Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Wendell Foo, M.D.
(NPI: 1164457511;
PTAN: H0000BDNKQ),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-17-378
Decision No. CR5003

Date: January 8, 2018

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its Medicare
administrative contractor, revoked the Medicare enrollment and billing privileges of
Wendell Foo, M.D. (herein Petitioner or Dr. Foo) because Petitioner was not operational
at a practice location on record with CMS. Specifically, the location on record with CMS
was a mailbox unit at a The UPS Store® location (herein “UPS Store”). For the reasons
stated herein, I affirm CMS’s revocation of Petitioner’s Medicare enrollment and billing
privileges.

I. Background

Petitioner is an anesthesiologist. Petitioner Exhibit (P. Ex.) at 20. Petitioner does not
maintain his own office that is open to the public, but rather, provides anesthesiology
services at several locations. CMS Exhibit (Ex.) 4 at 2. Petitioner submitted a Medicare
enrollment application in February 2010, at which time he reported that his physical
practice location was 4348 Waialae Avenue, 5-311, Honolulu, Hawaii (herein ““Waialae
Avenue address”). CMS Ex. 11. Ina letter dated March 4, 2010, Palmetto GBA, a
Medicare administrative contractor, informed Petitioner of the following, in pertinent
part:

We have received your enrollment application requesting revalidation. We
have reviewed and revalidated the information contained within and
determined that changes have occurred:

The changes noted below have been made:

Your physical address has been changed to 4348 Waialae Ave 5-
311, Honolulu, HI, 96816-5767.

CMS Ex. 10 at 1. Petitioner submitted an enrollment application to revalidate his
enrollment in May 2014. CMS Ex. 9. In that application, Petitioner maintained the same
practice location at the Waialae Avenue address. CMS Ex. 9 at 1.

A Medicare site visit contractor conducted a visit to the 4348 Waialae Avenue address on
March 5, 2015, at which time the contractor documented that the location was a UPS
Store. CMS Ex. 7 at 1-2. A subsequent contractor visit to the same location on May 8,
2015, confirmed that the location was a “one story building that has a UPS store,
Restaurant, and juice bar” and that “[t]here is no Dr [sic] office at this location.” CMS
Ex. 6 at 1.

On June 24, 2015, Noridian Healthcare Solutions (Noridian), a Medicare administrative
contractor, sent Petitioner an initial determination informing him that his Medicare
enrollment and billing privileges were being revoked retroactive to March 5, 2015, and
that he was barred from reenrollment for a period of two years. CMS Ex. 5 at 1-2. The
letter stated the following, in pertinent part:

42 [C.F.R. §]424.535(a)(5) On-site Review/Other Reliable Evidence
that Requirements Not Met

An Onsite visit was conducted on March 5, 2015 and on May 11, [2015] at
the address listed above and this is not a practice location.

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

In a letter dated July 3, 2015, Petitioner requested reconsideration of the June 24, 2015
revocation determination. CMS Ex. 4. Petitioner explained that he performs
anesthesiology services wherever the surgeon requests his services and thus “those
facilities are [his] practice locations.” CMS Ex. 4 at 1 (emphasis omitted). Petitioner
stated that he had three current practice locations at the Hawaii Eye Center, Surgicare of
Hawaii, and the Hawaii Endoscopy Center, and that two of these facilities had been listed
in Section 4 of his “most recent Medicare Enrollment Record.” CMS Ex. 4 at 2.
Petitioner also explained that he would “always specifically state [the] practice location
for the given anesthesia procedure” in “Box 32” of the Form CMS-1500 he submitted for
reimbursement by Medicare, and he faulted the site inspector for not seeking
“clarification” of his address. CMS Ex. 4 at 1 (emphasis omitted). Petitioner further
acknowledged that he had been asked to report his practice locations by submitting an
updated Form CMS-855] application, but he stated “it is not required for the appeal” and
that he had provided his practice location information in his July 3, 2015 letter. CMS Ex.
4at2.

Mr. D. Wahl, on behalf of Petitioner, submitted follow-up email correspondence on July
15, 2015, at which time he complained that the on-site visits to the UPS Store were
performed “without the on-site representative cross-referencing against Section 4
(Practice Locations — Medical Records Storage location).” CMS Ex. at 3 at | (emphasis
in original). Shortly thereafter, on or about July 18, 2015, Petitioner submitted an
updated application through the Provider Enrollment, Chain, and Ownership System
(PECOS) listing the Hawaii Eye Center, Surgicare of Hawaii, and the Hawaii Endoscopy
Center as practice locations. P. Ex. 17 at 1-3 (Petitioner’s copy of a July 18, 2015 “report
of [his] current Medicare application in PECOS”).

On August 27, 2015, Noridian issued an unfavorable reconsidered determination. CMS
Ex. 1. The reconsidered determination stated the following:

Revocation, Denial, or Effective date reason: 42 [C.F.R. §] 424.535(a)(5)
On-site Review/Other Reliable Evidence that Requirements Not Met

An On-Site visit was conducted on March 5, 2015 and on May 11, 2015
at the address listed above and this is not a practice location.

CMS Ex. | at 1 (emphasis in original). The reconsidered determination explained that
Petitioner “had not provided evidence to show full compliance with the standards for
which [he was] revoked.” CMS Ex. | at 1 (emphasis omitted).

Petitioner submitted a request for an administrative law judge (ALJ) hearing on October
23, 2015, which was assigned docket number C-16-50. On October 28, 2015, I issued an
Acknowledgement and Pre-Hearing Order (Order), at which time I directed the parties to
each file a pre-hearing exchange consisting of a brief and any supporting documents, and
also set forth the deadlines for those filings. Order, § 4. I further explained that the
parties should submit written direct testimony for any witnesses in lieu of in-person direct
testimony. Order, § 8. In the Order, I explained that a hearing would only be necessary
for the purpose of cross-examination of witnesses. Order, §§ 9, 10.

In response to my October 28, 2015 Order, CMS filed a brief and 15 exhibits (CMS Exs.
1-15). Petitioner, through counsel, filed a brief (P. Pre-Hearing Br.) and five exhibits (P.
Exs. 16-20). Each party submitted written direct testimony for one witness (CMS Ex. 13,
P. Ex. 19).

As neither party requested an opportunity to cross-examine the other’s witness, I
considered the record closed after the parties filed their respective pre-hearing exchanges.
I admitted the parties’ exhibits into the record and issued a decision, on the merits, based
on the parties’ written submissions. Wendell Foo, M.D., DAB CR4580 (2016).

Petitioner appealed my decision to the Departmental Appeals Board (DAB), which issued
a decision remanding the case to me with instructions. Wendell Foo, M.D., DAB No.
2769 (2017). The remanded case has been assigned docket number C-17-378.!

Following remand, I issued an Order dated March 1, 2017, in which I directed the parties
to submit additional evidence and written arguments, along with written notice of any
request for an opportunity to cross-examine any witness. I also gave the parties an
opportunity to reply to each other’s arguments.

Petitioner thereafter filed a brief (P. Br.) and three exhibits (P. Exs. 21-23), and CMS
filed a brief and six exhibits (CMS Exs. 16-21). On May 26, 2017, CMS filed a motion
to file out of time along with a substitute version of CMS Ex. 17, which is the signed
declaration of a witness, L. Hoffman.” Thereafter, Petitioner filed a reply brief

(P. Reply), objections to portions of the written direct testimony that CMS submitted as
CMS Exs. 16 and 17 (P. Objections), and a request for an opportunity to cross-examine
CMS’s two witnesses. CMS filed a reply brief and responses to Petitioner’s objections;

' The documents filed in the previously-docketed case appear in the electronic record for
case number C-16-50, while the documents filed in the remanded case appear in the
electronic record for case number C-17-378.

2A day earlier, on May 25, 2017, Petitioner, through counsel, contacted me directly via
an email message (even though I had not provided my email address to the parties) to
object to CMS Ex. 17 and to pre-emptively object to the filing of a substitute version of
CMS Ex. 17. Docket entry 12 (email upload); see, e.g., Civil Remedies Division
Procedures, Section 4 (“Direct communication with the ALJ is prohibited unless all
parties are present,” and “[a]n ALJ may impose sanctions against a party for engaging in
ex parte communication ....”). On May 26, 2017, I issued an Order informing
Petitioner that it must cease direct communications with me and that the appropriate way
to request relief is by submitting “an appropriate filing through DAB E-File... .”
CMS did not request an opportunity to cross-examine either of Petitioner’s two
witnesses. Following a pre-hearing conference, I issued an order on August 10, 2017, in
which I, inter alia, informed the parties that I had provisionally admitted all exhibits.

On August 23, 2017, I held a hearing by telephone for the purpose of enabling Petitioner
to cross-examine CMS’s witnesses. A transcript of the proceedings (Tr.) was made
available to the parties following the hearing, at which time I directed, inter alia, a post-
hearing briefing schedule. CMS timely filed a post-hearing brief (CMS Post-Hrg Br.)
and a notice that it would not be filing a post-hearing reply. Petitioner timely filed a post-
hearing brief (P. Post-Hrg Br.) and reply brief (P. Post-Hrg Reply).

In the absence of objections by CMS, I admit P. Exs. 16-23. Despite Petitioner’s
objections to CMS Exs. 8, 10, 11, 13, 16, and to a withdrawn and substituted version of
CMS Ex. 17, ladmit CMS Exs. 1-21.

On May 22, 2017, CMS submitted CMS Ex. 17, a supplemental declaration of C.
Finneman.? On May 26, CMS submitted “corrected” CMS Ex. 17, a declaration of L.
Hoffman, along with a motion for leave to file the corrected version of CMS Ex. 17 out
of time. I strike CMS Ex. 17, as filed on May 22, 2017, and admit CMS Ex. 17, as filed
on May 26, 2017.* I overrule Petitioner’s objection to CMS’s submission of CMS Ex. 17
because Petitioner has not demonstrated he is prejudiced by a four-day delay in the
submission of CMS Ex. 17, and further, he had an opportunity to cross-examine the
declarant who signed CMS Ex. 17.

