Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Subramanya K. Prasad, M.D.
(NPI: 1124130349),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-23
Decision No. CR4522

Date: February 5, 2016

DECISION

The Centers for Medicare & Medicaid Services (CMS), acting through its administrative
contractor, CGS Administrators, LLC (CGS), denied the enrollment application that
Petitioner, Subramanya K. Prasad, M.D. (herein “Petitioner”), submitted following his
period of exclusion from participation in Federal health care programs that resulted from
a felony conviction. CGS’s denial of enrollment was based on Petitioner’s felony
conviction for making false statements to a federal agent, in violation of 18 U.S.C.

§§ 1001 and 2, within the 10 years preceding his enrollment application. Petitioner
timely requested a hearing before an administrative law judge (ALJ). For the reasons
stated below, I reverse CMS’s denial of Petitioner’s enrollment application on this basis.

I. Background and Procedural History

Petitioner is an internal medicine physician who is licensed to practice in Kentucky and
Ohio. CMS Exhibit (Ex.) 2 at 1, 3. On October 18, 2010, the United States Attorney for
the Southern District of California charged, in a superseding criminal information, that
Petitioner “did knowingly and willfully make a false, fictitious, and/or fraudulent
statement as to a material fact” in a matter within the jurisdiction of the Food and Drug
Administration (FDA) in violation of 18 U.S.C. §§ 1001 and 2. CMS Ex. 7. On or about
October 18, 2010, Petitioner pleaded guilty to the single count in the superseding
criminal information and thereby admitted committing the offense of “False statements to
[a] Federal Agent.” CMS Ex. 8. On October 18, 2010, United States District Judge Irma
E. Gonzalez imposed a sentence of one year of probation, along with forfeiture.' CMS
Ex. 8 at 1-2.

Effective May 20, 2013, the Inspector General (IG) of the Department of Health and
Human Services (Department) excluded Petitioner from participation in all federal health
care programs for a period of one year based on section 1128(b)(2) of the Social Security
Act (Act), 42 U.S.C. § 1320a-7(b)(2), which permits the IG to exclude an individual who
has been convicted, under federal or state law, in connection with the interference with or
obstruction of any investigation or audit related to any offense described in section
1128(a) or 1128(b)(1) of the Act. CMS Ex. 4 at 4-7, 9; CMS Ex. 5. In an April 11, 2014
decision, the Departmental Appeals Board (DAB), in reversing a Civil Remedies
Division (CRD) ALJ decision’, concluded that the IG met his burden “of establishing that
Petitioner’s offense was in connection with the interference with or obstruction of an
investigation” and that the IG had “established that it had a basis for excluding Petitioner
under section 1128(b)(2) of the Act.” CMS Ex. 5 at 8-9; see Subramanya K. Prasad,
M.D., DAB No. 2568 at 8-9 (2014). The DAB concluded that a one-year term of
exclusion imposed by the IG “is within a reasonable range,” and that the length of the
exclusion “accounts for the impact of Petitioner’s cooperation in accordance with the
applicable regulatory mitigating factor while still serving section 1128’s remedial
objective of protecting federal health care programs and their beneficiaries from
untrustworthy providers.” Jd. at 10.

Subsequent to the issuance of the DAB’s decision, the IG and Petitioner jointly entered
into an Exclusion Agreement in which Petitioner agreed to be excluded “under 42 U.S.C.
§ 1320a-7(b)(2) from Medicare, Medicaid, and all other Federal health care programs, as
defined in 42 U.S.C. § 1320a-7b(f), for a period of 1 year.” As part of the agreement,
Petitioner explicitly waived his right to appeal the DAB’s decision. CMS Ex. 4 at 4-7.

' Records documenting the specific amount of forfeiture or the basis therefor are not
included in the parties’ exhibits.

> The ALJ decision reversed the IG’s determination that Petitioner should be excluded
from participation in Federal health care programs for a period of one year. Petitioner
submitted a copy of this decision as an attachment to his brief. The decision can be found
on the DAB’s public website at
http://www.hhs.gov/dab/decisions/civildecisions/2013/cr3014.pdf (last visited January
29, 2016).

The agreement indicated that the Petitioner’s one-year exclusion would be effective May
20, 2013. Id. at 5.

On September 8, 2014, the IG informed Petitioner that his eligibility to participate in
federal health care programs had been reinstated as of the date of the letter. CMS Ex. 4 at
9. Thereafter, on or about February 20, 2015, Petitioner submitted a Medicare enrollment
application, at which time he indicated that he had been subject to a “[M]edicare
exclusion” and had been reinstated by the IG on September 8, 2014. CMS Ex. 2.

On May 4, 2015, CGS issued an initial determination in which it denied Petitioner’s
application, giving the following reason: “42 CFR §424.530(a)(3) — Felonies .. . You are
within 10 years of your 2010 felony conviction.” CMS Ex. 3 at 1. On June 1, 2015,
Petitioner submitted a corrective action plan (CAP) and request for reconsideration.

CMS Ex. 4 at 1-2. In an August 24, 2015 letter, CGS denied Petitioner’s request for
reconsideration, again stating: “Denial reason: 42 CFR §424.530(a)(3) ... You are
within 10 years of your 2010 felony conviction.” CMS Ex. | at 1.

Petitioner, through his current counsel, filed a request for hearing (RFH) on October 13,
2015. On October 15, 2015, I issued an Acknowledgement and Pre-Hearing Order
(Order) directing the parties to file pre-hearing exchanges, consisting of an opening brief
by CMS and a response brief by Petitioner, in accordance with specific requirements and
deadlines.

CMS filed a Pre-Hearing Brief and Motion for Summary Disposition? (CMS Br.), along
with eight exhibits (CMS Exs. 1-8). Petitioner submitted a Pre-Hearing Brief and Brief
Opposing Summary Judgment (P. Br.). Although my Order did not permit the parties to
file any briefs other than the pre-hearing brief (or motion for summary disposition), CMS
filed a reply brief (CMS Reply) without seeking leave to do so. I afforded Petitioner an
opportunity to respond to CMS’s reply brief, and he filed a sur-reply brief (P. Sur-Reply).
I admit the briefs and CMS Exs. 1-8 into the record.

Neither party has submitted the written direct testimony of any proposed witnesses.
Order 8. Consequently, there are no witnesses for the parties to cross-examine at an in-
person hearing. Order {{§ 9-10. The record is closed, and the case is ready for a decision
on the merits.

3 : . : . . .

As an in-person hearing to cross-examine witnesses is not necessary and I am reversing
CMS’s determination, it is unnecessary to further address CMS’s motion for summary
disposition.
IL. Issue

Whether CMS has a legitimate basis to deny Petitioner’s enrollment application under 42
C.F.R. § 424.530(a)(3) based on Petitioner’s October 2010 felony conviction.

Il. Jurisdiction

I have jurisdiction to decide this issue. 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 of health care services for purposes of the
Medicare program. See 42 U.S.C. § 1395x(d); 42 C.F.R. §§ 400.202, 410.20(b)(1). In
order to participate in the Medicare program as a supplier, an individual must meet
certain criteria to enroll and receive billing privileges. 42 C.F.R. §§ 424.505, 424.510.
CMS may deny a supplier’s enrollment for any reason stated in, inter alia, 42 C.F.R.

§ 424.530.

A supplier’s enrollment application for Medicare billing privileges can be denied based
on the existence of a felony conviction, as is set forth in 42 C.F.R. § 424.530(a)(3):

(3) Felonies. The provider, supplier, or any owner or managing employee
of the provider or supplier was, within the preceding 10 years, convicted (as
that term is defined in 42 CFR 1001.2) of a Federal or State felony offense
that CMS determines is detrimental to the best interests of the Medicare
program and its beneficiaries.

(i) Offenses include, but are not limited in scope and severity to—

ORK

(D) Any felonies that would result in mandatory exclusion under
section 1128(a) of the Act.

42 C.F.R. § 424.530(a)(3). This current version of the regulation has been in effect since
February 3, 2015. 79 Fed. Reg. 72500, 72531-2 (Dec. 5, 2014). Immediately prior to the

+ My findings of fact and conclusions of law are in bold and italics.
regulatory amendment, section 424.530(a)(3) was substantively different, and contained
the pertinent regulatory language as follows:

(3) Felonies. If within the 10 years preceding enrollment of revalidation of
enrollment, the provider, supplier, or any owner of the provider or supplier,
was convicted of a Federal or State felony offense that CMS has
determined to be detrimental to the best interests of the program and its
beneficiaries. CMS considers the severity of the underlying offense.

(i) Offenses include—

re

(D) Any felonies outlined in section 1128 of the Act.

42 C.F.R. § 424.530(a)(3) (2014). The two versions of the regulation each provide a list
of the types of felony offenses that CMS considers to be detrimental to the best interests
of the program and its beneficiaries. 42 C.F.R. §§ 424.530(a)(3)(i)(A)-(D). Subsection
(D) of the former version of the regulation specified that any felony outlined in section
1128 of the Act would be considered per se detrimental to the best interests of the
program and its beneficiaries, whereas the latter version of the regulation specified that
only felonies outlined in section 1128(a) of the Act are per se detrimental to the best
interests of the program and its beneficiaries. The instant offense has previously been
determined by the DAB, and also agreed upon by the parties in an Exclusion Agreement,
to have warranted exclusion under section 1128(b)(2) of the Act (pertaining to a
conviction that was in connection with the interference with or obstruction of an
investigation into any criminal offense described in section 1128(b)(1) or 1128(a) of the
Act)).

