Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Zongli Chang, M.D./Metro Home Visiting Physicians PLLC,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-1577
Decision No. CR4540

Date: March 3, 2016

DECISION

Petitioner, Zongli Chang, M.D. and his medical practice, Metro Home Visiting
Physicians PLLC, appeal a December 19, 2014 reconsideration decision. After a review
of the full written record, I reverse the determination of the Centers for Medicare &
Medicaid Services (CMS) to revoke Petitioner’s Medicare enrollment and billing
privileges. CMS did not show that Petitioner was noncompliant with Medicare
enrollment requirements due to a physician practice location of record that was allegedly
not operational.

I. Case Background and Procedural History

Petitioner participated in the Medicare program as a “supplier” of services. By letter
dated October 24, 2014, Wisconsin Physicians Service (WPS), a Medicare contractor,
notified Petitioner that it was revoking Petitioner’s Medicare enrollment and billing

privileges effective September 10, 2014, pursuant to 42 C.F.R. § 424.535(a)(5). CMS

' A “supplier” is defined as “a physician or other practitioner, a facility, or other entity
(other than a provider of services) that furnishes items or services under [Title XVIII of
the Social Security Act].” 42 U.S.C. § 1395x(d); see also 42 C.F.R. § 400.202.
Exhibit (Ex.) 4. The letter stated the contractor conducted two site visits at Petitioner’s
practice location of record on September 10, 2014 and October 15, 2014, the location did
not have signage, there was no activity noted at the practice location, and the premises
were vacant and locked. /d. at 1. The letter also explained that Petitioner would not be
eligible to reapply for enrollment in Medicare for two years from September 10, 2014.
Id. at 2.

Petitioner requested reconsideration of the initial determination on November 10, 2014,
and included five exhibits with his request. CMS Ex. 5. On December 19, 2014, a WPS
hearing officer determined that Petitioner’s enrollment in the Medicare program was
properly revoked. CMS Ex. 6. The reconsidered determination provided Petitioner with
appeal rights for review by an Administrative Law Judge. Id.

Petitioner then filed a hearing request with the Civil Remedies Division of the
Departmental Appeals Board by letter dated February 9, 2015. The case was assigned to
me. | issued an Acknowledgment and Pre-Hearing Order (Pre-Hearing Order) on March
20, 2015, which required a complete pre-hearing briefing of all issues with supporting
evidence, including any motions for summary judgment. In response, CMS filed a
motion for summary judgment with a supporting brief (CMS Br.) along with six proposed
exhibits (CMS Exs. 1-6). Petitioner filed an opposition to CMS’s motion for summary
judgment with a supporting brief (P. Br.) and 21 proposed exhibits (P. Exs. 1-21).
Petitioner also objected to CMS Exs. 1-3. On June 12, 2015, CMS filed objections to P.
Ex. | and P. Ex. 2 at 5-11(CMS Response).

Petitioner submitted affidavits of direct testimony from 23 proposed witnesses, including
Dr. Chang, as P. Ex. 2 at 1-4 and P. Exs. 3-21. CMS did not request to cross-examine the
witnesses and did not propose any of its own witness testimony. I informed the parties
that I would only conduct a hearing if either party submitted affidavits of relevant direct
testimony from a witness, and the opposing party wished to cross-examine that witness.
Pre-Hearing Order § 10. Because CMS did not seek to cross-examine Petitioner’s
witnesses, an in-person hearing is not necessary, and I will decide this matter on the full
merits of the written record. Jd. at { 11; see Marcus Singel, D.P.M., DAB No. 2609, at 5-
6 (2014).

Il. Evidentiary Ruling

Petitioner objected to CMS Exs. 1-3. CMS Ex. 1 is a document titled ““ ZPIC
Recommendation for Revocation,” on Cahaba Safeguard Administrators letterhead and
dated October 15, 2014, the date of the last site visit to Petitioner’s practice location and
before WPS’s October 24, 2014 initial determination to revoke Petitioner’s enrollment
and billing privileges. The document identifies the ZPIC (Zone Program Integrity
Contractor) contact person and is not signed. The document is a narrative summary of
the observations of the four ZPIC investigators from the September 10, 2014 and October
15, 2014 site visits and includes the basis for the ZPIC investigators’ recommendation for
revocation of Petitioner’s Medicare enrollment and billing privileges. Petitioner objects
to this exhibit on the grounds that the document is not witness testimony that complies
with my Pre-Hearing Order and CMS did not list the ZPIC contact as a witness. P. Br. at
7. Petitioner claims that if I admit the exhibit he would be denied the opportunity to
cross-examine its author. P. Br. at 7-8. I overrule Petitioner’s objections because the fact
that the October 15, 2014 report is unsigned would only potentially affect the weight I
may give the document and not its ultimate admissibility. CMS Exhibit | was not
proffered as sworn written direct testimony and is not subject to cross-examination.
Petitioner had the ability to request a subpoena of any related witness pursuant to 42
C.F.R. § 498.58, but he did not do so. Regardless, the primary material facts in the report
are not at issue here because Petitioner does not challenge that no one was present at the
time of the visits or the absence of exterior signage with Petitioner’s name and posted
business hours.

Petitioner also objected to the photos contained in CMS Exs. 2 and 3 based on lack of
authenticity, lack of foundation, and because the photos are more prejudicial to Petitioner
than probative. P. Br. at 7-8. Nonetheless, Petitioner does not specifically dispute that
the photos are of Petitioner’s practice location at Five Mile Road. I overrule the
objections because the photos are relevant to my review and were available to the hearing
officer for review prior to the issuance of the December 19, 2014 reconsidered
determination. Further, I do not find their inclusion prejudices Petitioner’s case. I
therefore admit CMS Exs. 1-6 into the record.

CMS objects to P. Ex. 1 and all the photos contained in P. Ex. 2 at 5-11 because they are
irrelevant, new evidence that Petitioner did not submit at the reconsideration level, and
Petitioner has not stated good cause for why I should admit them now. CMS Response at
3 see 42 C.F.R. § 498.56(e). Petitioner’s Exhibit 1 contains a copy of an email dated
December 23, 2014, from Dr. Chang to a WPS employee, and 13 photos attached to the
email. Petitioner claims the photos at Petitioner’s Exhibit 1 at 2-4, which are of the Five
Mile Run Road practice location at issue, were primarily taken on November 4, 2014,
after he moved out of the location. P. Ex. 1 at 1. Petitioner’s Exhibit 2 at 5-11 includes
photos of the Five Mile Run Road location after Petitioner vacated the premises and also
photos of Petitioner’s new practice location at Farmington Road. The revocation in this
case was premised on the Five Mile Road address and not on whether Petitioner
maintained a new practice location at Farmington Road. Therefore I do not find this
evidence relevant, so I will sustain CMS’s objections. Accordingly, I admit P. Ex. 2 at 1-
4 and P. Exs. 3-21 into the record.

III. Discussion
A. Issue

Whether CMS had a legitimate basis to revoke Petitioner’s Medicare enrollment and
billing privileges because Petitioner, a physician supplier who primarily conducted house
visits, was allegedly not operational during two site visits.

B. Findings of Fact and Conclusions of Law

1. It is undisputed that Petitioner’s practice location was not open to the
investigators on September 10 and October 15, 2014, when they
attempted to complete site visits.