Petitioner objects “to the introduction of evidence related to the June 24, 2014 phone
call” placed by a Noridian employee, L. Hoffman, to the telephone number listed in
Petitioner’s 2014 revalidation application. P. Objections at 2-3, 5; see CMS Ex. 17 at 6
(testimony of Ms. Hoffman that she made the telephone call and authored the record of
the call, a “Provider Enrollment Call Log” (herein “call log”), which is found at CMS Ex.
8);° see Tr. at 18-71 (cross-examination of Ms. Hoffman). Petitioner argues that the call
log is inadmissible because it is illegible, unreliable, and a product of hearsay. Iam

> This submission was duplicative of CMS Ex. 16, which was also a declaration of Ms.
Finneman.

* T construe CMS’s May 26, 2017 motion for leave out of time to encompass a request to
withdraw the version of CMS Ex. 17 filed on May 22, 2017.

> Ms. Hoffman incorrectly referenced this document as CMS Ex. 9 in her written direct
testimony. CMS Ex. 17 at 5. On cross-examination, Ms. Hoffman referenced CMS
Ex. 8 when discussing the information she recorded in the call log. Tr. at 48.
authorized to consider any evidence that is relevant and material, even hearsay evidence,
that would be inadmissible under the Federal Rules of Evidence. 42 C.F.R. § 498.61
(“Evidence may be received at the hearing even though inadmissible under the rules of
evidence applicable to court procedure.”); 42 C.F.R. § 498.60(b)(3) (“The ALJ inquires
fully into all of the matters at issue, and receives in evidence the testimony of witnesses
and any documents that are relevant and material.”). Petitioner has cross-examined Ms.
Hoffman, the author of CMS Ex. 8, and therefore, his argument that CMS Ex. 8 is
inadmissible hearsay is not persuasive. Further, CMS Ex. 8 is sufficiently legible for the
purpose it was submitted. See Tr. at 50 (my observation during the hearing that the
electronic copy of the document contained in DAB E-File was more legible than a printed
copy of the same document). Additionally, Petitioner argues that Noridian introduced
evidence related to the call log for the first time on reconsideration and therefore did not
comply with the Chapter 15, § 15.25.2.2.D of the Medicare Program Integrity Manual
(MPIM). Section 15.25.2.2.D instructs that a contractor should not “‘introduc[e] new
denial or revocation reasons or chang[e] a denial or revocation reason listed in the initial
determination during the reconsideration process.” Petitioner has not shown that
Noridian presented a new reason for revocation when it issued the reconsidered
determination, nor has it demonstrated that CMS was prevented from submitting that
evidence or that I am precluded from admitting the same evidence. In both the initial and
reconsidered determinations, the reason cited by Noridian for Petitioner’s failure to
comply with 42 C.F.R. § 424.535(a)(5) was that it was not operational at the practice
location of record. CMS Exs. 1, 5. Finally, CMS argues that the June 2014 telephone
call is “not determinative of the basis for revocation” (CMS Post-Hrg Br. at 2), and
Petitioner similarly argues that the call log has “limited relevance.” P. Post-Hrg Reply at
4. Lagree with the parties that CMS Ex. 8, while it has been admitted into evidence, is
minimally relevant and is not determinative of whether Petitioner’s enrollment revocation
was appropriate; in fact, I do not rely on CMS Ex. 8 in determining that CMS
appropriately revoked Petitioner’s Medicare enrollment and billing privileges.

Finally, Petitioner broadly objects to and requests exclusion of “any and all proffered
evidence concerning a 2010 revalidation application.” P. Br. at 2; see CMS Exs. 10, 11.
Evidence falling into this category includes the revalidation application (CMS Ex. 11)
and the letter informing him that Noridian had revalidated his enrollment based on the
application (CMS Ex. 10), and certain portions of CMS’s witness declarations (CMS Exs.
13, 16, and 17) addressing the 2010 application. The DAB has already determined that
the admission of this evidence was not erroneous, and that “evidence related to the 2010
revalidation is as relevant to the question of how CMS came to have Waialae Ave. as
Petitioner’s practice location of record as the evidence related to the 2014 revalidation
is.”° Wendell Foo, M.D., DAB No. 2769 at 11 (2017). Therefore, I overrule Petitioner’s
blanket objection to the admissibility of evidence related to his 2010 revalidation
application.

Based on the foregoing, I admit CMS Exs. 1-21 into the record.
IL. Issue

Whether CMS has a legal basis to revoke Petitioner’s Medicare enrollment and billing
privileges because Petitioner was not operational at the practice location on file with
CMS.

Il. Jurisdiction

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

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

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

42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1). In
order to participate in the Medicare program as a supplier, individuals must meet certain
criteria to enroll and receive billing privileges. 42 C.F.R. §§ 424.505, 424.510. CMS
may revoke the enrollment and billing privileges of a supplier for any reason stated in
42 C.F.R. § 424.535. When CMS revokes a supplier’s Medicare billing privileges, CMS
establishes a reenrollment bar for a period ranging from one to three years. 42 C.F.R.

§ 424.535(c). Generally, a revocation becomes effective 30 days after CMS mails the
initial determination revoking Medicare billing privileges, but if CMS finds a supplier to
be nonoperational, as it did here, the revocation is effective from the date that CMS
determines that the supplier was not operational. 42 C.F.R. § 424.535(g).

® CMS Ex. 10 is the February 2010 application, and CMS Ex. 11 is the letter approving
enrollment based on the application and confirming the practice location listed in the
application. CMS Exs. 13, 16 and 17 are the written direct testimony of Noridian
employees.

7 My numbered findings of fact and conclusions of law appear in bold and italics.
On-site review is addressed in 42 C.F.R. § 424.535(a)(5). Pursuant to subsection
424.535(a)(5)(i), a supplier is non-operational if CMS determines upon on-site review
that it is “[n]o longer operational to furnish Medicare-covered items or services.”

I. On March 5 and May 8, 2015, Petitioner’s Medicare enrollment record
listed a practice location of 4348 Waialae Ave., Unit 5-311, Honolulu,
Hawaii, 96816-5767, and no other practice location address.

On or about February 4, 2010, Petitioner submitted an electronic Form CMS-8551
through PECOS in which he provided a “physical location” of the Waialae Avenue
address, which he identified as a “[p]ractice [l]ocation,” and indicated that his practice
was an “other health facility” and a “[p]rivate [p]ractice.” CMS Ex. 11 at 3. Petitioner
likewise reported his correspondence address was the same address. CMS Ex. 11 at 2.

In a letter dated March 4, 2010, the Medicare administrative contractor, Palmetto GBA,
informed Petitioner that it received his enrollment application and “reviewed and
validated the information contained within and determined the changes have occurred.”
CMS Ex. 10 at 1. Palmetto GBA informed Petitioner that his “physical address has been
changed to reflect 4348 Waialae Ave[.] 5-311 Honolulu, HI. 96816-5767.” CMS Ex. 10
at 1.

On May 14, 2014, Petitioner submitted another application to revalidate his Medicare
enrollment.* CMS Ex. 9; P. Exs. 19 at 5; 21 at 3; see 42 C.F.R. § 424.515 (discussing
requirements for revalidation of Medicare enrollment information). In the Application
Record Data (ARD) Report of the revalidation application, the field for “Practice
Location(s)/Base(s) of Operations” lists, “No Current Records Exist for Practice
Location(s)/Base(s) of Operations.” CMS Ex. 9 at 1.

CMS has submitted sworn and written direct testimony of C. Finneman, a project analyst
for Noridian. CMS Ex. 13; see also CMS Ex. 16. Ms. Finneman stated that “[t]he
document marked as CMS Exhibit 9 is a copy of the Application Record Data Report
which details the information submitted on May 14, 2014 to revalidate the enrollment of
Dr. Foo via the online PECOS system.” CMS Ex. 13 at 4. Ms. Finneman reported that
“Ta]s normal operation, the ARD report shows that statement [i.e., that “No Current
Records Exist”] on all sections of a revalidation enrollment application in which the
provider is not changing/updating information.” CMS Ex. 13 at 4-5. Ms. Finneman
added that “[i]f the provider wanted to make any changes to information currently

® Neither party has alleged or submitted evidence that Petitioner submitted any
applications between the February 2010 and May 2014 applications.
contained in PECOS during the revalidation process, they would need to edit that section
and add the new information.” CMS Ex. 13 at 5. Ms. Finneman also explained that in
Petitioner’s previous enrollment application, dated February 4, 2010, “[u]nder ‘Practice
Location’ he listed the ‘Physical Location’ as 4348 Waialae Ave. 5-311, Honolulu,
Hawaii 96816-5767.” CMS Ex. 13 at 3-4. Thus, based on Ms. Finneman’s explanation
of the ARD report in PECOS, Petitioner did not enter a physical practice location address
in PECOS in May 2014 because he did not change the physical location that was already
of record; this is evidenced by the message “no current records exist” that appears on the
report. CMS Exs. 9 at 1; 13 at 4-5; see CMS Ex. 15 (“screen shot” of Section 4 of
PECOS showing that a supplier can use the “Add” button to add “new Practice Location
Information.”).

Contrary to the ARD report and Ms. Finneman’s testimony, both Petitioner and his
witness, Mr. Wahl, testify that Petitioner, in the May 2014 application, listed three
physical practice locations at which Petitioner routinely provides services and that he did
not list the Waialae Avenue address as a practice location in that application. P. Exs. 19
at 6; 21 at 4. Both Mr. Wahl and Petitioner further testify that they “have never indicated
to anyone that 4348 Waialae Avenue is a medical office or practice location.” P. Exs. 19
at 9; 21 at 5. Relying on this testimony, Petitioner argues that when he completed his
enrollment applications, he listed the Waialae Avenue address as a correspondence
address because he does not maintain a private office. P. Br. at 13; P. Post-Hrg Br. at 3-
4. He further argues that he did not list the UPS Store as a practice location, but rather,
he listed each of the individual locations where he practices anesthesiology. P. Pre-
Hearing Br. at 15; P. Post-Hrg Br. at 3-4.

While CMS has presented witness testimony that has been subject to cross-examination,
along with supporting evidence, as discussed above, demonstrating that the practice
location of record at the time of the March and May 2015 site visits was the Waialae
Avenue address and no other location, the sole evidence Petitioner offers is his testimony,
along with the testimony of Mr. Wahl. Despite the fact that Petitioner claims he
submitted updated enrollment information, he has been unable to present his own copy of
such important documentation.” I find CMS’s documentary evidence, along with the
testimony of its witnesses, to be credible and probative. Petitioner’s testimony is
inconsistent with the evidence of record and is otherwise unsupported by any other
evidence of record. Therefore, Petitioner has not supported his claim that he updated his

° While Petitioner could not produce a copy of this application, he has produced a copy
of a later application. See P. Ex. 17; see also P. Exs. 19 at 6; 21 at 4.
10

practice location to an address or addresses other than the Waialae Avenue address prior
to the May 2015 site visit.'°

Petitioner did not report any physical practice locations, other than the Waialae Avenue
address, on his revalidation applications. CMS Exs. 9, 11. While Petitioner reported the
addresses for the Hawaii Eye Center and the Hawaii Endoscopy Center as records storage
locations in his February 2010 application and did not revise that information in his May
2014 application, he did not report that these records storage locations were physical
practice locations in his applications. CMS Exs. 9 at 1; 11 at 3-4; see also CMS Ex. 13 at
4-5,

For the foregoing reasons, I find that Petitioner listed only the Waialae Avenue address as
a practice location on his February 2010 application and did not change that information
in his May 2014 revalidation application. Neither party has presented probative evidence
of any intervening applications or attempts by Petitioner to update his practice location
information between May 14, 2014, and the first site visit on March 5, 2015, or between
the first site visit and the second site visit on May 8, 2015. Therefore, the Waialae
Avenue address was the practice location of record on March 5, 2015, the effective date
of Petitioner’s revocation.

2. The PECOS records and related testimony about PECOS recordkeeping
submitted by CMS are reliable and credible.

Petitioner argues that the “PECOS record is unreliable” and that “there is no reliable
evidence in the record related to his 2014 revalidation application identifying the UPS
Store location as a practice address.” P. Br. at 3 (bold and underline font in heading
omitted). In its decision, the DAB discussed that the evidence of record did not explain
iow PECOS retains data, and that this warranted examination upon remand. Foo, DAB
No. 2769 at 12-13. In summary, CMS has established that PECOS records are reliable.

Ms. Finneman, who is “personally acquainted” with enrollment records maintenance in
PECOS, testified that “[o]nce an approved Medicare enrollment application[ Jhas been
submitted via PECOS an enrollment record is generated using the approved application

'° For the same reasons, I also reject Petitioner’s use of this testimony to argue that
PECOS is unreliable because “the print out of the 2014 PECOS information . . . is not
reflective of the information [Petitioner] submitted with his 2014 enrollment application.”
P. Br. at 3. Petitioner has submitted no probative evidence to refute that the PECOS
information in CMS Ex. 9 contains information that he provided in his May 2014
application.

11

data.” CMS Ex. 13 at 3, 4. In other words, a Medicare “enrollment record includes
approved application data.” CMS Ex. 13 at 3. Such information includes “data such as
the provider type, practice address, billing information,” and more. CMS Ex. 13 at 3.
When questioned at the hearing, Ms. Finneman explained that a supplier filling out an
electronic revalidation application in PECOS would “see the information that is of
record” in PECOS and would have the option to either “update or [not] update that
information on their record.” Tr. at 102; see also Tr. at 117. However, Ms. Finneman
noted that while “the supplier may see whatever information they input into each section”
of the application, that application “information is not automatically added to the final
enrollment record until after it has been verified by the applicable [Medicare
administrative contractor].”” CMS Ex. 16 at 3. In some cases, information is not added to
an approved enrollment record. Tr. at 88-89. For instance, in the case of a supplier
whose billing privileges have been revoked, “[n]o data would be entered in [the revoked
supplier’s] official PECOS enrollment record after” the date of revocation; thus, even if a
revoked supplier submitted updated information, that information would not be
incorporated into the enrollment record. CMS Ex. 16 at 4.'' Ms. Finneman explained
that this would occur even if the revoked supplier submitted a new enrollment
application, because MPIM § 15.8.1.A instructs “contractors [to] return applications
submitted by a... supplier prior to the expiration of a re-enrollment bar.” CMS Ex. 16 at
4. In fact, “[a]s long as PECOS documents that a particular enrollment record is still in
the re-enrollment bar period . . . no updates to the official PECOS record would be
maintained or stored by PECOS. Any attempts to update information would result in
showing ‘No Data Provided.’” CMS Ex. 16 at 5.

Ms. Finneman testified that Petitioner’s copy of a July 2015 application (P. Ex. 17) is an
example of a completed application that the contractor returned and did not accept for
purposes of updating an enrollment record. Tr. at 102-104. Petitioner’s Medicare billing
privileges were revoked effective March 5, 2015, and a two-year re-enrollment bar went
into effect on July 24, 2015. CMS Ex. 5. Therefore, because Petitioner submitted the
July 2015 application during the period a re-enrollment bar was in effect, the information
he inputted was not stored in PECOS based on the fact that it had been “returned”
pursuant to MPIM § 15.8.1.A. Tr. at 103-104; see also CMS Ex. 16 at 3-5. In support of
Ms. Finneman’s testimony, the evidence shows that Noridian returned the application to
Petitioner and Mr. Wahl by email, explaining it was doing so because a “revocation is in
place.” CMS Exs. 19 at 1; 20 at 1 (emphasis omitted).

With regard to the PECOS records submitted by CMS, Ms. Finneman confirmed that the
February 2010 application data (CMS Ex. 11) “show[s] the information [Petitioner]

'! Ms. L. Hoffmann, a provider enrollment representative for Noridian, corroborates Ms.
Finneman’s testimony on this point. CMS Ex. 17 at 3-4; Tr. at 39.
12

provided to CMS in February 2010 at the time he revalidated his enrollment as a
Medicare supplier.” CMS Ex. 13 at 3; see CMS Ex. 11. She also confirmed that the May
2014 ARD report (CMS Ex. 9) “details the information submitted on May 14, 2014 to
revalidate the enrollment of [Petitioner] via the online PECOS system.” CMS Ex. 13 at
4. According to Ms. Finneman, the ARD report shows a message that “no current
records exist” for “all sections of a revalidation enrollment application in which the
provider is not changing/updating information.” CMS Ex. 13 at 4-5; see also Tr. at 87-
88, 101. To make changes to a particular section of the application, Petitioner would
ave “need[ed] to edit that section and add the new information.” CMS Ex. 13 at 5; see
also Tr. at 101. When cross-examined at the hearing, Ms. Finneman confirmed that the
May 2014 ARD report “says no current record exists for practice location,” and she
explained that this occurred “[b]ecause [Petitioner] made no updates to that section when
e submitted [his May 2014 application].” Tr. at 99; see also Tr. at 113.

Petitioner’s attempts to cast doubt on Ms. Finneman’s testimony and the reliability of the
PECOS records are not persuasive and do not diminish Ms. Finneman’s testimony or the
reliability of the PECOS records. For example, Petitioner argues that overlap in the
February 2010 and May 2014 PECOS records undermines Ms. Finneman’s explanation
that the “No Current Records Exist” message appears in all sections of a revalidation
application where the supplier makes no changes. Petitioner points out that both records
contain his demographic information and apparently identical contact information, but do
not indicate that “No Current Records Exist” with respect to his demographic and contact
information. He contends that because neither his demographic information nor the
contact information changed, each section should indicate “No Current Records Exist.”
P. Post-Hrg Br. at 5-6; see also Foo, DAB No. 2769 at 13 (discussing the similarities in
the contact information provided in the February 2010 and May 2014 PECOS records). I
observe there are subtle differences in the contact information reported in the two
applications.” Based on those differences, it is clear that Petitioner did make changes to
the contact information field in his May 2014 application, which explains why that field
does not contain a “No Current Records Exist” message. Second, the “demographic”
information Petitioner references is static information that would not be expected to
change (i.e., Social Security Number, date of birth, place of birth) with each successive
enrollment application.'* Therefore, the lack of a “No Current Records Exist” message in

". For example, the February 2010 application lists “4348 WAIALAE AVE 5-311,”
whereas the May 2014 application lists “4348 Waialae Ave Unit 5-311.” CMS Exs. 9 at
2 (emphasis added); 11 at 4.

8 This would explain why the February 2010 PECOS report and the May 2014 ARD
report do not contain the same “Web Tracking ID” or “PAC ID.” CMS Exs. 9 at 1; 11 at
2.
13

the demographic information and contact information fields gives no reason to doubt Ms.
Finneman’s testimony concerning the presence of that message in many other fields in
the May 2014 ARD report.

Petitioner also unpersuasively argues that purported discrepancies in the format and
information contained in the May 2014 ARD report and the returned July 2015
application discredit Ms. Finneman’s explanation of the “No Current Records Exist”
entry in the May 2014 ARD report.'* Petitioner discusses that information he provided in
his July 2015 application is not included in the May 2014 ARD report. P. Pre-Hearing
Br. at 16. Ms. Finneman persuasively explained that the July 2015 application contains
more detailed information because Petitioner inputted all of that information into the
application. Tr. at 104. Ms. Finneman further explained that because Noridian rejected
this application and returned it to Petitioner without updating his PECOS record,
Petitioner’s enrollment record was not updated based on this information. Tr. at 103-104.
Any differences between the May 2014 ARD report submitted by CMS (CMS Ex. 9) and
the July 2015 application submitted by Petitioner (P. Ex. 17) are due to the fact that they
are dissimilar documents; one is a report based on an approved application, and the other
is Petitioner’s copy of his application.

Finally, Petitioner argues that the practice of not retaining data from rejected applications
“is further evidence of the lack of reliability of PECOS records.” P. Br. at 10. Petitioner
alleges that, as a result, “information submitted by providers or suppliers apparently can
be disregarded and not automatically added to their enrollment records.” P. Reply at 10.
Noridian determined that the July 2015 application should be rejected and returned
pursuant to MPIM § 15.8.1.A (because it had been submitted while a re-enrollment bar
was in effect), and it notified both Petitioner and Mr. Wahl of such; pursuant to section
15.8.1.A of the MPIM, Noridian did not update Petitioner’s enrollment record after it
received the July 2015 application. Petitioner’s allegation that Noridian’s processing of
the July 2015 application evidences unreliability by PECOS is without merit.