Suppliers of health care services who have been denied enrollment have a statutory right
to a hearing to dispute the denial. 42 U.S.C. § 1395cc(j)(8). A supplier who has been
denied enrollment has a right to an administrative law judge hearing and DAB review of
the denial of its enrollment in the Medicare program. 42 C.F.R. §§ 498.3(b)(17),
498.5(/)(2)-(3). An ALJ may review CMS’s exercise of its discretion to deny enrollment
based on a determination that a felony offense committed by a supplier is detrimental to
the best interests of the program and its beneficiaries. See Fady Fayad, M.D., DAB No.
2266 at 16 (2009), aff'd, Fayad v. Sebelius, 803 F.Supp. 2d. 699, 704 (E.D. Mich. 2011).
I. On October 18, 2010, Petitioner pleaded guilty to making false statements to
a federal agent in violation of 18 U.S.C. §§ 1001 and 2.

2. Petitioner was convicted of a felony offense for purposes of 42 C.F.R.
§ 424.530(a)(3).

According to Title 18 of the United States Code, “whoever, in any manner within the
jurisdiction of the executive, legislative, or judicial branch of the Government of the
United States, knowingly and willfully .. . (2) makes any materially false, fictitious, or
fraudulent statement or representation . . . shall be fined under this title, imprisoned not
more than 5 years... .” 18 U.S.C. § 1001(a)(2). Title 18 of the United States Code also
indicates that an offense is considered to be a felony based on the maximum term of
imprisonment, and that an offense that is punishable by more than one year of
imprisonment is considered to be a felony. 18 U.S.C. § 3559(a). On October 18, 2010,
the United States District Court for the Southern District of California entered a
Judgment in a Criminal Case based on Petitioner’s guilty plea to the offenses listed in 18
U.S.C. §§ 1001 and 2. CMS Ex. 8 at 1. I conclude that Petitioner was convicted of a
felony for purposes of 42 C.F.R. § 424.530(a)(3).>°

3. Petitioner was convicted of a felony offense that warranted exclusion
pursuant to section 1128(b) of the Act.

The DAB, the highest level appellate review body of the Department, concluded that
Petitioner’s offense was in connection with the interference with or obstruction of an
investigation and that the IG established that it had a basis for excluding him from
participation in Federal health care programs pursuant to section 1128(b)(2) of the Act
for a period of one year. Subramanya K. Prasad, M.D., DAB No. 2568 at 8-10. Ina
May 2014 Exclusion Agreement jointly entered into by the IG and Petitioner, “Petitioner
agree[d] to be excluded under 42 U.S.C. § 1320a-7(b)(2) from Medicare, Medicaid, and
all Federal health care programs . . . for a period of 1 year.” Neither party has submitted
any new evidence that points to any facts that were not known to the DAB, Petitioner, or
the IG at the time of the DAB’s decision or the execution of the Exclusion Agreement. In
addition, the parties have not alleged that any other exclusion provision is applicable to
this case. See CMS Br. at 7-8.

5 In its decision, the DAB determined that Petitioner had been convicted of a felony,
stating: “Petitioner still pled guilty to a felony, and his potential prison time remained
five years.” Subramanya K. Prasad, M.D., DAB No. 2568 at 8.

° Petitioner has acknowledged that he was convicted of a felony offense (CMS Ex. 4 at
1), and he has not argued otherwise in his briefs.
I have no independent basis to conclude that any exclusion provision, other than section
1128(b)(2), is applicable to this case. The conviction-related evidence submitted and
admitted into the record in these proceedings with respect to Petitioner’s criminal
conviction totals five pages and consists of: (1) A superseding information charging that
Petitioner made false statements to a federal agent in violation of 18 U.S.C. §§ 1001 and
2, and (2) a Judgment in Criminal Case reporting Petitioner’s guilty plea and imposition
of asentence. In support of their respective arguments, Petitioner has submitted a copy
of a previous CRD ALJ decision and CMS has submitted a copy of the DAB decision
that reversed the CRD ALJ’s decision. P. Br., P. Attachment 1; CMS Ex. 5. I note that
although both decisions discussed the underlying facts surrounding Petitioner’s role in
criminal activity, the summaries of the circumstances surrounding Petitioner’s conviction
contained in these decisions do not constitute actual evidence relating to the
circumstances of Petitioner’s conviction. Therefore, as concluded by the DAB, and
previously agreed upon by Petitioner, section 1128(b)(2) of the Act is the applicable
exclusion provision related to Petitioner’s criminal conviction.

4. Petitioner’s felony offense is not listed in 42 C.F.R. § 424.530(a)(3) as being
per se detrimental to the best interests of the Medicare program or its
beneficiaries.

The version of 42 C.F.R. § 424.530(a)(3) in effect when the initial determination in this
case was issued lists the following offenses as being per se detrimental to the best
interests of the Medicare program or its beneficiaries:

(A) | Felony crimes against persons, such as murder rape, assault, and
other similar crimes for which the individual was convicted, including
guilty pleas and adjudicated pretrial diversions.

(B) Financial crimes, such as extortion, embezzlement, income tax
evasion, insurance fraud and other similar crimes for which the individual
was convicted, including guilty pleas and adjudicated pretrial diversions.

(C) Any felony that placed the Medicare program or its beneficiaries at
immediate risk, such as a malpractice suit that results in a conviction of
criminal neglect or misconduct.

(D) Any felonies that would result in mandatory exclusion under section
1128(a) of the Act.

42 C.F.R. § 424.530(a)(3)(i)(A)-(D). As previously discussed, the DAB has concluded,
and Petitioner and CMS have agreed, that Petitioner’s offense falls under section
1128(b)(2) of the Act. Thus, under subsection (D), which now more narrowly includes
only offenses listed in section 1128(a) of the Act, Petitioner’s offense would not warrant
a per se denial of enrollment in the Medicare program.’ There is no indication, in either
the initial or reconsidered determinations, that Petitioner’s felony offense should be
considered under subsections (A) through (C) listed above, and I see no such connection
in my review of the limited facts before me. Additionally, CMS has not contended in its
briefs that enrollment should be denied pursuant to subsections (A) through (C).
Therefore, I conclude that Petitioner’s felony offense is not an offense listed in 42 C.F.R.
§ 424.530(a)(3)(i)(A)-(D).

5. When a felony offense is not listed in 42 C.F.R. § 424.530(a)(3)(i)(A)-(D), a
denial of enrollment based on a felony conviction in the ten years preceding
the application must be based on a determination that the offense is
detrimental to the best interests of the Medicare program or its beneficiaries.

In its proposed rule addressing the intended revision of 42 C.F.R. § 424.530(a)(3), CMS
explained that it would “modify the list of felonies in each section such that any felony
conviction—including guilty pleas and adjudicated pretrial diversions—that we have
determined to be detrimental to the best interests of the Medicare program and its
beneficiaries would constitute a basis for denial or revocation.” 78 Fed. Reg. 25013,
25021 (April 29, 2013). CMS further stated that this amendment “would give us the
discretion to deny or revoke enrollment based on any felony conviction that we believe to
be detrimental to the best interests of Medicare and its beneficiaries.” Jd.

The revised regulation included changes to the enumerated felonies that CMS finds are
per se detrimental to the best interests of the Medicare program and makes it clear that
CMS has the discretion to determine whether any felony conviction within 10 years
preceding enrollment is detrimental to the best interests of the Medicare program and its
beneficiaries. 42 C.F.R. § 424.530(a)(3). The revised regulation, which became
effective on February 3, 2015, explicitly lists four categories of felony offenses that
warrant a denial of enrollment for a period of 10 years from the date of conviction, but
indicates that offenses “include, but are not limited in scope and severity” to those
specified offenses. 42 C.F.R. § 424.530(a)(3)(i). Furthermore, the revised regulation
states that enrollment can be denied for any felony offense that CMS “determines is
detrimental to the best interests of the Medicare program and its beneficiaries.” 42
CFR. § 424.530(a)(3).

7 One key change in the regulation is that subsection (D) of the former version more
broadly included “[a]ny felonies outlined in section 1128 of the Act” and did not limit the
offenses to the ones outlined in section 1128(a) of the Act.
In explaining the regulatory changes in the Final Rule, CMS noted that “[t]he
determination of whether a particular conviction will or will not result in the revocation
or denial of Medicare enrollment will depend on the specific facts of each individual
situation.” 79 Fed. Reg. 72510. CMS elaborated, as follows:

We believe that the term “determines” makes clearer that the lists of
felonies in these two provisions are not exhaustive and include other
felonies that CMS may deem as meeting the “detrimental” standard based
on the particular facts of the case. Second, and to further emphasize CMS’
discretion to use felonies other than those specified in §§ 424.530(a)(3)

and 424.535(a)(3) as grounds for denial or revocation, we have included the
phrase “but are not limited in scope or severity” within both provisions.

However, notwithstanding these changes, we again stress that we will only
exercise our authority under §§ 424.530(a)(3) and 424.535(a)(3) after very
careful consideration of the relative seriousness of the underlying offense
and all of the circumstances surrounding the conviction. It should in no
way be assumed that every felony conviction will automatically result in a
denial or revocation.

Id. at 72511-72512. In stating such, CMS indicated that any determination that a felony
not contained in the list at 42 C.F.R. § 424.530(a)(3)(i)(A)-(D) would result in a denial of
enrollment would first require CMS to determine that the offense was detrimental to the
best interests of the Medicare program and its beneficiaries. Jd. Furthermore, CMS
avowed that it would only make such a determination after it carefully considered the
relative seriousness of the underlying offense and all of the circumstances surrounding
the conviction. /d. The plain language of the updated regulation is consistent with the
discussion in the final rule, in that it limits denials to instances in which CMS
“determines” an offense is detrimental to the best interests of the Medicare program and
its beneficiaries. Therefore, CMS must make a determination that a given felony offense
is detrimental to the best interests of the Medicare program and its beneficiaries relative
to the facts of the specific case when considering an enrollment application from an
individual who has committed a felony in the preceding 10 years if the felony offense is
not listed in subsections (A) through (D).