Investigators from Cahaba Safeguard Administrators, LLC, a ZPIC, attempted to conduct
a site visit of Petitioner’s practice location at 32854 Five Mile Road, Livonia, Michigan,
to verify Petitioner’s compliance with Medicare enrollment requirements on September
10, 2014, and again on October 15, 2014. CMS Ex. 1. At 10:00 a.m. on September 10,
2014, two investigators found the practice location locked and reported that it appeared to
be vacant. Jd. at 2. They reported that they were unable to see any furniture through the
glass door. Jd. They also did not see a sign indicating that Petitioner had an office at the
location, and they noted that Petitioner had not posted business hours. /d. They took
photos of the exterior of the building. CMS Ex. 2 at 1-4. The two investigators returned
to Petitioner’s practice location at noon the same day and were still unable able to
complete the site visit. CMS Ex. | at 2. They then took photos of the rear of the
building. CMS Ex. 2 at 5. They looked through the back glass door and reported only
seeing boxes and a rug with no one inside. Jd.

On October 15, 2014 at 12:18 p.m., a different pair of ZPIC investigators attempted to
conduct a site visit at the same practice location. CMS Ex. | at 2. They reported there
was no exterior signage with Petitioner’s name, there were no lights on inside the
location, and they did not see any furniture or activity in the building. /d. They reported
that both the front and the back doors were locked. Jd. They saw some cleaning supplies
when they looked through the window in the back of the building. Jd. They took photos
of the interior of the building through both the front and back glass doors and photos of
the outside of the building. CMS Ex. 3 at 1-7.

The ZPIC investigators determined that based on the unsuccessful site visits, Petitioner
was not operational and recommended that CMS revoke Petitioner’s Medicare enrollment
and billing privileges effective the date of the first site visit. CMS Ex. 1.
2. The CMS contractor revoked Petitioner’s Medicare enrollment and
billing privileges on the basis that Petitioner’s physician practice
location was not operational.

A supplier in the Medicare program “must be operational to furnish Medicare covered
items or services before being granted Medicare billing privileges.” 42 C.F.R.

§ 424.510(d)(6). CMS is authorized to revoke a supplier’s Medicare billing privileges
when the provider is determined not to be in compliance with Medicare enrollment
requirements. 42 C.F.R. § 424.535(a). Federal regulations provide for revocation of a
provider or supplier’s Medicare billing privileges for a variety of reasons including:

(5) On-site review. CMS determines, upon on-site review, that the
provider or supplier is no longer operational to furnish Medicare
covered items or services, or is not meeting Medicare enrollment
requirements under statute or regulation to supervise treatment of, or
to provide Medicare covered items or services for, Medicare
patients. ...

42 CFR. § 424.535(a)(5).

Furthermore, 42 C.F.R. § 424.517 provides that:

(a) CMS reserves the right, when deemed necessary, to perform on-site
review of a provider or supplier to verify that the enrollment information
submitted to CMS or its agents is accurate and to determine compliance
with Medicare enrollment requirements. Site visits for enrollment purposes
do not affect those site visits performed for establishing compliance with
conditions of participation. Based upon the results of CMS’s on-site
review, the provider may be subject to denial or revocation of Medicare
billing privileges as specified in § 424.530 or § 424.535 of this part.

oe

(2) Medicare Part B providers. CMS determines, upon review, that
the supplier meets any of the following conditions:

(i) Is unable to furnish Medicare-covered items or services.

(ii) Has failed to satisfy any or all of the Medicare enrollment
requirements.
After reviewing and evaluating the information Petitioner submitted, the WPS hearing
officer issued a reconsidered determination on December 19, 2014, that upheld the
revocation based on 42 C.F.R. § 424.525(a)(5). CMS Ex. 6. The hearing officer wrote:

According to our records during the on-site review of the practice location
of 32854 Five Mile Rd Livonia, MI 48154 the investigator did not find
signage for Metro Home Visiting Physicians PLLC. In the back of the
building the only sign found was for DMC University Laboratories. The
inside of the building appeared to be vacant with only a few counters and
there were some empty boxes near the back door. According to the
reconsideration request there is no signs showing the business hours
because appointments are scheduled over the phone, however, once the
appointment is made there is no way for a patient to know this is where Dr.
Chang’s office is.

CMS Ex. 6 at 1.

The only basis cited for revocation under 42 C.F.R. § 424.535(a)(5) was that Petitioner
was not operational to furnish Medicare covered items or services. CMS Exs. 4 at 1; 6 at
1. There is no allegation, finding, or conclusion that Petitioner failed to satisfy any other
Medicare enrollment requirement or failed to furnish Medicare covered items or services
as Medicare required. CMS Exs. 4, 6.

3. CMS did not have a legitimate basis to revoke Petitioner’s enrollment
and billing privileges because CMS did not show Petitioner, as a
physician practice specializing in house call visits, was not
operational.

The regulations define “operational” as follows:

Operational means the provider or supplier has a qualified physical practice
location, is opened to the public for the purpose of providing health care
related services, is prepared to submit valid Medicare claims, and is
properly staffed, equipped, and stocked (as applicable, based on the type of
facility or organization, provider or supplier specialty, or the services or
times being rendered), to furnish these items.

42 C.F.R. § 424.502 (emphasis added).

CMS categorizes its screening of existing suppliers into levels based on the risk for fraud.
Medicare Program Integrity Manual (MPIM), CMS Pub. 100-08, ch. 15, § 15.19.2.1,
Screening Categories, Background. Physicians and their practices are categorized as
“limited,” the lowest level of risk and screening. Jd. The CMS enrollment process
allows physicians the ability to explain if they will use an address for administrative
purposes. See, e.g., Alexander Eugene Istomin, DAB No. 2484, at 5 (2012); Form CMS-
8551 (07/11), Medicare Enrollment Application for Physicians and Non-Physician
Practitioners at 19 (“Explain unique circumstances concerning your practice locations or
the method by which you render health care services (e.g. you only render services in
patients’ homes [house calls only]).”), available at www.cms.gov/Medicare/CMS-
Forms/CMS-Forms/Downloads/cms855i.pdf.

Here, Petitioner admitted that the Five Mile Road practice location, although not vacant,
was locked on both those days because he was working at another facility with non-
Medicare patients. CMS Ex. 5 at 1, 2; P. Ex. 2 § 11. However, Petitioner— a physician
practice that is in a limited risk category for fraud and screening— explained at the
reconsideration level” (CMS Ex. 5 at 1-2), and persuasively to me now, that the nature of
Petitioner’s business was primarily making house calls. Petitioner’s practice name
actually reflects this, “Metro Home Visiting Physicians.”

Petitioner specifically acknowledged the practice location was locked “most of the time,”
and there was no signage with his name or hours of operation posted as his main service
was house calls to Medicare patients with disabilities. CMS Ex. 5. He noted that he only
held meetings or treated patients at the office by appointment only, and these
appointments and meetings were all scheduled in advance by phone. Jd. He explained
that on both site visit days — September 10 and October 15, 2014 — he was not in the
office because he was seeing non-Medicare patients at another facility. Jd. He further
explained that he was conducting business by phone when the site visits occurred. He
submitted phone records as documentary evidence in support of this. Jd. at 4-7.
According to Petitioner, the Five Mile Run practice location was not vacant, and he
occupied the space during the two site visits. Jd. at 2. He provided two rent checks as
proof. Jd. at 7-8. According to Petitioner, the office rooms were furnished and were not
vacant until he moved from the location around October 31, 2014, to another practice
location. /d. at 2. He presented a letter he sent his landlord terminating the lease
effective the end of October 2014. Jd. at 9. He claims that there was a desk at the
practice location that was visible through the front door. Jd.