‘4 Likewise, Petitioner alleges that there are purported discrepancies between the format
and information contained in February 2010 ARD report and the January 2016 PECOS
record. P. Br. at 5. Petitioner is comparing dissimilar documents; one document,
furnished by CMS, is a February 2010 ARD report for a then-current Medicare
enrollment; the other document is a Petitioner-accessed summary of his revoked
Medicare enrollment record. Compare CMS Ex. 13 with P. Ex. 18. As Ms. Finneman
explained, “an enrollment record is generated using . . . approved application data.”
CMS Ex. 13 at 3.
14

The DAB expressed concern that section 4 (practice location information) of Petitioner’s
January 2016 enrollment record (P. Ex. 18) “showed the ‘no data provided’ message,”
and further discussed that it “would expect to see a similar message in the January 2016
PECOS records for the category for ‘medical record storage facility records,” yet
“neither the July 2015 screenshot, nor the January 2016 PECOS records, shows such a
message, and the field for the medical storage facilities remains populated with ASC
addresses.” Foo, DAB No. 2769 at 12-13. The January 2016 PECOS record is an
enrollment record, which Ms. Finneman explained would be “generated using . . .
approved application data.” CMS Ex. 13 at 3. Therefore, the January 2016 PECOS
record would report the approved data from Petitioner’s enrollment applications, to
include all approved medical storage facility addresses dating back to the 2010
application. Compare CMS Ex. 11 at 3-4 with P. Ex. 18 at 3. The absence of any
practice location information in Section 4 of the January 2016 enrollment record is to be
expected; as of January 2016, Petitioner’s enrollment had already been revoked because
the practice location previously of record had been determined to be a UPS Store;
therefore, the enrollment record correctly reported that there was “No Data Provided” for
a practice location as of January 2016. P. Ex. 18 at 1.

Ms. Finneman’s testimony with respect to how PECOS maintains records is probative
and credible, and it is consistent with the evidence of record. See CMS Exs. 9, 11; P.
Exs. 17, 18. PECOS correctly shows that Petitioner did not report a practice location
other than the UPS Store location at any time prior to the March 5 and May 8, 2015 site
visits.

3. _A site visit contractor was unable to conduct a site visit of Petitioner’s
practice location on file (i.e., the Waialae Avenue address) on March 5
and May 8, 2015, because a UPS Store, and not a medical office, is at
that location.

On March 5, 2015, a Noridian contractor visited the Waialae Avenue address, the address
Petitioner reported as his practice location, to attempt a “‘site verification survey.” CMS
Ex. 7. The contractor determined that the location was a UPS Store. CMS Ex. 7 at 1. At
the time of the attempted site verification, the contractor “made calls to the Dr’s office,”
but there was no answer. CMS Ex. 7 at 1. The same contractor re-visited the location on
May 8, 2015, and again determined that Petitioner did not have an office at that location.
CMS Ex. 6.

Petitioner does not dispute that the Waialae Avenue address is a UPS Store; he described
it as such in his reconsideration request, and both he and Mr. Wahl concede that the
Waialae Avenue address is the location of a UPS Store in their testimony. CMS Ex. 4 at
1; P. Exs. 19 at 9; 21 at 2.
15

Based on this undisputed evidence, I find that Petitioner’s practice location on file (the
Waialae Avenue address) is a UPS store, and not a medical office. Therefore, the site
visit contractor was unable to conduct a site visit of Petitioner’s physical practice location
on March 5 and May 8, 2015.

4. CMS had a legal basis to revoke Petitioner’s Medicare enrollment and
billing privileges because he was not operational pursuant to 42 C.F.R.
§ 424.535(a)(5) at the practice location on file with CMS.

As previously discussed, Petitioner concedes that the Waialae Avenue address is a UPS
Store, not a practice location, but he argues that he was nonetheless operational to see
Medicare beneficiaries.

A supplier is “operational” when the supplier:

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

42 C.F.R. § 424.502. CMS may revoke a currently enrolled supplier’s Medicare billing
privileges in the following circumstance:

Upon on-site review or other reliable evidence, CMS
determines that the provider or supplier is... :

(i) No longer operational to furnish Medicare-covered
items of services.

42 CFR. § 424.535(a)(5)(i).

While Petitioner asserts that he provided services at the Hawaii Eye Center, Surgicare of
Hawaii, and Hawaii Endoscopy Center, the address he provided as his physical practice
location was that of a UPS Store. The regulatory definition of the term “operational”
refers to the “qualified physical practice location” of a supplier, 42 C.F.R. § 424.502.
The enrollment and revalidation applications request the address of the supplier’s
physical practice location. CMS Ex. 11 at 3; see CMS Ex. 14. Additionally, a supplier
must be able to provide documentation of its “practice location” with its enrollment
application. 42 C.F.R. § 424.510(d)(2)(ii). CMS may perform on-site inspections to
verify that the enrollment information submitted by a supplier is accurate and to
16

determine compliance with Medicare requirements. 42 C.F.R. § 424.517(a). This means
that CMS will inspect the “qualified physical practice location” that has been provided by
the supplier and is currently on file with CMS. See, e.g., CompRehab Wellness Group,
Inc., DAB No. 2406 at 7-8 (2011).

Because the physical practice location on file with CMS was a UPS Store, and not a
private office or medical facility, CMS had a legal basis to revoke Petitioner’s enrollment
and billing privileges pursuant to 42 C.F.R. § 424.535(a)(5)(ii). See Care Pro Home
Health, Inc., DAB No. 2723 at 6 (2016) (holding that CMS lawfully revoked a supplier’s
Medicare enrollment based on its non-operational status at a single location); see also
Viora Home Health, Inc., DAB No. 2690 at 13 (2016) (holding that CMS properly
revoked Medicare enrollment when a practice location of record was not operational
upon onsite review). Because the physical practice location on file with CMS was that of
the UPS Store, and because it is not disputed that Petitioner was not operational at the
UPS Store location on the dates of the attempted site visits, CMS had a legal basis to
revoke Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R.

§ 424.535(a)(5)(i).

5. Petitioner has not demonstrated that CMS or its contractor lacked the authority
to revoke his Medicare enrollment and billing privileges.

Petitioner alleges that “Noridian appears to have taken an overly simplistic, result
oriented approach to evaluating Dr. Foo’s 2014 enrollment application” and “this is not
how the Medicare enrollment process is supposed to work.” P. Pre-Hearing Br. at 23-24.
In fact, Petitioner states that “upon on-site inspection of the 4348 Waialae Avenue
location and ‘discovering’ that it was a UPS store, rather than simply concluding that Dr.
Foo was not operational, Noridian should have made an effort to determine whether Dr.
Foo was providing services at other locations.” P. Pre-Hearing Br. at 21. Petitioner adds
that “[h]ad Noridian made that effort, they would have determined that Dr. Foo was
indeed fully operational as a Medicare supplier.” P. Pre-Hearing Br. at 21. Petitioner
reiterates this argument in his post-remand briefing. P. Br. at 13-15; P. Reply at 11-14;
P. Post-Hrg Reply at 5-7.

Petitioner essentially contends that the administrative burden of demonstrating that a
physician practice is operational should be placed on the Medicare contractor. P. Pre-
Hearing Br. at 21. As a preliminary matter, I point out that CMS’s determination to
revoke a provider or supplier’s enrollment is discretionary, and my review is limited to
deciding whether the CMS contractor had a “legal basis” for its action. Letantia Bussell,
M.D., DAB No. 2196 at 10 (2008); see Abdul Razzaque Ahmed, M.D., DAB No. 2261 at
19 (2008) (stating if CMS establishes that the regulatory elements necessary for
revocation are satisfied, an administrative law judge may not substitute his or her
“discretion for that of CMS in determining whether revocation is appropriate under all
the circumstances”), aff'd, Ahmed v. Sebelius, 710 F. Supp. 2d 167 (D. Mass. 2010).
17

While I am required to decide whether CMS had a legal basis for its revocation of
Petitioner’s enrollment, I am not required to assess whether CMS could have made
additional efforts to identify Petitioner’s practice location, and Petitioner has not cited
any authority showing CMS had such an obligation.'° Likewise, it is unreasonable to
expect that, in the event of a failed site verification inspection, CMS and its contractors
will proactively search for physical locations that are not listed on an enrollment
application. '® As Petitioner points out, a purpose of the Medicare site visit verification
process is “to reduce fraud and keep ‘bad’ providers and supplier[s] out of the program.”
P. Pre-Hearing Br. at 24. To that end, CMS and its contractors place the burden on a
physician to correctly provide his or her practice location or locations when completing
an application for enrollment or revalidation purposes. The Form CMS-855]I clearly
instructs a physician to list his or her practice location, and if the physician has more than
one practice location, section 4C of the form instructs that “[a]ll locations disclosed on
claims forms should be identified in this section as practice locations.” CMS Ex. 14 at 16
(copy of Form CMS-855]). Physicians are further instructed to “[c]omplete this section
for each of [their] practice locations where [they] render services to Medicare
beneficiaries,” and “[i]f [they] render services in a hospital and/or other health care
facility,” they are instructed to “furnish the name and address of the hospital or facility.”
CMS Ex. 14 at 16. The enrollment application unambiguously informs physicians that
they must identify all practice locations. CMS Ex. 14 at 16. Finally, physicians are even
afforded an opportunity, in Section 4H, to “[e]xplain any unique circumstances
concerning [their] practice locations.” CMS Ex. 14 at 20.

Petitioner further argues that “the most reliable evidence relating to [his] practice location
are the many hundreds of claims submitted to Medicare over the years, directly to
Noridian, with his practice location . . . clearly listed on... CMS 1500 claim forms.”

'S Petitioner argues that “Noridian did not appropriately follow” procedures listed in
chapter 15 of the MPIM. P. Pre-Hearing Br. at 22; see also P. Br. at 13-15; P. Reply at
11-14; P. Post-Hrg Reply at 5-7. Petitioner cites to various provisions, but none require
the contractor to further investigate possible physical practice locations. Further,
subsection 15.5.4.3.C (Practice Location Information) of the MPIM states that “the
contractor shall verify that the address is a physical address” and specifies that “[p]ost
office boxes and drop boxes are not acceptable.”

'© | take notice that there are well more than a half million physicians enrolled as
suppliers in the Medicare program, and these physicians are also subject to periodic site
verification visits. See U.S. Dep’t of Health & Human Servs., 2016 CMS Statistics,
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/CMS-Statistics-Reference-Booklet/Downloads/2016_CMS._ Stats.pdf(last visited
December 15, 2017).
18

P. Reply at 3; see also CMS Ex. 4 at 1; P. Ex. 16 (a redacted Form CMS-1500 (Health
Insurance Claim Form) that includes Block 32 (“Service Facility Location
Information”)). This argument is without merit. Section 4C of the Form CMS-855I
states that “[a]ll locations disclosed on claims forms should be identified in this section as
practice locations.” CMS Ex. 14 at 16. Moreover, Form CMS-1500, which is aptly titled
“Health Insurance Claim Form,” is used for the submission of a “claim for payment from
federal funds,” and it does not indicate, on its face or in its accompanying instructions,
that it should be used for the purpose of updating enrollment information. See Form
CMS-1500. The form does not contain any field to allow a supplier to report that he or
she is updating enrollment information. Thus, there is no reason for CMS or its
contractors to refer to this form to seek information about a supplier’s practice location. '7
Suppliers may submit hundreds, or even thousands, of these claims forms each year, and
it would be absurd to expect that each claim reimbursement form should be reviewed for
a potential update to enrollment information, when a Form CMS-855 exists for that very
purpose. See P. Reply at 3 (Petitioner’s assertion that he has submitted “many hundreds
of claims . . . to Medicare over the years”). Moreover, the representative Form CMS-
1500 that Petitioner submitted includes the Waialae Avenue address in Section 33
(“Billing provider info & [phone number]”). P. Ex. 16.

Petitioner argues that “[n]either Noridian nor CMS should be permitted in the context of
the 2014 revalidation application to revoke [based] on information that was consistent
with its record and raised no issues following the 2010 revalidation process.” P. Br. at
10. Ina similar vein, Petitioner notes that other physicians list the Waialae Avenue
address as a primary practice address. P. Br. 12-13. Neither of these arguments calls into
question the appropriateness of Petitioner’s revocation. The fact that a site visit
contractor did not attempt to visit Petitioner’s practice address of record until March 2015
does not establish “affirmative misconduct” required to even consider estopping CMS
from revoking Petitioner’s billing privileges. US Ultrasound, DAB No. 2302 at 8 (2010).
Similarly, Petitioner provides no authority to support that because other suppliers have
apparently used the same UPS Store address as a practice location, that CMS is not
authorized to revoke his enrollment. See Tr. at 81 (testimony that Noridian ordered the
site visit because the Inspector General notified Noridian that the UPS Store was being
used as a practice location by Petitioner and others). To the extent either of these points

'7 Indeed, Ms. Finneman testified at the hearing that “[mlost of the analysts or
representatives on the enrollment team do not have access to the claims system nor are
they required under CMS enrollment regulations to look up claims. If the provider is
verifying and attesting that this is their practice location, they are to do it via their
applications and their PECOS record. It’s irrelevant what’s on the claim form.” Tr. at
97-98.
19

attempt to invoke equitable concerns, I recognize that I do not have equitable jurisdiction.
US Ultrasound, DAB No. 2302 at 8.

Finally, Petitioner argues that CMS’s revocation of his billing privileges is somehow
inconsistent with the “intent” of the Medicare enrollment regulations. P. Pre-Hearing Br.
24-25; P. Reply 14-15. Petitioner has not cited any authority that evidences the “intent”
of any regulations, and therefore, I need not address this unsupported argument.

V. Conclusion

I affirm CMS’s revocation of Petitioner’s Medicare enrollment and billing privileges.

/s/
Leslie C. Rogall
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Syed Hamzavi, M.D.
(NPI: 1295780989),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-17-572
Decision No. CR5004

Date: January 5, 2018

DECISION

On November 1, 2016, Wisconsin Physicians Service (WPS or “the contractor”) notified
Syed Hamzavi, M.D. (Petitioner), that it had deactivated his Medicare enrollment and
billing privileges, effective October 31, 2016, because he failed to timely revalidate his
Medicare enrollment information. After receiving Petitioner’s enrollment and
reassignment applications for purposes of revalidation and reactivation on November 18,
2016, WPS reactivated Petitioner’s Medicare enrollment and billing privileges, effective
November 18, 2016. For the reasons discussed below, I conclude that the effective date
of Petitioner’s reactivated billing privileges remains November 18, 2016.

I. Background

On June 14, 2016, WPS mailed a letter to Petitioner informing him that he was required
to revalidate his Medicare enrollment record every five years and that he must revalidate
his enrollment no later than August 31, 2016. Centers for Medicare & Medicaid Services
(CMS) Exhibit (Ex.) 2 at 1. WPS warned Petitioner that a failure to timely revalidate
“will result in a hold on [his] payments, and possible deactivation of [his] Medicare
enrollment,” which could “cause a gap in [his] reimbursement.” WPS mailed the letter to
Syed Hamzavi, University Pediatricians, at “4201 ST ANTOINE UHC-6F SUITE 226”
in Detroit, Michigan.' CMS Ex. 2 at 1.

After Petitioner did not respond to the June 14, 2016 letter, WPS sent another letter to the
same address, dated September 5, 2016, because he had “not revalidated by the requested
due date of August 31, 2016.” CMS Ex. 3 at 1. WPS reiterated that Petitioner was
required to revalidate his enrollment record every five years and “will not be paid for
services rendered during the period of deactivation,” which “will cause a gap in...
reimbursement.” CMS Ex. 3 at 1.

On November 1, 2016, after it did not receive a response to its previous correspondence,
WPS informed Petitioner it had deactivated his Medicare enrollment and billing
privileges because he did not comply with the revalidation request. CMS Ex. 4 at 1.

On November 8, 2016, Petitioner submitted a Form CMS-855I and Form CMS-855R
through the Provider Enrollment, Chain, and Ownership System (PECOS). CMS Ex. 5 at
1. Petitioner submitted a signed “Certification Statement for Individual Practitioners” to
complete his Form CMS-855] revalidation application, and also submitted a signed
“Authorization Statement for Reassignment of Medicare Benefits” to complete his Form
CMS-855R, which were mailed and postmarked on November 14, 2016. CMS Exs. 12,
13. WPS received the signed forms on November 18, 2016. CMS Exs. 5 at 4; 12; 13 at
1-2; 14.

WPS approved Petitioner’s revalidation enrollment application on December 8, 2016, at
which time it informed Petitioner of the following: “Please note the effective date [of
November 18, 2016] reflects a gap in coverage from October 31, 2016 to November 17,
2016 for failure to respond to the revalidation requested development.” CMS Ex. 8 at 1-2
(emphasis omitted).”

' WPS mailed the revalidation notice to the address previously provided by Petitioner in
a May 2011 enrollment application, in which he reported a single practice location,
University Pediatricians, and listed the address for that practice, 4201 St. Antoine, UHC-
6F, Suite 226, in Detroit Michigan, as the address for both correspondence and to reach
his designated contact person. CMS Ex. | at 4, 13, 20, 24.

> WPS’s December 8, 2016 letter to Petitioner erroneously lists a “September 01, 2004”
effective date of billing privileges. CMS Ex. 8 at 1. However, the letter clarifies that
“the effective date above reflects a gap in coverage from October 31, 2016 to November
17, 2016,” and thereby provides notice of a November 18, 2016 effective date of billing
privileges. CMS Ex. 8 at 2 (emphasis omitted). Petitioner acknowledged the November
18, 2016 effective date in his request for reconsideration, explaining that his billing

(Footnote continued on next page)
On December 19, 2016, Petitioner submitted a request for reconsideration in which he
argued that the effective date of his reactivated billing privileges should be November 8,
2016, and also alleged that he did not receive any correspondence pertaining to the
revalidation request and subsequent deactivation of his reenrollment. CMS Ex. 9.
Petitioner contended that this was his first coverage gap since he first enrolled in
Medicare in 2004, and explained that “[t]he delay in responding [to] the revalidation
request was not intentional and we corrected it as soon as we became aware of the
situation.” CMS Ex. 9 at 1. Petitioner also explained that he had “implemented internal
steps to ensure this does not happen in the future... .” CMS Ex. 9 at 1.

WPS issued a reconsidered determination on February 7, 2017, in which it denied
Petitioner’s request for an earlier effective date of reactivated billing privileges. CMS
Ex. 10. WPS explained that the “gap in coverage was processed correctly” because
Petitioner “failed to respond to the revalidation request.” CMS Ex. 10 at 2.

Petitioner submitted a request for hearing that was received at the Civil Remedies
Division on April 4, 2017. CMS filed a pre-hearing brief and motion for summary
judgment, along with 11 exhibits (CMS Exs. | - 11). Petitioner filed a combined
response brief, response to CMS’s motion for summary judgment, and cross-motion for
summary judgment (P. Br.) and 14 exhibits (P. Exs. 1 - 14). CMS filed a response to
Petitioner’s motion for summary judgment, along with three additional supporting
exhibits (CMS Exs. 12 - 14). Petitioner thereafter filed a motion to reply to CMS’s
response and a reply brief (P. Reply). In the absence of any objections, I admit all
exhibits in to the record, and I grant Petitioner’s motion to submit P. Reply.

Neither party offered the written testimony of any witnesses. A hearing for the purpose
of cross-examining witnesses is therefore unnecessary. See Acknowledgment and Pre-
Hearing Order §§ 8, 9, and 10. I consider the record in this case to be closed, and the
matter is ready for a decision on the merits.°

(Footnote continued)

manager, S. Salloum, contacted WPS to “inquire[] as to why the new effective date was
November 18, 2016.” CMS Ex. 9 at 1; see also P. Br. at 2 (describing Ms. Salloum as
“the billing manager”).

> Both parties have argued that summary judgment is appropriate. It is unnecessary in
this instance to address the issue of summary judgment, as neither party has requested an
in-person hearing.
IL. Issue

Whether CMS had a legitimate basis for establishing November 18, 2016, as the effective
date of Petitioner’s reactivated billing privileges.

Il. Jurisdiction
I have jurisdiction to decide this case. 42 C.F.R. §§ 498.3(b)(15), 498.5(/)(2).
IV. Findings of Fact, Conclusions of Law, and Analysis*

I. On June 14, 2016, WPS mailed a letter to Petitioner directing
him to revalidate his Medicare enrollment record by August 31,
2016, and that the failure to respond could result in
deactivation of his billing privileges, nonpayment for services
rendered during a period of deactivation, and a gap in
reimbursement.

2. On September 5, 2016, WPS mailed another letter to Petitioner
notifying him that he had not revalidated his enrollment prior
to the August 31, 2016 deadline, and that the failure to respond
could result in deactivation of his billing privileges,
nonpayment for services rendered during a period of
deactivation, and a gap in reimbursement.

3. After Petitioner did not revalidate his Medicare enrollment
record in response to the revalidation request, WPS notified
Petitioner on November 1, 2016, that it had deactivated his
Medicare enrollment and billing privileges, effective October
31, 2016.

4. WPS received Petitioner’s signed enrollment application, along
with a reassignment of Medicare benefits application, for the
purposes of revalidating and reactivating Medicare enrollment,
on November 18, 2016.

5. An effective date earlier than November 18, 2016, the date WPS
received the signed enrollment applications, is not warranted
for the reactivation of Petitioner’s Medicare enrollment and
billing privileges.

+ My findings of fact and conclusions of law are set forth in italics and bold font.
As a physician, Petitioner is a “supplier” for purposes of the Medicare program. See

42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202 (definition of supplier), 410.20(b)(1); see
also 42 C.F.R. § 498.2. A “supplier” furnishes services under Medicare and the term
applies to physicians or other practitioners that are not included within the definition of
the phrase “provider of services.” 42 U.S.C. § 1395x(d). A supplier must enroll in the
Medicare program to receive payment for covered Medicare items or services. 42 C.F.R.
§ 424.505. The regulations at 42 C.F.R. Part 424, subpart P, establish the requirements
for a supplier to enroll in the Medicare program. 42 C.F.R. §§ 424.510 - 424.516; see
also 42 U.S.C. § 1395cc(j)(1)(A) (authorizing the Secretary of the U.S. Department of
Health and Human Services to establish regulations addressing the enrollment of
providers and suppliers in the Medicare program). A supplier that seeks billing
privileges under Medicare “must submit enrollment information on the applicable
enrollment application.” 42 C.F.R. § 424.510(a)(1). “Once the provider or supplier
successfully completes the enrollment process ... CMS enrolls the provider or supplier
into the Medicare program.” 42 C.F.R. § 424.510(a)(1); see also 42 C.F.R. § 424.510(d)
(listing enrollment requirements). Thereafter, “[t]o maintain Medicare billing privileges,
a... supplier... must resubmit and recertify the accuracy of its enrollment information
every 5 years.” 42 C.F.R. § 424.515.

CMS is authorized to deactivate an enrolled supplier’s Medicare billing privileges if the
enrollee does not provide complete and accurate information within 90 days of a request
for such information. 42 C.F.R. § 424.540(a)(3). If CMS deactivates a supplier’s
Medicare billing privileges, “[n]o payment may be made for otherwise Medicare covered
items or services furnished to a Medicare beneficiary.” 42 C.F.R. § 424.555(b). Further,
and quite significantly, the Departmental Appeals Board (DAB) has unambiguously
stated that “[i]t is certainly true that [the petitioner] may not receive payment for claims
for services during any period when his billing privileges were deactivated.” Willie
Goffney, Jr., M.D., DAB No. 2763 at 6. The regulation authorizing deactivation explains
that “[d]Jeactivation of Medicare billing privileges is considered an action to protect the
provider or supplier from misuse of its billing number and to protect the Medicare Trust
Funds from unnecessary overpayments.” 42 C.F.R. § 424.540(c).

The reactivation of an enrolled provider or supplier’s billing privileges is governed by
42 C.F.R. § 424.540(b), and the process for reactivation is contingent on the reason for
deactivation. If CMS deactivates a supplier’s billing privileges due to the supplier’s
failure to respond to a request for updated enrollment information, such as in this case,
the supplier may apply for CMS to reactivate its Medicare billing privileges by
completing and submitting the appropriate enrollment application(s) or recertifying its
enrollment information, if deemed appropriate. 42 C.F.R. § 424.540(a)(3), (b)(1).

On June 14, 2016, WPS mailed to Petitioner a letter notifying him that he was required to
revalidate his Medicare enrollment record by August 31, 2016, and warning him that the

failure to revalidate could lead to deactivation of his Medicare enrollment and billing
privileges, with a resulting gap in reimbursement. CMS Ex. 2 at 1. On September 5,
2016, WPS mailed to Petitioner a second letter informing him that it had not received a
response to the revalidation request, and again cautioned that his billing privileges could
be deactivated and that he would not receive reimbursement for services rendered while
deactivated. CMS Ex. 3 at 1. On November 1, 2016, WPS sent another letter in which it
notified Petitioner it had deactivated his billing privileges because he failed to revalidate
his Medicare enrollment record. CMS Ex. 4 at 1.

Nearly five months after WPS first requested that Petitioner revalidate his enrollment
record, Petitioner submitted enrollment and reassignment applications via PECOS on
November 8, 2016. CMS Ex. 5 at 1. However, Petitioner did not mail the accompanying
signature forms for those applications for another six days, and WPS did not receive
those forms until November 18, 2016. CMS Exs. 12, 13. After further development of
the applications (CMS Exs. 6, 7), WPS approved Petitioner’s applications on December
8, 2016, and reactivated his billing privileges, effective November 18, 2016. CMS Ex. 8;
see note 2, above.

The pertinent regulation with respect to the effective date of reactivation is 42 C.F.R.

§ 424.520(d). Arkady B. Stern, M.D., DAB No. 2329 at 4 (2010). Section 424.520(d)
states that “[t]he effective date for billing privileges for physicians . . . is the later of — (1)
[t]he date of filing of a Medicare enrollment application that was subsequently approved
by a Medicare contractor; or (2) [t]he date that the supplier first began furnishing services
at a new practice location.” The DAB has explained that the “date of filing” is the date
“that an application, however sent to a contractor, is actually received.” Alexander C.
Gatzimos, MD, JD, LLC, DAB No. 2730 at 5 (2016) (emphasis omitted). Of particular
importance to this case, “the date of filing for Internet-based PECOS will be the date the
Medicare . . . contractor receives all of the following: (1) A signed certification
statement; (2) an electronic version of the enrollment application; and (3) a signature
page that the Medicare . . . contractor processes to approval.” /d. at 9 n.2 (internal
quotation marks omitted) (quoting 73 Fed. Reg. 69,726, 69,767 (November 19, 2008));
see also 42 C.F.R. § 424.510(d)(3) (including as an enrollment requirement the
following: “The certification statement found on the enrollment application must be
signed by an individual who has the authority to bind the provider or supplier, both
legally and financially, to the requirements set forth in this chapter.”). Petitioner’s date
of filing was November 18, 2016, the date WPS received Petitioner’s signed certification
and authorization statements for his enrollment and reassignment applications. Based on
the November 18, 2016 receipt date of the signed applications, WPS correctly assigned a
November 18, 2016 effective date for reactivated billing privileges. See Goffney, DAB
No. 2763 at 6 (“It is certainly true that [the petitioner] may not receive payment for
claims for services during any period when his billing privileges were deactivated.”); 42
CFR. § 424.520(d).
Although the November 18, 2016 effective date is appropriate, as explained above,
Petitioner focuses much attention on the deactivation of his billing privileges, arguing
that WPS did not properly notify him of his need to revalidate his Medicare enrollment.
Petitioner contends that he updated his mailing address with NPPES, the National Plan &
Provider Enumeration System, on January 15, 2014, and that WPS should have updated
its records with that mailing address and mailed notice of his need to revalidate to that
address.° P. Br. at 9-11 (citing, inter alia, P. Ex. 2). However, the DAB has explained
that a deactivation action is not reviewable, and “[t]he only action in the reconsidered
determination which is appealable is . . . the initial determination of the effective date of
the enrollment application reinstating [the petitioner].”° Goffney, DAB No. 2763 at 3-5.

Even though I need not address Petitioner’s arguments that the deactivation action was
erroneous, I nonetheless observe that Petitioner’s arguments are otherwise not persuasive.
Petitioner has not claimed, nor demonstrated through the submission of evidence, that he
updated his Medicare enrollment record with a mailing address other than the address he
provided on his enrollment application in May 2011. Petitioner was required to report a
change to the information supplied in his enrollment application directly to CMS or WPS
“within 90 calendar days of when the change occurred.” 42 C.F.R. § 424.540(a)(2).
Changes to enrollment information are effectuated through the submission of a completed
enrollment application, and not by updating information with NPPES. 42 C.F.R.

§ 424.510(a)(1) (“Providers and suppliers must submit enrollment information on the
applicable enrollment application.”). Petitioner’s most recent enrollment application
prior to the revalidation request, submitted in May 2011, listed the same address for both
correspondence and for his designated contact person, 4201 St. Antoine, UHC-6F, Suite

> The National Plan & Provider Enumeration System maintains the National Provider
Identifier (NPI) system, which assigns a single, unique NPI to health care providers.

42 C.F.R. § 162.408. A provider need not be enrolled in Medicare to have an NPI. See
42 CFR. §§ 162.408, 162.410, 162.412, 162.414. The NPI system is not a Medicare
enrollment database, and an update of information in the NPI system is not an update of
Medicare enrollment information.

° The DAB explained: “Moreover, neither [42 C.F.R. §] 424.545(b) nor any other
regulation provides appeal rights from the contractor’s deactivation determination or any
rebuttal determination.” Goffney, DAB No. 2763 at 5; see also Arkady B. Stern, M.D.,
DAB No. 2417 at 3 n.4 (2011) (Petitioner argues on appeal that deactivation was
improper, but the DAB “does not have the authority to review” deactivation under
circumstances of this case, (citing 42 C.F.R. §§ 424.545(b) and 498.3(b)); Andrew J.
Elliott, M.D., DAB No. 2334 at 4 n.4 (2010) (DAB “does not have authority to review” a
deactivation).
226, Detroit, MI 48201-2153 (CMS Ex. | at 4, 20),” which is the address to which WPS
mailed the revalidation-related correspondence in June, September, and November of
2016. CMS Exs. 2, 3, 4. If Petitioner did not receive the revalidation correspondence, it
was due to his own failure to update his Medicare enrollment information, and not any
failure of WPS.

Petitioner also argues that WPS was obligated to mail a revalidation request to another
address on file, citing the Medicare Program Integrity Manual (MPIM), CMS Pub. 100-
08, Ch. 15, § 15.29.2. P. Br. at 11-12; see CMS Ex. 11 at 24. However, Petitioner did
not list any other addresses in his May 2011 application, and the only address listed is the
aforementioned address; in fact, Petitioner did not opt to list a separate billing agency or
special payments address in the application. CMS Ex. 1. Thus, although the MPIM
provision at issue directs the contractor to mail two revalidation notices to the
correspondence address, special payments address, and/or practice location, I observe
that Petitioner reported a single address on his May 2011 enrollment application.*
MPIM, § 15.29.2; see CMS Ex. 11 at 24. Petitioner has not shown that WPS did not
adhere to the procedures for requesting revalidation of enrollment.

Petitioner argues that the effective date of his reactivated billing privileges should be
November 8, 2016, the date he alleges he filed the applications for purposes of
revalidation and reactivation of his enrollment. P. Br. at 12-16; P. Reply at 2-4.
Although Petitioner electronically submitted the applications on November 8, 2016, it
was not complete because Petitioner did not send in the accompanying signature pages
until November 14, 2016, and they were not received until November 18, 2016. CMS
Exs. 5 at 4, 7; 12; 13; 14. Asa result, Petitioner’s complete applications were not
received until November 18, 2016. See Gatzimos, DAB No. 2730 at 9 n.2 (quoting

73 Fed. Reg. at 69,767).

To the extent that any of Petitioner’s arguments can be construed as a request for
equitable relief in the form of an earlier effective date of reactivated billing privileges, I

7 Petitioner faults WPS and CMS for relying on the addresses listed in the May 2011

enrollment application, and points out purported discrepancies involving the processing
of that application. P. Br. at 9-11. However, Petitioner has not submitted any evidence
demonstrating that he updated his Medicare enrollment record prior to November 2016.

* | further note that the MPIM is sub-regulatory internal policy guidance for Medicare
administrative contractors, and it does not create any substantive rights to compliance.
See, e.g., Viora Home Health, Inc., DAB No. 2690 at 8 (2016). Even if I were to find
that WPS did not fully adhere to the MPIM, which I do not, I could not grant Petitioner
any relief based on such noncompliance. Further, I reiterate that I lack the authority to
review the deactivation of billing privileges.
am unable to grant equitable relief. US Ultrasound, DAB No. 2302 at 8 (2010) (“Neither
the ALJ nor the [DAB] is authorized to provide equitable relief by reimbursing or
enrolling a supplier who does not meet statutory or regulatory requirements.”).”
Petitioner also argues that I “should designate an effective date of November 8, 2016, in
the interest of due process.” P. Br. at 8. I cannot grant Petitioner relief on this basis
because I do not have the authority to “[f]ind invalid or refuse to follow Federal statutes
or regulations or secretarial delegations of authority.” See, e.g., 18661CPayday.com,
L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by applicable laws and
regulations and may not invalidate either a law or regulation on any ground, even a
constitutional one.”).

In the absence of any basis to grant an earlier date for the reactivation of billing
privileges, the November 18, 2016 effective date for the reactivation of Petitioner’s
billing privileges must stand.

V. Conclusion

I uphold the November 18, 2016 effective date of the reactivation of Petitioner’s
Medicare billing privileges.

/s/
Leslie C. Rogall
Administrative Law Judge

° The DAB has suggested that equitable estoppel may be available in a case involving
“affirmative misconduct,’ such as fraud, by the federal government.” US Ultrasound,
DAB No. 2302 at 8. Petitioner vaguely claims such “misconduct” occurred here (P. Br.
at 8), but he provides no evidence of any governmental misconduct.


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

Center for Tobacco Products,

Complainant,
v.

32 Ave Valero Corp
d/b/a Valero,

Respondent.

Docket No. T-19-1719
FDA No. FDA-2019-H-0855

Decision No. TB4149

Date: July 31, 2019

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, 32 Ave Valero Corp d/b/a Valero, at 1121 Southwest 32nd
Avenue, Miami, Florida 33135, and by filing a copy of the complaint with the Food and
Drug Administration’s (FDA) Division of Dockets Management. The complaint alleges
that Valero impermissibly sold covered tobacco products to a minor and failed to verify,

by means of photo identification containing a date of birth, that the covered to

Dacco

product purchaser was 18 years of age or older, thereby violating the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 ef seq., and its implementing regulations, 21
C.F.R. pt. 1140. The complaint also alleges that Respondent previously sold covered

tobacco products 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. T

ie

complaint further alleges that Respondent Valero previously admitted to five violations
of regulations found at 21 C.F.R. pt. 1140 and, therefore, CTP seeks an $11,410 civil
money penalty against Respondent Valero for seven violations within a 48-month period.

During the hearing process, Respondent failed to comply with multiple judicial orders
and directions. I, therefore, strike Respondent’s answer and issue this decision of default

judgment.
I. Background

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on February 26, 2019, CTP served the
complaint on Respondent Valero by United Parcel Service. On March 19, 2019,
Respondent timely filed its answer. On March 26, 2019, I issued an Acknowledgment
and Pre-hearing Order (APHO) setting forth case procedures and deadlines. The APHO
contained a provision that set out instructions regarding a party's request for production
of documents. That provision states, in part, that a party had until May 3, 2019, to
request that the other party provide copies of documents relevant to this case. APHO

4 12. The APHO also stated that, pursuant to 21 C.F.R. § 17.23(a), a party receiving such
a request must provide the requested documents no later than 30 days after the request
has been made. Jd. The parties were warned that failure to comply with any order
including the APHO may result in sanctions. Id. { 16.

On May 15, 2019, CTP filed a Motion to Compel Discovery stating that its request for
production of documents (RFP) was sent to Respondent on April 5, 2019, and delivered
to Respondent’s retail establishment on April 8, 2019. CTP further stated that it did not
receive a response from Respondent regarding its RFP, and requested that I issue an order
requiring Respondent to comply. A May 21, 2019 letter issued by my direction allowed
Respondent until June 5, 2019, to file a response to CTP’s Motion to Compel Discovery.
Respondent failed to file a response to CTP’s Motion to Compel Discovery or otherwise
to respond to the May 21, 2019 letter. Therefore, on June 6, 2019, I granted CTP’s
Motion to Compel Discovery and ordered Respondent to comply with CTP’s RFP by
June 21, 2019. I warned Respondent that failure to comply with my order may result in
sanctions, including the issuance of an initial decision and default judgment finding
Respondent liable for the violations alleged in the complaint and imposing a civil money
penalty.

On June 28, 2019, CTP filed a Status Report and Motion to Impose Sanctions stating that
Respondent has not produced any documents as ordered. CTP requested I strike
Respondent’s answer and issue an initial decision and default judgment imposing a civil
money penalty against Respondent. A July 2, 2019 letter issued by my direction allowed
Respondent until July 15, 2019 to file a response to CTP’s Motion to Impose Sanctions.
To date, Respondent has not responded to the Motion to Impose Sanctions or the July 2,
2019 letter.

Therefore, pursuant to 21 C.F.R. § 17.35, 1am granting CTP’s Motion to Impose
Sanctions, and striking Respondent’s answer for failing to comply with multiple judicial
orders and directions. Specifically, Respondent failed to comply with my March 26,
2019 APHO and my June 6, 2019 order requiring it to comply with CTP’s RFP.
Additionally, Respondent failed to file a response to CTP’s Motion to Compel Discovery,
CTP’s Motion to Impose Sanctions, and the May 21, 2019 and July 2, 2019 letters. This
repeated conduct is sufficiently egregious to warrant striking Respondent’s answer and
issuing an initial decision by default.

I. Default Decision

Striking Respondent’s answer leaves the complaint unanswered. Pursuant to 21 C.F.R.
§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

e On June 26, 2018, CTP initiated a previous civil money penalty action, CRD
Docket Number T-18-2687, FDA Docket Number FDA-2018-H-2441 (see also
CRD Docket Number T-18-1646, FDA Docket Number FDA-2018-H-1130),
against Respondent for five! violations of 21 C.F.R. pt. 1140 within a 36-month
period. CTP alleged those violations to have occurred at Respondent’s business
establishment, 1121 Southwest 32nd Avenue, Miami, Florida 33135, on July 7,
2017, February 4, 2018, and May 10, 2018;

e The previous action concluded when Respondent admitted the allegations
contained in the Complaint issued by CTP, and paid the agreed upon monetary
penalty in settlement of that claim. Further, “Respondent expressly waived its
right to contest such violations in subsequent actions”;

e At approximately 9:11 AM on November 24, 2018, at Respondent’s business
establishment, 1121 Southwest 32nd Avenue, Miami, Florida 33135, an
FDA-commissioned inspector documented Respondent’s staff selling a package of
two Swisher Sweets Classic Grape cigars to a person younger than 18 years of
age. The inspector also documented that staff failed to verify, by means of
photographic identification containing a date of birth, that the purchaser was 18
years of age or older.

These facts establish Respondent Valero’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 also 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 also 21
U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974,

' Two violations were documented on July 7, 2017, two on February 4, 2018, and two on
May 10, 2018. In accordance with customary practice, CTP counted the violations at the
initial inspection as a single violation, and all subsequent violations as separate individual
violations.
28,975-76 (May 10, 2016). Under 21 C.F.R. § 1140.14(b)(1), no retailer may sell
covered tobacco products to any person younger than 18 years of age. Under 21 C.F.R.
§ 1140.14(b)(2)(), retailers must verify, by means of photographic identification
containing a purchaser’s date of birth, that no covered tobacco product purchasers are
younger than 18 years of age.

Under 21 C.F.R. § 17.2, an $11,410 civil money penalty is permissible for seven
violations of the regulations found at 21 C.F.R. pt. 1140 within a 48-month period.

Order

For these reasons, I enter default judgment in the amount of $11,410 against Respondent
32 Ave Valero Corp d/b/a Valero. 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/
Wallace Hubbard
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2018-H-4192)

Complainant,
v.

White Dove Groceries, Inc.
d/b/a Grafton Shop N Save Express,

Respondent.
Docket No. T-19-401
Decision No. TB4137

Date: July 30, 2019

INITIAL DECISION

The Center for Tobacco Products (CTP) of the Food and Drug Administration (FDA)
seeks a civil money penalty (CMP) of $11,182, against Respondent, White Dove
Groceries, Inc. d/b/a Grafton Shop N Save Express, for six violations of the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140, within a 48-month period. Specifically, the
Administrative Complaint (Complaint) alleges that Grafton Shop N Save Express
impermissibly sold cigarettes to a minor, 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. The Complaint also alleges that Respondent previously sold cigarettes or
smokeless tobacco to minors and failed to verify, by means of photo identification
containing a date of birth, that some of the purchasers were 18 years of age or older. For
the reasons discussed below, I find Respondent liable for the violations alleged, and
conclude that a CMP of $11,182 is appropriate.
I. Background

CTP began this matter by serving a Complaint on Respondent at its establishment located
at 57 Maple Avenue, Grafton, West Virginia 26354, and by filing a copy of the
Complaint with the FDA Division of Dockets Management. Respondent timely filed an
Answer to CTP’s Complaint. On December 17, 2018, I issued an Acknowledgement and
Pre-Hearing Order in which I set a schedule of pre-hearing exchanges and deadlines for
submissions.

CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief, list of
proposed witnesses and exhibits, and 18 exhibits (CTP Exs. 1-18), including the written
direct testimony of two proposed witnesses, CTP’s Senior Regulatory Counsel Laurie
Sternberg (CTP Ex. 7) and Inspector William Bennett (CTP Ex. 8). Respondent timely
filed its pre-hearing exchange, consisting of six exhibits (R. DAB file 7-7e). However,
Respondent did not file a pre-hearing brief, submit a list of proposed witnesses, or proffer
direct testimony of any witnesses.

On May 16, 2019, I held a pre-hearing conference in this case. I explained to the parties
that the purpose of an administrative hearing under the applicable regulations is to afford
the parties an opportunity for cross-examination and redirect of exchange witnesses. I
further explained that I must determine whether Respondent is liable for the violations
alleged in the Complaint as well as the appropriate penalty.

At the pre-hearing conference, Respondent admitted to the violations in the Complaint,
but contested the penalty. Since Respondent admitted liability, I informed the parties that
there was no real purpose for a hearing to cross-examine CTP’s witnesses about the CMP
issue. Accordingly, Respondent waived its right to cross-examine CTP’s witnesses and
both parties indicated that an in-person telephone hearing was unnecessary.
Consequently, I informed the parties that I would issue a decision based on the evidence
of record. I also informed the parties that the decision, along with the parties’ appeal
rights, would be sent to the parties, who could then appeal the decision to the
Departmental Appeals Board if desired.

During the pre-hearing conference, I admitted CTP’s and Respondent’s exhibits into the
record and informed the parties that no further evidence would be admitted. I also gave
the parties an opportunity to submit final briefs with any arguments they wanted me to
consider. On June 17, 2019, Respondent filed its final brief (Resp. Final Brief) along
with an attachment described as its 2018 tax return (DAB file 15). CTP filed its final
brief on June 19, 2019. As the briefing period is over, I now render my decision.

Il. ISSUES

A. Whether Respondent sold cigarettes to a minor on August 12, 2018, in
violation of 21 C.F.R. § 1140.14(a)(1); and
B. Whether the CMP amount of $11,182 sought by CTP is reasonable.

Til. Analysis, Findings of Fact and Conclusions of Law
A. Violations

CTP determined to impose a CMP against Respondent pursuant to the authority conferred
by the Act and implementing regulations at Part 21 of the Code of Federal Regulations.
The Act prohibits the misbranding of tobacco products while they are held for sale after
shipment in interstate commerce. 21 U.S.C. § 331(k). FDA and its agency, CTP, may
seek civil money penalties from any person who violates the Act’s requirements as they
relate to the sale of tobacco products. 21 U.S.C. § 331(£)(9). The sale of tobacco
products to an individual who is under the age of 18 is a violation of an implementing
regulation. 21 C.F.R. § 1140.14(a)(1).

CTP alleges that Respondent committed at least six violations of the Act and its
implementing regulations within a 48-month period. Complaint at ¥.1. Specifically, CTP
alleges that, on August 12, 2018, Respondent sold cigarettes to a minor, and previously
admitted to at least five violations of regulations found at 21 C.F.R. pt. 1140. Id. at 49 7,
9-14.

As indicated above, Respondent has admitted to the violation as alleged at the pre-
earing conference. As a result, I find Respondent liable for six violations under the Act.

B. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent Grafton Shop N Save Express is liable for
a CMP not to exceed the amount listed in FDA’s CMP regulations at 21 C.F.R. § 17.2.

In its Complaint, CTP seeks to impose the maximum penalty amount, $11,182, against
Respondent for six violations of the Act and its implementing regulations within a 48-
month period. Complaint at § 1. In its Answer, Respondent requests a lower penalty. In
addition, Respondent contends, “a multi-thousand dollar fine during our company’s
ardship could force us to close our doors for good.” Resp. Final Brief.

I find that Respondent committed six violations of the Act and its implementing
regulations within a 48-month period. When determining the amount of a CMP, Iam
required to take into account “the nature, circumstances, extent, and gravity of the
violation or violations and, with respect to the violator, ability to pay, effect on ability to
continue to do business, any history of prior such violations, the degree of culpability,
and such other matters as justice may require.” 21 U.S.C. § 333(f)(5)(B).

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

I find that Respondent committed five violations of selling cigarettes or smokeless
tobacco to minors, and two violations for failing to verify, by means of photo
identification containing a date of birth, that the purchasers were 18 years of age or
older.! The repeated inability of Respondent to comply with federal tobacco regulations
is serious in nature and the CMP amount should be set accordingly.

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

As stated above, Respondent requests a lower fine and argues, “a multi-thousand dollar
fine during our company’s hardship could force us to close our doors for good.” Answer;
Resp. Final Brief. Respondent asserts “[w]e have been trying to cut costs everywhere we

an,” and “have even had to cut the owners/managers pay.” Resp. Final Brief.
Respondent also provided an attachment described as its 2018 tax return (DAB file 15).
Id.

As a preliminary matter, I will not admit Respondent’s attachment into evidence.
Respondent did not submit this document with its pre-hearing exchange. In my May 20,
2019 pre-hearing conference order, | informed the parties that no further evidence would
be admitted. See Order Scheduling Briefs. Further, CTP asserts that Respondent did not
produce the tax return in response to its Requests for Production sent to Respondent on
December 28, 2018. CTP Final Brief. For these reasons, I will not admit Respondent’s
2018 tax return into evidence or consider the information contained therein.

While it is understandable that Respondent is concerned about the future of its business,
Respondent did not provide sufficient evidence to demonstrate that the $11,182 CMP
sought by CTP would force it into bankruptcy, or make it close its doors. Respondent
provided a profit/loss statement (DAB file 7a). However, it is unclear how the
information contained in this document relates to Respondent’s ability to pay the penalty.
There is no other evidence in the record that demonstrates Respondent’s inability to pay
the penalty. Therefore, I find that Respondent has not presented any evidence that it does
not have the ability to pay the $11,182 CMP sought by CTP.

' Tn accordance with customary practice, CTP counted the violations at the initial
inspection as a single violation, and all subsequent violations as separate individual
violations.
c. History of Prior Violations

The current action is the fourth CMP action that CTP has brought against Respondent.”
On October 20, 2017, CTP initiated the most recent, third CMP action, CRD Docket
Number T-18-189, FDA Docket Number FDA-2017-H-6215, against Respondent for two
violations of 21 C.F.R. pt. 1140. Complaint at § 9. The third action concluded when
Respondent admitted the allegations contained in the Complaint issued by CTP, and paid
the agreed upon penalty. /d. at § 10. On June 30, 2017, CTP initiated the second CMP
action, CRD Docket Number T-17-5000, FDA Docket Number FDA-2017-H-3902,
against Respondent for violations of 21 C.F.R. pt. 1140. Jd. at § 11. The second action
concluded when Respondent admitted the allegations contained in the Complaint issued
by CTP, and paid the agreed upon penalty. Jd. at § 12. On September 16, 2015, CTP
initiated the first CMP action, CRD Docket Number C-15-4022, FDA Docket Number
FDA-2015-H-3242, against Respondent for violations of 21 C.F.R. pt. 1140. Jd. at ¥ 13.
The first action concluded when Respondent admitted the allegations contained in the
Complaint issued by CTP, and paid the agreed upon penalty. Jd. at 14. While
Respondent has already paid civil money penalties for its previous violations, its
continued inability to comply with the federal tobacco regulations calls for a more severe
penalty.

d. Degree of Culpability

Respondent suggests its employees should be held responsible for the violations. Resp.
Final Brief. Although I understand that Respondent’s owner cannot be at its business all
the time, it is Respondent’s responsibility to ensure its employees comply with the law. I
find that Respondent committed the six violations as alleged in the Complaint, and I hold
it fully culpable for all six violations of the Act and its implementing regulations.

e. Additional Mitigating Factors

Respondent has taken responsibility for its actions by admitting the violations. At the
pre-hearing conference, Respondent acknowledged that it was liable for the violation in
the current Complaint. See Order Scheduling Briefs (DAB file 13; order memorializing
pre-hearing conference). To prevent future violations, Respondent asserts that every
cashier receives additional training for tobacco sales, it has dates on its cash registers for
employees to verify the ages of tobacco product purchasers, and frequently reminds all
register clerks not to sell tobacco products to minors. Answer; Resp. Final Brief.
Additionally, Respondent states that it performs “‘in house stings” and has implemented

 Respondent’s prior violations include violations for sale to a minor on September 4,
2014, June 3, 2015, May 24, 2017, October 11, 2017, and August 12, 2018, and failure to
verify identification on September 4, 2014, and June 3, 2015.
stricter rules for employees, including automatic and immediate termination for
employees who are caught selling regulated tobacco products to minors. Jd.

Respondent’s attempts to train employees and deter tobacco sales to minor are
commendable. However, this is Respondent’s fourth CMP action, and Respondent has
had ample opportunity to correct its violations and come into compliance. Thus, I find
that a CMP of $11,182 is appropriate.

IV. PENALTY

Based on the foregoing reasoning, I find a penalty amount of $11,182 to be appropriate
under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

Vv. CONCLUSION

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $11,182, against
Respondent, White Dove Groceries, Inc. d/b/a Grafton Shop N Save Express, for six
violations of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140, within a 48-month period. Pursuant to
21 C.F.R. § 17.45(d), this Order becomes final and binding upon both parties after

30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge