Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Amanda LaComb, M.D., APMC,
(CLIA No. 19D0964266),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-622
Decision Number CR3675
Date: March 4, 2015

DECISION

I deny the Centers for Medicare & Medicaid Services’ (CMS’s) motion to dismiss and
grant CMS’s motion for summary judgment. The undisputed evidence establishes that
CMS had the authority to revoke Petitioner Amanda LaComb, M.D., APMC’s certificate
under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) for a two-year
period because Amanda LaComb, M.D., operated another laboratory that had its CLIA
certificate revoked.

I. Background

The following facts are undisputed unless otherwise noted. Petitioner is a laboratory
owned by Dr. LaComb under CLIA certificate number 19D0964266. Dr. LaComb is a
physician licensed to practice medicine in Louisiana and specializes in family medicine.
Her office is located at 1322 Elton Road, Suite F, Jennings, Louisiana. Petitioner Exhibit
(P. Ex.) 1 (Affidavit of Amanda LaComb, M.D.), at 1-2 §§ 1, 6. Dr. LaComb was also
the laboratory director of record for another laboratory in Jennings, which performed
moderate complexity testing and was owned by Antonio Rogers under the name Lake

Area Laboratories (CLIA number 19D2002974) (Jennings Lake Area Laboratory).!
CMS Ex. 1, at 2; CMS Ex. 4, at 1. Petitioner is a “CLIA —waived” laboratory,” and

Dr. LaComb contracted with Lake Area Laboratories to provide “CLIA-certified”
services. P. Br. at 2 and n.2; P. Ex. 1, at 2 J] 5-7; CMS Ex. 1, at 2 (Dr. LaComb’s
statement that she contracted with Lake Area Laboratories to operate the Jennings Lake
Area Laboratory “to assist in urine drug screening in an effort to minimize diversion of
narcotics in [her] rural practice.”).

By letter dated April 30, 2013, CMS notified Antonio Rogers, as owner, and Dr.
LaComb, as laboratory director, that a second onsite revisit survey by the Louisiana
Department of Health and Hospitals (state agency) found three condition-level
deficiencies at the Jennings Lake Area Laboratory. CMS sent the notice letter to them at
1322 Elton Road, Ste. F, Room 9, Jennings, Louisiana, Dr. LaComb’s practice location.
In the notice letter, CMS stated that it was sanctioning the Jennings Lake Area
Laboratory based on the cited deficiencies, including revocation of its CLIA certificate
effective July 2, 2013, unless Dr. LaComb (or Mr. Rogers) requested a hearing by July 1,
2013. CMS Ex. 4, at 1-5. The notice letter specifically indicated that CMS did not find
the Jennings Lake Area Laboratory met the condition requirements for a laboratory
director in a moderate complexity laboratory. Dr. LaComb admits receiving the notice
letter on May 22, 2013. P. Ex. 1, at 411; CMS Ex. 4, at 6. Dr. LaComb admits she did
not file a hearing request prior to the date of revocation on behalf of the Jennings Lake
Area Laboratory, and CMS did not receive any other hearing request on behalf of the
Jennings Lake Area Laboratory. CMS Ex. 1, at 2-3; P. Ex. 1, at 4-5 ff 12, 13.

By letter dated July 30, 2013, CMS notified Antonio Rogers, as owner, and Dr. LaComb,
as laboratory director, that the Jennings Lake Area Laboratory’s CLIA certificate had
been revoked because no appeal had been filed by the July 1, 2013 deadline and because
the laboratory was closed. CMS Ex. 5, at 1-3. The notice stated:

Please note that sections 42 U.S.C. 263a(i)(3) and 42 C.F.R.
493.1840(a)(8) prohibit the owner(s) or operator(s) (including
director — see 42 C.F.R. 493.2) of laboratories that have had
their certificates revoked from owning or operating (or
directing) a laboratory for at least two years from the date of

' Lake Area Laboratories apparently performed testing at several locations other than
Petitioner’s office and listed Petitioner as their laboratory director, including Crowley,
Louisiana (CLIA number 19D2003420); Plaquemine, Louisiana (CLIA number
19D2038508); and Baton Rouge, Louisiana (CLIA number 19D2007919). CMS Ex. 4, at
7-21,

> CLIA waived tests are categorized as “simple laboratory examinations and procedures
that have an insignificant risk of an erroneous result.” 42 U.S.C. § 263a(d)(2),(3).
the revocation. This prohibition applies to the owner(s) as
well as the director at the time that the deficiencies were
found which led to the revocation action. The two year
period is in effect from July 2, 2013 to July 1, 2015.

CMS Ex. 5, at 1 (emphasis in original).

By letter dated July 30, 2013, CMS sent Petitioner notice that it was revoking its CLIA
certificate (number 19D0964266) for two years because Dr. LaComb, as Petitioner’s
owner, was the laboratory director of the four Lake Area Laboratories whose CLIA
certificates had been revoked, including the Jennings Lake Area Laboratory.? CMS
explained that the revocation was based on the prohibition on a laboratory owner or
operator whose CLIA certificate has been revoked from owning or operating another
laboratory for two years from the date of revocation. CMS stated it would impose this
revocation by September 30, 2013, or after a hearing decision if Petitioner requested a
hearing. CMS informed Petitioner that its hearing request should be sent to the
Departmental Appeals Board, Civil Remedies Division (CRD) and to S.P., a CMS
laboratory consultant working in the CLIA program office in Dallas. CMS Ex. 2. On
September 24, 2013, Dr. LaComb faxed a letter to S.P. explaining why revocation of
Petitioner’s CLIA certificate should not take place and asking CMS to “reconsider” the
revocation. CMS Ex. 13, at 3; CMS Ex. 1, at 2-3.

On January 8, 2014, CMS sent Petitioner notice that its CLIA certificate (number
9D0964266) was revoked for a two-year period, from January 8, 2014, through January
7, 2016. CMS noted that Petitioner’s deadline for filing a hearing request was September
30, 2013, but CMS had “not received a formal hearing request” from Petitioner. CMS
Ex. 3.

Dr. LaComb responded to the January 8, 2014 notice and stated that she had timely filed
a hearing request on Petitioner’s behalf by mailing a hearing request to CRD and by
faxing and mailing the request to the CMS CLIA program office. P. Ex. 1, at 4-5

§ 14; CMS Ex. 1. Although CRD never docketed, or has any record of receiving, any
request for hearing from Petitioner, the CMS CLIA program did receive the September
24, 2013 responsive letter from Dr. LaComb concerning her laboratory’s revocation.
Based on this letter, CMS postponed the revocation of Petitioner’s CLIA certificate.
CMS Ex. 13, at 3.

On January 16, 2014, CMS forwarded the correspondence S.P. received regarding
Petitioner’s revocation to CRD. CRD docketed Petitioner’s two documents as
Petitioner’s hearing request, and the case was assigned to me for hearing and decision.

> Tneed only consider the revocation of the Jennings Lake Area Laboratory in this
decision.
I issued an Acknowledgment and Initial Pre-hearing Order setting out a prehearing
briefing schedule. CMS filed a motion to dismiss and, in the alternative, a motion for
summary judgment with supporting brief (CMS Br.) and 13 proposed exhibits (CMS Exs.
1-13). Petitioner filed an opposition to the motion to dismiss (P. Opp.), a prehearing brief
(P. Br.), and one proposed exhibit (P. Ex. 1).

II. CLIA Authority

CLIA establishes requirements for all laboratories that perform clinical diagnostic tests
on human specimens and provides for federal certification of such laboratories. Pub. L.
No. 100-578, amending § 353 of the Public Health Service Act (codified at 42 U.S.C.

§ 263a et. seq.). The purpose of CLIA is to ensure the accuracy and reliability of
laboratory tests and the public health of all Americans. See H.R. REP. No. 100-899, as
reprinted in 1988 U.S.C.C.A.N. 3828, 3839. CMS certifies a laboratory under CLIA
only if it meets statutory and regulatory requirements. 42 U.S.C. § 263a(f)(1)(E); 42
C.F.R. § 493.1 et. seg. Pursuant to CLIA, the Secretary of Health and Human Services
(Secretary) has broad enforcement authority, including the ability to suspend, limit, or
revoke the certificate of a laboratory that is out of compliance with one or more
requirements for certification.

Implementing regulations specify the standards and conditions of certification that a
laboratory must meet to achieve compliance. 42 C.F.R. Part 493. The regulations confer
broad authority on CMS to ensure that laboratories perform as Congress intended,
including authority to inspect and sanction laboratories that fail to comply with the
regulatory requirements. CMS has the delegated authority to suspend, limit, or revoke
the CLIA certificate of a laboratory that is out of compliance with one or more CLIA
conditions and may also impose alternative sanctions, such as a directed plan of
correction or state monitoring. 42 C.F.R. § 493.1806.

A laboratory or, under circumstances specified in 42 U.S.C. § 263a(i)(1), a laboratory
owner or operator, is entitled to reasonable notice and an opportunity for a hearing before
an administrative law judge (ALJ) to contest imposition of CLIA remedies and may
request review of the ALJ’s decision by the Departmental Appeals Board. The CLIA
regulations incorporate by reference the hearing procedures and the request for review
provisions in 42 C.F.R. Part 498, subparts D and E. 42 C.F.R. § 493.1844.

III. Discussion
A. Issues Presented

1) Whether Petitioner’s request for hearing should be dismissed; and, if not,
2) Whether CMS is authorized to revoke Petitioner’s CLIA certificate number
19D0964266.

B. Findings of Fact & Conclusions of Law

I. I deny CMS’s motion to dismiss because CMS received a timely
hearing request that identified Dr. LaComb’s role in the Jennings Lake
Area Laboratory as an appealable issue.

CMS moves to dismiss this case because Petitioner failed to timely request a hearing
from CRD within 60 days, and the time for filing has not been extended. See 42 C.F.R.

§ 498.70. S.P. admits that the CMS CLIA program received Dr. LaComb’s letter
(arguing why revocation of Petitioner’s CLIA certificate should not take place) on
September 24, 2013, which was within the 60-day deadline. CMS Ex. 13, at3 48. CMS
waited some time but still revoked Petitioner’s CLIA certificate on January 8, 2014.