Petitioner also now provides the credible written direct testimony of 21 witnesses, all
unchallenged by CMS, attesting that Dr. Chang provided health care related services at
the Five Mile Road practice location prior to and after the site visits. P. Exs. 4-21. The
witnesses testified that Petitioner rented office space at the Five Mile Road location,
Petitioner occupied the practice location for several years prior to the site visits, the office

> No Medicare enrollment application of Petitioner was part of the record, so I was not
able to ascertain how Petitioner explained the nature of his medical practice in the
application, but he undisputedly presented those explanations at the reconsideration level.
CMS Ex. 5 at 1-2.
location was furnished and not vacant, and the witnesses provided dates before and after
the two site visits where they met with Dr. Chang at the Five Mile Road practice location.
P. Exs. 4-21.

The definition of “operational” requires a physical location to be open to the public,
properly staffed, equipped, and stocked to deliver the type of services the physician is
licensed and enrolled to provide. 1 am aware of no program requirements that a
physician’s practice location be open to the public at specific times or have signs
identifying the location of the practice or the hours the location is open to the public. The
regulations and policies also do not specify requirements that must be satisfied for a
physician to be found prepared to submit valid Medicare claims, other than the
requirements for licensure, Medicare enrollment, and the ability to deliver covered items
or services to a qualified Medicare beneficiary. See 42 C.F.R. §§ 410.20, 410.26; MPIM,
ch. 15, § 15.4.4.11. Iam aware of no evidence suggesting any issue with Petitioner’s
icense or enrollment status. Further, Petitioner has presented persuasive argument
supported by credible evidence of his ability during the period of the two site visits to
provide covered services to Medicare beneficiaries considering the nature of his medical
practice that specialized in making house calls.

IV. Conclusion

For the reasons outlined above, I find CMS did not have a legitimate basis to revoke
Petitioner’s Medicare enrollment and billing privileges on the grounds that Petitioner was
not operational, and I reverse its revocation determination and its imposition of a two-
year reenrollment bar upon Petitioner.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Alamo Mobility,
Petitioner,
v.

Centers for Medicare & Medicaid Services.

Docket No. C-16-189
Decision No. CR4537

Date: February 29, 2016

DECISION

I sustain the determination of a contractor for the Centers for Medicare & Medicaid
Services (CMS) to deny Medicare enrollment to Petitioner, Alamo Mobility.

I. Background

Petitioner requested a hearing to contest a determination, affirmed on reconsideration, to
deny it enrollment and participation in the Medicare program. CMS moved for summary
judgment and Petitioner opposed the motion. CMS filed five proposed exhibits,
identified as CMS Ex. 1 — CMS Ex. 5, with its motion. Petitioner filed six exhibits,
identified as P. Ex. 1 — P. Ex. 6, in opposition to the motion. I receive these exhibits into
the record.

It is unnecessary for me to decide whether the criteria for summary judgment are met
here. Neither CMS nor Petitioner has offered witness testimony in support of its position
and, thus, an in-person hearing is unnecessary. I decide this case based on the parties’
written exchanges.
IL. Issue, Findings of Fact and Conclusions of Law
A. Issue

The sole issue is whether a CMS contractor correctly determined that Petitioner does not
meet the prerequisites for participation as a Medicare supplier.

B. Findings of Fact and Conclusions of Law

Petitioner applied to participate in Medicare as a supplier of durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS). In order to qualify for participation, a
DMEPOS supplier must establish that it is accredited by a CMS-approved accrediting
organization. 42 C.F.R. § 424.57(c)(22). Petitioner was unable to satisfy this criterion.
As it concedes, it attempted to attain accreditation from 11 different CMS-approved
accrediting organizations. All of them rejected Petitioner’s application.

A DMEPOS supplier must meet and certify in its enrollment application that it meets and
will continue to meet the DMEPOS supplier standards. 42 C.F.R. § 424.57(c).
Petitioner’s application was denied because it failed to become accredited as is required
by 42 C.F.R. § 424.57(c)(22). That denial is not only appropriate, but it is the only
lawful action that the contractor could take under the circumstances.

Petitioner argues that it is caught in a catch-22 situation not of its making. It asserts that
it provides services that are paid for by the Texas Medicaid program and that it is
certified to participate in that program. However, some of the services — consisting in the
main of the labor that its staff provides in customizing certain durable medical equipment
—are not paid for by the Medicaid program and will be reimbursed only if Medicare pays
for them. Petitioner contends that none of the accrediting organizations approved by
CMS recognize these services or the unique billing arrangement that exists in Texas.
Thus, according to Petitioner it cannot qualify under Medicare participation regulations
even though it provides valuable services that are in part reimbursed by the Texas
Medicaid program.

[hat may be so, but Petitioner’s argument offers no basis for me to direct CMS to certify
it as a participating supplier. As I have stated, Petitioner cannot qualify as a supplier
because it doesn’t meet all regulatory criteria for participation. There is nothing in the
regulations that allows me to either waive, or to direct CMS and its contractor to waive,
these requirements.

At bottom, Petitioner’s argument boils down to a policy dispute with CMS over the
criteria that CMS uses to qualify DMEPOS suppliers. Whatever the merits of that
dispute, I have no authority to order an outcome. My authority is limited only to deciding
whether CMS and its contractor acted correctly under applicable regulations. As I have
stated, the only possible outcome in this case is to sustain the contractor’s denial of
Petitioner’s application to participate in the Medicare program.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Randall Wayne Toothaker, D.D.S.
(OI File No.: H-15-42253-9),

Petitioner,
v.
The Inspector General.
Docket No. C-16-45
Decision No. CR4536
Date: February 25, 2016
DECISION
I sustain the determination of the Inspector General (1.G.) to exclude Petitioner, Randall
Wayne Toothaker, D.D.S., from participating in Medicare, State Medicaid programs, and
other federally financed health care programs for a minimum of five years. Petitioner’s
conviction of a crime as is defined by section 1128(a)(3) of the Social Security Act (Act)
mandates his exclusion. The exclusion is for the minimum period required by law. Act
§ 1128(c)(3)(B).
I. Background
Petitioner requested a hearing to challenge his exclusion. The I.G. filed a brief
supporting his determination along with five exhibits that are identified as I.G. Ex. 1 —
1.G. Ex. 5. Petitioner filed a brief in opposition and no supporting exhibits.
Petitioner objected to my receiving into the record I.G. Ex. 2 and LG. Ex. 3. He
challenges I.G. Ex. 2, which is an affidavit supporting a criminal complaint against
Petitioner, as inadmissible hearsay, among other objections. He challenges I.G. Ex. 3, a

criminal complaint, as irrelevant because it was subsequently superseded. I overrule
these objections. I do not receive the exhibits as proof of Petitioner’s guilt. That is
established by his subsequent nolo contendere plea and by entry of a judgment of
conviction by a United States District Court. The exhibits are relevant as background
showing the history of Petitioner’s criminal case and also the facts that underlay the
criminal complaint that was filed against Petitioner. Consequently, I receive I.G. Ex. 1 —
1.G. Ex. 5 into evidence.

The exclusion determination in this case derives from Petitioner’s conviction. This
hearing is not a forum in which the facts of the case underlying the conviction are
litigated. But, facts that explain why Petitioner was charged with a crime are certainly
relevant in order to establish the nature of the criminal allegations and ultimately, what
underlies the conviction. Here, the criminal charges against Petitioner emanated from
allegations — stated in I.G. Ex. 2 — that Petitioner was observed stealing government
property, including precious metals, from a Veterans Administration health care facility.
Those allegations are highly relevant to establishing the reason for the criminal complaint
that was filed against Petitioner and they explain what underlay his subsequent nolo
contendere plea. Thus, although I do not find from the affidavit that Petitioner stole
government property, I find that the affidavit explains the allegations to which Petitioner
subsequently pled guilty and that are the basis for his conviction. As to I.G. Ex. 3,
Petitioner has not asserted that it inaccurately states the elements of the crime to which
Petitioner subsequently entered his plea.

II. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether Petitioner was convicted of a crime as is defined by section
28(a)(3) of the Act.

If I find the I.G. was authorized to exclude Petitioner, I will have to uphold the five-year
exclusion because that is the minimum length of exclusion mandated by law. Act §
28(c)(3)(B); 42 C.F.R. § 1001.2007(a)(2).

B. Findings of Fact and Conclusions of Law

Section 1128(a)(3) of the Act mandates the exclusion of anyone that has been convicted
of a criminal offense occurring after the 1996 enactment of the Health Insurance
Portability and Accountability Act consisting of a felony relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct in
connection with the delivery of a health care item or service or with respect to any act or
omission in a health care program operated or financed by any federal, state, or local
government agency.

The facts of this case are undisputed. Petitioner was charged with theft of government
property, a charge to which he subsequently entered a nolo contendere plea. That plea
was based on allegations that he stole dental supplies, including precious metals, that
were the property of the Veterans Administration and that were used in a Veterans
Administration health care facility (a dental clinic) in Omaha, Nebraska. I.G. Ex.2. A
United States District Court accepted Petitioner’s plea and entered a judgment of guilty
of theft of government property against him, a felony offense. I.G. Ex. 5.

Thus, Petitioner was convicted of stealing dental supplies — including precious metals —
that were intended for use in delivering patient care by the Veterans Administration.
That brings his conviction squarely within the meaning of section 1128(a)(3).

Petitioner argues that the I.G. failed to carry his burden of proof in this case because he
did not prove that the supplies and precious metals that Petitioner stole were reserved for
the benefit of providing care to specific patients at the Veterans Administration facility.
He argues that, in order to establish a requisite nexus between the crime and a health care
item or service, the I.G. must prove that there were identifiable patients whose care was
affected adversely by the theft. As support for this contention Petitioner relies on a 1992
decision by the Departmental Appeals Board, Catherine L. Dodd, R.N., DAB No. 1345
(1992).

The Dodd decision is not applicable to the facts of this case. Dodd involved an exclusion
determination made pursuant to section 1128(a)(1) of the Act and not section 1128(a)(3).
Section 1128(a)(1) mandates the exclusion of anyone convicted of a criminal offense
related to the delivery of an item or service under Medicare or a State Medicaid program.
The section requires a specific nexus between the crime and a Medicare or Medicaid item
or service. In Dodd, the petitioner, a nurse employed at a nursing facility, was convicted
of altering patient records to conceal her conversion of controlled substances to her use.
The Board found that the fact that the facility provided care to Medicare beneficiaries and
recipients of Medicaid was not sufficient to establish the requisite nexus between the
petitioner’s crime and these programs because, given the record in the case, the
possibility existed that the petitioner had converted drugs and altered records relating to
someone who was neither a beneficiary nor a recipient.

Section 1128(a)(3) does not require a specific nexus between the crime and either
Medicare or a State Medicaid program. It is a section that applies to crimes committed in
connection with items or services delivered under any health care program, public or
private. It is inarguable that the Veterans Administration is a health care program and
that individuals treated in Veterans Administration facilities are beneficiaries of that
program, receiving health care items or services. Those individuals are part of that
program and receive health care items or services even if they might pay in part for some
services out of their own funds. Consequently, it is unnecessary here to pinpoint the
individuals whose care was affected directly by Petitioner’s theft. '

/s/
Steven T. Kessel
Administrative Law Judge

' Had section 1128(a)(3) of the Act been in existence in 1992, the petitioner in Dodd
would have been excludable under that section without any proof that specific Medicare
beneficiaries or recipients of Medicaid were the victims of her crime. Skilled nursing
facilities are “health care programs” and all residents of those facilities receive health
care items or services even if they are not covered by Medicare or a State Medicaid
program.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Tonya Rushing
(O.I. File No. L-08-40057-9),

Petitioner,
v.
The Inspector General.
Docket No. C-16-2
Decision No. CR4535

Date: February 25, 2016

DECISION

The Inspector General (IG) of the United States Department of Health and Human
Services notified Tonya Rushing (Ms. Rushing or Petitioner) that she was being excluded
from participation in Medicare, Medicaid, and all other federal health care programs for a
minimum period of five years under 42 U.S.C. § 1320a-7(a)(1) based on her criminal
conviction of conspiracy to commit health care fraud. Petitioner requested a hearing
before an administrative law judge (ALJ) to dispute the exclusion, arguing that the
federal judge who sentenced Ms. Rushing specifically ordered that Ms. Rushing would
not be subject to employment restrictions. I affirm the IG’s exclusion because section
1320a-7(a)(1) requires that the IG impose such an exclusion on Ms. Rushing for a
minimum of five years.

I. Background

Ina July 31, 2015 notice, the IG informed Ms. Rushing that she was being excluded from
participation in Medicare, Medicaid, and all federal health care programs for five years.
The IG indicated that the legal basis for the exclusion was 42 U.S.C. § 1320a-7(a)(1).
The IG stated that he was taking this action based on Ms. Rushing’s conviction in the
United States District Court for the District of Nevada (District Court) of a criminal
offense related to the delivery of an item or service under Medicare or a state health care
program, including the performance of management or administrative services relating to
the delivery of items or services, under any such program. IG Exhibit (Ex.) 1.

On September 29, 2015, Petitioner, through counsel, timely requested a hearing.
Petitioner asserted that the District Court and the United States Probation Office, “in
connection with Ms. Rushing’s federal charges (Case No.: 2:11-CR-166-LRH-CWH)
specifically precluded any ‘employment restrictions’ with respect to Ms. Rushing’s
‘employment, consulting, or association with any medical business.’” Therefore,
Petitioner argued, the IG’s exclusion “runs contrary” to the District Court’s order and
must be lifted.

In an October 16, 2015 letter, the Civil Remedies Division acknowledged receipt of
Petitioner’s hearing request and set a date for a prehearing conference. Included with the
letter was a copy of the Civil Remedies Division Procedures (CRDP). On November 17,
2015, I convened a prehearing conference by telephone, the substance of which is
summarized in my November 20, 2015 Order and Schedule for Filing Briefs and
Documentary Evidence (Order). That Order incorporated the CRDP by reference. Order
4] 7; see also CRDP § 1.

In accordance with the Order, the IG filed a brief (IG Br.) and four exhibits (IG Exs. 1-4).
Petitioner filed a response brief (P. Br.) with five exhibits (P. Exs. A-E). The IG filed a
reply brief.

II. Decision on the Record

Neither party objected to any of the proposed exhibits. Therefore, I admit them all into
the record. See Order § 3; CRDP § 14(e).

At the prehearing conference, I ordered the parties to complete and submit short-form
briefs with their prehearing exchanges. Order § 1. I provided a copy of Petitioner’s
short-form brief with my Order. Order § 1. The short-form brief requires, in relevant
part, that each party indicate whether a hearing is necessary and whether the party would
like to provide any testimony at the hearing. If a party answers those questions in the
affirmative, the party must provide the names of the proposed witnesses, a description of
the testimony expected from the proposed witnesses, and an explanation as to how the
proposed testimony will not duplicate information contained in the documentary exhibits.
lL also expressly included these requirements in my Order. Order §[ 4.