6. The initial and reconsidered determinations did not state that Petitioner’s
offense was detrimental to the best interests of the Medicare program and its
beneficiaries.

The May 4, 2015 initial determination and August 24, 2015 reconsidered determination
contain the same explanation for the denial of Petitioner’s enrollment in the Medicare
program, stating identically, to include punctuation and boldface font:
10

42 CFR §424.530(a)(3)
You are within 10 years of your 2010 felony conviction.

CMS Exs. | at 1; 3 at 1 (emphasis in original). No further explanation is provided, and
neither determination provides any reasoning other than the fact that 10 years has not yet
elapsed since Petitioner’s felony conviction. The following list of “submitted
documentation” is cited in the reconsidered determination:

-Reconsideration request letter dated June 1, 2015

-Letter from the Southern District Ohio’s US Probation office dated June 11, 2012

-Office of Inspector General (OIG) reinstatement letter dated September 8, 2014

-Exclusion Agreement between Dr. Prasad and the OIG signed by Dr. Prasad on
May 7, 2014

-Attorney letter to OIG dated May 13, 2014

CMS Ex. | at 1. Of note is that the hearing officer who authored the reconsidered
determination did not indicate that she had considered any other documents pertaining to
the offense, such as the superseding indictment, judgment, statements of investigators,
and/or transcripts of court proceedings.

While the given reason for the denial of enrollment in the reconsidered determination was
solely that Petitioner had a felony conviction in the previous 10 years, CMS, in its
opening brief, elaborated on that basis with additional reasoning that is not contained in
the four corners of the reconsidered determination. CMS’s opening brief explained that
“CMS, through its contractor CGS, denied Petitioner’s application for enrollment as a
Medicare supplier because Petitioner had been convicted of a felony specifically
identified in 42 C.F.R. § 424.530(a)(3) within the previous ten years.” CMS Br. at 5
(emphasis added). CMS offered, in support of this basis, that “[t]his offense falls
squarely within the list of felonies in Section 1128 of the Act” because “Petitioner’s
offense is a ‘[fJelony outlined in section 1128 of the Act.’” CMS Br. at 6.

CMS, in its reply brief, acknowledged Petitioner’s arguments regarding CMS’s incorrect
application of the regulation and conceded that the felony offense at issue is not
enumerated in 42 C.F.R. § 424.530(a)(3)(i)(D), which marked a change in its litigation
position. It acknowledged the requirement that CMS “must consider whether the felony
is detrimental to the best interests of Medicare.” CMS Reply at 2. Although CMS made
a bare assertion that “CMS, through its contractor CGS Administrators, determined that
these felonies were detrimental to the best interests of the Medicare program and its
beneficiaries and denied Petitioner’s enrollment on this basis,” it does not provide a
11

citation to any document or other credible evidence in support of this assertion.’ CMS
Reply at 3. Likewise, I have found no such language in the contractor’s reconsidered
determination. Furthermore, CMS’s briefs lack any specific discussion of how
Petitioner’s conviction for violating 18 U.S.C. §§ 1001 and 2 has been determined to be
detrimental to the best interests of the Medicare program.

CMS contends, in its reply, that the regulatory revisions “are intended to expand CMS’s
authority to deny Medicare billing privileges based on a felony conviction” and that
Petitioner is incorrect in arguing that the basis provided in the reconsidered determination
is incorrect. CMS Reply at 2 (emphasis in original). I observe that, in the proposed
rulemaking, CMS stated that it was amending the regulation to give it the “discretion to
deny or revoke enrollment based on any felony conviction.” 78 Fed. Reg. 25021. While
CMS may have sought to expand its authority with regard to the types of felony
convictions that would bar Medicare enrollment, it did not indicate that it would do so
without first making a determination that was based on the facts of each individual case.
CMS overlooks that in seeking the discretion to consider all felony convictions within 10
years of an application, it unambiguously stated that its determination would “depend
upon the specific facts of the individual situation” and that “we will only exercise our
authority . . . after consideration of the relative seriousness of the underlying offense and
all of the circumstances surrounding the conviction.” 79 Fed. Reg. 72510. In the instant
case, the CMS contractor appeared to limit its consideration to whether Petitioner had a

® Tt is worth noting that in a previous matter before a different ALJ, CMS argued the
following, in pertinent part:

An ALJ may only conduct the most minimal review (i.e., must uphold a
denial or revocation under 42 C.F.R. §§ 424.530(a)(3) and 424.535(a)(3) so
long as Petitioner has committed a felony and CMS'’s reconsidered
determination states that CMS has determined this felony to be detrimental
to the best interests of the program and program beneficiaries).

Barry Ray, MD, DAB CR3655 at 13 (2015) (emphasis added). CMS appears to have
moved the proverbial target, as in the current case CMS essentially argues that it is not
necessary for a contractor, on behalf of CMS, to state that it has actually determined the
offense to be detrimental (much less describe how it reached that conclusion). CMS’s
current position is that the mere fact that the contractor has denied a supplier enrollment
pursuant to 424.530(a)(3) is ipso facto proof that the supplier has committed an offense
CMS has determined to be detrimental to the Medicare program. I reject that position, as
it is inconsistent with both the plain language of the regulation and the rationale provided
in CMS’s rulemaking.
12

felony conviction in the ten years prior to the application, and CMS, in its brief, added
that the contractor “denied Petitioner’s application for enrollment as a Medicare supplier
because Petitioner had been convicted of a felony specifically identified in 42 C.F.R.

§ 424.530(a)(3) within the previous ten years.” CMS Br. at 5. CMS has not
demonstrated that Petitioner’s enrollment was denied because CMS determined that his
offense was detrimental to the best interests of the Medicare program and its
beneficiaries.

7. Since CMS has not determined that Petitioner’s offense was detrimental to
the best interests of the Medicare program, and the offense is not among the
offenses listed in 42 C.F.R. § 424.530(a)(3)(i)(A)-(D), CMS did not properly
deny Petitioner’s Medicare enrollment on that basis.

CMS has asserted that the reconsidered determination denied Petitioner’s application
“because Petitioner had been convicted of a felony specifically identified in 42 C.F.R.

§ 424.530(a)(3),” thereby acknowledging that CMS, through its contractor, had denied
enrollment based on the fact that it believed the offense was included in the list of
enumerated offenses at subsections (A) to (D). CMS Br. at 5. Even without taking into
account CMS’s post-hoc rationale for the reconsidered determination, it is unquestionable
that the reconsidered determination denied enrollment without addressing whether the
offense was detrimental to the best interests of the Medicare program and its
beneficiaries. In doing so, despite CMS’s assurance in its rulemaking that “[e]ach case
will be carefully reviewed on its own merits and . . . we will act judiciously and with
reasonableness in our determinations,” there was no specific determination regarding
whether the offense was detrimental to the best interests of the Medicare program. 79
Fed. Reg. at 72510.

Iam limited in my review of the bases for a denial of enrollment to the bases that are
stated in the reconsidered determination. See e.g., Neb Group of Arizona LLC, DAB No.
2573 at 7 (2014). The regulations require that the reconsidered determination “‘give[] the
reasons for the determination” and “[i]f the determination is adverse, the notice specifies
the conditions or requirements of law or regulations that the affected party fails to meet
....” 42 C.F.R. § 498.25(a). The reconsidered determination’s denial of enrollment, if
CMS’s assertions are accepted as true, was premised on a legal error in which the hearing
officer felt that an exclusion under section 1128(b)(2) warranted a per se denial of
enrollment. The same reconsidered determination makes no finding that the offense was
detrimental to the best interests of the Medicare program and its beneficiaries, and CMS,
in its briefs, has not advanced any arguments, with either legal or factual support, that the
offense was detrimental to the best interests of the Medicare program and its
beneficiaries.

13

The reason given in the reconsidered determination for upholding the denial of
enrollment was simply that Petitioner had a felony conviction within 10 years of his
submission of an enrollment application. In such an instance in which a felony
conviction did not fall under the enumerated offenses listed in 42 C.F.R.

§ 424.530(a)(3)(A)-(D), CMS did not fulfill its obligation to “determine” whether the
offense was “detrimental to the best interests of the Medicare program and its
beneficiaries.” 42 C.F.R. § 424.530(a)(3). I cannot determine in the first instance, and
based on the limited evidence before me, that this offense was detrimental to the best
interests of the Medicare program or its beneficiaries. 1 therefore do not affirm CMS’s
denial of Petitioner’s enrollment in the Medicare program.°

While I find that CMS improperly denied enrollment based on its application of 42
C.F.R. § 424.530(a)(3), I limit my review to only this aspect of the enrollment
application. CMS, or its contractor, must issue a new determination regarding
Petitioner’s enrollment application.

V. Conclusion

I reverse CMS’s denial of Petitioner’s enrollment application for Medicare billing
privileges.

/s/
Leslie C. Rogall
Administrative Law Judge

° For example, the record before me does not indicate whether any Medicare
beneficiaries or funds were involved in the FDA investigation that preceded Petitioner’s
guilty plea to making false statements to an FDA agent. As I have previously noted,
CMS, in its briefs, has not explained how the offense was detrimental to the best interests
of the Medicare program and its beneficiaries.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Francisco Cintron Acevedo
(O.1. File No. 2-11-4-0532-9),

Petitioner,
v.

The Inspector General,
Department of Health and Human Services.

Docket No. C-15-3477
Decision No. CR4521
Date: February 4, 2016

DECISION

Petitioner, Francisco Cintron Acevedo, is excluded from participation in Medicare,
Medicaid, and all federal health care programs pursuant to section 1128(a)(3) of the
Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)), effective May 20, 2015.
Petitioner’s exclusion for the minimum period of five years is required by section
1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).!

I. Background

The Inspector General (I.G.) notified Petitioner by letter dated April 30, 2015, that he was
being excluded from participation in Medicare, Medicaid, and all federal health care
programs for five years. The L.G. cited section 1128(a)(3) of the Act as the basis for
Petitioner’s exclusion and stated that the exclusion was based on his conviction in the
United States District Court for the District of Puerto Rico (District Court) of a criminal

' Pursuant to 42 C.F.R. § 1001.3001, Petitioner may apply for reinstatement only after
the period of exclusion expires. Reinstatement is not automatic upon completion of the
period of exclusion.
offense related to fraud, theft, embezzlement, breach of fiduciary responsibility or other
financial misconduct in connection with the delivery of a health care item or service.

Petitioner filed a request for hearing (RFH) dated June 30, 2015. The case was assigned
to me on August 12, 2015, for hearing and decision. A prehearing telephone conference
was convened on September 3, 2015. The substance of the conference is memorialized in
my Order to Show Cause, Prehearing Conference Order, and Schedule for Filing Briefs
and Documentary Evidence dated September 9, 2015 (Prehearing Order).

The LG. filed a motion for summary judgment and supporting brief (I.G. Br.) on October
6, 2015, with LG. exhibits (Exs.) 1 through 3. Petitioner did not object to my
consideration of I.G. Exs. | through 3 and they are admitted as evidence. The I.G. failed
to file a copy of the April 30, 2015 notice of exclusion as an I.G. exhibit as required by
my Prehearing Order ¥ 7. The I.G. is required by 42 C.F.R. § 1001.2003(a)’ to give an
individual or entity to be excluded proper notice. Whether or not Petitioner has a right to
hearing, whether or not I have jurisdiction, and whether or not the I.G. may proceed with
the exclusion action are all dependent upon whether Petitioner was properly notified by
the I.G. The I.G. has the burden under 42 C.F.R. § 1005.15(c) and paragraph 7 of my
Prehearing Order to establish that proper notice was given. In this case, Petitioner has
raised no issue related to the sufficiency of the April 30, 2015 notice. Petitioner filed two
pages of the April 30, 2015 notice with his request for hearing and as an exhibit.
Therefore, I conclude that there is no issue to be resolved regarding the sufficiency of the
notice Petitioner received, and there is no prejudice due to the I.G.’s failure to comply
with my Prehearing Order by not filing the notice of exclusion as evidence. Counsel for
the I.G. is admonished, however, to ensure careful compliance with my Prehearing Order
in the future.

Petitioner filed two documents in response to the I.G. motion for summary judgment, one
titled “Petitioner’s Opposition to Motion for Summary Judgment” (P. Opp.) and the other
titled “Opposition to Motion for Summary Judgment” (P. Br.)* on November 20, 2015.
Petitioner also filed three exhibits marked “EXIBIT I,” “EXHIBIT II,” and “EXHIBIT
Ill” (DAB E-File Item # 13c). Petitioner failed to mark and number the pages of the
exhibits as required by Civil Remedies Division Procedures (CRDP) § 14. Rather than
reject the documents, | treat them as being marked as follows:

> References are to the 2014 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise stated.

> Departmental Appeals Board Electronic Filing System (DAB E-File) Items # 13 and
13a, respectively.
P. Ex. 1: “EXIBIT I,” a five-page document containing the judgment the District
Court entered against Petitioner, which is also I.G. Ex. 1.

P. Ex. 2: “EXHIBIT II,” two pages of the April 30, 2015 notice letter the I.G. sent
to Petitioner providing him notice of the proposed exclusion.

P. Ex. 3: “EXHIBIT III,” the last page of the I.G.’s notice letter informing
Petitioner of the limitations an exclusion imposes on him.

The L.G. has not objected to my consideration of P. Exs. 1 through 3 and they are
admitted as evidence. On December 7, 2015, the LG. filed a reply brief.

II. Discussion
A. Applicable Law

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) establishes Petitioner’s rights to a
hearing by an administrative law judge (ALJ) and judicial review of the final action of
the Secretary of Health and Human Services (the Secretary).

Pursuant to section 1128(a)(3) of the Act, the Secretary must exclude from participation
in any federal health care program:

Any individual or entity that has been convicted for an
offense which occurred after... [August 21, 1996], under
Federal or State law, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in [section 1128(a)(1)]) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a
felony relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

The Secretary has promulgated regulations implementing these provisions of the Act.
42 CFR. § 1001.101(c).

Pursuant to section 1128(i) of the Act, an individual is convicted of a criminal offense
when: (1) a judgment of conviction has been entered by a federal, state, or local court
whether or not an appeal is pending or the record has been expunged; (2) there is a
finding of guilt in a court; (3) a plea of guilty or no contest is accepted by a court; or (4)
the individual has entered into any arrangement or program where judgment of
conviction has been withheld. 42 U.S.C. § 1320a-7(i)(1)-(4); 42 C.F.R. § 1001.2.
Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section
1128(a) of the Act will be for a period of not less than five years. 42 C.F.R.

§ 1001.102(a). The Secretary has published regulations that establish aggravating factors
the I.G. may consider to extend the period of exclusion beyond the minimum five-year
period, as well as mitigating factors that may be considered only if the I.G. proposes to
impose an exclusion greater than five years. 42 C.F.R. § 1001.102(b), (c).

The standard of proof is a preponderance of the evidence, and there may be no collateral
attack of the conviction that provides the basis of the exclusion. 42 C.F.R.
§ 1001.2007(c), (d). Petitioner bears the burden of proof and the burden of persuasion on

any affirmative defenses or mitigating factors, and the I.G. bears the burden on all other
issues. 42 C.F.R. § 1005.15(b), (c).

B. Issues
The Secretary has by regulation limited my scope of review to two issues:

Whether the I.G. has a basis for excluding Petitioner from participation in
Medicare, Medicaid, and all federal health care programs; and

Whether the length of the proposed period of exclusion is unreasonable.
42 C.F.R. § 1001.2007(a)(1).
If, as in this case, the I.G. imposes the minimum authorized five-year period of exclusion
under section 1128(a) of the Act, there is no issue as to whether the period of exclusion is
unreasonable. 42 C.F.R. § 1001.2007(a)(2).

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

My conclusions of law are set forth in bold followed by the pertinent findings of fact and
analysis.

1. Petitioner’s request for hearing was timely and I have jurisdiction.
2. Summary judgment is appropriate in this case.

The L.G. informed Petitioner by letter dated April 30, 2015, that the I.G. was excluding
Petitioner effective 20 days from the date of the letter. P. Ex. 2 at 1. Petitioner requested
a hearing by letter dated June 30, 2015. The Civil Remedies Division received
Petitioner’s request for hearing on July 7, 2015, via U.S. Mail. The LG. has not offered
evidence that he personally served Petitioner with the notice of exclusion. In the absence
of evidence of personal service, Petitioner is presumed to have received the notice of
exclusion on May 5, 2015, and Petitioner states that he did in fact receive the notice of
exclusion on May 5, 2015. 42 C.F.R. § 1005.2(c); RFH at 1. Petitioner had 60 days from
the date he received the notice of exclusion to request a hearing, or Saturday, July 4,
2015, a federal holiday. 42 C.F.R. § 1005.2(c). Therefore, Petitioner had until the next
business day, July 6, 2015, to file his request for hearing. CRDP § 11. Because
Petitioner filed his request for hearing via regular U.S. Mail and the Civil Remedies
Division received it on July 7, 2015, I infer that Petitioner filed his hearing request
timely, consistent with the date Petitioner’s counsel certified he filed it. RFH at 4. I
conclude, that Petitioner’s request for hearing was timely, and I have jurisdiction
pursuant to section 1128(f) of the Act and 42 C.F.R. pt. 1005.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to
reasonable notice and an opportunity for a hearing. The Secretary has provided by
regulation that a sanctioned party has the right to hearing before an ALJ. Pursuant to
42 C.F.R. § 1005.15(a), Petitioner is entitled to a “hearing on the record.” Both the
sanctioned party and the LG. have a right to participate in the hearing. 42 C.F.R.

§§ 1005.2-.3. Either or both parties may choose to waive appearance at an oral hearing
and to submit only documentary evidence and written argument for my consideration.
42 CFR. § 1005.6(b)(5).

Petitioner did not appear during the prehearing conference and did not waive the right to
appear at an oral hearing. In his opposition to the motion for summary judgment,
Petitioner stated that he “opposes the [I.G.’s] Motion for Summary Judgment and moves
for a remedy as a matter of law, on the record, since there are no issues of fact to be
decided.” P. Opp. at 1. I interpret Petitioner’s statement to be a concession that there are
no genuine disputes of material fact that require an oral hearing and that only issues of
law are presented for decision. However, Petitioner has not unambiguously waived an
oral hearing in writing. Therefore, I evaluate whether summary judgment is appropriate
in this case.

Summary judgment is appropriate, and no hearing is required, where either: there are no
genuine disputes of material fact and the only questions that must be decided involve
application of law to the undisputed facts; or, the moving party prevails as a matter of law
even if all disputed facts are resolved in favor of the party against whom the motion is
made. A party opposing summary judgment must allege facts which, if true, would
refute the facts relied upon by the moving party. Deciding a case on summary judgment
differs from deciding a case on the merits after a hearing. An ALJ does not assess
credibility or weigh conflicting evidence when deciding a case on summary judgment.
Bartley Healthcare Nursing & Rehab., DAB No. 2539 at 3-4 (2013); Senior Rehab. &
Skilled Nursing Ctr., DAB No. 2300 at 3 (2010); Holy Cross Village at Notre Dame, Inc.,
DAB No. 2291 at 5 (2009); see Fed. R. Civ. Pro. 56.
Petitioner does not dispute that: he was convicted within the meaning of section 1128(i)
of the Act; he pled guilty to and was convicted of felony misbranding and adulterating
prescription medications with intent to mislead and defraud; his criminal offense was
related to fraud; and the offense for which he was convicted occurred after August 21,
1996. RFH at 2; P. Br. at 1-2. Petitioner argues that his exclusion violates the District
Court’s judgment; is vague and overbroad; and constitutes double jeopardy. The issues
that Petitioner raises are issues that must be resolved against him as a matter of law. I
conclude that summary judgment is appropriate as there are no genuine disputes as to any
material facts related to the elements for an exclusion pursuant to section 1128(a)(3) of
the Act. The LG. prevails as a matter of law on the issue of whether there is a basis for
exclusion based on the facts conceded by Petitioner. The five-year period of exclusion is
not unreasonable as a matter of law because the period is the minimum authorized by
Congress for exclusion pursuant to section 1128(a) of the Act. Petitioner’s defenses are
unavailing as matters of law.

3. Petitioner’s exclusion is required by section 1128(a)(3) of the Act.
a. Facts

On February 26, 2014, a 14-count indictment was filed against Petitioner and three other
individuals in the District Court. Petitioner was charged with six counts of health care
fraud in violation of 18 U.S.C. §§ 2 and 1347; one count of conspiracy to commit health
care fraud in violation of 18 U.S.C. §§ 1347 and 1349; and five counts of misbranding
prescription medications with intent to mislead and defraud in violation of 21 U.S.C.

§§ 331(k); 333(a)(2); 351(a)(2)(A)-(B); and 352(a), (b), and (0). I.G. Ex. 2 at 8, 13, 16-
17; LG. Ex. 3 at 8.

Petitioner entered into a plea agreement with the United States Attorney on July 11, 2014.
The agreement provided that Petitioner would plead guilty to Count Ten of the
indictment, which alleged misbranding and adulterating prescription medications with
intent to mislead and defraud. I.G. Ex. 3 at 1. Petitioner stipulated as part of his plea
agreement that on or about April 11, 2011, he and others aiding and abetting each other:

cause[d] drugs known as Levalbuterol and Budenoside (sic)
to become misbranded and adulterated by among other:

(1) Bearing labeling that was false and misleading in any
particular in violation of 21 U.S.C. §352(a);

(2) Failing to bear a label containing the name and place of
business of the manufacturer, packer, and distributor in
violation of Title 21 U.S.C. §352(b);
(3) Being manufactured, prepared, propagated, compounded,
and processed in an establishment not duly registered with
FDA in violation of Title 21 U.S.C. §352(0));

(4) Being prepared, packed, and held under insanitary
conditions whereby they may have been contaminated with
filth and may have been rendered injurious to health in
violation of 21 U.S.C. §351(a)(2)(A);

(5) Employing methods used in, and facilities and controls
used for, their manufacture, packing, storage, and installation
that did not conform with the current good manufacturing
practices established by Title 21 U.S.C. §351(a)(2)(B);

All in violation of Title 21, United States Code, Sections
331(k), 333(a)(2), 351(a)(2)(A) and (B), 352(a), (b), 352(0)
and Title 18, United States Code, Section 2.

LG. Ex. 3 at 8.

On November 21, 2014, Petitioner entered a guilty plea in the District Court to Count
Ten of the indictment. The District Court accepted Petitioner’s guilty plea to
misbranding and adulterating prescription medications with intent to mislead and defraud
in violation of 21 U.S.C. §§ 331(k), 333(a)(2), 351(a)(2)(A) and (B), and 352(a),(b) and
(o). The District Court entered a judgment of conviction against Petitioner and sentenced
him to three years of probation, including six months of home detention, a $100
assessment, and a forfeiture of $134,871.41. I.G. Ex. 1.

b. Analysis

The LG. cites section 1128(a)(3) of the Act as the basis for Petitioner’s mandatory
exclusion. The statute provides:

(a) MANDATORY EXCLUSION.—The Secretary shall
exclude the following individuals and entities from
participation in any Federal health care program (as defined
in section 1128B(f)):

(3) Felony Conviction Relating to Health Care Fraud. — Any
individual or entity that has been convicted for an offense
which occurred after the date of the enactment of the Health
Insurance Portability and Accountability Act of 1996, under
Federal or State law, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in paragraph (1)) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a
felony relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

Act § 1128(a)(3) (emphasis added). The statute requires that the Secretary exclude from
participation any individual or entity: (1) who was convicted for an offense under federal
or state law; (2) whose offense occurred after August 21, 1996 (the date of enactment of
the Health Insurance Portability and Accountability Act of 1996); (3) whose offense was
committed in connection with the delivery of a health care item or service; (4) whose
crime was a felony offense; and (5) whose offense was related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct.

All the elements for exclusion under section 1128(a)(3) of the Act are satisfied in this
case. Petitioner does not dispute that he was convicted of a criminal offense within the
meaning of section 1128(i) of the Act (42 U.S.C. § 1320a-7(i)). RFH; P. Br. at 1-2.
Petitioner’s guilty plea was accepted and he was found guilty based on his plea. The
District Court issued a judgment of conviction and sentenced Petitioner for the offense
for which he was convicted. I conclude that Petitioner was convicted of a criminal
offense within the meaning of section 1128(i) of the Act.

fense that occurred after August 21, 1996, related to fraud, theft, embezzlement, breach
fiduciary responsibility, or other financial misconduct in connection with the delivery
a health care item or service. Act § 1128(a)(3). Petitioner does not dispute that he
ed guilty to and was convicted of a felony criminal offense under federal law. 1.G. Exs.
at 1; 3 at 1. Petitioner does not contest that his offense occurred after August 21, 1996.
.G. Ex. 1 at 1. Petitioner does not contest that his offense related to fraud. Count Ten, to
which Petitioner pled guilty, alleges specifically that Petitioner had the “intent to mislead
and defraud.” LG. Exs. 2 at 16; 3 at 1. Finally, Petitioner does not dispute that his felony
offense was committed in connection with the delivery of a health care item or service.
Count Ten specifically alleged that the misbranded or adulterated prescription of
Budesonide was dispensed to a Medicare Beneficiary with the initials A.L. I.G. Ex. 2 at
16. The nexus between Petitioner’s offense and the delivery of a health care item or
service is plain.

The statute requires that Petitioner be excluded if he was convicted of a felony criminal
1

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Petitioner argues that the exclusion runs contrary to the District Court’s order that as part
of his probation Petitioner remain employed. P. Br. at 4-5. As part of the “Standard
Conditions of Supervision,” the District Court ordered Petitioner to “support his or her
dependents and meet other family responsibilities” and “work regularly at a lawful

occupation, unless excused by the probation officer for schooling, training, or other
acceptable reasons.” I.G. Ex. 1 at 2 §§ 4-5. Petitioner argues that because of the broad
nature of the exclusion, Petitioner’s ability to support his family by working at a
pharmacy will be impeded should the exclusion remain in place without any
modification. P. Br. at 4-5. Petitioner’s argument is without merit. The fact that
Petitioner cannot participate in any capacity in the Medicare program, Medicaid program,
and all state health care programs as defined in Section 1128B(f) of the Act, in no way
prevents him from supporting his family by engaging in other lawful occupations. P. Ex.
2 at 1. The District Court did not specify that Petitioner support his family as a
pharmacist or by otherwise working at a pharmacy. While excluded, Petitioner is free to
obtain any employment whatsoever, as long as it does not violate the terms of his
exclusion by causing him to participate in the Medicare program, Medicaid program, or
any state health care programs as defined in Section 1128B(f) of the Act. Therefore, the
exclusion does not conflict with the District Court judgment.

Petitioner argues that the exclusion is vague and overbroad, and thereby violates his due
process rights because it does not notify him of the conduct it prohibits. P. Br. at 5-8. He
asserts that “the Office of the Inspector General’s interpretation and enforcement of the
law must be consistent with the Court’s judgment, and rational and consistent with the
statute.” P. Br. at 7. Petitioner’s argument verges on frivolity. The April 30, 2015 notice
of exclusion (P. Ex. 2) and its attachment (P. Ex. 3) are detailed and absolutely clear in
describing the exclusion, its basis, and its scope.* Petitioner and his counsel cannot
credibly claim ignorance or confusion about the fact that he has been excluded, why he
has been excluded, or the scope and effect of the exclusion. The I.G. action and notice is
based on and consistent with the clear direction of Congress. Section 1128(a) of the Act
requires that the Secretary exclude an individual convicted of an offense within the scope
of section 1128(a)(3), except when the limited circumstances exist that give the Secretary
discretion to grant a waiver under section 1128(c)(3)(B) — circumstances which do not
exist in this case. Congress mandates exclusion for a minimum of five years. Act

§ 1128(c)(3)(B). Congress also mandates that exclusion be from any federal health care
program as defined in section 1128B(f) of the Act. Section 1128B(f) defines federal
health care program as:

(1) any plan or program that provides health benefits, whether
directly, through insurance, or otherwise, which is funded
directly, in whole or in part, by the United States Government

* To the extent Petitioner has further questions about the scope of his exclusion, the I.G.
has provided additional guidance in its UPDATED Special Advisory Bulletin on the Effect
of Exclusion from Participation in Federal Health Care Programs, available at:
http://oig.hhs.gov/exclusions/files/sab-05092013.pdf.

10

(other than the health insurance program under chapter 89 of
title 5 United States Code); or

(2) any State health care program, as defined in section
1128(h).

Act § 1128B(f). Section 1128(h) of the Act includes any state plan or program that is
approved or receives federal funds under title V, XIX, XX, or XXI of the Act.

Furthermore, I have no authority to find the provisions of the Act or regulations
unconstitutionally vague or overbroad. Susan Malady, R.N., DAB No. 1816 (2002); 42
C.F.R. § 1005.4(c)(1). While I must interpret the Act and the Secretary’s regulations in a
manner consistent with Constitutional principles, Petitioner does not ask me to interpret
the term “exclusion” and the scope of exclusion specified by Congress, but rather, asks
that I invalidate the exclusion itself or somehow compel the Inspector General to interpret
the term in a certain manner. Petitioner does not request relief that 1 am empowered to
grant.

Finally, Petitioner argues that his exclusion constitutes double jeopardy because the
exclusion is a second punishment from the government that “rises upon the federal court
judgment” and “carries with it” criminal sanctions. P. Br. at 8-10. Petitioner is in error.
Exclusion under section 1128 of the Act is not a criminal penalty. It is well-settled that
1.G. exclusions pursuant to section 1128 of the Act are civil sanctions designed to protect
the beneficiaries of health care programs and are remedial in nature.° I.G. exclusions
thus do not trigger double jeopardy, since they are primarily remedial and not punitive.
Manocchio v. Kusserow, 961 F.2d 1539, 1542-43 (11th Cir. 1992); Greene v. Sullivan,
731 F.Supp. 838 (E.D. Tenn. 1990); cf: Patel v. Thompson, 319 F.3d 1317 (11th Cir.
2003), cert. denied, 539 U.S. 959 (2003) (finding exclusions present no ex post facto
problem because they are remedial, not punitive).

Accordingly, I conclude that the elements of section 1128(a)(3) of the Act are satisfied,
including the required nexus between Petitioner’s criminal offense and the delivery of a

> Congress enacted the exclusion provisions to serve two purposes: the protection of
federal funds and program beneficiaries from untrustworthy individuals; and the
deterrence of health care fraud. S. REP. NO. 109, 100th Cong., Ist Sess. 1-2 (1987),
reprinted in 1987 U.S.C.C.A.N. 682, 686 (noting “clear and strong deterrent”); Joann
Fletcher Cash, DAB No. 1725, at 18 (2000) (discussing trustworthiness and deterrence).
When Congress added section 1128(a)(3) in 1996, it again focused upon the deterrent
effect of exclusions: “greater deterrence was needed to protect the Medicare program
from providers who have been convicted of health care fraud felonies... .” H.R. REP.
496(1), 104th Cong., 2nd Sess. (1996), reprinted in 1996 U.S.C.C.A.N. 1865, 1886.
11

health care item or service. Therefore, I conclude that there is a basis for Petitioner’s
exclusion pursuant to section 1128(a)(3) of the Act and that his exclusion is required.

4. Five years is the minimum authorized period of exclusion pursuant
to section 1128(a)(3) of the Act.

5. Petitioner’s exclusion for five years is not unreasonable as a matter
of law.

I have concluded that there is a basis to exclude Petitioner pursuant to section 1128(a)(3)
of the Act. Therefore, Petitioner must be excluded for a minimum period of five years
pursuant to section 1128(c)(3)(B) of the Act.

Exclusion is effective 20 days from the date of the I.G.’s notice of exclusion to the
affected individual or entity. 42 C.F.R. § 1001.2002(b).

II. Conclusion
For the foregoing reasons, Petitioner is excluded from participation in Medicare,

Medicaid, and all federal health care programs for the minimum statutory period of five
years, effective May 20, 2015.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

CC Patel LLC
d/b/a Carousel Deli and Pizzeria,

Respondent.

Docket No. C-15-3647
FDA No. FDA-2015-H-2841

Decision No. CR4519
Date: February 4, 2016
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated a $5,000 civil money penalty (CMP)
action against Respondent for unlawfully selling tobacco to minors, on three separate
occasions, and failing to verify, by means of photo identification containing a date of
birth, that the purchasers were 18 years of age or older, on three separate occasions, in
violation of the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and
its implementing regulations, 21 C.F.R. pt. 1140. During the hearing process,
Respondent failed to comply with a judicial direction regarding CTP’s discovery request.
I therefore strike Respondent’s answer and issue this decision of default judgment.

I. Procedural History
Respondent timely answered CTP’s complaint. Administrative Law Judge Margaret G.

Brakebusch issued an Acknowledgement and Prehearing Order (APHO) that set
deadlines for parties’ submissions, including the October 28, 2015 deadline to request

' The case was transferred from Judge Brakebusch to me on January 28, 2016.
that the opposing party provide copies of documents relevant to this case. Additionally,
the APHO stated that a party receiving such a request must provide the requested
documents no later than 30 days after the request.

CTP served Respondent with its request for documents on October 28, 2015. On
December 3, 2015, CTP filed a motion to compel discovery indicating that CTP had not
received a response to its request for production of documents. See 21 C.F.R. § 17.23(a).
On December 3, 2015, CTP also filed a motion to extend the deadlines. Pursuant to
Judge Brakebusch’s direction, a December 7, 2015 letter allowed Respondent until
December 22, 2015 to file a response to CTP’s motion to compel discovery. On
December 8, 2015, Judge Brakebusch issued an Order that extended the parties’ pre-
hearing exchange deadlines.

On January 4, 2016, Judge Brakebusch issued an Order that granted CTP’s motion to
compel discovery. Judge Brakebusch noted that Respondent had not filed a response to
CTP’s motion to compel discovery. In that Order, Judge Brakebusch stated that
Respondent shall comply with CTP’s request for production of documents by January 26,
2016. She further stated that:

Failure to do so may result in sanctions, including the issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing a civil money penalty. Within five (5)
days of Respondent’s deadline to comply with discovery, CTP must file a
status report notifying me whether Respondent has complied with
discovery.

The January 4, 2016 Order also further extended the parties’ pre-hearing exchange
deadlines.

On January 28, 2016, CTP filed an updated status report advising that Respondent had
not complied with the January 4, 2016 Order. On January 28, 2016, CTP also filed a
motion to impose sanctions that asked the Administrative Law Judge to strike the
Respondent’s answer and issue a default judgment in this case.

Il. Striking Respondent’s Answer

Respondent failed to file a response to CTP’s motion to compel discovery, and to comply
with the January 4, 2016 Order compelling discovery responses to be provided by
January 26, 2016. Respondent did not comply with CTP’s discovery requests.
Respondent has not made any contact with this Court since September 24, 2015, the date
Respondent timely filed its answer and notice of appearance. Respondent’s failure to
effectively prosecute and defend actions taken over the course of the proceedings have
interfered with the orderly and speedy processing of this case, further warranting the
imposition of sanctions. See 21 C.F.R. § 17.35(a) (1)(2) and (3).

Due to Respondent’s noncompliance with the January 4, 2016 Order, I am striking
Respondent’s Answer, issuing this default decision, and assuming the facts alleged in
CTP’s complaint to be true. See 21 C.F.R. § 17.35(c) (3), 17.11(a). The harshness of the
sanctions I impose upon either party must relate to the nature and severity of the
misconduct or failure to comply, and I find the failure to comply here sufficiently
egregious to warrant striking the answer and issuing a decision without further
proceedings. See 21 C.F.R. § 17.35(b). Respondent failed to comply with the January 4,
2016 Order, nor did it provide any adequate justification for not doing so.

III. Default Decision

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

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

e Respondent owns Carousel Deli and Pizzeria, an establishment that sells tobacco
products and is located at 28 John Ringo Road, Ringoes, New Jersey 08551.
Complaint § 3.

¢ CTP previously initiated a civil money penalty action, CRD Docket Number C-15-
1052, FDA Docket Number FDA-2015-H-0224, against Respondent for three
violations of 21 C.F.R. pt. 1140 within a 24-month period.” Specifically, those
violations included two violations on April 5, 2014, when Respondent sold
tobacco to a minor and failed to verify, by means of photographic identification,
that the tobacco purchaser was 18 years of age or older;* and two violations on
August 12,2014, when Respondent sold cigarettes to a minor, and failed to verify,
by means of photographic identification, that the tobacco purchaser was 18 years
of age or older. Complaint § 10; January 23, 2015 Complaint § 10.

> In this prior complaint, Respondent’s name was “C C Patel LLC / Manish Amin d/b/a
Carousel Deli and Pizzeria.”
> CTP counted the two violations on April 5, 2014, as one violation.
e The previous civil money penalty
Respondent’s authorized represen

action concluded when Vinus Patel,
tative, settled the action with CTP on

Respondent’s behalf. Ms. Patel signed an Acknowledgment Form, dated March 2,
2015 in which she “admitt[ed] that the violations . . . occurred, waiv[ed] her ability
to contest the violations in the future, and stat[ed] that she understood that the
violations may be counted in determining the total number of violations for
purposes of future enforcement actions.” The Administrative Law Judge closed
the case on March 12, 2015. Complaint § 11.

e During a subsequent inspection o:

f Respondent’s establishment conducted on April

29, 2015, at approximately 6:12 PM, FDA-commissioned inspectors documented
that “a person younger than 18 years of age was able to purchase a package of Red
Man smokeless tobacco ....” The inspectors also documented that “the minor’s
identification was not verified before the sale . . . [.]” Complaint { 1.

These facts establish that Respondent is

iable under the Act. The Act prohibits

misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The

Secretary of the U.S. Department of Hea

th and Human Services issued the regulations at

21 CFR. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,22

9 (Mar. 19, 2010). The regulations prohibit the

sale of cigarettes or smokeless tobacco to any person younger than 18 years of age. 21
CFR. § 1140.14(a). The regulations also require retailers to verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are

younger than 18 years of age. 21 C.F.R.

Taking the above alleged facts as true, Ri

§ 1140.14(b)(1).

espondent violated the prohibition against selling

tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on April 5,

2014, August 12, 2014, and April 29, 20

15. On those same dates, Respondent also

violated the requirement that retailers verify, by means of photo identification containing
a purchaser’s date of birth, that no tobacco purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law

that merit a civil money penalty.

CTP has requested a fine of $5,000, which is a permissible fine under the regulations. 21
C.F.R. § 17.2. Therefore, I find that a civil money penalty of $5,000 is warranted and so

order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Nova Home Care Agency, Inc.
(NPI: 1477793867),
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-15-3680
Decision No. CR4518

Date: February 2, 2016

DECISION

The Centers for Medicare & Medicaid Services (CMS) revoked the Medicare enrollment
and billing privileges of Nova Home Care Agency, Inc. (Nova or Petitioner) because
Nova failed to report that its Administrator was an officer of another Medicare provider
that CMS had revoked. Because applicable regulations only require Nova to report this
information when next surveyed, I reverse CMS’s revocation of Nova.

I. Background

Nova was enrolled in the Medicare program as a home health agency. See CMS Exhibit
(Ex.) 7 at 5. In a March 26, 2015 initial determination, a CMS administrative contractor
revoked Nova’s Medicare billing privileges effective April 5, 2015, and barred Nova
from reenrollment for one year. CMS Ex. 1. The initial determination stated:

42 CFR §424.535(a)(1) Noncompliance

With its authorized official’s signature on the Medicare
enrollment 855A application, Nova Home Care Agency, Inc.
agreed to abide by Medicare laws, rules, and program
instructions.

Nova Home Care Agency’s Medicare enrollment record
reflects Tamara Rodriguez as CEO and authorized Official.
Tamara Rodriguez is also listed as Owner, Authorized
Official, W-2 Managing employee, and Director for Maju’s
Home Health Care, Inc. Maju’s Home Health Care Agency,
Inc. was revoked from Medicare by CMS on July 19, 2013.
Nova Home Care Agency, Inc. failed to report final adverse
legal action on the 855A enrollment application within 90
days as required in 42 CFR 424.516, regarding
CEO/Authorized Official Tamara Rodriguez.

CMS Ex. | at 1.

On May 20, 2015, Nova, through counsel, requested reconsideration of the
revocation. CMS Ex. 3. Nova asserted that Ms. Rodriguez did not have a
provider number revoked in her personal capacity; therefore, Nova did not have an
obligation to report the revocation of Maju’s Home Health Care, Inc. (Maju).
CMS Ex. 3 at 2.

On June 12, 2015, CMS issued a reconsidered determination upholding the revocation.
CMS Ex. 4. CMS stated in response to Nova’s arguments that the enrollment application
for providers (CMS-855A) requires disclosure of final adverse legal actions against
Nova’s managers, such as Ms. Rodriguez, including sanctions imposed on Ms.
Rodriguez’ “business identity.” CMS Ex. 4 at 2. CMS also quoted 42 C.F.R.

§ 420.206(a)(3), which requires a provider to disclose an administrative sanction imposed
on another entity that is owned in part by a manager of the provider. CMS Ex. 4 at 2.

Nova timely filed a request for hearing. In response to my Acknowledgement and Pre-
hearing Order (Order), CMS filed a brief and motion for summary judgment (CMS Br.),
as well as 12 exhibits (CMS Exs. 1-12). Nova submitted a brief and opposition to
summary judgment (P. Br.), as well as five exhibits (P. Exs. A-E).

II. Decision on the Record

I admit all of the proposed exhibits into the record because neither party objected to any
of them. Order 7; Civil Remedies Division Procedures (CRDP) § 14(e).

I issue this decision based on the written record because CMS did not submit written
direct testimony for any witnesses and did not request to cross-examine the witness for
whom Petitioner filed written direct testimony (P. Ex. D). Order 4 8-11; CRDP
§§ 16(b), (d), 19(b).

III. Issue

Whether CMS had a legitimate basis to revoke Nova’s Medicare enrollment and billing
privileges because Nova did not report to CMS that another provider with whom Nova’s
Administrator had an ownership interest was revoked by CMS.

IV. Jurisdiction

I have jurisdiction to decide this case. 42 C.F.R. §§ 405.803(a), 424.545(a)(1),
498.3(b)(17), 498.5(1)(2); see also 42 U.S.C. § 1395cc(j)(8).

V. Findings of Fact

1. Nova was enrolled in the Medicare program as a home health agency. See CMS
Ex. 7 at 5.

2. Tamara Rodriguez became Nova’s Administrator on January 25, 2013. CMS Ex.
7 at 19.

3. Tamara Rodriguez did not have an ownership interest in Nova. P. Ex. D § 2.

4. Maju was enrolled in the Medicare program as a home health agency.
See CMS Ex. 8; CMS Ex. 11 at 8.

5. Tamara Rodriguez became an officer of Maju on March 28, 2013, and, by no later
than January 31, 2014, was president of Maju. CMS Ex. 3 at 2; CMS Ex. 11 at 12.

6. Maju was organized as a corporation and was “a separate and independent legal
entity” from Tamara Rodriguez. CMS Ex. 11 at 9; P. Ex.D 43.

7. Effective July 19, 2013, CMS revoked the Medicare enrollment and billing
privileges of Maju because Maju filed claims for reimbursement for home health
services without a valid physician’s certification. CMS Ex. 8 at 1.

8. Maju requested a hearing before an administrative law judge; however, in
December 2013, an administrative law judge dismissed the case at Maju’s request.

CMS Exs. 9-10.

9. Nova did not report to CMS that Maju had been revoked. See CMS Ex. 3 at 2.
10. On May 18, 2015, Tamara Rodriguez resigned from her position at Nova. CMS
Ex. 5 at 2, 7.

VI. Conclusions of Law and Analysis’

A home health agency is considered a “provider of services” in the Medicare program.
42 U.S.C. § 1395u; see also 42 C.F.R. § 400.202 (definition of Provider). The Social
Security Act (Act) authorizes the Secretary of Health and Human Services (Secretary) to
promulgate regulations governing the enrollment process for providers and suppliers.

42 U.S.C. §§ 1302, 1395cc(j). Under the Secretary’s regulations, a provider or supplier
that seeks billing privileges under the Medicare program must “submit enrollment
information on the applicable enrollment application. 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). Providers and suppliers must
report changes in their enrollment information to CMS. 42 C.F.R. § 424.516. CMS may
revoke a provider or supplier’s Medicare enrollment or billing privileges for a variety of
reasons. 42 C.F.R. § 424.535. One basis for revocation is a provider or supplier’s failure
to be in compliance with enrollment requirements described in the regulations or the
appropriate enrollment application. 42 C.F.R. § 424.535(a)(1).

1. CMS did not legitimately revoke Nova based on an alleged failure to comply
with enrollment requirements under 42 C.F.R. § 424.535(a)(1) because Nova
was not obligated to report Maju’s revocation under 42 C.F.R. § 424.516(e) or
the requirements stated in the enrollment application for providers (CMS-855A).

CMS revoked Nova based on 42 C.F.R. § 424.535(a)(1), which permits revocation if a
provider is not in compliance with the enrollment requirements stated in the regulations
or the applicable enrollment application. In its reconsidered determination, CMS
primarily relied on the provisions of the provider enrollment application (CMS-855A) to
conclude that Nova had a duty to report Maju’s revocation to CMS because Maju was the
“business identity” of Tamara Rodriguez, Nova’s Administrator, based on Ms.
Rodriguez’ ownership of Maju. See CMS Ex. 2 at 39. That determination stated:

However, section 6B of Form CMS 855-A states, “has the
individual in Section 6A [i.e., individuals with an ownership
interest or managing control], under any current or former
name or business identity, ever had a final adverse legal
action listed on page 16 of this application imposed against
him/her?” Page 16 list “revocation” as a final adverse legal

' My numbered conclusions of law appear in bold and italics.
action and Ms. Rodriguez, as an owner, is part of the
business identity of Maju’s Home Health Care.

CMS Ex. 4 at 2 (emphasis added). In this proceeding, CMS points out that the provider
enrollment application certification statement states that a provider agrees to report any
future changes to the information contained in the application within the time frames
indicated in 42 C.F.R. § 424.516(e). CMS Br. at 2, 6; CMS Ex. 2 at 49.

Nova asserts in opposition that Ms. Rodriguez was not sanctioned in her individual
capacity when CMS revoked Maju. P. Br. at 4. Ms. Rodriguez testified that:

Maju’s Home Health Care, Inc. . . . wasn’t my alter ego. It
[was] a separate and independent legal entity and it observed
standard corporate formalities. For instance, it established
and maintained its own books and records; I didn’t
commingle my personal and [Maju’s] business accounts; and
I did not pay my personal expenses directly from [Maju’s]
bank account.

P. Ex. D4 3. Nova argues that the CMS-855A does not define what a “business identity”
is, but that it could not be applicable in this case because Maju “was a corporation owned
by several persons, which observed appropriate corporate formalities, and thus is the
‘business identity’ of none of them specifically.” P. Br. at 5. Nova also observes that if
CMS contends that Maju was Ms. Rodriguez’ “alter ego,” CMS provided no evidence to
support that contention. P. Br. at 6.

I conclude that a revocation of a provider’s Medicare enrollment and billings privileges is
a final adverse action that a provider must report to CMS within 90 days. 42 C.F.R.

§ 424.502 (definition of Final adverse action); 424.516(e)(2); see also CMS Ex. 2 at 17,
49. However, I conclude that Nova was not required to report Maju’s revocation based
on the requirements in the enrollment application because Maju was not Ms. Rodriguez’
“business identity.” I agree with Petitioner’s argument, summarized above, that the term
“business identity,” left undefined in the enrollment regulations and the enrollment
application, is too ambiguous for me to conclude that Maju was Ms. Rodriquez’
“business identity.”

I accept Ms. Rodriguez’ uncontroverted testimony that Maju was a separate and distinct
legal entity from herself. Because Maju was not Ms. Rodriguez’ “business identity,”
Nova was not required to report Maju’s revocation under the requirements in the
enrollment application or 42 C.F.R. § 424.516(e), and consequently, did not fail to
comply with enrollment requirements under 42 C.F.R. § 424.535(a)(1).
2. CMS did not legitimately revoke Nova based on an alleged failure to comply
with the disclosure provisions in 42 C.F.R. § 420.206 because Nova was only
obligated to disclose Maju’s revocation when CMS next surveyed Nova,
following Maju’s revocation, and there is no evidence of record that CMS
surveyed Nova after Maju’s revocation.

In the reconsidered determination, CMS quoted 42 C.F.R. § 420.206(a)(3) to support its
contention that Nova had the duty to report Maju’s revocation to CMS. The reconsidered
determination then stated:

Here, Ms. Rodriguez is a managing employee and authorized
official for NOVA and has had, in the previous three years, an
ownership interest in an entity that has had an administrative
sanction related to participation in Medicare (i.e., she was an
owner of Maju’s Home Health which was revoked July
2013).

CMS Ex. 4 at 2.

In these proceedings, CMS argues that section 420.206(a)(3) created a duty for Nova to
disclose the revocation of Maju and that Nova’s failure to disclose that information
violated 42 C.F.R. § 424.535(a)(1) because Nova did not comply with all applicable
Medicare regulations. CMS Br. at 6. Nova responded that section 420.206(b) provides
triggering events for disclosure and that CMS did not make any showing that a triggering
event actually occurred in Nova’s case. P. Br. at 7-8.

I agree with CMS that section 420.206(a)(3) generally required Nova to disclose Maju’s
revocation to CMS. However, I agree with Nova that there was no trigger event to
require disclosure to CMS yet.

The Act establishes the general requirement that providers must disclose information
related to their ownership. 42 U.S.C. § 1320a-3. In so doing, it authorized the Secretary
to promulgate regulations to effectuate that requirement and permitted the Secretary to
make the disclosure requirements a condition of participation. /d § 1320a-3(a)(1)(A).
The Secretary promulgated the necessary regulations in 42 C.F.R. §§ 420.206 and
484.12, which established the information disclosure requirement as a condition of home
health agency participation. Consistent with this approach, the Secretary authorized the
termination of the Medicare provider agreement for any home health agency that failed to
comply with section 420.206. 42 C.F.R. §§ 420.206(c)(2) (authorizing termination for
providers and revocation for Medicare part B suppliers), 489.53(a)(8); see also Horizon
Health Care, Inc., DAB CR1689, at 12 (2007).
CMS cited section 420.206 in the reconsidered determination even though it is a
condition of participation and not an enrollment requirement. CMS Ex. 4 at 2. However,
there is nothing in the record to indicate that CMS intended to terminate Nova’s provider
agreement based on a violation of section 420.206. Rather, it appears that CMS is
attempting to use the disclosure requirements in section 420.206(a)(3) as a predicate
violation justifying revocation under section 424.535(a)(1). If this is CMS’s intent, I do
not believe that the conditions of participation in section 420.206 may be grafted onto the
enrollment requirements for providers and suppliers in 42 C.F.R. part 424, subpart P.
However, even if section 420.206 could be viewed as an enrollment requirement, Nova
did not violate section 420.206.

Section 420.206 requires a provider to disclose the following information:

The name of any other disclosing entity in which any person
with an ownership or control interest, or who is a managing
employee in the reporting disclosing entity, has, or has had in
the previous three-year period, an ownership or control
interest or position as managing employee, and the nature of
the relationship with the other disclosing entity. If any of
these other disclosing entities has been convicted of a
criminal offense or received a civil monetary or other
administrative sanction related to participation in Medicare,
Medicaid, title V (Maternal and Child Health) or title XX
(Social Services) programs, such as penalties assessments and
exclusions under sections 1128, 1128A or 1128B of the Act,
the disclosing entity must also provide that information.

42 C.F.R. § 420.206(a)(3). This provision applies to Nova. Under the definitions in

42 C.F.R. § 420.201, Nova was a “disclosing entity” and Maju was an “other disclosing
entity.” It is undisputed that Ms. Rodriguez was a managing employee for Nova and, in
the previous three years, was a partial owner of Maju, a provider that was revoked from
participation in the Medicare program. Therefore, Nova was required to disclose Maju’s
revocation “in the manner specified in paragraph (b) of [section 420.206].” 42 C.F.R.

§ 420.206(a).

Section 420.206(b) establishes the “Time and manner of disclosure.” Nova, as a home
health agency, is a provider that is subject to periodic survey and certification at least
every 36 months. 42 C.F.R. §§ 488.710, 488.730, 488.740. Therefore, the following
provision governs Nova’s disclosure of Maju’s revocation:

Any disclosing entity that is subject to periodic survey and
certification of its compliance with Medicare standards must
supply the information specified in paragraph (a) of this
section to the State survey agency at the time it is
surveyed. The survey agency will promptly furnish the
information to the Secretary.

42 C.F.R. § 420.206(b)(1) (emphasis added).

The record in this case does not indicate when Nova was last surveyed. However, neither
in the reconsidered determination nor in CMS’s brief does CMS assert that Nova was
surveyed between June 19, 2013 (the date of Maju’s revocation notice) and March 26,
2015 (the date of Nova’s revocation notice). See CMS Exs. 1, 8. Therefore, in the
absence of evidence to the contrary, I conclude that Nova was not under an obligation to
disclose Maju’s revocation until Nova was surveyed, and that a survey had not occurred
by the time CMS revoked Nova.

VII. Conclusion

For the reasons stated above, I reverse CMS’s revocation of Nova’s Medicare enrollment
and billing privileges.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Bruceville Terrace,
(CCN: 555344),
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-91
ALJ Ruling No. 2016-8

Date: February 1, 2016

DISMISSAL

For the reasons set forth below, I conclude that Petitioner, Bruceville Terrace, is
not entitled to Administrative Law Judge (ALJ) review. I therefore dismiss its
hearing request pursuant to 42 C.F.R. § 498.70(b).

Discussion

Petitioner has no right to a hearing because CMS did not impose a
remedy. !

Petitioner is a skilled nursing facility located in Sacramento, California, that
participates in the Medicare program as a provider of services. On August 31,
2015, the California Department of Public Health (State Agency) completed an
abbreviated survey of the facility and found that it was not in substantial
compliance with federal requirements. By letter dated September 4, 2015, the
State Agency (as authorized by CMS) advised Petitioner that, based on the survey

' I make this one finding of fact/conclusion of law.
findings, it would recommend that civil money penalties be imposed unless the
facility achieved substantial compliance by October 1, 2015. CMS Ex. 1.

On September 21, 2015, the State Agency notified Petitioner that it had corrected
its deficiencies as of September 17, 2015, so no penalties were imposed. CMS Ex.
2.

Nevertheless, on October 12, 2015, Petitioner requested a hearing to challenge the
survey findings.

On December 18, 2015, CMS moved to dismiss Petitioner’s hearing request.
Petitioner has not responded and the time for responding has passed.

The hearing rights of a long-term care facility are established by federal
regulations at 42 C.F.R. Part 498. A provider dissatisfied with an initial
determination is entitled to further review, but administrative actions that are not
initial determinations are not subject to appeal. 42 C.F.R. § 498.3(a), (d). The
regulations specify which actions are “initial determinations” and set forth
examples of actions that are not. A finding of noncompliance that results in the
imposition of a remedy specified in 42 C.F.R. § 488.406, “except the State
monitoring remedy,” is an initial determination for which a facility may request an
ALJ hearing. 42 C.F.R. § 498.3(b)(13) (emphasis added). But a facility has no
right to a hearing unless CMS imposes one of the specified remedies. Lutheran
Home - Caledonia, DAB No. 1753 (2000); Schowalter Villa, DAB No. 1688
(1999); Arcadia Acres, Inc., DAB No. 1607 (1997). The remedy, not the citation
of a deficiency, triggers the right to a hearing. Schowalter Villa; Arcadia Acres,
Inc. Where CMS withdraws the remedies or otherwise declines to impose one,
Petitioner has no hearing right. See, Fountain Lake Health & Rehabilitation, Inc.,
DAB No. 1985 (2005).

Because CMS has imposed no remedies, Petitioner has no right to an ALJ hearing,
and this matter must be dismissed. 42 C.F.R. § 498.70(b). I therefore grant
CMS’s motion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge