored at his medical practice. Additionally, the evidence supports that
Aclasta was infused to patients at his office. IG Exs. 4, 5. Finally, as I will discuss
below, Petitioner’s conviction is related to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

Petitioner contends that “[t]he evidence in the record does not support a finding that
Petitioner provided Aclasta to his patients, much less that he defrauded them... .” P. Br.
at 5. Petitioner argues that he was not convicted of distributing or providing the
medications to patients, and there “can only be fraud involved in the delivery or
dispensing of misbranded drugs, and then only with a knowing misrepresentation or
concealment of material fact, of which Petitioner was not convicted.” P. Br. at 6.
Petitioner contends that he “was only convicted of receipt of misbranded medications in
interstate commerce, and as such, whether or not the instructions were in English or
another language is irrelevant.” P. Br. at 12-13. Petitioner further states that “even if
his] conviction involved the administration of Aclasta to his patients, there is no
evidence that Petitioner or his staff required instructions on how to administer this
common medication.” P. Br. at 13.

Regardless of whether Petitioner administered Aclasta himself in his medical practice, the
undisputed evidence demonstrates that he repeatedly purchased Aclasta from two
different online Canadian pharmacies over a nearly two and a half year period, and he
paid several hundred dollars less for each bottle of Aclasta than he would have paid for
each bottle of Reclast if lawfully purchased in the United States. IG Ex. 2 at 5.
Petitioner had the bottles of Aclasta shipped to his medical practice, and ten boxes of
Aclasta were found by federal agents at his practice.> IG Ex. 2 at 5. Further, Petitioner’s
employee, R.L., entered a guilty plea to Count Two of the information, which charged
that she “infused patients with . .. Aclasta.” IG Ex. 4 at 7. Even though the IG alleged in
is brief that Petitioner provided his patients with Aclasta and “subjected them to non-
FDA approved drugs,” Petitioner does not refute this allegation anywhere in his 19-page
brief, in that he does not affirmatively state that he did not provide Aclasta to his patients.
IG Br. at 6. Rather, Petitioner emphasizes that his conviction was not for administering
Aclasta to patients, but instead, was only for receiving the misbranded Aclasta in
interstate commerce. P. Br. at 5-6. Petitioner further argues that “the evidence in the
record does not support a finding that Petitioner provided Aclasta to his patients,” yet he
ultimately does not deny that he did provide Aclasta to his patients. P. Br. at 5. Instead,
he spends considerable effort arguing that “Reclast and Aclasta are the same medication”
and “the chemical formula of Aclasta is identical to that of Reclast.” P. Br. at 9. In
support of these arguments regarding the purported similarity of Aclasta and Reclast,
Petitioner submitted evidence from the Center for Drug Evaluation and Research.® P. Ex.
1.

Petitioner has identified no reason why he repeatedly purchased Aclasta from outside of
the United States for approximately $749 per bottle over a period of nearly two and a half
years, and had those bottles shipped to, and stored at, his medical practice. Despite
having the opportunity to do so in his brief, Petitioner gave no explanation, in response to
the IG’s allegations, why he expended large sums of money to have illegal drugs shipped
to and stored at his medical practice. In fact, in his background discussion, he admits that

> The evidence does not show how many bottles of Aclasta are contained in a box.

® Petitioner’s submission is incomplete, in that he did not submit the majority of the
pages referenced in the table of contents. In particular, Petitioner did not submit the
section entitled “Labeling and Package Insert” that is referenced at page 7 of P. Ex. 1.
he purchased Aclasta from approximately April 2009 through September 2011 (P. Br. at
2), and then explains how Aclasta and Reclast have different brand names but “are
administered in the same fashion and are equally as potent, safe, and effective.” P. Br. at
3. In so doing, Petitioner appears to justify his actions to obtain a misbranded drug that
indisputably led R.L. to administer Aclasta to Petitioner’s patients. While Petitioner
disputes the IG’s allegation that he used the Aclasta in his practice, Petitioner has not
refuted the IG’s allegations. Nor has Petitioner reconciled the fact that his employee
entered a guilty plea based on her conduct of infusing patients with the Aclasta that
Petitioner, the owner of Patterson Medical and its sole doctor, purchased. In fact,
Petitioner makes the bald statement that “there is no evidence in the record that any
patient received Aclasta from Petitioner.” P. Br. at 9. As the sole owner of Patterson
Medical and the sole doctor supervising R.L. at the practice, such a claim is beyond belief
and is undermined by the evidence.

Even though Petitioner has not admitted as much, I can make no other conclusion than
Petitioner purchased the Aclasta for use in his practice. Petitioner repeatedly purchased
the non-FDA compliant version of the drug Zoledronic Acid over a lengthy period of
time and at a substantial discount, and there appears to be no other logical reason why he
would stockpile such a medication that is “used primarily to treat osteoporosis,” other
than to obtain at a deep discount medication to infuse to his patients.’ See IG Ex. 2 at 4.
Both Petitioner, who purchased the Aclasta, and his employee R.L., who infused the
Aclasta, were co-defendants charged in the same count of the superseding information,
and both individuals entered guilty pleas to the charges presented in Count Two of the
information. IG Exs. 3, 4, 5.

Petitioner acknowledged in his plea agreement that a drug is misbranded if the labeling
fails to bear adequate direction for use or fails to bear adequate warnings where the use of
the drug may be dangerous to the health of users. 21 U.S.C. §§ 352(f)(1), 352(£)(2).
Along those lines, the FDA has imposed numerous requirements for the content and
labeling for prescription drugs in the United States. These requirements pertain to:

e product names
e boxed warnings

7 The IG has not submitted evidence regarding Petitioner’s treatment and billing for
patients who were administered Aclasta or Reclast. Therefore, I cannot ascertain whether
Petitioner, his patients, and/or insurance companies were the beneficiaries of the cost
savings yielded through the administration of Aclasta versus Reclast. However, being
that Aclasta cannot be legally imported, prescribed or dispensed in the United States (IG
Ex. 2 at 4), it is highly unlikely that any insurance company would knowingly provide
reimbursement for the infusion of Aclasta.
10

e recent major changes

e indications and usage

e dosage and administration

e dosage forms and strengths

© contraindications, warnings and precautions

e adverse reactions

e drug interactions (to include significant interactions with other prescription and
over-the-counter drugs, classes of drugs, foods)

© use in specific populations (to include pregnancy, lactation, females and males of
reproductive potential, pediatric use, and geriatric use)

¢ patient counseling information

e drug abuse and dependence

© overdosage

e clinical pharmacology (to include mechanism of action, pharmacodynamics, and
pharmacokinetics)

e nonclinical toxicology

¢ clinical studies

e references

e drug storage and handling; and

e the revision date of the most recent revision of the labeling.

21 C.E.R. §§ 201.56, 201.57. Additionally, labeling information must be in accordance
with specific type face and font size requirements. /d. In discussing these requirements,
the FDA has explained that “[a]ll drugs approved in the United States, regardless of
where they are made, must be in compliance with . . . product label requirements.”
http://www.fda.gov/AboutF DA/Transparency/Basics/ucm 194989.htm (last visited
December 9, 2016). While Petitioner contends that “there is no evidence that Petitioner
or his staff required instructions on how to administer this common medication” (P. Br. at
12), in the absence of FDA-compliant labeling and content, he ignores the essential
purpose of the FDA’s drug labeling requirements: “The labeling must contain a
summary of the essential scientific information needed for the safe and effective use of the
drug.” 21 C.F.R. § 201.56(a)(1) (emphasis added). Petitioner oversimplifies the reason
for FDA-approved labeling in the United States, which is not merely to provide “required
instructions on how to administer” a medication. The “how to” for the administration of
a medication is only a very small component of the FDA’s labeling requirements. While
Petitioner believes it is only necessary to know “how to administer” a misbranded
medication that was not produced for the United States market, he overlooks that, as a
physician, the correct labeling is required in order for the prescriber to be aware of such
issues as contraindications, adverse reactions, drug interactions, patient counseling
information, and proper storage of the drugs. 21 C.F.R. §§ 201.56, 201.57.

11

I conclude that Petitioner purchased the Aclasta for use in his practice; even if the limited
evidence before me does not demonstrate that Petitioner actually administered Aclasta to
is patients himself, it is clear that Petitioner purchased the Aclasta for that purpose.
Further, the evidence shows that his employee, R.L, infused patients with Aclasta and
entered a guilty plea to the offense of receiving misbranded drugs in interstate commerce
on the same day as Petitioner entered his plea. IG Ex. 5. Further, Petitioner purchased
prescription drugs that did not contain the FDA-mandated packaging information, in that
the drugs were labeled in Turkish or Italian. In fact, Petitioner admitted in his plea
agreement that the foreign language on the labeling was “a clear indication that the drug
was not intended for use in the United States.” IG Ex. 2 at 5. Owing to the fact that
Petitioner admitted that he paid several hundred dollars less than United States prices per
bottle, and had a clear indication the Aclasta was not intended for use in the United
States, I conclude that Petitioner purchased the drugs from online Canadian pharmacies
in order to obtain a deep discount on the medications he stocked and administered at this
practice. Petitioner treated Medicare and TRICARE beneficiaries, along with privately
insured patients, and these patients expected, and deserved, to be treated by a licensed
doctor who administered FDA-approved medications in an informed and appropriate
manner. Contrary to Petitioner’s arguments that Reclast and Aclasta are identical, these
drugs are not identical: Reclast has been approved by the FDA for use in the United
States, and Aclasta has not been approved for use in the United States.* One drug,
Reclast, comes with FDA-compliant labeling that is intended to provide a prescribing
doctor “a summary of the essential scientific information needed for the safe and
effective use of the drug,” and one drug may or may not have such labeling. 21 C.F.R.
§ 201.56(a)(1). In purchasing a non-FDA approved drug for use in his practice,
Petitioner looked out for monetary interests, rather than the medical interests of his
patients. Even if no harm actually occurred to any patients, Petitioner exposed his
patients to the possibility of harm through the administration of an unapproved drug and
without having the labeling information required by the FDA. The facts of this case
support that Petitioner’s offense is related to fraud. While Petitioner had an obligation to
provide each patient with an FDA-approved drug, he illegally purchased an unapproved
drug in order to obtain it at a lower price. When a patient visits his or her doctor for a

® T note that while the two drugs may have an identical formula, as Petitioner alleges, the
evidence does not show whether they are manufactured in identical facilities that have
been inspected and approved by the FDA. Nor does the evidence demonstrate whether
Aclasta and Reclast have the same shelf life (i.e., expiration date). Further, even if the
drugs are identical, the FDA has noted there are risks inherent in purchasing drugs from
foreign websites. See, e.g., The Possible Dangers of Buying Medicines Over the Internet
http://www.fda. gov/ForConsumers/Consumer Updates/ucm048396.htm (last visited
December 9, 2016) (FDA informing the public of various risks, to include counterfeit,
old, unlabeled, and improperly stored and shipped drugs).
12

medication infusion, the patient expects that he or she will receive a legal, safe, and FDA-
compliant drug. Providing a patient a misbranded drug that cannot legally be sold in this
country, if not fraud, is undoubtedly related to fraud. Simply stated, when a doctor, for
the sake of saving money, purchases a cheap and illegal substitute to use in place of an
approved medication, he is acting in a fraudulent manner. Every patient should rightfully
expect that his or her doctor will prescribe legally obtained medications that are not
misbranded.

3. Petitioner’s exclusion for a period of two years is not
unreasonable.

The period of exclusion under section 1128(b)(1) is three years, unless aggravating or
mitigating factors justify lengthening or shortening that period. 42 U.S.C. § 1320a-
7(c)(3)(D); 42 C.F.R. § 1001.201(b)(1). Only the mitigating factors authorized by 42
C.F.R. § 1001.201(b)(3) may be considered in order to reduce the period of exclusion.
The IG has the discretion to impose an exclusion longer than the minimum period when
there are aggravating factors present. See 42 C.F.R. § 1001.201(b)(2). The notice letter
states that the IG considered one mitigating factor, that Petitioner was convicted of one
misdemeanor offense and that the entire amount of financial loss to a government
program or to other individuals or entities was less than $1500.” 42 C.F.R.

§ 1001.201(b)(3)(i); IG Ex. | at 2.

Petitioner argues with little specificity why “a two-year exclusionary period is
unreasonable.” P. Br. at 15. Petitioner repeats his argument that “Aclasta is identical in
all respects to the FDA-approved medication, Reclast, and the only reason Aclasta was
illegal to receive in the first place was due to the name the manufacturer chose to give it.”
P. Br. at 15. Petitioner could not be more mistaken: Petitioner admitted that he received
Aclasta “that was misbranded within the meaning of the Food, Drug, and Cosmetic Act in
that (a) the drug’s labeling failed to bear adequate directions for use in that the drug’s
labeling was in the Turkish or Italian language . . . and (b) the Aclasta came from
Novartis, a foreign drug establishment based in Switzerland and Aclasta was not annually
listed with the FDA by Novartis as one the drugs which was being manufactured for
commercial distribution in the United States.” IG Ex. 2 at 5.

° The IG argues the presence of an aggravating factor, that the duration of Petitioner’s
offense was one year or more, in his brief. IG Br. at 9-10. That aggravating factor is not
listed in the IG’s notice letter. IG Ex. 1. Even without consideration of this aggravating
factor, a minimum period of exclusion of at least two years is warranted.
13

While Petitioner argues that the two-year period of exclusion is not reasonable because
the mitigating factors were not weighed heavily enough, I disagree.’ P. Br. at 15.
Petitioner’s characterization that a “hyper-technical violation of the FDCA that required
no showing of fraud or mens rea and that was not (and cannot be) shown to have resulted
in harm or risk to patients was not weighed heavily enough, if at all” is misguided and is
not a basis for mitigation. P. Br. at 16. Further, such a basis, even if true, is not
permitted by regulation and shows Petitioner’s lack of recognition for the risks associated
with prescribing a misbranded medication. 42 C.F.R. § 1001.201(b)(3). Furthermore,
the financial savings received from purchasing a heavily discounted drug demonstrates
there was a mens rea in his conduct, even if mens rea is not a required element of the
offense for which he was convicted. See Friedman, 686 F.3d at 820, 824 (noting conduct
underlying the conviction warrants exclusion if it is factually related to fraud, even if the
elements of the offense do not require mens rea).

In weighing the mitigating factors, the IG reduced the period of exclusion by one year, or
a third. While the IG considered the sole mitigating factor that Petitioner had a single
misdemeanor conviction and the financial loss was less than $1500, I note that Petitioner
admitted in his plea agreement that he “repeatedly” purchased Aclasta online from
Canadian companies over a lengthy time period. Thus, Petitioner has admitted to
committing repeated offenses of receiving misbranded drugs in interstate commerce,
even if he has a single conviction. Likewise, while the loss to health care programs is
under $1500, the monetary gain to Petitioner did not necessarily arise from a loss from
health care programs or entities, but rather, by providing a cheaper and illegal drug to his
patients. The IG’s reduction of the three-year period of exclusion to two years is
reasonable, if not overly generous, and Petitioner has not shown that a one third reduction
in the period of exclusion based on the mitigating factor listed at 42 C.F.R.

§ 1001.201(b)(3)(i) was inappropriate.

‘© While it may be appropriate to increase the length of the minimum period of exclusion
in this case, I will limit my discussion to whether the length of the two-year exclusion
determined by the IG was reasonable. See 42 C.F.R. § 1005.20(b) (stating an
administrative law judge may “affirm, increase or reduce the penalties, assessment or
exclusion proposed or imposed by the IG, or reverse the imposition of the exclusion.”)
14

V. Conclusion

For the foregoing reasons, I affirm the IG’s exclusion of Petitioner from participation in
Medicare, Medicaid, and all other federal health care programs for a period of two years,
effective March 20, 2016.

/s/
Leslie C. Rogall
Administrative Law Judge


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

Dallas Home Health Care, Inc.
(NPI: 1265594246 / PTAN: 74-7003)

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-1521
Decision No. CR4760
Date: December 13, 2016
DECISION

The Medicare enrollment and billing privileges of Petitioner, Dallas Home Health Care,
Inc., are revoked pursuant to 42 C.F.R. § 424.535(a)(5)(ii)', for noncompliance with
42 C.F.R. § 424.516(e)(2). The revocation is effective July 16, 2014. 42 C.F.R.
§ 424.535(g).
I. Procedural History and Jurisdiction
Petitioner was enrolled in Medicare as a home health agency. Palmetto GBA (Palmetto),
a Medicare administrative contractor, notified Petitioner by letter dated October 10, 2014,
that Petitioner’s Medicare billing privileges were revoked and its provider agreement
terminated effective July 16, 2014. Centers for Medicare & Medicaid Services (CMS)

Exhibit (Ex.) 1 at 8. Palmetto cited 42 C.F.R. § 424.535(a)(5) as the authority for
revocation based on the fact that an on-site inspection determined that Petitioner was

' Citations are to the 2014 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise stated.
not operational at 3635 Broadway Boulevard, Suite A, Garland, Texas. CMS Ex. | at 8.
Palmetto notified Petitioner that it was subject to a two-year bar to re-enrollment pursuant
to 42 C.F.R. § 424.535(c). CMS Ex. | at 9.

Petitioner requested reconsideration by letter dated November 4, 2014 that was received
by Palmetto on or about November 10, 2014. CMS Ex. | at 5-6. Palmetto notified
Petitioner by letter dated January 7, 2015, that the revocation of its enrollment and billing
privileges pursuant to 42 C.F.R. § 424.535(a)(5), was upheld on reconsideration because
Petitioner was no longer operational and not meeting Medicare enrollment requirements.
CMS Ex. | at 1-2.

Petitioner requested a hearing before an administrative law judge (ALJ) on March 4,
2015 (RFH). On March 19, 2015, the case was assigned to me for hearing and decision
and an Acknowledgement and Prehearing Order (Prehearing Order) was issued at my
direction. Petitioner’s request for hearing was timely; the parties have not challenged my
authority to decide this case; and I have jurisdiction.

On April 20, 2015, CMS filed a prehearing brief, with CMS Exs. Ithrough 6. On May
19, 2016, Petitioner filed its prehearing brief with Petitioner’s exhibits (P. Exs.) 1 through
12. On June 9, 2015, CMS filed its reply brief with CMS Exs. 7 through 13. CMS filed
CMS Exs. 14 and 15 on September 3, 2015.

A hearing was convened on May 5, 2016, and a transcript (Tr.) was prepared. CMS Exs.
1 through 15 were offered and admitted as evidence. Tr. 20-21. Upon subsequent review
I have determined that CMS Ex. 6 is not relevant, the prior ruling admitting that
document is vacated, and the exhibit is not admitted or considered as evidence. Petitioner
offered P. Exs. 1 through 13.” Tr. 21-50. P. Exs. 1, 3, and 6 through 15 were admitted as
evidence at hearing. Tr. 51, 83-84. I deferred ruling on the admissibility of P. Ex. 2 and
offered the parties the opportunity to address the question of admissibility in their post-
hearing briefs. Tr. 47-50, 84-85. CMS elicited the testimony of Angela Holladay,

a manager with Palmetto. Tr. 53-82. Petitioner called no witnesses.

CMS filed a post-hearing brief (CMS Br.) on August 2, 2016. Petitioner filed its reply
brief (P. Br.) on August 8, 2016. On September 8, 2016, CMS filed its post-hearing reply
brief (CMS Reply) and Petitioner waived its right to file a reply brief.

> P. Ex. 13 is filed in the Departmental Appeals Board Electronic Filing System (DAB E-
File) record as #23. The document was not properly marked as an exhibit but is treated
as if marked P. Ex. 13 at Petitioner’s request. Tr. 23-27.
CMS argued in its post-hearing briefs that Petitioner has not shown good cause for failing
to offer P. Ex. 2 on reconsideration and offering it for the first time before me. CMS Br.
at 7-9, CMS Reply at 1-2. Petitioner argues that P. Ex. 2 is a credit card receipt from the
USS. Postal Service (USPS). P. Br. at 1. It is clear from the face of P. Ex. 2 that it is a
sales receipt issued by a USPS facility on April 17, 2014, in Garland South Station, Texas
75043 at 4:14:56 pm. The receipt reflects that five items were mailed, two to Columbia,
South Carolina 29202; one to Austin, Texas 78751; one to Burleson, Texas 76028; and
one to Garland, Texas 75043. The receipt does not reflect the contents of any of the
envelopes or parcels. Petitioner implies without specifically asserting that P. Ex. 2 is the
receipt for the mailing of a CMS-855A reporting Petitioner’s change of address to
Palmetto. P. Br. at 1-2. Petitioner submitted with its request for hearing the affidavit of
Viju Mathew, Petitioner’s chief financial officer, who attests that he completed and
mailed a CMS-855 to Palmetto from Garland Station Texas 75043 on April 17, 2014 at
about 2:50 pm. RFH Ex. A-2. Mr. Mathew does not identify the receipt depicted in

P. Ex. 2 as the receipt he received. However, a copy of the same receipt was filed with
Mr. Mathew’s affidavit. RFH Ex. A-2. Mr. Mathew does not explain in his affidavit the
discrepancy between the time he recalls mailing at about 2:50 pm and the time on the
receipt, which is 4:14 pm. Mr. Mathew’s affidavit was not offered as evidence at hearing
and he was not called to testify subject to cross-examination despite being present at the
hearing on May 5, 2016. Tr. 2, 6. CMS did not object to the authenticity of P. Ex. 2 or to
its relevance. However, I may only admit and consider evidence that is relevant and
material. 42 C.F.R. §§ 498.60(b), 498.66(d). Petitioner has failed to establish the
relevance of P. Ex. 2. Petitioner failed to offer testimony at hearing that P. Ex. 2 isa
receipt for the mailing of the CMS-855A in question to Palmetto. Even if, I consider

Mr. Mathew’s affidavit, he testifies that he mailed the packet at 2:50 pm but the receipt
shows that the five items were actually mailed at 4:14 pm on April 17, 2014. Therefore,
Mr. Mathew’s affidavit does not support a finding that P. Ex. 2 is evidence of the mailing
of the CMS-855A to which he refers. Accordingly, I conclude that P. Ex. 2 must be
excluded because its relevance has not been established. Even if I accepted P. Ex. 2 on
the basis that it shows that Petitioner mailed a CMS-855A to Palmetto, its relevance is
minimal because it is receipt by Palmetto that satisfies the notification requirement, not
the mailing of the CMS-855A. See Alexander C. Gatzimos, M.D., J.D., LLC d/b/a
Michiana Adult Medical Specialists DAB No. 2730 at 1 (2016).

II. Discussion
A. Applicable Law

Sections 1811 through 1821 of the Social Security Act (the Act) (42 U.S.C. §§ 1395c-
1395i-5) establish the hospital insurance benefits program for the aged and disabled
known as Medicare Part A. Section 1831 of 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 both the Part A and B programs is through
contractors, such as Palmetto. Act §§ 1816, 1842(a) (42 U.S.C. §§ 1395h, 1395u(a)).
Payment under the programs for services rendered to Medicare-eligible beneficiaries may
only be made to eligible providers of services and suppliers.* Act §§ 1815, 1817,
1834(j)(1) (42 U.S.C. §§ 1395g, 1395i, 1395m(j)(1)); 1835(a) (42 U.S.C. § 1395n(a));
1842(h)(1) (42 U.S.C. § 1395u(h)(1)). Petitioner, a home health agency, is a provider.

The Act requires the Secretary of Health and Human Services (Secretary) to issue
regulations that establish a process for the enrollment in Medicare of providers and
suppliers, including 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. §§ 424.500 and 424.505, a provider 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.

Providers must submit complete, accurate, and truthful responses to all information
requested in the enrollment application. 42 C.F.R. § 424.510(d)(2). Pursuant to

42 C.F.R. §§ 424.502 and 424.510(d)(3), a provider’s application to enroll in Medicare
must be signed by an authorized official, i.e., one with authority to bind the provider or
supplier both legally and financially. Subsection 424.510(d)(3) provides that the
signature attests to the accuracy of information provided in the application. The signature
also attests to the fact that the provider is aware of and abides by all applicable statutes,

*In the case of Medicare-eligible beneficiaries not enrolled in Medicare Part B, home
health services are paid under Part A subject to the limitations specified in section
1812(a)(3) of the Act. Home health services are also covered under Medicare Part B for
those enrolled. Act § 1832(a)(2)(A). Thus, home health agencies, which are defined as
providers by section 1861(u) of the Act, may be reimbursed under Part A or Part B
depending upon the facts of the particular case.

* 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.
regulations, and program instructions. 42 C.F.R. § 424.510(d)(3). Providers must meet
basic requirements depending on their type of service. 42 C.F.R. §§ 424.505, 424.516,
424.517. Providers are also subject to additional screening requirements depending upon
the type of service they provide. 42 C.F.R. § 424.518.

The Secretary has delegated authority to CMS or its Medicare contractor to revoke an
enrolled provider’s Medicare enrollment and billing privileges and any provider
agreement for any of the reasons listed in 42 C.F.R. § 424.535. The provider bears the
burden to demonstrate that it meets enrollment requirements with documents and records.
42 C.F.R. § 424.545(c). If CMS revokes a provider’s Medicare billing privileges for not
complying with enrollment requirements, then the revocation is effective 30 days after
CMS or its contractor mails notice of its determination to the provider. 42 C.F.R.

§ 424.535(g). When CMS revokes a provider’s billing privileges because the provider is
not operational, the revocation is effective as of the date CMS determined the provider
was no longer operational. 42 C.F.R. § 424.535(g). After a provider’s Medicare
enrollment and billing privileges are revoked, the provider is barred from re-enrolling in
the Medicare program for one to three years. 42 C.F.R. § 424.535(c).

The Secretary has issued regulations that establish the right to a hearing and judicial
review of certain enrollment determinations. Act § 1866(j) (42 U.S.C. § 1395cc(j)).
Pursuant to section 1866(h)(1) and (j)(8), a provider or supplier whose enrollment
application or renewal application is denied or whose Medicare enrollment is revoked
and corresponding agreement, if any, is terminated is entitled to a hearing before an ALJ
and Board review, followed by judicial review. Pursuant to 42 C.F.R. § 424.545(a),

a provider or supplier denied enrollment in Medicare or whose Medicare enrollment and
billing privileges are revoked has the right to administrative and judicial review in
accordance with 42 C.F.R. pt. 498. Appeal and review rights are specified by 42 C.F.R.
§ 498.5.

The Secretary’s regulations do not address the allocation of the burden of proof or the
standard of proof. However, the Departmental Appeals Board (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. The standard of proof is a preponderance of the evidence.
CMS has the burden of coming forward with the evidence and making a prima facie
showing of a basis for revocation of Petitioner’s enrollment. Petitioner bears the burden
of persuasion to rebut the CMS prima facie showing by a preponderance of the evidence
or to establish any affirmative defense. Batavia Nursing & Convalescent Inn, DAB No.
1911 (2004); Batavia Nursing & Convalescent Ctr., DAB No. 1904 (2004), aff’d, 129

F. App’x 181 (6th Cir. 2005); Emerald Oaks, DAB No. 1800 (2001); Cross Creek Health
Care Ctr., DAB No. 1665 (1998); Hillman Rehab. Ctr., DAB No. 1611 (1997) (remand),
DAB No. 1663 (1998) (aft. remand), aff'd, Hillman Rehab. Ctr. v. United States, No. 98-
3789 (GEB), 1999 WL 34813783 (D.N.J. May 13, 1999).

CMS makes a prima facie showing of noncompliance if the evidence CMS relies on is
sufficient to support a decision in its favor absent an effective rebuttal. Hillman Rehab.
Ctr., DAB No. 1611 at 8 (1997). A provider can overcome CMS’s prima facie case
either by rebutting the evidence upon which that case rests or by proving facts that
affirmatively show statutory or regulatory compliance. Tri-County Extended Care Ctr.,
DAB No. 1936 (2004). “An effective rebuttal of CMS’s prima facie case would mean
that at the close of the evidence, the provider had shown that the facts on which its case
depended (that is, for which it had the burden of proof) were supported by a
preponderance of the evidence.” Jd. at 4 (quoting Western Care Mgmt. Corp., DAB No.
1921 (2004)).

B. Issues

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

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

My conclusions of law are set forth in bold followed by the pertinent findings of fact and
analysis. I have carefully considered all the evidence and the arguments of both parties,
though not all may be specifically discussed in this decision. I discuss in this decision the
credible evidence given the greatest weight in my decision-making.* I also discuss any
evidence that I find is not credible or worthy of weight. The fact that evidence is not
specifically discussed should not be considered sufficient to rebut the presumption that I
considered all the evidence and assigned such weight or probative value to the credible
evidence that I determined appropriate within my discretion as an ALJ. There is no
requirement for me to discuss the weight given every piece of evidence considered in this
case, nor would it be consistent with notions of judicial economy to do so. Charles H.
Koch, Jr., Admin. L. and Prac. § 5:64 (3d ed. 2013).

> “Credible evidence” is evidence that is worthy of belief. Black's Law Dictionary 596
(8th ed. 2004). The "weight of evidence" is the persuasiveness of some evidence
compared to other evidence. /d. at 1625.
1. Pursuant to 42 C.F.R. § 424.516(e)(2), Petitioner was required to
report to CMS or its contractor a change of address within 90 days of
the change.

2. Providers and suppliers enrolling in Medicare or reporting changes
to enrollment information must use the enrollment application — CMS-
855 — of the type applicable to the provider or supplier. 42 C.F.R.

§ 424.510-.515.

3. Petitioner violated 42 C.F.R. § 424.516(e)(2) by not reporting its
change of address to CMS or its contractor within 90 days of the
change using the appropriate CMS-855.

4. There is a basis to revoke Petitioner’s Medicare enrollment and
billing privileges pursuant to 42 C.F.R. § 424.535(a)(5)(ii) for
noncompliance with the requirement of 42 C.F.R. § 424.516(e)(2) to
give notice of a change of enrollment information within 90 days.

5. Revocation is effective July 16, 2014, the date on which CMS or its
contractor determined that Petitioner was no longer operational at the
practice location on file with Palmetto. 42 C.F.R. § 424.535(g).

a. Facts

There is no dispute that prior to revocation Petitioner was enrolled in Medicare as a
provider of home health services. In February 2012, Petitioner’s revalidation application
showed Petitioner’s practice location to be 3635 Broadway Boulevard, Suite A, Garland
Texas (the Broadway location). CMS Ex. 5. There is also no dispute that Petitioner
moved its office from the Broadway location to 713 Gatewood Road, Suite C, Garland,
Texas 75043 (the Gatewood location) sometime prior to July 16, 2014.° P. Br. at 1.

It is not disputed that on July 16, 2014, a Palmetto inspector attempted to conduct a site
inspection of the Broadway location and found that Petitioner was not operational at that

® There is a conflict in Petitioner’s assertions about whether Petitioner moved on or

about May 1, 2014 or on or about July 1, 2014. But it is not necessary for the purposes of
this decision to decide the exact date on which Petitioner moved because I find that no
notice of the change of address was received by Palmetto with 90 days of either date.
location. P. Br. at 1; CMS Exs. 2, 5 at 2 11. It is also undisputed that Petitioner was
operational at the Gatewood location on July 16, 2014. CMS Br. at 1, P. Br. at 1.

In its November 4, 2014, request for reconsideration, Petitioner represents that a CMS-
855A was mailed to Palmetto on July 2, 2014 to update its address. CMS Ex. 1 at 5, 12.
In the copy of the CMS-855A filed with the request for reconsideration, Petitioner
completed the form to reflect a change of practice location to the Gatewood location
effective July 1, 2014. CMS Ex. | at 38-39. In its request for hearing, Petitioner states
that the move to the Gatewood location occurred on May 1, 2014, and that a CMS-855A
was mailed to report the change of address on April 17, 2014. RFH at 1; RFH Ex. A-2.
Petitioner argues before me that a CMS-855A was sent to Palmetto on April 17, 2014.
Petitioner does not adequately explain the inconsistency between its representations on
reconsideration and its representations before me. However, even if I accepted that
Petitioner mailed a CMS-855A on either or both April 17, 2014 and July 2, 2014, those
facts do not establish that Palmetto received either CMS-855A.

It is not disputed that Petitioner received correspondence from Palmetto addressed to its
Gatewood location and postmarked May 29 and June 25, 2014. P. Exs. 4, 5. Petitioner
argues that those undisputed facts establish that Palmetto knew of Petitioner’s Gatewood
location. Clearly, Palmetto did know of Petitioner’s Gatewood location as early as May
29, 2014. However, the fact that Palmetto sent correspondence to Petitioner at its
Gatewood location does not show that Petitioner complied with the Medicare enrollment
requirement established by 42 C.F.R. § 424.516(e)(2) to notify CMS or its contractor of a
change of address within 90 days using the applicable CMS-855. Ms. Holladay credibly
testified that the letters postmarked May 29 and June 25, 2014, were mailed to Petitioner
using an address provided by the USPS on returned mail and the fact those letters were
mailed to Petitioner’s correct address should not be accepted as evidence that Palmetto
actually received a CMS-855A from Petitioner prior to the attempted onsite inspection in
July 2014. Tr. 53-82; CMS Ex. 7. I also accept as credible Tanesha Norman’s
unrebutted declaration that Palmetto had no record of receiving a CMS-855A from
Petitioner between April 1 and November 3, 2014. CMS Ex. 5 at 2 4 13.

Petitioner has failed to meet its burden to show by a preponderance of the evidence that
Palmetto received a CMS-855A reporting Petitioner’s change of practice location to the
Gatewood address within 90 days of either May 1, 2014 or July 1, 2014. Petitioner has
not presented a certified or registered mail receipt, a courier service receipt, or other
evidence that Palmetto received a CMS-855A reporting Petitioner’s change of address
within 90 days of either May 1, 2014 or July 1, 2014. Petitioner has not presented
evidence that it notified CMS and Palmetto of the change of address within 90 days of the
change using the CMS Provider Enrollment, Chain, and Ownership System (PECOS),
which allows providers and suppliers to file a CMS-855 on-line.
b. Analysis

As a condition for maintaining Medicare enrollment, a provider or supplier is required to
provide CMS notice of any change in its enrollment information, including a change of
address of a practice location, using the appropriate CMS-855 enrollment application.

42 C.F.R. §§ 424.510-.515. A provider, such as Petitioner, is also required as a condition
of enrollment to report a change of address to CMS or its contractor within 90 days of the
change. 42 C.F.R. § 424.516(e)(2). A provider or supplier must be able to demonstrate
that it meets enrollment requirements and to produce the documents necessary to show it
is in compliance with enrollment requirements. 42 C.F.R. § 424.545(c).

Pursuant to 42 C.F.R. § 424.535(a)(5)(i),” CMS may revoke a provider’s enrollment and
billing privileges if CMS determines upon on-site review that:

(1) The provider is no longer operational to furnish Medicare covered items or
services; or

(2) The provider has failed to satisfy any or all of the Medicare enrollment
requirements.

In this case, there is no dispute that Petitioner moved from the Broadway location to the
Gatewood location. The move probably occurred on about May 1, 2014, but Petitioner
has also asserted that the move occurred on or about July 1, 2014. There is no dispute
that an investigator attempted to conduct a site inspection on July 16, 2014 at the
Broadway location, but Petitioner was not operational at that practice location. Palmetto
has no record of receiving a CMS-855 from Petitioner reporting the change in practice
location from the Broadway location to the Gatewood location until a CMS-855A was
received in November 2014, more than 90 days after either May | or July 1, 2014. The
reporting requirement is satisfied by Palmetto’s receipt of the CMS-855, not the mailing
of the CMS-855 by the provider or supplier. See Gatzimos, DAB No. 2730 at 1.
Accordingly, I conclude that CMS has made a prima facie showing that Petitioner did not
comply with 42 C.F.R. § 424.516(e)(2). I also conclude that there is a prima facie
showing of a basis for revocation of Petitioner’s enrollment and billing privileges
pursuant to 42 C.F.R. § 424.535(a)(5)(i).

7 CMS may revoke a Medicare Part B supplier if on-site review determines the supplier
is no longer operational; the supplier has failed to satisfy all Medicare enrollment
requirements; or the supplier has failed to furnish Medicare covered items or services as
required by the Act or regulations. 42 C.F.R. § 424.535(a)(5)(ii).
10

Petitioner has failed to meet its burden to rebut the CMS prima facie case or establish an
affirmative defense by a preponderance of the evidence. Petitioner does not dispute that
the Broadway location was not operational on July 16, 2014. Petitioner has not shown by
a preponderance of the evidence that Palmetto received a CMS-855A reporting the
change of address within 90 days of the date on which operations ceased at the Broadway
practice location.

The effective date of revocation is determined pursuant to 42 C.F.R. § 424.535(g), which
provides:

(g) Effective date of revocation. Revocation becomes
effective 30 days after CMS or the CMS contractor mails
notice of its determination to the provider or supplier, except
if the revocation is based on Federal exclusion or debarment,
felony conviction, license suspension or revocation, or the
practice location is determined by CMS or its contractor
not to be operational. When a revocation is based on a
Federal exclusion or debarment, felony conviction, license
suspension or revocation, or the practice location is
determined by CMS or its contractor not to be
operational, the revocation is effective with the date of
exclusion or debarment, felony conviction, license suspension
or revocation or the date that CMS or its contractor
determined that the provider or supplier was no longer
operational.

42 C.F.R. § 424.535(g) (Emphasis added.) Although there is no dispute Petitioner was
operational at the Gatewood location on July 16, 2014, there is also no dispute that
Petitioner was not operational at the Broadway location when the site inspection was
attempted at that practice location. Therefore, a conclusion that Petitioner was not
operational at the Broadway location is shown by the evidence and constitutes grounds
for retroactive revocation as of July 16, 2014, pursuant to 42 C.F.R. § 424.535(g).

II. Conclusion

For the foregoing reasons, I conclude that Petitioner’s Medicare enrollment and billing
privileges are revoked effective July 16, 2014, pursuant to 42 C.F.R. § 424.535(a)(5)(ii)
for failure to comply with 42 C.F.R. § 424.516(e)(2).

/s/
Keith W. Sickendick
Administrative Law Judge