The IG indicated on its short-form brief that a hearing was unnecessary. IG Br. at 7.
Petitioner indicated on her short-form brief that a hearing was necessary and that there
was testimony she wanted to offer at the hearing. However, Petitioner did not provide
any further information. In essence, Petitioner did not provide a witness list. P. Br. at 4.

In these proceedings, “[a] party must file, as part of its prehearing exchange, a list of its
proposed witnesses that includes the last known address of each witness, sufficient
information to identify the relationship of the witness to the case, and a brief summary of
the testimony that the party anticipates the witness will provide.” CRDP § 16(a). An
ALJ does not have to receive testimony from a witness who is not identified in a party’s
prehearing exchange. CRDP § 16(c). Rather, “[t]he ALJ may determine that an oral
hearing is unnecessary and not in the overall interest of judicial economy if the parties do
not identify any proposed witnesses . . .. Under these circumstances, the ALJ may decide
the case based on the written record.” CRDP § 19(d).

Because Petitioner did not comply with my Order, the CRDP, or the instructions on the
short-form brief to provide the names of proposed witnesses and a brief summary of the
witness’ expected testimony, I deny Petitioner’s request for an in-person hearing and
decide this case on the basis of the written record.

III. Issue

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

IV. Jurisdiction

I have jurisdiction to decide this case. 42 U.S.C. § 1320a-7(f); 42 C.F.R. § 1005.2.

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

The IG indicated that 42 U.S.C. § 1320a-7(a)(1) was the basis for Petitioner’s mandatory
exclusion. IG Ex. 1. The statute provides:

(a) Mandatory exclusion.
The Secretary shall exclude the following individuals and

entities from participation in any Federal health care program
(as defined in section 1320a—7b(f) of this title):

' My findings of fact and conclusions of law are set forth in italics and bold font.
(1) Conviction of program-related crimes

Any individual or entity that has been convicted of a
criminal offense related to the delivery of an item or
service under subchapter XVIII of this chapter or
under any State health care program.

Thus, the elements the IG must prove to sustain Petitioner’s exclusion pursuant to section
1320a-7(a)(1) in this case are: (1) Petitioner was convicted of a criminal offense, and (2)
Petitioner’s offense was related to the delivery of an item or service under Medicare or a
State health care program.

A, Petitioner pled guilty to one count of conspiracy to commit health care fraud,
and the District Court sentenced her to one year and a day in prison as well
as payment of a $10,000 fine, an $8,100,000 forfeiture, and $50,000 in
restitution to Medicare, Medicaid, and private insurers.

On April 27, 2011, a federal grand jury indicted Dipak Desai, M.D. and Petitioner on one
count of conspiracy to commit health care fraud and twenty-five counts of health care
fraud. IG Ex. 2. The Indictment also sought a forfeiture of $8,100,000 from Dr. Desai
and Petitioner. IG Ex. 2 at 11.

On May 12, 2014, Petitioner signed a plea agreement in which she agreed to plead guilty
to Count One of the Indictment, which was “Conspiracy to Commit Health Care Fraud, in
violation of Title 18, United States Code, Section 371.” IG Ex. 3 at 2. Petitioner agreed
that the following facts were true:

Between in or about January 2005 and in or about February
2008, Dipak Desai (“Desai”), a physician and the owner of
the Endoscopy Center of Southern Nevada (“ECOSN”),
knowingly and willfully conspired, confederated, and agreed
with [Petitioner], his Chief Operating Officer, and others, to
systematically overcharge the federal Medicare program, the
State of Nevada Medicaid program, and other private health
insurance companies (the “Private Insurers”) for anesthesia
billing. Desai and [Petitioner] caused ECOSN to overstate
significantly the amount of time its certified registered nurse
anesthetists (“CRNAs”) spent with patients on a given
procedure.
Beginning in or about January 2005, Desai and [Petitioner]
caused fraudulent bills to be submitted to Medicare, Medicaid
and the Private Insurers that falsely inflated the amount of
anesthesia time spent by the CRNAs on the procedures
performed at ECOSN. [Petitioner] was aware that Desai had
a “standing order” that all CRNAs should list at least thirty
minutes of anesthesia time in their Anesthesia Record,
regardless of the amount of anesthesia time actually spent.
Petitioner] enforced this order. She directly instructed at
least one CRNA to list more than thirty minutes on the
Anesthesia Record they maintained for each procedure, even
though the CRNAs did not spend close to that amount of
face-to-face time with the patient. She also instructed her
employees responsible for insurance billing to rely upon the
CRNAs Anesthesia Record — the medical record that Desai
and [Petitioner] had instructed the CRNAs to falsify — when
preparing claims for reimbursement to be submitted to
Medicare, Medicaid and the Private Insurers.

During the relevant period of time, [Petitioner], actually
received approximately $1.3 million as her share of the
inflated anesthesia billing scheme.

IG Ex. 3 at 4-5. As part of the plea agreement, Petitioner agreed to pay $50,000 in
restitution and not to contest an $8,100,000 forfeiture. IG Ex. 3 at 10; P. Ex. C at 6.

In May 2015, the District Court accepted Petitioner’s guilty plea, adjudged her guilty of
violating 18 U.S.C. § 371 (Conspiracy to Commit Health Care Fraud), and sentenced
Petitioner to one year and a day in prison, and to pay a $10,000 fine, an $8,100,000
forfeiture, and $50,000 in restitution. IG Ex. 4 at 1, 2, 5; P. Ex. C at 34-35, 39. Included
in the list of entities due restitution were the Medicare Program Safeguard Contractor and
the Nevada Division of Healthcare Financing and Policy. IG Ex. 4 at 6.

B. Petitioner was convicted of a criminal offense for the purposes of 42 U.S.C.
§ 1320a-7(a)(1).

Under 42 U.S.C. § 1320a-7(a)(1), Petitioner must be “convicted of a criminal offense”
before she can be excluded. An individual is considered “convicted” when a judgment of
conviction has been entered by a federal, state, or local court, or a plea of guilty or no
contest has been accepted in a federal, state, or local court. 42 U.S.C. § 1320a-7(i)(1),
(3). In the present matter, Petitioner entered a guilty plea and, based on that guilty plea,
the District Court adjudicated Petitioner guilty of violating 18 U.S.C. § 371. Based on
these facts, I conclude that Petitioner was convicted of a criminal offense for purposes of
42 U.S.C. § 1320a-7(a)(1).

C. Petitioner’s criminal offense of conspiracy to commit health care fraud on
the Medicare and Medicaid programs is an offense related to the delivery of
an item or service under Medicare and a state health care program (i.e.,
Medicaid).

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

§ 1320a-7(a)(1); 42 C.F.R § 1001.101(a). A state health care program includes a state’s
Medicaid program. 42 C.F.R. § 1001.2 (definition of State health care program).

It is significant that the term “related to” simply means that there must be a nexus or
common sense connection. See Quayum v. U.S. Dep’t of Health and Human Servs.,

34 F.Supp.2d 141, 143 (E.D.N.Y. 1998); see also Friedman v. Sebelius, 686 F.3d 813,
820 (D.C. Cir. 2012) (describing the phrase “relating to” in another part of section 1320a-
7 as “deliberately expansive words,” “the ordinary meaning of [which] is a broad one,”
and one that is not subject to “crabbed and formalistic interpretation”) (internal quotes
omitted).

In the present case, there can be no doubt that Petitioner’s criminal conduct directly
related to the delivery of services under the Medicare and Medicaid programs. Count
One of the Indictment, which Petitioner was convicted of committing, alleged:

From in or about January 2005 and continuing through on or
about February 2008, in the state and federal District of
Nevada, DIPAK DESAI, M.D., and [Petitioner], defendants
herein, knowingly and willfully conspired, confederated, and
agreed with each other, and others known and unknown to the
Grand Jury, to devise and participate in a scheme and artifice
to defraud a health care benefit program, that is, Medicare,
Medicaid and the Private Insurers, and to obtain by means of
materially false and fraudulent pretenses, representations, and
promises, money owned by and under the custody and control
of Medicare, Medicaid and the Private Insurers, in connection
with the delivery of, and payment for, health care benefits,
items and services.
IG Ex. 2 at 5. Count One also alleged that Petitioner instructed individuals under her
supervision to submit Medicare and Medicaid claims based on falsified medical records.
IG Ex. 2 at 6. Petitioner admitted to conspiring to “systematically overcharge the federal
Medicare program, the State of Nevada Medicaid program . . . for anesthesia billing.” IG
Ex. 3 at 4.

Based on the facts in this case, Petitioner’s conviction, involving filing false claims with
the Medicare and Medicaid programs, was “related” to the delivery of an item or service
under Medicare or a state health care program. Jack W. Greene, DAB No. 1078 (1989),
aff'd, Greene v. Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); Michael Travers, M.D.,
DAB No. 1237 (1991), aff'd, Travers v. Sullivan, 791 F. Supp. 1471, 1481 (E.D. Wash.
1992), aff'd, Travers v. Shalala, 20 F.3d 993 (9th Cir. 1994).

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

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

Petitioner argues that the District Court’s decision not to impose employment restrictions
on Petitioner precludes the IG from excluding her. P. Br. at 2-4. The record in this case
shows that the District Court did not include such a restriction as part of her criminal
judgment. IG. Ex. 4 at 4; P. Ex. B at 2. The District Court stated the following during
sentencing:

I’m not going to impose the employment restriction from
business involving medical billing. She has shown herself to
be a competent and valued person in that industry. And the
success she’s shown since this whole case broke in a
community which would have known her involvement from
the Desai relationship speaks well to her. I’m not going to
restrict that employment.

P. Ex. C. at 36. Although Petitioner argues that the District Court’s decision not to
impose employment restrictions amounts to an order that precludes the IG from
excluding Petitioner, such is not the case.

It is clear from the District Court’s statement, quoted above, that the District Court was
exercising discretion under its authority to criminally sentence a defendant. The District
Court neither referenced 42 U.S.C. § 1320a-7 nor ordered the IG not to exclude
Petitioner.
This was appropriate since exclusions under section 1320a-7 are administrative sanctions,
which have a remedial purpose (i.e., protecting Medicare beneficiaries from abusers of
the program). Manocchio v. Kusserow, 961 F.2d 1539, 1542 (11th Cir. 1992); Westin v.
Shalala, 845 F. Supp. 1446, 1453-54 (D. Kan 1994). Further, the exclusion under section
1320a-7(a)(1) is mandatory. Travers, 20 F.3d at 998 (9th Cir. 1994) (“The language—
‘[t]he Secretary shall exclude’—is mandatory, not discretionary.”). Although it is
possible that a federal district court may eventually review the decision to exclude
Petitioner, that proceeding will be separate from Petitioner’s criminal case. See

42 U.S.C. §§ 405(b), (g), 1320a-7(f)(3). However, at sentencing in Petitioner’s criminal
case, the District Court did not have the authority to prohibit the IG from imposing an
exclusion based on Petitioner’s conviction for conspiracy to commit health care fraud.

Although absent from the IG’s exclusion notice, the IG imposed the minimum five-year
length of exclusion even though the record shows that four aggravating factors are
present in this case. See 42 C.F.R. § 1001.102(b)(1), (2), (5), (7). Perhaps the IG
considered Petitioner’s cooperation with state prosecutors, which resulted in the
conviction of Dr. Desai (P. Ex. C at 25-28), to mitigate those aggravating factors. See
42 C.F.R. § 1001.102(c)(3). However, Petitioner was instrumental in overbilling
$8,100,000 in medical services and personally profited by taking $1.3 million of those
fraudulently obtained proceeds. Even the District Court, which was favorably impressed
with Petitioner, stated that “[t]he loss of $8 million total is absolutely astounding.” P. Ex.
C at 31. A five-year exclusion may be insufficient to protect the Medicare and Medicaid
programs from someone who had no qualms with stealing so much money from
programs meant to provide health care to the aged, disabled, and poor.

V. Conclusion

For the foregoing reasons, I affirm the IG’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs for the
statutory five-year minimum period under 42 U.S.C. § 1320a-7(a)(1), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Zenex International Group, LLC
d/b/a Zenex Gas N Go / Sunoco Food Mart,

Respondent.

Docket No. C-15-3482
FDA No. FDA-2015-H-2669

Decision No.CR4534
Date: February 22, 2016
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated a $500 civil money penalty (CMP)
action against Respondent for unlawfully selling tobacco to minors, on two 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 two separate occasions, in
violation 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. During the discovery, Respondent
failed to comply with a judicial direction regarding CTP’s discovery request. I therefore
strike Respondent’s answer and issue this decision of default judgment.

I. Procedural History
Respondent timely answered CTP’s complaint. On September 1, 2015, Administrative

Law Judge Margaret G. Brakebusch issued an Acknowledgement and Prehearing Order
(APHO)! that set deadlines for parties’ submissions, including the October 2, 2015

' The case was transferred from Judge Brakebusch to me on January 29, 2016.
deadline to request that the opposing party provide copies of documents relevant to this
case. Additionally, the APHO stated that a party receiving such a request must provide
the requested documents no later than 30 days after the request.

CTP served Respondent with its request for documents on September 28, 2015. On
November 5, 2015, CTP filed a motion to compel discovery indicating that CTP had not
received a response to its request for production of documents. See 21 C.F.R. § 17.23(a).
On November 5, 2015, CTP also filed a motion to extend the deadlines. Pursuant to a
November 9, 2015 letter issued at Judge Brakebusch’s direction, Respondent had until
November 23, 2015 to file an objection to CTP’s motion to compel discovery and the
pre-hearing exchange deadlines were extended for the parties. On November 10, 2015,
pursuant to Judge Brakebusch’s direction, another letter was issued that corrected
Respondent’s pre-hearing exchange deadline because it was set forth incorrectly in the
November 9, 2015 letter.

On November 30, 2015, Judge Brakebusch issued an Order that granted CTP’s motion to
compel discovery. Judge Brakebusch noted that Respondent did not file an objection to
CTP’s motion to compel discovery. In that Order, Judge Brakebusch stated that
Respondent shall comply with CTP’s request for production of documents by December
15, 2015. She further stated that:

Failure to do so may result in sanctions, including the issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing a civil money penalty. CTP shall file
a status report by December 21, 2015 informing me of whether it is seeking
sanctions.

Emphasis removed. The November 30, 2015 Order also further extended the
parties’ pre-hearing exchange deadlines.

On December 18, 2015, CTP filed an updated status report advising that Respondent had
not complied with the November 30, 2015 Order. On December 18, 2015, CTP also filed
a motion to impose sanctions that asked the Administrative Law Judge to strike the
Respondent’s answer and issue a default judgment in this case. A December 21, 2015
letter, issued at Judge Brakebusch’s direction, gave Respondent until January 5, 2016 to
file an objection to CTP’s motion to impose sanctions. To date Respondent has not filed
an objection to CTP’s motion.

IL. Striking Respondent’s Answer

Respondent failed to file a response to CTP’s motion to compel discovery, and to comply
with the November 30, 2015 Order compelling discovery responses to be provided by
December 15, 2015. Respondent did not comply with CTP’s discovery requests.

Respondent has not made any contact with this Court since August 21, 2015, the date
Respondent timely filed its answer. Respondent’s failure to effectively prosecute and
defend actions taken over the course of the proceedings have interfered with the orderly
and speedy processing of this case, further warranting the imposition of sanctions. See 21
C.F.R. § 17.35(a) (1)(2) and (3).

Due to Respondent’s noncompliance with the November 30, 2015 Order, I am striking
Respondent’s Answer, issuing this default decision, and assuming the facts alleged in
CTP’s complaint to be true. See 21 C.F.R. § 17.35(c) (3), 17.11(a). The harshness of the
sanctions I impose upon either party must relate to the nature and severity of the
misconduct or failure to comply, and I find the failure to comply here sufficiently
egregious to warrant striking the answer and issuing a decision without further
proceedings. See 21 C.F.R. § 17.35(b). Respondent failed to comply with the November
30, 2015 Order and did not provide any adequate justification for not doing so.

Ill. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true and
conclude that default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with the orders. 21 C.F.R.

§ 17.11. Specifically:

e Respondent owns Zenex Gas N Go / Sunoco Food Mart, an establishment that
sells tobacco products and is located at 5450 Palm Beach Boulevard, Fort Myers,
Florida 33905. Complaint § 3.

e During an inspection of Respondent’s establishment on December 23, 2014, at
approximately 3:43 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Camel Crush
Menthol cigarettes . . . [.]” The inspector also observed that “the minor’s
identification was not verified before the sale... .” Complaint § 10.

e On January 29, 2015, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from December 23, 2014. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a)
and (b)(1), and that the named violations were not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violations, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 10.

e On February 10, 2015, FDA received an undated letter from the Respondent, in
response to the Warning Letter stating that the “Respondent spoke with and
retrained ‘the cashier in question’ on the establishment’s tobacco sales policy” and
that “Respondent requires all of its employees to verify the identification of
anyone who attempts to purchase tobacco products.” CTP responded with a
February 24, 2015 letter acknowledging receipt of the establishment’s response
and reminding Respondent of its continuing obligation to be in compliance with
the Act and its implementing regulations. Complaint § 11.

e During a subsequent inspection of Respondent’s establishment conducted on April
1, 2015, at approximately 2:29 PM, an FDA-commissioned inspector documented
that “‘a person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes ....” The inspectors also documented that “the minor’s
identification was not verified before the sale . . . [.]” Complaint { 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes or smokeless tobacco to any person younger than 18 years of age. 21
C.F.R. § 1140.14(a). The regulations also require retailers to verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on December
23, 2014 and April 1, 2015. On those same dates, Respondent also 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). Therefore, Respondent’s actions constitute violations of law that
merit a civil money penalty.
CTP has requested a fine of $500 which is a permissible fine under the regulations. 21
C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Hearthside Rehabilitation & Nursing Center,
(CCN: 395868),

Petitioner,

v.

Centers for Medicare & Medicaid Services,
Respondent.

Docket No. C-15-957
Decision No. CR4533

Date: February 18, 2016

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose a per-instance civil money penalty of $3000 against Petitioner, Hearthside
Rehabilitation & Nursing Center, a skilled nursing facility.

I. Background

Petitioner requested a hearing to challenge the remedy determination that I describe
above. I held a hearing by video teleconference on November 3, 2015. I received into
evidence exhibits offered by CMS that are identified as CMS Ex. 1 — CMS Ex. 14.

Petitioner offered no exhibits at the hearing.

IL. Issues, Findings of Fact and Conclusions of Law

' In its post-hearing brief Petitioner incorrectly describes the remedy imposed by CMS as
being a penalty of $2500. Post-Hearing Brief of Hearthside Rehabilitation & Nursing
Center at 2.
A. Issues
The issues are whether:

1. Petitioner failed to comply substantially with the requirements of 42 C.F.R.
§ 483.25(h); and

2. CMS’s remedy determination is reasonable.
B. Findings of Fact and Conclusions of Law

CMS alleges that Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.25(h). In relevant part, this regulation requires that a skilled nursing
facility, such as Petitioner, keep its premises as free from accident hazards as is possible.
The regulation is not a strict liability requirement. It has been determined universally to
require a facility to take all reasonable measures to protect its residents from accident
hazards.

Essentially, CMS alleges that Petitioner’s staff allowed a resident, identified as Resident
# 122, to consume proscribed food, causing the resident to choke and requiring her
hospitalization. CMS alleges that Petitioner violated 42 C.F.R. § 483.25(h) because the
proscribed food — a medium size chunk of ham — constituted an accident hazard for
Resident # 122, a hazard that was foreseen by Petitioner’s staff and preventable.

The facts that CMS relies on in support of its assertion are uncomplicated. Resident #
122 was, at the time of the event at issue, an elderly individual who suffered from
dysphagia (difficulty swallowing) and had difficulty chewing because she had dental
decay and was missing numerous teeth. CMS Ex. 5 at 1; CMS Ex. 4 at 15, 35. The
resident also suffered from cognitive impairments, including dementia. CMS Ex. 4 at 14-
15, 28. Petitioner’s staff recognized these problems and prescribed a “mechanical soft
diet” for the resident. CMS Ex. 6; CMS Ex. 4 at 18.

Petitioner has a diet manual that describes a mechanical soft diet as follows:

The Mechanical Soft Diet consists of foods that are in an easy to chew
form. Foods from the Regular Diet menu are mechanically altered,
chopped or ground, so [that they] can be consumed by a resident with
chewing difficulty.

CMS Ex. 10 at 2. The manual contains a list of foods that are allowed or are to be
avoided on a mechanical soft diet. Allowable meats consist of the following:
Ground meats and poultry with gravy, ground lunch meats and hot dogs,
chipped lunch meat, ground sausage, soft boneless fish (when baked), soft
casserole (with no larger than bite size pieces of fork-tender meat),
meatloaf with gravy, soft fork-tender meatballs, soft cheese, eggs and eggs
substitute.

Id. at 3. Proscribed meats include: “Whole meats and poultry, whole hamburger patties,
hard cheese or any difficult to chew meats.” Jd.

The policy does not prescribe the size of pieces of meat that may be served to a resident
who is receiving a mechanical soft diet. However, what is evident is that whatever is
served must be chopped so finely or ground so that it will not be a choking hazard or
must be of so soft a texture as to not cause a resident to choke when it is consumed.

On August 9, 2014, Resident # 122 had an incident of choking while she was eating. The
resident began coughing and could not breathe. CMS Ex. 7 at 1. Petitioner’s staff
performed the Heimlich maneuver on the resident several times and suctioned her,
retrieving a medium size chunk of meat from the resident’s throat. Jd. The resident was
sent to a hospital after this incident where she received a chest x-ray.

The uncontroverted evidence establishes that Resident # 122, despite being on a
mechanical soft diet, ingested a piece of meat that was large enough to cause the resident
to choke. There is no objective description of this meat except that Petitioner’s staff
lescribed it as a “medium size chunck [sic]” (CMS Ex. 7 at 1) and that it was a piece of
ham salad, the meal that was being served to the resident at the time of the choking
incident.

The conclusion that I draw from this evidence is that Petitioner’s staff fed Resident # 122
a piece of meat (ham) that was too large for the resident to consume safely. That plainly
was inconsistent with the requirements of the resident’s mechanical soft diet. As I have
iscussed, Petitioner’s diet manual requires that meat fed to any resident on a mechanical
soft diet must be either so soft (as with baked fish), or chopped or ground so finely, so as
not to cause a potential problem for a resident with swallowing difficulties, such as
Resident # 122.

I find that this failure by Petitioner’s staff contravened the requirements of 42 C.F.R.

§ 483.25(h). The fact that Resident # 122 was supposed to be receiving a mechanical soft
diet meant that Petitioner’s staff recognized that the resident was at risk from choking.
The staff had a duty to ensure that anything that was fed to Resident # 122 not contain
pieces of meat that were too large for the resident to consume safely. They plainly failed
to discharge this duty when they allowed the resident to consume a chunk of meat that
was large enough to cause the resident to choke.

Petitioner offers several arguments in its defense. I find these to be without merit.” First,
Petitioner argues that the food served to Resident # 122 at the time of the incident —
commercially manufactured ham salad — was safe, because it consisted of small pieces of
chopped ham that were lubricated with mayonnaise. Moreover, according to Petitioner,
the ham salad was in complete accord with the resident’s dietary restrictions because
Petitioner’s diet manual called for chopped meats and the ham was chopped.

CMS asserts in response that the manual actually called for meat to be ground and CMS
argues that the ham salad did not conform to the resident’s dietary restrictions. I don’t
need to resolve the question of whether the commercial ham salad that was fed to the
resident was a permissible item pursuant to Petitioner’s mechanical soft diet manual. The
fact is that the ham salad served to Resident # 122 on August 9, 2014, did not conform to
Petitioner’s mechanical soft diet manual, because it contained a chunk of meat that was
large enough to cause Resident # 122 to choke. That violated the resident’s mechanical
soft diet even if the remainder of the commercial ham salad that contained the chunk of
meat would otherwise comply with the resident’s dietary restrictions.

Petitioner’s staff had a duty to check the food that was fed to the resident in order to
assure that it was of a consistency that complied with the mechanical soft diet
restrictions. Petitioner cannot hide behind the fact that the ham salad that its staff fed to
the resident was prepared commercially. Whether the staff served commercially prepared
food or whether the staff prepared the food on premises, Petitioner had a duty to examine
everything that was fed to Resident # 122 to assure that it was of a safe consistency.

Petitioner asserts that its staff checked the ham salad that came from the kitchen generally
at that time and the resident’s ham salad after the choking incident and found no
additional chunks of meat in the salad. Post-Hearing Brief of Hearthside Rehabilitation
& Nursing Center at 9. But, even if that is so, that doesn’t lead to an inference that the
salad, when served to the resident, contained no chunks of meat that were large enough to
cause the resident to choke. That is made evident by the fact that the Resident did choke
on what the staff described as a medium size chunk of meat. That is proof that ham salad
served to the resident contained at least one chunk of meat that was larger than what the
resident should have been served.

Nor does the fact that the staff checked the ham salad after the resident choked and found
nothing out of the ordinary fulfill the staff’s obligation to assure that the resident was not

> Petitioner contends that a State review of the initial findings that led to CMS’s remedy
determination resulted in a conclusion that State surveyors had erred and it recommended
that no penalty be imposed against Petitioner. That review is irrelevant because it is not
binding on CMS. 42 C.F.R. § 488.452(a)(2). Ihave made findings based on an
independent and de novo review of the record.
served food that could cause her to choke. Checking the food after the fact is too
late. The food should have been checked before it was served to the resident.

Petitioner argues also that there is no evidence in the record that establishes the actual
size of the piece of meat that caused Resident # 122 to choke. It suggests that, in fact, the
piece may have been quite small, matching the overall consistency of the ham salad that
was served to the resident. It is true that there is no objective measurement of the piece
of ham that was retrieved from the resident’s airway. But, it is obvious that the piece —
whatever its specific dimensions — was large enough to cause the resident to choke.
Moreover, Petitioner’s own staff described the piece as being medium size. That
suggests three equally reasonable inferences. First, that the piece was bigger than the
other bits of food that the resident had been given to consume, with the term “medium
size” being used by Petitioner’s staff to explain that it was not of typical size. Second, if
the piece was not larger than the other bits that were fed to the resident, then a// of the
pieces of ham were at least “medium size.” Lastly, that there were both smaller pieces
and larger pieces, and the piece upon which Resident #122 ultimately choked fell
between the two. Under each of these circumstances Petitioner’s staff contravened its
duty to the resident. Either it allowed the resident to consume food containing an
abnormally large piece of meat or it allowed the resident to consume a meal that was, in
and of itself, inconsistent with the resident’s prescribed diet.

Petitioner asserts that, whatever happened to Resident # 122, she suffered no actual harm.
Therefore, according to Petitioner, the State survey agency finding of a “G” level
deficiency is incorrect.

As a matter of law Petitioner has no right to make this argument.

I take notice that State survey agencies assign letter grades to findings of deficiencies at
skilled nursing facilities. Under the States’ protocols, a grade of anything higher than
“C” signifies a failure to comply substantially with Medicare participation requirements.
Those letter grades are of relevance in hearings at the departmental level only if there is
an issue of immediate jeopardy or if the case involves the imposition of certain remedies
that have not been implemented here. A facility otherwise has no right to challenge the
letter grade of its deficiencies. 42 C.F.R. § 498.3(b)(14), (d)(10)(ii).*

> There is, in fact, ample evidence to support a finding that Resident # 122 actually
sustained harm even if that harm did not necessarily cause her to suffer long-term
injuries. The resident choked and was unable to breathe. She turned blue as a
consequence. She sustained whatever physical trauma comes with administration of the
Heimlich maneuver and whatever psychological trauma that comes with the inability to
breathe. She complained of pain in the right side of her chest. She had to be sent to a
hospital for evaluation and to undergo examination procedures and x-rays at the hospital.
Moreover, a finding of actual harm in this case — whatever the State agency may have
initially determined — is unnecessary to sustain a finding of noncompliance. The
regulations define substantial compliance with a participation requirement as being
compliance such that any identified deficiencies pose no greater risk to resident health or
safety than the potential for causing minimal harm. 42 C.F.R. § 488.301.
Noncompliance is defined by the same regulation to mean failure to comply substantially
with participation requirements. /d. Here, the overwhelming evidence was that the
resident was at great risk of harm. She could have died had the staff’s interventions not
succeeded.

The civil money penalty that CMS determined to impose in this case is reasonable. Per-
instance civil money penalties, such as the one that is at issue here, may fall within a
range of from $1000 to $10,000. 42 C.F.R. § 488.438(a)(2). What is reasonable within
that range depends on evidence pertaining to factors that may include: the seriousness of
a facility’s noncompliance; its compliance history; its culpability; and its financial
condition. 42 C.F.R. § 488.438(f)(1) — (4) (incorporating 42 C.F.R. § 488.404 by
reference).

CMS predicates its remedy — a $3000 per-instance civil money penalty — on the
seriousness of Petitioner’s noncompliance. I note that Petitioner has offered no argument
or evidence to show that the penalty determination is unreasonable.

In fact, the penalty, which is only 30% of the allowable maximum, is reasonable based on
the evidence pertaining to the potential for harm experienced by Resident # 122. This
resident was frail and debilitated to begin with, and could easily have died as a
consequence of her choking and as a result of Petitioner’s staff’s failure to check her food
for inappropriately sized items.

/s/
Steven T. Kessel
Administrative Law Judge