CMS Ex. 3. Dr. LaComb avers that she filed a timely hearing request with CRD
(received by CMS on September 24, 2013) but does not know why CRD did not receive
it. P. Ex. 1, at 4-5 9§ 14, 16. S.P. received faxed copies of both requests from Dr.
LaComb on January 8, 2014, and S.P. forwarded them to CRD. CMS Ex. 13, at 3 Jf 8, 9.
Because it is undisputed that the CMS CLIA program office timely received the letter
from Petitioner arguing against the revocation, I am extending the time for Petitioner to
file a hearing request and accepting the two documents CRD received from S.P. in
January 2014 as Petitioner’s hearing request in this case. CMS Ex. 1; P. Ex. 1, at 4-5

49 14-16.

In the alternative, CMS argues that if I do not dismiss Petitioner’s hearing request for
lack of timeliness, I must dismiss Petitioner’s hearing request because Petitioner failed to
identify the findings of fact and conclusions of law with which it disagreed. In particular,
CMS asserts that Petitioner did not challenge any of the allegations in CMS’s July 30,
2013 revocation letter, including that: Dr. LaComb is the owner and operator of
Petitioner’s CLIA certificate 19D0964266; Dr. LaComb was the laboratory director of
the Jennings Lake Area Laboratory; and CMS revoked the CLIA certificates for the Lake
Area Laboratory locations including the Jennings Lake Area Laboratory.

Dr. LaComb’s letter to S.P. does include an acknowledgment that, for the Jennings Lake
Area Laboratory, she “was responsible for the lab as the laboratory director on file.”
CMS Ex. 1, at 3. However, she appears to dispute whether she was always, in fact, a
director or operator of the Jennings Lake Area Laboratory:

Around March of 2013, I was informed by the owner that they would be
seeking a “High Complexity” level for their labs and they had hired another
physician to be the laboratory director because only a pathologist can serve
as a laboratory director for a “High Complexity” lab. In my mind I was no
longer serving as laboratory director once this other individual was hired
although I have nothing in writing to support my impression.

CMS Ex. 1, at 2. I thus find that Dr. LaComb intended to challenge CMS’s
determination that she was the laboratory director and operator of the Jennings Lake Area
Laboratory. See 42 C.F.R. § 498.40. Therefore, I deny CMS’s motion to dismiss
Petitioner’s hearing request.

2, Summary judgment is appropriate.

Summary judgment is appropriate if “the record shows that there is no genuine issue as to
any material fact, and the moving party is entitled to judgment as a matter of law.”
Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).
The moving party must show that there are no genuine issues of material fact requiring an
evidentiary hearing and that it is entitled to judgment as a matter of law. Jd. If the
moving party meets its initial burden, the non-moving party must “come forward with
“specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus.
Co. v. Zenith Radio, 475 U.S. 574, 587 (1986). “To defeat an adequately supported
summary judgment motion, the non-moving party may not rely on the denials in its
pleadings or briefs, but must furnish evidence of a dispute concerning a material fact -- a
fact that, if proven, would affect the outcome of the case under governing law.” Senior
Rehab., DAB No. 2300, at 3. To determine whether there are genuine issues of material
fact for hearing, an ALJ must view the evidence in the light most favorable to the
nonmoving party, drawing all reasonable inferences in that party’s favor. Jd. When
ruling on a motion for summary judgment, an ALJ may not assess credibility or evaluate
the weight of conflicting evidence. Holy Cross Vill. at Notre Dame, Inc., DAB No. 2291,
at 5 (2009).

Here, CMS has moved for summary judgment and asserted that the material facts of the
case are undisputed. While Petitioner denies certain of the “undisputed material facts”
adduced by CMS (P. Opp. at 4-5), as I explain below, its challenges to these facts are
not material to my decision.

3. A person who has operated a laboratory that had its CLIA certificate
revoked may not own or operate another CLIA-certified laboratory for
two years.

CLIA provides the following with respect to the owners and operators of noncompliant
laboratories:

(3) Ineligibility to own or operate laboratories after revocation
No person who has owned or operated a laboratory which has had its
certificate revoked may, within 2 years of the revocation of the
certificate, own or operate a laboratory for which a certificate has
been issued under this section.

42 U.S.C. § 263a(i)(3).

CMS may suspend, limit, or revoke a laboratory’s CLIA certificate of any type if it finds
that the owner or operator has:

[w]ithin the preceding two-year period, owned or operated a
laboratory that had its CLIA certificate revoked. (This provision
applies only to the owner or operator, not to all of the laboratory’s
employees.).

42 C.F.R. § 493.1840(a)(8).

4, The undisputed evidence demonstrates that CMS is authorized to
revoke Petitioner’s CLIA certificate because, as the laboratory director
of record for the revoked Jennings Lake Area Laboratory, Dr. LaComb
was necessarily responsible for overall operations of that laboratory.

The implementing regulations generally define an “operator,” as:

Operator means the individual or group of individuals who oversee
all facets of the operation of a laboratory and who bear primary
responsibility for the safety and reliability of the results of all
specimen testing performed in that laboratory. The term includes —

(1) A director of the laboratory if he or she meets the stated criteria

42 C.F.R. § 493.2. A CLIA certified laboratory that performs moderate complexity
testing, however, is specifically required to have a qualified laboratory director who is
responsible for the overall operation and administration of the laboratory and for assuring
compliance with the applicable regulations. 42 C.F.R. §§ 493.1403, 493.1407.

Dr. LaComb, as its uncontested laboratory director of record, does not dispute that she
received proper notice of the proposed revocation of the Jennings Lake Area
Laboratory’s CLIA certificate in May 2013, allowing her time to file a request for
hearing before CMS revoked that laboratory’s CLIA certificate. This notice included
CMS’s finding that the laboratory director did not meet the condition requirements for a
moderate complexity laboratory. CMS Ex. 4, at 1, 2. Neither Dr. LaComb nor Mr.
Rogers appealed the revocation decision, it became final, and I will not now reconsider
her involvement as the director in that laboratory. See P. Br. at 4-5; P. Opp at 5-7. As
the undisputed laboratory director of record for a laboratory conducting moderate
complexity testing, Dr. LaComb was ultimately responsible for the operations of the
Jennings Lake Area Laboratory and is now necessarily banned from owning or operating
another laboratory.

Petitioner argues that Dr. LaComb does not meet the definition of an “operator” in her
position as the laboratory director of the Jennings Lake Area Laboratory because she did
not oversee any laboratory operations or agree to assume responsibility for “all facets of
the operation.” Instead, Petitioner explains the owner, Antonio Rogers, and a technical
consultant were responsible for “some facets” of the operation. P. Br. at 4; P. Ex. 1, at 2-
3 §§ 7-10. It is true that the laboratory director of a moderate complexity laboratory may,
in certain circumstances, delegate responsibilities to qualified technical consultants,
clinical consultants, and testing personnel. 42 C.F.R. § 493.1407(a). However, the
laboratory director of a moderate complexity laboratory remains responsible for ensuring
that all duties are properly performed. 42 C.F.R. § 493.1407(b). Further, Dr. LaComb
was among the “group of individuals,” including Mr. Rogers and the unname:
technician, that did oversee all facets of the Jennings Lake Area Laboratory’s operations,
and she was specifically responsible for the safety and reliability of the testing results.
See CMS Ex. 1, at 2. Therefore, assuming for summary judgment purposes that Dr.
LaComb did not individually oversee all facets of the Jennings Lake Area Laboratory,
she was still ultimately responsible for the Jennings Lake Area Laboratory’s operations as
the laboratory director of record, was part of the group of individuals that did oversee all
facets of the laboratory, and thereby met the definition of an “operator” of the Jennings
Lake Area Laboratory.

Even if I were to reconsider that underlying determination that necessitates the instant
revocation, I do not find her descriptions of her involvement as creating a genuine issue
of material fact. For example, in her letter to S.P. from the CMS CLIA program office,
Dr. LaComb describes that, as laboratory director for the Jennings Lake Area Laboratory,
she:

completed the laboratory director course and served as laboratory director
for the lab in my office. I reviewed the CLIA Improvement amendments,
“Laboratory Director Responsibilities”, and the “Interpretive Guidelines for
Laboratories” from the CMS CLIA website and adhered to the
interpretations therein. I performed my duties in good faith to the best of
my abilities based on the training and material available to me to perform
my job. I oversaw policies and procedures, proficiency testing of the
employees, evaluated proficiency testing results and reports, reviewed any
problem logs or concerns, and reviewed patient reports for accuracy and
appropriateness. I was presented with materials that indicated to me that

there were quality assurance measures in place, that there was adequate and
appropriate safety and quality in the lab operation. Materials presented to
me by those who were under my direction indicated that the day to day
operations were within the guidelines for appropriate, quality and safe
operations of the lab. The owner hired a technical consultant to respond to
deficiencies and these were addressed by the technical consultant. What
was presented to me was a reasonable response to those issues when
applicable and brought to my awareness.

CMS Ex. 1, at 2.

By her own description, Dr. LaComb “oversaw policies and procedures, proficiency
testing of the employees, evaluated proficiency testing results and reports, reviewed any
problem logs or concerns, and reviewed patient reports for accuracy and
appropriateness.” CMS Ex. 1, at 2.

Dr. LaComb generally avers in her affidavit that sometime in 2013 the owner of the
Jennings Lake Area Laboratory informed her he was retaining another laboratory director
and that her “service as laboratory director for the laboratory in my office terminated at
that point.” P. Ex. 1,47. Petitioner’s statement does not constitute a specific fact
creating a genuine issue that would preclude me from ruling on CMS’s motion for
summary judgment. Instead, Petitioner offers only a vague and unsupported statement
failing to describe, among other things, exactly when in 2013 a new laboratory director
was actually hired, who that person was, whether he or she visited the Jennings Lake
Area Laboratory, or whether Dr. LaComb or someone else was responsible for training
and transitioning that person at the Jennings Lake Area Laboratory. Dr. LaComb even
admits in her hearing request that she has “nothing in writing to support [her]
impression.” CMS Ex. 1, at 2 (emphasis added). Dr. LaComb’s vague affidavit does not
defeat CMS’s adequately supported summary judgment motion. See Matsushita Elec.
Indus. Co., 475 U.S. 574, 586-87 (requiring the non-moving party to come forward with
specific facts to preclude a decision on summary judgment).

I also find unavailing Petitioner’s argument that Dr. LaComb’s agreement to serve as
laboratory director of the Jennings Lake Area Laboratory is void ab initio because it was
induced by fraud. Petitioner asserts that Dr. LaComb never agreed to serve as laboratory
director for three other Lake Area laboratories that CMS also revoked or for any
laboratory location other than the Jennings Lake Area Laboratory and Petitioner’s
laboratory. P. Ex. 1, at 295; P. Brief at 3. Petitioner argues that Mr. Rogers deceived
Dr. LaComb and that she would not have agreed to contract with him for the Jennings
Lake Area Laboratory if she knew he was going to list her as the laboratory director for
Lake Area Laboratories’ Baton Rouge, Crowley, and Plaquemine locations. P. Br. at 3-4.
10

Nonetheless, even assuming for purposes of summary judgment that her affiliations with
the other laboratories were fraudulently listed, it is uncontested that her involvement with
the Jennings Lake Area Laboratory was not obtained by fraud, and that one laboratory’s
revocation is sufficient to sustain the revocation of Petitioner’s certificate here.

Finally, Petitioner argues Congress enacted the two-year ban on operators from CLIA-
revoked laboratories to specifically prevent those operators from simply opening another
laboratory. Petitioner argues that, as a CLIA-waived laboratory wholly unrelated to, and
at a different complexity level from, the Jennings Lake Area Laboratory, the revocation
of Petitioner’s CLIA certificate does not serve the purpose for which section 263a(i)(3)
was enacted. Petitioner argues that because Dr. LaComb, who operated Petitioner (a
CLIA-waived laboratory) for over ten years, has no intention of applying for a CLIA
certificate for a higher complexity laboratory or of opening or becoming a laboratory
director of another laboratory, there is no purpose to be served by the two-year ban.

P. Br. at 5-6. Even if I assume for summary judgment purposes that Dr. LaComb has no
intentions of operating any other laboratory besides the one at issue here, I have no
discretion to consider Petitioner’s argument to exempt her from the ban. Once the
Jennings Lake Area Laboratory’s CLIA certificate was revoked, Dr. LaComb, as its
uncontested laboratory director of record, was subject to the two-year ban by operation of
law, a legal requirement that I cannot ignore. 42 U.S.C. § 263a(i)(3); 42 C.F.R.

§ 493.1840(a)(8).

IV. Conclusion

I grant summary judgment to CMS to revoke Petitioner’s CLIA certificate. Dr. LaComb
is Petitioner’s owner and operator. The undisputed facts demonstrate that Dr. LaComb
did not contest CMS’s previous revocation determination regarding the Jennings Lake
Area Laboratory, and, as the laboratory director of record for a laboratory that has a
CLIA certificate to allow moderate complexity testing, she was responsible overall as an
operator of that laboratory. Dr. LaComb is necessarily banned from owning or operating
another laboratory for a two-year period.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

A and H Investments USA Ine. /
Ashok Chauhan
d/b/a Getty,

Respondent.

Docket No. C-15-781
FDA Docket No. FDA-2014-H-2290

Decision No. CR3674

Date: March 2, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, A and H Investments USA Inc. / Ashok Chauhan d/b/a Getty, that
alleges facts and legal authority sufficient to justify the imposition of a $250 civil money
penalty. Respondent did not answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default judgment
against Respondent and assess a $250 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent sold cigarettes to minors, and
failed to verify, by means of photo identification containing a date of birth, that a tobacco
purchaser was 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, Cigarettes
and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a civil money penalty of
$250.

On January 5, 2015, CTP served the Complaint on Respondent by United Parcel Service,
pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying cover letter,
CTP explained that within 30 days, Respondent should pay the proposed penalty, file an
answer, or request an extension of time within which to file an answer. CTP warned
Respondent that if it failed to take one of these actions within 30 days, an Administrative
Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision ordering
Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Getty, an establishment that sells tobacco products and is
located at 4 Ocean Avenue, Monmouth Beach, New Jersey 07750. Complaint § 3.

e During an inspection of Respondent’s establishment on October 13, 2013, at
approximately 12:24 PM, an FDA-commissioned inspector observed 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 § 10.

¢ On December 19, 2013, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from October 13, 2013. 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 Although United Parcel Service records indicate that an individual named
“Chalham” received the Warning Letter, CTP did not receive a response.
Complaint § 11.

e During a subsequent inspection of Respondent’s establishment, conducted on
September 3, 2014, at approximately 12:46 PM, FDA-commissioned inspectors
documented that “‘a person younger than 18 years of age was able to purchase a
package of Marlboro cigarettes.” 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.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of tobacco products to any person younger than 18 years of age. 21 C.F.R.

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

Respondent violated the prohibition against selling tobacco products to persons younger
than 18 years of age, 21 C.F.R. § 1140.14(a), on October 13, 2013 and September 3,
2014. Additionally, on October 13, 2013, Respondent violated the requirement that
retailers verify, by means of photo identification containing a purchaser’s date of birth,
that no cigarette 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 $250, which is a permissible fine under the regulations. 21
C.F.R. § 17.2. I thus find that a civil money penalty of $250 is warranted and so order
one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-2219)

Complainant
v.

Sam’s Mini Mart 3, Inc. / Ali Mosed
d/b/a Gulf,

Respondent.
Docket No. C-15-696
Decision No. CR3673

Date: March 2, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Sam’s Mini Mart 3, Inc. / Ali Mosed d/b/a Gulf, at 14127
Linwood Street, Detroit, Michigan 48238, and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Gulf impermissibly sold cigarettes to a minor, failed to verify, by
means of photo identification containing a date of birth, that a cigarette purchaser was
18 years of age or older, and offered sale of individual cigarettes, thereby violating 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. CTP seeks to impose a $250 civil money
penalty against Respondent Gulf.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on January 12, 2015, CTP served the
complaint on Respondent Gulf by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

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

e At approximately 10:42 a.m. on December 21, 2013, at Respondent’s business
establishment, 14127 Linwood Street, Detroit, Michigan 48238, an
FDA-commissioned inspector observed Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspector also observed that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older;

e Ina warning letter dated March 20, 2014, CTP informed Respondent of the
inspector’s December 21, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

¢ On October 21, 2014, at Respondent’s business establishment, 14127 Linwood
Street, Detroit, Michigan 48238, FDA-commissioned inspectors documented an
open package of Newport cigarettes and a box of individual cigarettes in a Swisher
Streets box next to the cash register, and the Respondent’s staff confirmed that
those cigarettes were available for individual purchase.

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

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R.

§ 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1) stipulates that retailers must verify,
by means of photographic identification containing a purchaser’s date of birth, that no
cigarette purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(d) prohibits
retailers from opening any cigarette package to sell or distribute individual cigarettes.

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent
Sam’s Mini Mart 3, Inc. / Ali Mosed d/b/a Gulf. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
All-Pro Medical Supply, Inc.,
(PTAN: 6390060001),
Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-14-1863
Decision No. CR3671

Date: February 27, 2015

DECISION

Petitioner, All-Pro Medical Supply, Inc., is a supplier of durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS), located in Shelby Township, Michigan,
that, until recently, participated in the Medicare program. The Centers for Medicare &
Medicaid Services (CMS) determined that the supplier was no longer accredited by a
CMS-approved accrediting organization and revoked its Medicare billing privileges.
Petitioner appeals the revocation.

Neither party presents any witnesses, so an in-person hearing would serve no purpose.
See Acknowledgment and Pre-hearing Order at 6 (J 10, 11). I may therefore decide
the matter based on the written record.

Because the supplier was no longer accredited by a CMS-approved accrediting
organization, CMS properly revoked its billing privileges.
Background

Until its Medicare provider number was revoked, effective on or about May 28, 2014,
Petitioner participated in the Medicare program as a supplier of DMEPOS. See 42 C.F.R.
§ 424.57. Ina letter dated April 28, 2014, the Medicare contractor, National Supplier
Clearinghouse, notified Petitioner that its Medicare supplier number would be revoked,
effective 30 days from the date of the letter’s postmark, pursuant to 42 C.F.R.

§§ 405.800; 424.57(e); 424.535(a)(1); and 424.535(g). According to the letter, Petitioner
did not comply with one supplier standard: 42 C.F.R. § 424.57(c)(22), because the
supplier’s accreditation expired on November 14, 2013, and had not been renewed.

CMS Ex. 6.

Petitioner sought reconsideration. In a reconsidered determination dated July 25, 2014,
a Medicare hearing officer affirmed the revocation of Petitioner’s supplier number. CMS
Ex. 1. Petitioner now appeals that determination pursuant to 42 C.F.R. § 424.545.

With its brief, CMS submits seven exhibits (CMS Exs. 1-7). Petitioner submitted letters
dated November 20, 2014 and December 29, 2014. Notwithstanding the November 20
date, we received both letters on December 30, 2014.' In the absence of any objection,
I admit into evidence CMS Exs. 1-7.

Discussion

CMS properly revoked the supplier’s billing number, because the supplier
was no longer accredited, as required by the Medicare statute and
regulations. *

Requirements fora DMEPOS supplier’s Medicare participation. To receive Medicare

payments for items furnished to a Medicare-eligible beneficiary, a supplier of medical

equipment and supplies must have a supplier number issued by the Secretary of Health
and Human Services. Social Security Act § 1834(j)(1)(A); 42 C.F.R. § 424.505.

To obtain and retain a supplier number, a Medicare supplier must, among other
requirements, demonstrate that it is accredited by an approved accreditation organization.

' My pre-hearing order directed Petitioner to submit its pre-hearing exchange by
November 30, 2014. We did not receive Petitioner’s submission, and, on December 15,
2014, I issued an order to show cause directing Petitioner to submit the required briefing
within 15 days. Petitioner responded by submitting these two letters and explaining that,
in error, the Civil Remedies Division sent the order to Shelby Township, Mississippi
48315 rather than Shelby Township, Michigan 48315.

> T make this one finding of fact/conclusion of law.
Act § 1834(a)(20)(F)(i); 42 C.F.R. § 424.57(c)(22). CMS may revoke its billing
privileges if it fails to do so. 42 C.F.R. § 424.57(c) and (d); 42 C.F.R. § 424.535(a)(1).

Here, the parties agree that Petitioner was accredited by the Accreditation Commission
for Healthcare, Inc., until November 14, 2013, when its accreditation expired. CMS Br.
at 9; CMS Exs. 1, 5; CMS Ex. 6 at 1; see P. Nov. 20 Ltr.; CMS Ex. 7 (indicating
Petitioner was not listed as an accredited supplier). Petitioner concedes that its
accreditation expired, but asserts that it applied for re-accreditation before then. P. Nov.
20 Ltr. at 2; see CMS Ex. 3. Petitioner attributes its delay in filing to the considerable
expense involved. Email correspondence between the supplier and the accreditation
organization indicates that the organization received the supplier’s application on
November 18, 2013. CMS Ex. 5 at 2. The supplier’s application was apparently
approved on July 29, 2014 so it was eventually re-accredited. P. Nov. 20 Ltr. at 2.

I agree with CMS, that the reasons Petitioner allowed its accreditation to lapse are
irrelevant. The statute and regulation make no exceptions for lapses in accreditation.
Further, that the supplier was eventually re-accredited does not preclude CMS from
revoking its billing privileges based on the loss of its accreditation. See Pepper Hill
Nursing & Rehab. Ctr., LLC, DAB No. 2395 at 5-7 (2011) (finding retroactive
compliance insufficient to prevent revocation of a supplier’s billing privileges).

Conclusion

Because the supplier was not accredited, as required by the Medicare statute and
regulations, CMS properly revoked its billing privileges.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Douglas Bradley, M.D.
(PTANs: 514170QH2, 514170, and 514170AM3),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1922
Decision No. CR3670

Date: February 26, 2015

DECISION

Novitas Solutions, Inc. (Novitas), an administrative contractor acting on behalf of the
Centers for Medicare & Medicaid Services (CMS), revoked the Medicare billing
privileges of Petitioner, Douglas Bradley, M.D., based on Petitioner’s exclusion from the
Medicaid program by the New York State Office of the Medicaid Inspector General
(NYOMIG). Petitioner requested a hearing to dispute the revocation. For the reasons
stated below, I affirm CMS’s revocation of Petitioner’s Medicare billing privileges.

I. Background and Procedural History

Petitioner is a physician licensed to practice medicine in the states of Pennsylvania
(license number MD-039252-E), New Jersey (license number 25MA04990400 ), and
New York (license number 00154380). CMS Ex. 2 at 3; CMS Ex. 6 at 1, 6; CMS Ex. 9
at 1, 6. In October 2010, the New Jersey Attorney General filed a complaint with the
New Jersey State Board of Medical Examiners alleging six counts of professional
misconduct. On December 27, 2011, the New Jersey State Board of Medical Examiners
and Petitioner signed a Final Consent Order and Settlement Agreement to resolve the
disciplinary action against Petitioner. CMS Ex. 9 at 6-12; P. Ex 4 at 12-18. Although
Petitioner did not admit or deny the charges against him, he agreed to the imposition of
17 sanctions/conditions on his practice, including among others, the following:
Petitioner’s medical license in New Jersey was suspended for three years, but this was
stayed and Petitioner actually served three years of probation; and Petitioner had to pay
penalties and costs totaling $48,455. CMS Ex. 9 at 7-11; P. Ex. 4 at 13-17.

Following resolution of Petitioner’s disciplinary matter in New Jersey, the Pennsylvania
State Board of Medicine instituted a disciplinary proceeding against Petitioner. In May
2012, Petitioner signed a Consent Agreement and Order in which he agreed that he had
been disciplined by a proper licensing authority in another state (i.e., New Jersey), would
pay a $5,000 penalty, and would not apply for renewal of his medical license in
Pennsylvania until Petitioner’s medical license in New Jersey was restored to
unrestricted, non-probationary status. CMS Ex. 9 at 1-5. On July 24, 2012, the
Pennsylvania State Board of Medicine approved the Consent Agreement. CMS Ex. 9 at
13.

On November 29, 2012, the New York State Board of Professional Medical Conduct
issued a Statement of Charges against Petitioner based on his discipline in New Jersey.
The Statement of Charges included two specifications: 1) Petitioner violated New York
Education Law § 6530(9)(b) because he was found guilty of improper professional
practice or professional misconduct by a duly authorized professional disciplinary body
of another state and, had that conduct occurred in New York, it would have constituted
professional misconduct under the laws of New York State; and 2) Petitioner violated
New York Education Law § 6530(9)(d) because he was disciplined by a duly authorized
professional disciplinary body of another state where the conduct resulting in discipline,
had it occurred in New York, would have constituted a violation of the laws of New York
State. CMS Ex. 6 at 10-11. In April 2013, Petitioner signed a Consent Agreement in
which he agreed that:

I do not contest the two (2) Specifications [in the Statement of
Charges] in that some of the conduct resulting in the New
Jersey disciplinary action would constitute misconduct under
the laws of New York State, and agree to the following
sanction:

Censure and Reprimand;
Respondent shall pay a $2,000 fine... .

CMS Ex. 6 at 6. On May 11, 2013, the New York State Board of Professional Medical
Conduct approved the Consent Agreement. CMS Ex. 6 at 5.
On July 26, 2013, NYOMIG issued a letter informing Petitioner that he was being
excluded from the New York Medicaid program under 18 New York Comp. Codes R. &
Regs. (NYCRR) § 515.7(e) due to professional misconduct based on Petitioner’s
violation of New York Education Law § 6530. The letter indicated that the exclusion
would be effective five days from the date of the letter. The letter stated that the
exclusion meant that Petitioner could neither bill Medicaid for services he provided nor
provide services related to care that would be billed to Medicaid. The letter notifies
Petitioner of his appeal rights and where to file an appeal. Petitioner did not appeal the
exclusion. CMS Ex. 6 at 12-13; CMS Ex. 11 at 1.

New Jersey excluded Petitioner from its Medicaid program based on NYOMIG’s
exclusion. P. Ex. 14 at 3.

In an April 8, 2014 initial determination, Novitas revoked Petitioner’s Medicare billing
privileges. Novitas based this action on 42 C.F.R. §§ 424.535(a)(2) (exclusion from
Medicare, Medicaid, and any other federal health care program) and 424.535(a)(12)
(termination or revocation of Medicaid billing privileges by a state Medicaid agency).
Factually, Novitas asserted that NYOMIG excluded Petitioner from the Medicaid
program and that the Department of Health and Human Services’ Inspector General
excluded Petitioner from Medicare, Medicaid, or any other federal health care program.'
CMS Exhibit (Ex. 1).

Petitioner timely requested reconsideration of the revocation determination, arguing that
Petitioner had never been enrolled in the New York Medicaid program and thus could not
be excluded or terminated from the program. Petitioner also disputed that Novitas was
authorized, in place of CMS, to revoke Petitioner’s billing privileges and that, in any
event, the revocation was an abuse of discretion. CMS Ex. 3.

In an August 28, 2014 reconsidered determination, a Novitas hearing officer upheld the
initial determination based on the NYOMIG exclusion.” The hearing officer also stated
that Novitas revoked Petitioner’s billing privileges at CMS’s direction. CMS Ex. 5.

Petitioner timely requested a hearing. On September 30, 2014, I issued an
Acknowledgment and Pre-Hearing Order (Order) establishing deadlines for the
submission of prehearing exchanges. However, because Petitioner’s hearing request did
not specify why he had appealed, CMS moved for a more definitely statement. I granted
this motion, provided Petitioner with time to file a perfected hearing request, and

' Tt is unclear whether this federal exclusion was ever imposed because there is no
evidence in the record that proves it occurred.

> The Novitas hearing officer appears to have abandoned the allegation in the April 8,
2014 initial determination that Petitioner was subject to a federal exclusion.
modified the prehearing submission schedule. Petitioner timely filed a revised hearing
request in which he disputed the same issues as stated in his reconsideration request.

In accordance with the Order, as modified, CMS filed its prehearing exchange, which
included a brief (CMS Brief) in support of summary judgment,’ ten exhibits (CMS Exs.
1-10), and written direct testimony for two witnesses (CMS Ex. 6 at 1-3; CMS Ex. 7).
Petitioner also filed a prehearing exchange consisting of a brief (P. Br.) in opposition to
summary judgment, 18 exhibits (P. Exs. 1-18), and written direct testimony of Petitioner
(P. Ex. 2). Because Petitioner’s brief raised many issues not stated in the hearing request,
I ordered CMS to respond to any issues in Petitioner’s brief that it had not addressed in
its brief. I also provided Petitioner with an opportunity to file a response to CMS. CMS
submitted a reply brief (CMS Reply Br.) along with two additional exhibits (CMS Exs.
11-12), one of which was written direct testimony for another witness (CMS Ex. 11).
Petitioner filed a reply brief (P. Reply Br.)

Il. Evidentiary Ruling and Decision on the Record

Petitioner objected to the admission of CMS Ex. 12, which is a blank Form CMS-8551
enrollment application. P. Reply Br. at 14-15. CMS submitted this form to support the
new basis it identified (i.e., 42 C.F.R. § 424.535(a)(9)) in its brief for revoking
Petitioner’s Medicare billing privileges. CMS Reply Br. at 15 n.7. As discussed in
footnote 2 of this decision, I cannot consider a basis for revocation that does not appear in
the reconsidered determination. Therefore, I exclude CMS Ex. 12 from the record.

In the absence of any other objection to the proposed exhibits, I admit CMS Exs. 1-11
and P. Exs. 1-18 into the record.

My Order advised the parties that they must submit written direct testimony for each
proposed witness and that an in-person hearing would only be necessary if the opposing
party requested to cross-examine a witness. Order {J 8-10; Pacific Regency Arvin, DAB
No. 1823, at 8 (2002). CMS submitted written direct testimony for two witnesses and

> CMS asserts a new basis for revocation in its brief based on an alleged violation of

42 C.F.R. § 424.535(a)(9). CMS urges me to consider this new basis in this proceeding
because Novitas overlooked it when issuing its revocation determination and because it
would conserve resources to adjudicate it now. P. Br. at 4-5, 13-14. Petitioner objects to
this. P. Br. at 20. While the Departmental Appeals Board previously permitted CMS to
provide new reasons for a revocation in its brief submitted to an ALJ (Fady Fayad, DAB
No. 2266, at 10-11 (2008), aff'd Fayad v. Sebelius, 803 F.Supp. 2d 699 (E.D. Mich.
2011), the Departmental Appeals Board now restricts administrative law judge review to
the basis or bases for revocation CMS asserts in its reconsidered determination. See e.g.,
Neb Group of Arizona LLC, DAB No. 2573, at 7 (2014). Asa result, I must uphold
Petitioner’s objection to the inclusion of this new basis to support revocation in this case.
Petitioner submitted his own written testimony. However, neither party requested to
cross-examine a witness. Therefore, I issue a decision based on the written record. Order
§ 11; Marcus Singel, D.P.M., DAB No. 2609, at 5-6 (2014).

III. Issue

Whether CMS had a legitimate basis for revoking Petitioner’s Medicare billing privileges
under 42 C.F.R. §§ 424.535(a)(2) and/or 424.535(a)(12).

IV. Jurisdiction

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

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

Petitioner is a physician and, therefore, a supplier for purposes of the Medicare program.
See 42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of Supplier), 410.20(b)(1).
CMS may revoke the Medicare billing privileges of a supplier for any of the reasons
stated in 42 C.F.R. § 424.535.

I. Effective July 31, 2013, the NYOMIG excluded Petitioner from
participation in the New York State Medicaid program and Petitioner
did not appeal the exclusion.

On July 26, 2013, the NYOMIG issued a letter informing Petitioner that he was being
excluded from the New York Medicaid program under 18 NYCRR § 515.7(e) due to a
violation of New York Education Law § 6530 for conduct that the New York State Board
of Professional Medical Conduct described as professional misconduct or unprofessional
conduct. CMS Ex. 6 at 12-13. The exclusion became effective on July 31, 2013, which
is five days after the date on the letter. CMS Ex. 6 at 2, 12; CMS Ex. 11 at 1. The letter
stated that Petitioner could neither bill the New York Medicaid program for services he
provided nor provide services related to care that would be billed to Medicaid. The
exclusion letter notified Petitioner of his right to file an appeal within 30 days. CMS Ex.
6 at 12-13. Petitioner did not appeal the exclusion. CMS Ex. 11 at 1.

+ My findings of fact and conclusions of law are set forth in italics and bold font.
2. CMS did not have a legitimate basis to revoke Petitioner’s Medicare
billing privileges under 42 C.F.R. § 424.535(a)(2) because NYOMIG
excluded Petitioner in accordance with New York State regulations
and not with exclusion provisions in the Social Security Act (Act).

CMS revoked Petitioner’s Medicare billing privileges based in part on the conclusion that
Petitioner’s exclusion from the New York Medicaid program could serve as a predicate
for revocation under 42 C.F.R. § 424.535(a)(2). The relevant portion of that regulation
states that CMS may revoke a supplier who is:

[e]xcluded from the Medicare, Medicaid, and any other
Federal health care program, as defined in §1001.2 of this
chapter, in accordance with section 1128, 1128A, 1156, 1842,
1862, 1867 or 1892 of the Act.

42 CFR. § 424.535(a)(2)(i).

Petitioner argues that NYOMIG’s exclusion cannot be an exclusion on which a
revocation under section 424.535(a)(2)(i) is based because the exclusion must be imposed
in accordance with one of the listed sections of the Act, and that each of those provisions
only authorizes the Secretary of Health and Human Services (Secretary) to impose the
exclusion. Therefore, NYOMIG could not impose an exclusion under one of the sections
of the Act listed in section 424.535(a)(2)(i). Petitioner further argues that the NYOMIG
exclusion was not imposed “in accordance with” the Act provisions listed in section
424.535(a)(2)(i), but rather in accordance with New York State regulations. P. Br. at 8;
P. Reply Br. at 6-7. CMS responded to this argument by arguing that section
424.535(a)(2)(i) includes Medicaid exclusions, which includes NYOMIG’s exclusion.
CMS Reply Br. 12-13.

Petitioner’s argument that a state Medicaid agency cannot impose an exclusion under the
authority of the Act is incorrect. Congress expressly authorized states to exclude
individuals and entities from participation in their Medicaid programs based on any of the
grounds for exclusion indicated in sections 1128, 1128A, and 1866(b)(2) of the Act.

42 U.S.C. § 1396a(p)(1); 42 C.F.R. § 1002.2(a). Indeed, each “State agency must have
administrative procedures in place to exclude an individual or entity for any reason for
which the Secretary could exclude such individual or entity under [sections 1128 and
1128A of the Act].” 42 C.F.R. § 1002.210. Therefore, the primary question to resolve is
whether NYOMIG imposed its exclusion on Petitioner in accordance with section 1128,
1128A, or 1866(b)(2) of the Act.

The NYOMIG letter specifies that it is excluding Petitioner under the authority in
18 NYCRR § 515.7(e). That provision states:
Upon receiving notice that a person has been found to have
violated a State or Federal statute or regulation pursuant to a
final decision or determination of an agency having the power
to conduct the proceeding and after an adjudicatory
proceeding has been conducted, in which no appeal is
pending, or after resolution of the proceeding by stipulation
or agreement, and where the violation resulting in the final
decision or determination would constitute an act described as
professional misconduct or unprofessional conduct by the
tules or regulations of the State Commissioner of Education
or the State Board of Regents, or an unacceptable practice
under this Part, or a violation of article 33 of the Public
Health Law, the department may immediately sanction the
person and any affiliate.

CMS Ex. 8. A review of sections 1128, 1128A, and 1866(b)(2) of the Act reveals that
there is no provision to exclude in those sections that has all of the same elements as
stated in 18 NYCRR § 515.7(e). Further, there is nothing in the NYOMIG exclusion
letter expressly citing to the Act for authority to exclude. CMS Ex. 6 at 12-13.

The Act recognizes that states have their own authority to exclude individuals from the
Medicaid program. 42 U.S.C. § 1396a(p)(1); see also 42 C.F.R. § 1002.2(a) (“Nothing
contained in this part should be construed to limit a State’s own authority to exclude an
individual or entity from Medicaid for any reason or period authorized by State law.”);
Cf. James O. Boothe, DAB No. 2530, at 5 (2013) (distinguishing federal and state
exclusions and indicating exclusions under 18 NYCRR § 515.7 are based on a state law
that authorizes NYOMIG “to regulate Petitioner’s participation in New York State’s
Medicaid program.”). Because NYOMIG excluded Petitioner based on New York State
regulations, I conclude that CMS’s revocation of Medicare billing privileges cannot be
affirmed based on section 424.535(a)(2)(i).

3. CMS had a legitimate basis for revoking Petitioner’s Medicare billing
privileges under 42 C.F.R. § 424.535(a)(12) because NYOMIG
excluded Petitioner from the Medicaid program, the exclusion has the
same effect as a termination of Medicaid billing privileges, and
Petitioner has no appeal of the exclusion pending.

Based on NYOMIG’s exclusion (CMS Ex. 6 at 12-13), CMS also revoked Petitioner’s
Medicare billing privileges under 42 C.F.R. § 424.535(a)(12). CMS Exs. 1, 5. That
regulation states that CMS may revoke billing privileges if:

(i) Medicaid billing privileges are terminated or revoked by a
State Medicaid Agency.
(ii) Medicare may not terminate unless and until a provider or
supplier has exhausted all applicable appeal rights.

As discussed below, I conclude that CMS properly revoked Petitioner’s Medicare billing
privileges under section 424.535(a)(12).

a. NYOMIG is a state Medicaid agency.
Petitioner was excluded by the NYOMIG. As testified to by two NYOMIG employees:

[NYOMIG] is an independent entity created within the New
York State Department of Health to improve and preserve the
integrity of the Medicaid program by conducting and
coordinating fraud, waste, and abuse control activities for
services funded by Medicaid. In carrying out its mission,
[NYOMIG] conducts and supervises all prevention, detection,
audit, and investigation efforts and coordinates these
activities with the New York Department of Health, among
other state agencies and offices.

CMS Ex. 6 at 1; CMS Ex. 11 at 1. The statute establishing the NYOMIG is consistent
with this testimony. See New York Public Health Law §§ 31-33. Petitioner has not
disputed that the NYOMIG is a state Medicaid agency. Therefore, I conclude that
NYOMIG is a state Medicaid agency.

b. For purposes of 42 C.F.R. § 424.535(a)(12), Petitioner’s
exclusion from the New York Medicaid program is equivalent
to the termination of Medicaid billing privileges.

Petitioner disputes that his exclusion from the New York Medicaid program is the same
as a termination of Medicaid billing privileges. Petitioner asserts that a plain language
reading of section 424.535(a)(12) means that CMS may only revoke Medicare billing
privileges when the supplier’s Medicaid billing privileges have been terminated or
revoked, and not when a supplier has been excluded. P. Reply Br. at 7-8. Because I
believe that the Secretary meant for the terms “terminated” and “revoked” in section
424.535(a)(12) to be descriptive of an action that a state Medicaid agency may take that
could result in revocation of Medicare billing privileges, I disagree with Petitioner’s
argument.

The Secretary added section 424.535(a)(12) as a basis for revocation of Medicare billing
privileges so that it could “work[] in tandem” with the requirement in the Affordable
Care Act (ACA) § 6401 that each state must terminate the Medicaid billing privileges of
a provider who has been terminated from the Medicare program or another state’s
Medicaid program. 76 Fed. Reg. 5,861, 5,946 (Feb. 2, 2011). The reason that the
Secretary thought that coordination between Medicare and state Medicaid programs was
important was because “providers and suppliers whose enrollment has been terminated
by a State Medicaid program may pose an increased risk to the Medicare program.” Jd.
Significantly, even though section 424.535(a)(12) as originally proposed and ultimately
promulgated only mentions terminations and revocations of Medicaid billing privileges in
the regulatory text, the preambles to the proposed rule and final rule consider
terminations, revocations, and suspensions of billing privileges to be actions that permit
CMS to revoke Medicare billing privileges. d.; 75 Fed. Reg. 58,203, 58,229, 58,242
(Sept. 23, 2010). The inclusion of suspensions to the actions that a state Medicaid agency
can take that could result in revocation of Medicare billing privileges indicates that the
specific name of the action taken is not dispositive under section 424.535(a)(12). Rather,
it is more important to look to the action taken by the state Medicaid agency and
determine if it is essentially the same in effect as a termination or revocation. This
flexible approach is necessary because the states may use various terms in their statutes
and regulations to indicate that an individual has been prohibited from billing a state’s
Medicaid program. Based on this approach, I believe that New York Medicaid
exclusions have essentially the same effect as a termination of Medicaid billing
privileges.

As an initial matter, I note that the Act does not treat Medicaid terminations and
exclusions as entirely separate. In the statute authorizing states to exclude individuals
from the Medicaid program based on sections 1128, 1128A, and 1866(b)(2) of the Act,
Congress defined the word “exclude” to encompass “the refusal to enter into or renew a
Medicaid] participation agreement or the termination of such agreement.” 42 U.S.C.
§ 1396a(p)(3) (emphasis added).

Under New York State’s regulations, which authorize both terminations and exclusions
(see 18 NYCRR §§ 504.7, 515.3(a)(1)), terminations and exclusions are clearly
interrelated. See Koch v. Sheehan, 998 N.E.2d 804, 806-806 (N.Y. 2013) (stating the
following when reviewing an exclusion under 18 NYCRR § 515.7(e): “thus,
[NY]OMIG's decision to terminate petitioner physician's participation in the Medicaid
program falls squarely within the agency's explicit powers.”) (emphasis added). The
primary basis for imposing a termination for misconduct under New York State’s
regulations appears to be when a Medicaid provider has engaged in an “unacceptable
practice” as set forth in the exclusion regulations, and if a provider is terminated under
that provision, the provider has the same appeal rights as an excluded provider.

18 NYCRR §§ 504.7(b), 515.2; see also Plaza Health Laboratories, Inc. v. Perales, 878
F.2d 577, 582 (2d Cir. 1989). Most significantly, terminations and exclusions in New
York State have effectively the same fundamental result: the provider cannot bill the
10

Medicaid program for services provided.” Compare 18 NYCRR §§ 504.1(b)(1), (d)(16)
with 18 NYCRR § 515.5.

Although section 424.535(a)(12) does not list all of the possible terms that state Medicaid
agencies might use when prohibiting a provider from billing the Medicaid program, I
cannot accept Petitioner’s narrow interpretation of that section. To do so would
unnecessarily restrict CMS’s efforts to protect the Medicare program from individuals
“who may pose an increased risk to the Medicare program.” The NYOMIG exclusion
bars Petitioner from billing the New York Medicaid program for services. CMS Ex. 6 at
12. This is the same as terminating Medicaid billing privileges. Therefore, I conclude
that Petitioner’s exclusion from the New York Medicaid program is a termination for the
purposes of section 424.535(a)(12).

Petitioner would dispute this conclusion because he also argues that he was never
enrolled in the New York Medicaid program and that the use of the terms “terminated”
and “revoked” in section 424.535(a)(12) mean that Medicaid billing privileges must have
been first conferred and then removed. P. Br. at 9; P. Reply Br. at 8-9. In support of this
argument, Petitioner testified that he was never enrolled in the New York State Medicaid
program. CMS Ex. 2. Further, Petitioner submitted a letter in which CMS counsel states
that “there is no enrollment application for [Petitioner’s] enrollment in the New York
Medicaid program.” CMS Exs. 3, 10.

CMS asserts that Petitioner was enrolled in the New York Medicaid program and
provided testimony from a NYOMIG employee who stated that a review of eMedNY
(New York’s Medicaid provider computer system) shows that Petitioner was enrolled “to
provide services as part of Hudson Health Plan, a managed care provider for the New
York Medicaid program... .” CMS Ex. 6 at 2-3. The NYOMIG employee also
provided screen shots from that system. CMS Ex. 6 at 15-17.

Although Petitioner argues that the screen shots from the eMedNY are unclear to
someone who does not understand that system, I accept the testimony of the NYOMIG
employee as to their meaning. The NYOMIG did not need to show that Petitioner was
enrolled in the New York State Medicaid program to exclude him, so the NYOMIG
employee would have no motivation to falsely interpret the records in the eMedNY
system. CMS Ex. 6 at 2. Further, Petitioner did not cross-examine this witness.

In addition, I find it significant that Petitioner’s testimony, which is focused entirely on
denying that he was enrolled in the New York Medicaid program, does not deny (or even

> The interrelatedness of terminations and exclusions is further evidenced by the New
York State regulation that requires exclusion from the Medicaid program when an
individual is “excluded or terminated from participation in the Federal Medicare
program.” 18 NYCRR § 515.8(a)(1).
11

mention) an association with Hudson Health Plan in response to the NYOMIG’s
testimony. Further, I do not accept as conclusive the ambiguous statement by CMS
counsel that there is no enrollment application for Petitioner in the New York Medicaid
program. P. Ex. 3. This statement was made in response to Petitioner’s counsel’s request
for that document from CMS counsel, not from the NYOMIG. P. Ex. 10. I do not know
if CMS counsel is able to categorically state that an enrollment application for Petitioner
does not exist.

To the extent that such a finding is necessary to uphold Petitioner’s revocation under
section 424.535(a)(12), I find that the record establishes by a preponderance of the
evidence that Petitioner was enrolled in the New York Medicaid program prior to being
excluded from it.

c. Petitioner does not have an appeal of his NYOMIG exclusion
pending.

The July 26, 2013 letter informing Petitioner that NYOMIG was excluding him from the
New York Medicaid program stated that the exclusion was imposed based on 18 NYCRR
§ 515.7(e) and that he had the right to an appeal under 18 NYCRR § 515.7(g). CMS Ex.
6 at 12. The letter provides detailed information as to the potential bases for appeal, the
time limit to file an appeal (30 days), and the address where to send the appeal. CMS Ex.
6 at 12-13.

An NYOMIG attorney testified that: Petitioner did not file an appeal of the exclusion
under 18 NYCRR § 515.7(g); Petitioner did not appeal to a state court within 4 months of
the exclusion letter; NYOMIG’s decision to exclude Petitioner is final; and Petitioner
“has no further appeal rights to try to challenge his exclusion from the New York
Medicaid program.” CMS Ex. 11 at 1. The testimony concerning Petitioner’s failure to
appeal is partially corroborated by Petitioner’s testimony: “I did not in July of 2013 —
and continue to not — perceive the July 16, 2013 letter from the [NYOMIG] purporting to
exclude me from the New York Medicaid Program as an adverse legal action.” P. Ex. 2.
This testimony, taken in conjunction with the fact that Petitioner did not assert he
appealed the exclusion, is essentially a concession that Petitioner did not file an appeal to
the exclusion within the 30-day period provided under New York regulations.

However, Petitioner asserts that he currently has an appeal pending related to his request
for the NYOMIG to remove his name from their exclusion list and that this appeal is
sufficient to show that he has not exhausted “all applicable appeal rights” as required
under section 424.535(a)(12)(ii). Petitioner asserts that a request for removal of his name
from the exclusion list is distinct from a request for reinstatement based on NYOMIG’s
website. P. Br. at 16-18; Reply Br. at 11-12; P. Exs. 14, 15.
12

Petitioner sent a letter in August 2014 requesting removal from the New York Medicaid
exclusion list, which NYOMIG denied. P. Exs. 4,5. This was approximately a year after
an appeal of his exclusion was due. Although it is true that Petitioner has an appeal
pending related to the denial of the request to remove his name from the exclusion list (P.
Exs. 6, 7), under New York State regulations, this appeal technically relates to the denial
of a request for reinstatement and not to the original exclusion. CMS Ex. 11 at 1. The
decision denying Petitioner’s request to remove his name from the exclusion list
expressly states that NYOMIG applied the regulations related to the denial of an
enrollment application (18 NYCRR § 504.5) as required by the regulation governing
reinstatement requests (18 NYCRR § 515.10(b)).° P. Ex. 5.

An attorney with NYOMIG testified to the following regarding the nature of Petitioner’s
appeal:

Even if [Petitioner] were ultimately successful in getting
reinstated to the New York Medicaid program as a result of
his pending appeal for reinstatement under [18 NYCRR §
515.10(b)], that decision would not “overturn” his current
exclusion from the New York State Medicaid program... .
Thus, even if [Petitioner] were to achieve reinstatement in the
New York Medicaid program, the exclusion would
nevertheless be in effect from July 31, 2013 until the date of
any reinstatement.

CMS Ex. 11 at 2.

Based on the foregoing, I conclude that Petitioner did not appeal his exclusion from the
New York Medicaid program and that Petitioner’s current appeal with NYOMIG is not
an appeal related to the decision to exclude him from the New York Medicaid program.
As a result, Petitioner’s exclusion may serve as the basis for a revocation under section
424.535(a)(12).

4. I reject Petitioner’s various other arguments.

Petitioner’s raises various arguments related to NYOMIG’s exclusion decision and
CMS’s revocation determination.

° The regulation at 18 NYCRR § 515.10(b) states that a “request for reinstatement or for
removal of any condition or limitation on participation in the program is made as an
application for enrollment under Part 504 of this Title and must be denominated as a
request for reinstatement to distinguish it from an original application.”
13

Petitioner argues that 42 C.F.R. § 424.535(a) only authorizes CMS and not a contractor to
make the discretionary decision to revoke Petitioner’s Medicare billing privileges on
behalf of CMS. Further. Petitioner argues that even if the contractor has been granted
such authority, this grant is impermissible. P. Reply Br. at 4-5. I reject this argument
because the regulations governing provider revocation matters expressly authorizes CMS
contractors to revoke Medicare billing privileges (42 C.F.R. §§ 800(b), 803) and this
authorization has been upheld by a federal court. Fayad v. Sebelius, 803 F.Supp. 2d. 699,
704-706 (E.D. Mich. 2011). Further, the preamble to the final rule indicates that CMS
“directly or through its contractor” could revoke billing privileges under section
424.535(a)(12). 76 Fed. Reg. 5,861, 5,946 (Feb. 2 2011). Finally, even if a contractor
cannot make the discretionary decision to revoke billing privileges, in this case, Novitas
revoked Petitioner’s billing privileges at CMS’s direction. CMS Ex. 5 at 2.

Petitioner argues that an administrative law judge, who is holding a de novo hearing, may
review the discretionary act of CMS to revoke Petitioner’s billing privileges. P. Reply
Br. at 5-6. However, it has been long settled that CMS has discretion to revoke a
supplier’s billing privileges and that discretionary decision is not reviewable. Latantia
Bussell, M.D., DAB No. 2196, at 13 (2008) (‘the right to review of CMS’s determination
by an ALJ serves to determine whether CMS had the authority to revoke . . . not to
substitute the ALJ’s discretion about whether to revoke.”’). Rather, “[t]he ALJ’s review
of CMS’s revocation . . . is thus limited to whether CMS had established a legal basis for
its actions.” Jd.

Petitioner asserts that I should not uphold CMS’s revocation in this case because
NYOMIG’s exclusion decision did not comply with New York State regulations, that
NYOMIG did not have sufficient evidence to exclude Petitioner, and that the regulations
governing Petitioner’s exclusion are deficient because the appeal rights do not provide for
a hearing. P. Br. at 11-16, 18-20; P. Reply Br. at 9-12. CMS argues, citing Ravindra
Patel, M.D., DAB CR2171 (2010), that Petitioner’s arguments are impermissible
collateral attacks on NYOMIG’s exclusion decision and that I do not have authority to
consider them, especially since the exclusion decision is final. CMS Reply Br. at 2-4. I
agree with CMS. A revocation under section 424.535(a)(12) is derivative to the action of
a state Medicaid agency. The terms of that regulation do not authorize me to review the
merits or procedures involved in the exclusion decision. If Petitioner wanted to challenge
the exclusion, Petitioner ought to have followed the appeal procedures in New York
State’s regulations and, if necessary, sought judicial relief. However, this is not the
forum for an appeal of the exclusion decision.

Petitioner argues that the reenrollment bar imposed by CMS is arbitrary and capricious.
P. Br at 22-25. However, I do not have jurisdiction to consider this issue. See Ravindra
Patel, M.D., DAB CR2171, at 7 n.5 (2010); Emmanuel Brown M.D. and Simeon K.
Obeng, M.D., DAB CR2145, at 10 (2010).
14

III. Conclusion

For the reasons explained above, I affirm CMS’s determination to revoke Petitioner’s
Medicare billing privileges.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,

(FD

A No. FDA-2014-H-2348)
Complainant
v.

M and H Fuel, Inc.
d/b/a Sunoco,

Respondent.
Docket No. C-15-812

Decision No. CR3669

Date: February 25, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products
complaint on Respondent, M and

(CTP) began this matter by serving an administrative
H Fuel, Inc. d/b/a Sunoco, at 1555 East Outer Drive,

Detroit, Michigan 48234, and by filing a copy of the complaint with the Food and Drug

Administration’s (FDA) Division

of Dockets Management. The complaint alleges that

Sunoco impermissibly sold cigarettes to minors and failed to verify, by means of photo

identification containing a date of

birth, that the purchasers were 18 years of age or older,

thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.
§ 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose

a $500 civil money penalty agains

t Respondent Sunoco.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on January 7, 2015, CTP served the

complaint on Respondent Sunoco

by United Parcel Service. In the complaint and

accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.

CTP warned Respondent that, if it

failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

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

e At approximately 10:21 a.m. on February 21, 2014, at Respondent’s business
establishment, 1555 East Outer Drive, Detroit, Michigan 48234, an FDA-
commissioned inspector observed Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspector also observed that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older;

e Ina warning letter dated April 24, 2014, CTP informed Respondent of the
inspector’s February 21, 2014 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 4:26 p.m. on July 31, 2014, at Respondent’s business
establishment, 1555 East Outer Drive, Detroit, Michigan 48234, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age. The
inspectors also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older.

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

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R.

§ 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order
For these reasons, I enter default judgment in the amount of $500 against Respondent M

and H Fuel, Inc. d/b/a Sunoco. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final
and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

George John Schulte
(OI File No. H-13-4-3161-9),

Petitioner,
v.

The Inspector General.

Docket No. C-14-1867

Decision No. CR3667

Date: February 25, 2015
DECISION

The Inspector General (IG) of the Department of Health and Human Services notified
George John Schulte (Petitioner) that he was being excluded from participation in
Medicare, Medicaid, and all other federal programs for three years. Petitioner filed a
request for hearing (RFH) to dispute the exclusion. For the reasons explained below, I

conclude that the IG had a legitimate basis to exclude Petitioner and that a three-year
exclusion is reasonable as a matter of law.

I. Background

By letter dated August 29, 2014, the IG notified Petitioner that he was being excluded,
effective 20 days from the date of the IG’s letter, from participating in Medicare,
Medicaid, and all other federal health care programs for three years. The IG cited

42 U.S.C. § 1320a-7(b)(2) as the basis for the exclusion due to Petitioner’s conviction of
a criminal offense in the Unites States District Court, District of Colorado. RFH,
Attached IG Exclusion Letter at 1.
On September 10, 2014, Petitioner filed a timely RFH with 21 exhibits. Petitioner also
filed a motion to stay the exclusion with the RFH. On October 8, 2014, I held a
telephonic prehearing conference, the substance of which is summarized in my October
8, 2014 Order and Schedule for Filing Briefs and Documentary Evidence (Order).
During the conference, I denied Petitioner’s motion for a stay of the exclusion since I
lacked authority under the regulations to impose such a stay. Order at 2-3. I also stated
that I accepted the 21 exhibits submitted with the RFH as Petitioner’s proposed exhibits
1-21 (P. Exs. 1-21). [indicated to Petitioner that he did not need to submit exhibits with
is prehearing exchange unless they were new ones submitted in addition to those
enclosed with the RFH. Order at 3. The IG filed a brief (IG Br.) together with two
exhibits (IG Exs. 1-2). Petitioner filed his brief (P. Br.) with three additional exhibits (P.
Exs. 22-24). The LG. filed a reply brief (IG Reply Br.).

IL. Issues

1. Whether the IG has a basis to exclude Petitioner from participating in Medicare,
Medicaid, and all other federal health care programs under 42 U.S.C. § 1320a-
7(b)(2); and

2. Whether the length of the three-year length of exclusion imposed by the IG is
unreasonable.

Il. Jurisdiction

I have jurisdiction over this case and to decide the issues stated above. 42 U.S.C.
§ 1320a-7(f); 42 C.F.R. §§ 1001.2007, 1005.2(a).

IV. Evidentiary Ruling
I admit IG Exs. 1-2 and P. Exs. 1-11 and 22-24 without objection from the parties.

The IG objected to P. Exs. 12-21, consisting largely of personal letters from friends,
family and colleagues of Petitioner, as irrelevant to the two issues in this matter: whether
the IG has the authority to exclude Petitioner and whether the length of the exclusion is
reasonable. IG Br at 7.

Petitioner responded as follows:

The unnecessarily punitive nature of exclusion in this case is
further revealed by the character-attesting letters submitted to
the U.S. District Court by Mr. Schulte’s family and personal
and professional contacts. Thus, the representative sample of
those letters that Mr. Schulte provided with his Motion for
Stay, id. § 16; P. Exs. 12-21, are properly considered. The
1.G.’s position that the letters are irrelevant or immaterial is
misplaced.

P. Brat 8.

The regulations require me to exclude irrelevant or immaterial evidence from the record.
42 C.F.R. § 1005.17(c). As stated by the IG, the only issues I may decide in this case are
whether the IG had a basis for excluding Petitioner and, if so, whether the length of
exclusion imposed is not unreasonable. Jd. § 1001.2007(a)(1). P. Exs. 12-21, as letters
concerning Petitioner’s character, are not relevant to the determination of either issue I
ave jurisdiction to decide. Therefore, I must exclude P. Exs. 12-21 from the record.

V. Decision on the Record

The IG offered no witnesses and indicated that an in-person hearing is unnecessary. IG
Br. at 6. Petitioner did not offer any witnesses to testify at a hearing, but suggested that
oral argument would provide the parties an opportunity to further explain their positions,
clarify any misunderstandings, and address questions. P. Br. at 6. Because neither party
seeks to present witness testimony, an evidentiary hearing is not necessary in this case.
Further, after review of the record, I do not believe that oral argument is necessary for me
to decide the issues in this case. Therefore, I deny Petitioner’s request for oral argument.

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

The IG may exclude any individual from participation in any federal health care program,
as defined in 42 U.S.C. § 1320a-7B(f), who is “convicted, under Federal or State law, in
connection with the interference with or obstruction of any investigation into any
criminal offense described in [42 U.S.C. § 1320a-7(a) or (b)(1)].” 42 U.S.C. § 1320a-
7(b)(2); 42 C.F.R. § 1001.301(a).

A, The IG had a legitimate basis for excluding Petitioner under 42 U.S.C.
§ 1320a-7(b)(2).

1. Petitioner was convicted of an offense under federal law.

Relevant to this case, an individual is considered “convicted” for exclusion purposes
when either of the follow occur:

' My findings of fact and conclusions of law are set forth in italics and bold font.
(1) when a judgment of conviction has been entered against
the individual or entity by a Federal, State, or local court,
regardless of whether there is an appeal pending or whether
the judgment of conviction or other record relating to criminal
conduct has been expunged; [or]

(2) when there has been a finding of guilt against the
individual or entity by a Federal, State, or local court.

42 U.S.C. § 1320a-7(i)(1), (2).

Petitioner does not dispute that he was convicted of a criminal offense. P. Br. at 1-2.
Petitioner was charged with twelve counts of offenses under federal law. P. Ex. 2. On
March 1, 2012, a jury found Petitioner guilty of Count Two, which involved a violation
under 18 U.S.C. § 1001(a)(2) for knowingly and willfully making materially false
statements to an investigative agent of the Food and Drug Administration (FDA). P. Ex.
2 at 22-23; P Ex. 3 at 1. On May 31, 2012, the United States District Court for the
District of Colorado entered a Judgment in a Criminal Case in which the court noted
Petitioner was guilty of an offense under 18 U.S.C. § 1001, sentenced Petitioner to one
year of probation, and ordered Petitioner to pay a $5,000 fine. P. Ex. 8 at 1-2, 4.
Therefore, based on the evidence of record, I conclude that Petitioner was convicted of a
criminal offense under federal law.

2. Petitioner’s conviction was in connection with the interference
of an investigation into a criminal offense relating to fraud in
connection with the delivery of a health care item or service.

The statute at 42 U.S.C. § 1320a-7(b)(2) requires that the excluded individual be
convicted of interfering with an investigation into an offense described in 42 U.S.C.

§ 1320a-7(a) or (b)(1). The IG argues that Petitioner was convicted of a criminal offense
of interfering with an investigation into a criminal offense described in 42 U.S.C.

§ 1320a-7(b)(1). IG Br. at 3. Crimes under 42 U.S.C. § 1320a-7(b)(1) include fraud
related to the delivery of a health care item or service. The IG argues that this is
precisely why Petitioner was being investigated:

Here, [Spectranetics Corporation] knowingly imported
unapproved medical devices, did not properly declare them to
Customs, and then distributed them to physicians for use in
patients. I.G. Ex. 1 at 9-10. This conduct has a common-sense
nexus to fraud and is directly related to the delivery of a
health care item or service.

IG Brat 4.
Petitioner contends that although he was convicted of making false statements, that fact
alone is not sufficient to authorize exclusion under 42 U.S.C. § 1320a-7(b)(2); the IG also
must prove that the false statements were material to interfering with an investigation. P.
Br. at 2. Petitioner cites Subramanya K. Prasad, M.D., DAB No. 2568, at 8-9 (2014), for
the proposition that simply because an individual is convicted of a false statement under
18 U.S.C. § 1001, it does not follow that such a conviction is grounds for exclusion under
42 U.S.C. § 1320a-7(b)(2) unless the IG shows additional evidence that the false
statement actually interfered with an investigation. RFH at 12-13. Petitioner argues that
the false statements made to the FDA investigator, which resulted in his conviction, did
not impact the FDA’s investigation because the investigator knew, at the time Petitioner
made the statements, that they were false. RFH at 5. Petitioner also avers that he
corrected his false statements shortly after his interview with the FDA investigator. RFH
at 6-11; P. Exs. 5-7.

The IG responded to Petitioner’s argument by citing the appellate decision from the
United States Court of Appeals for the Tenth Circuit in which that court affirmed
Petitioner’s conviction by rejecting a similar argument to the one Petitioner makes in this
proceeding (i.e., Petitioner’s false statements to the FDA investigator did not have an
impact on the FDA’s investigation since the FDA investigator knew those statements
were false and because Petitioner corrected the false statements promptly). The IG
asserts that the Tenth Circuit decision is sufficient evidence that Petitioner’s false
statements interfered with the FDA investigation. Further, the IG argues that Petitioner
misinterprets Prasad and points out that Petitioner’s arguments, which are essentially the
same as the ones made during his criminal case, may be viewed as impermissible
collateral attacks on the Petitioner’s conviction. IG Reply Br. at 2-3.

I am persuaded that the IG is correct and that it has met its burden of proof in this case.
Petitioner was the Chief Executive Office of Spectranetics Corporation (SPNC), a
corporation located in Colorado that manufactured medical lasers and related devices
associated with them such as catheters. IG Ex. 2 at 2; P. Ex. 2 at 2-3. In 2008, the
United States investigated SPNC for, among other things, the importation and provision
to physicians of certain medical devices which were not approved by the FDA, but which
were nonetheless used in humans.” IG Ex. | at 8-11; IG Ex. 2 at 2-9; P. Ex. 2 at 5-22. As

> The FDA is responsible for enforcing the provisions of the Federal Food, Drug, and
Cosmetic Act (FDCA). P. Ex. 2. The FDA’s responsibilities include regulating the
manufacture, labeling and distribution of medical devices shipped or received in
interstate commerce. Medical devices which are defined under the FDCA must be either
cleared or approved by the FDA for each intended use prior to being distributed in
interstate commerce, unless they are exempt from clearance or approval. The United
States Customs and Border Protection (CBP), an agency of the Department of Homeland
Security, is responsible for assessing duties, collecting duties on imported goods and
preventing the smuggling of goods into the United States. P. Ex. 2 at 2. By agreement
part of the investigation, the United States executed a search warrant on the SPNC
facilities. IG Ex. 2 at 6-9; P. Ex. 23. During the execution of the search warrant, and as
part of its investigation, an FDA investigator conducted an interview with Petitioner
during which he made certain statements. IG Ex. 2 at 6-8; P. Ex. 23.

In this case, the exclusion is based on Petitioner’s conviction for making false statements
pursuant to 18 U.S.C. § 1001. The jury found Petitioner guilty of making materially false
statements to an FDA investigator during the investigation of SPNC by the United States
Government and interfering with that investigation. The United States Court of Appeals
for the Tenth Circuit affirmed the conviction concluding that Petitioner’s statements were
material and, as they were given during the course of an investigation, could have
influenced the government’s actions.

The FDA, charged with protecting citizens’ health, was trying
to ascertain the number and type of unapproved devices
placed into human patients. Schulte’s statements misdirected
the focus of the investigation from a company policy
soliciting clinical trials to the possible, but unknown activities
of individual employees. . . . Given Schulte’s position in the
company and his ability to explain the purpose and use of the
devices prior to FDA approval, the jury was provided
sufficient evidence to find, beyond a reasonable doubt,
Schulte’s statements could have influenced the agency.

IG Ex. 2 at 23-24.

The United States charged Petitioner not only with making false statements pursuant to
18 U.S.C. § 1001, but also with, among other things, knowingly conspiring to defraud the
United States under 18 U.S.C. § 371 for the purpose of impeding, impairing, obstructing,
and defeating their lawful government functions of inspecting, taxing, approving,
evaluating and clearing medical devices imported into the United States, and medical
levices distributed in the Unites States in interstate commerce. P. Ex. 2 at 5. The
indictment further charged that as part of the conspiracy, Petitioner imported medical
levices into the United States by false declarations regarding the description, value or
uses for which the medical devices were imported, thereby defeating the lawful
government functions of CBP and FDA; introduced and delivered for introduction into
interstate commerce medical devices that were adulterated and misbranded in that they
were not approved nor cleared by the FDA nor exempt from approval or clearance,
lefeating the lawful government functions of the FDA; unlawfully delivered unapproved

with the FDA, CBP also cooperates in the enforcement of provisions of the FDCA
relative to the importation of medical devices. Id.
and uncleared medical devices for use in humans, and concealed his conduct from
internal investigators at SPNC and investigators from the FDA and Department of
Homeland Security. P. Ex. 2 at 5.

I find that the record, including the Tenth Circuit’s decision, is sufficient to show
Petitioner’s false statements to the FDA investigator interfered with the FDA’s
investigation. IG Ex. 2 at 23-24. It is important to note the context in which Petitioner
made his false statements. Petitioner was not providing false information to a federal
agency under normal circumstances, rather, Petitioner made false statements to a federal
investigator during the execution of a search warrant involving more than 30 federal
agents. Any material false statements to the investigator would tend to interfere with that
investigation. Based on the record in the criminal case, the Tenth Circuit came to this
conclusion when it found that Petitioner’s “statements misdirected the focus of the
investigation from a company policy soliciting clinical trials to the possible, but unknown
activities of individual employees” and that “the jury was provided sufficient evidence to
find, beyond a reasonable doubt, Schulte’s statements could have influenced the agency.”
IG Ex. 2 at 23-24.

Further, Petitioner interfered with an investigation involving, in part, an effort to
determine if Petitioner or SPNC were conspiring to defraud the United States
Government by importing medical devices for the insertion in human patients.’ IG Ex. 1
at 9-11; P. Ex. 2 at 4-22. Thus, I concluded that the offense for which Petitioner was
convicted involved the interference of an investigation into a criminal offense under

42 U.S.C. § 1320a-7(b)(1). Therefore, the I.G. had a legitimate basis for excluding
Petitioner pursuant to 42 U.S.C. § 1320a-7(b)(2).

B. Because neither the IG nor Petitioner proved that there were any
aggravating or mitigating factors in this case, Petitioner must be excluded
for three years.

For an exclusion under 42 U.S.C. § 1320a-7(b)(2), “the period of the exclusion shall be 3
years, unless the Secretary determines in accordance with published regulations that a
shorter period is appropriate because of mitigating circumstances or that a longer period
is appropriate because of aggravating circumstances.” 42 U.S.C. § 1320a-7(c)(3)(D). The
IG did not assert that there were any aggravating factors and set the length of Petitioner’s
exclusion as three years.

In order to reduce this length of exclusion, Petitioner has the burden of proving that one
or more of the mitigating factors specified in the regulations exist. 42 C.F.R.

> While Petitioner was found not guilty with respect to the charge of defrauding the
government, the charge is nonetheless evidence that the investigation by the FDA and
CBP involved fraud related to the medical devices. P. Exs. 2 and 8.
§§ 1001.301(b)(3), 1005.15(c); Order at 2. Only the following can serve as mitigating
factors in this case:

(i) The record of the criminal proceedings, including
sentencing documents, demonstrates that the court determined
that the individual had a mental, emotional or physical
condition, before or during the commission of the offense,
that reduced the individual's culpability;

(ii) The individual's or entity's cooperation with Federal or
State officials resulted in—

(A) Others being convicted or excluded from Medicare,
Medicaid and all other Federal health care programs,

(B) Additional cases being investigated or reports being
issued by the appropriate law enforcement agency identifying
program vulnerabilities or weaknesses, or

(C) The imposition of a civil money penalty against others; or

(iii) Alternative sources of the type of health care items or
services furnished by the individual or entity are not
available.

42 C.F.R. $§ 1001.301(b)(3).

Petitioner has not asserted or proven that any of the mitigating factors listed above are
present in his case. Therefore, I conclude that the three-year length of exclusion that the
IG imposed is required by statute and thus reasonable as a matter of law.

VII. Conclusion

For the foregoing reasons, I affirm the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs for three
years.

/s/
Scott Anderson
Administrative Law Judge