Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Omni Medical Supplies, LLC,
(Supplier No. 5810380001),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-806
Decision No. CR3440

Date: October 31,2014

DECISION

The National Supplier Clearinghouse (NSC) of Palmetto, GBA, an administrative
contractor for the Centers for Medicare & Medicaid Services (CMS), revoked the
Medicare enrollment and billing privileges of Omni Medical Supplies, LLC (Petitioner)
for not complying with two standards for suppliers of durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS), which are stated in 42 C.F.R.

§ 424.57(c). In its reconsidered determination, NSC affirmed the revocation and
specifically cited the basis for revocation as Petitioner’s noncompliance with supplier
standard 7, relating to accessibility and staffing. Petitioner appealed. Both parties now
move for summary judgment.

For the reasons set forth below, I find that Petitioner does not dispute the factual findings
resulting from two attempted site inspections of its location or the legal basis for the
revocation of its Medicare billing privileges. Petitioner has also not raised a valid
defense to the revocation action. Therefore, I grant summary judgment in favor of CMS
affirming the revocation of Petitioner’s Medicare enrollment and two-year reenrollment
bar.
I. Case Background and Procedural History

Petitioner was located in Brooklyn, New York and enrolled in the Medicare program as a
supplier of DMEPOS. It is undisputed that on September 10 and September 16, 2013,
NSC attempted to conduct an on-site inspection of Petitioner’s establishment. On each
occasion, the site inspector found Petitioner’s location closed, with its doors locked and
no one present. As a result of these attempted on-site inspections, NSC notified
Petitioner by letter dated October 23, 2013 that its Medicare enrollment and privileges
were revoked effective September 16, 2013 because NSC determined that Petitioner was
not operational and did not comply with Medicare supplier standards. NSC also imposed
a two year bar on Petitioner’s re-enrollment in the Medicare program. CMS Exhibit
(Ex.) 3, at 1-2.

On December 18, 2013, Petitioner’s representative submitted a request for
reconsideration. CMS Ex. 4. Petitioner did not dispute the site inspector’s findings but
instead stated that “due to Omni not being awarded a Medicare DMEPOS competitive
bidding contract for their line of business, Omni had no alternative but to close the
business effective August 31,2013.” CMS Ex. 4, at 2 (emphasis in original). Petitioner
also asserted that as part of closing its business, it submitted a form CMS-855S to NSC,
post-marked August 15, 2013, that sought to terminate its Medicare enrollment
voluntarily. CMS Ex. 4, at 2. Petitioner requested that the revocation be reversed and
that NSC allow Petitioner to terminate its Medicare enrollment voluntarily effective
August 31, 2013.

NSC issued its reconsidered determination on January 24, 2014, which affirmed the
revocation of Petitioner’s enrollment and billing privileges. CMS Ex. 6. The hearing
officer found that Petitioner was closed at the time of both attempted on-site inspections
and that Petitioner had not shown that NSC ever received the CMS-855S that Petitioner
mailed on August 15,2013. CMS Ex. 6, at 2-3. The hearing officer also pointed out that
Petitioner’s hours of operation were still posted at its location, and there was no sign that
it was no longer in business or other reason for being closed at the time of the attempted
on-site inspections. CMS Ex. 6, at 3. The hearing officer concluded that Petitioner had
not shown compliance with supplier standard 7, relating to accessibility and staffing, and
“cannot be granted access to the Medicare Trust Fund by way of a Medicare supplier
number.” CMS Ex. 6, at 5. The hearing officer did not address the effective date of
Petitioner’s revocation.

On March 18, 2014, Petitioner submitted its request for a hearing arguing that NSC did
not give proper consideration to all of the underlying facts of the case when making its
reconsidered determination. Petitioner challenged the NSC hearing officer’s findings
regarding whether there was a legitimate factual basis for the revocation action and
whether Petitioner had established a valid defense. CMS moved for summary judgment
and provided a supporting brief (CMS Br.) arguing there is no genuine issue of disputed
material fact and that Petitioner had not provided a defense to its noncompliance with the
supplier standards. CMS also filed eight proposed exhibits (CMS Exs. 1-8). Petitioner
filed a cross-motion for summary judgment and a supporting brief (P. Br.), arguing that
Petitioner submitted a CMS-855S on August 15, 2013, that voluntarily terminated
Petitioner’s Medicare enrollment, making the September 10 and 16, 2013 on-site
inspections moot because Petitioner previously had ceased participation in the Medicare
program. Petitioner also submitted two proposed exhibits (P. Exs. 1-2). Absent
objections, I enter all proposed exhibits into the record.

II. Findings of Fact and Conclusions of Law
1. Summary judgment is appropriate.

Summary judgment is appropriate if “the record shows that there is no genuine issue as to
any material fact, and the moving party is entitled to judgment as a matter of law.”

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

Here, CMS moved for summary disposition and provided documentary evidence that
sufficiently establishes the material facts of the case. CMS Br. at 1; CMS Exs. 1-8. CMS
has offered documentary evidence showing Petitioner’s business was closed and
unstaffed at the time of both attempted on-site inspections. CMS Ex. 2. Petitioner does
not dispute the evidence that CMS submitted establishing that Petitioner was closed and
not staffed on September 10 and September 16, 2013. See P. Br. at 3 (“The
representative was unable to conduct the inspections because Petitioner had ceased doing
business as of August 31, 2013.”). However, Petitioner has filed a cross-motion for
summary judgment and has come forward with evidence that it mailed a CMS-855S to
terminate its Medicare enrollment effective August 31, 2013, prior to the site inspections.
P. Br. at 5; CMS Ex. 4, at 39; P. Ex. 2 §§ 3-5. CMS has not sufficiently disputed that
Petitioner indeed mailed the CMS-855S as it asserts. See CMS Br. at 12-13 (disputing
whether NSC ever received the August 15, 2013 CMS-855S but not raising any genuine
factual dispute about whether Petitioner mailed it). Thus, I find that the facts presented
by each party do not present a genuine issue of disputed material fact. The only issue I
need to resolve in this case is a matter of law, which, as discussed below, must be decided
in CMS’s favor. Summary judgment is therefore appropriate.

2. Petitioner does not dispute that it was not in compliance with supplier
standard 7 (42 C.F.R. § 424.57(c)) at the time of the two attempted on-site
inspections because it was not accessible and staffed.

A supplier of DMEPOS must, among other things, be “accessible and staffed during
posted hours of operation.” 42 C.F.R. § 424.57(c)(7)(i)(C). NSC determined that
Petitioner was not open, accessible, or staffed during its posted hours of operation, in
violation of supplier standard 7. CMS Ex. 3. Petitioner has not offered any evidence or
argument in its reconsideration request, hearing request, or briefing in this proceeding,
suggesting that it was open, accessible, and staffed at the time of the attempted on-site
inspections on September 10 and September 16, 2013. Petitioner has in fact repeatedly
acknowledged that it ceased operating as a business on August 31,2013. CMS Ex. 4,
at 1-3; Hearing Request at 2-3; P. Br. at 3. Therefore, absent a valid defense, NSC’s
determination that Petitioner was not in compliance with supplier standard 7 at the time
of two attempted on-site inspections and the revocation action taken pursuant to that
finding must be summarily affirmed because the factual findings that underpin the
revocation action remain unchallenged.

3. Without coming forward with any proof of receipt, Petitioner has not created
a genuine issue of material fact by simply proving that Petitioner mailed its
termination notice.

Petitioner has come forward with documentary and testimonial evidence that shows it
mailed a CMS-855S to NSC on August 15, 2013, which sought to terminate its
enrollment as a supplier of DMEPOS in the Medicare program. CMS Ex. 4, at 12-39;

P. Ex. 2. Petitioner argues that its proof of mailing the CMS-855S is sufficient to
establish that it notified NSC of its intent to terminate enrollment voluntarily and that it
was ceasing all business operations as of August 31, 2013. P. Br. at 10. Petitioner
contends NSC should not have attempted to inspect Petitioner’s location and held it to the
enrollment standards of a DMEPOS supplier because Petitioner was no longer enrolled in
the Medicare program as a DMEPOS supplier. CMS, however, argues and comes
forward with testimonial evidence from an NSC representative that NSC never received
the CMS-855S that Petitioner mailed on August 15,2013. CMS Ex. 1.

Whatever actually happened to the CMS-855S dated August 15, 2013, remains unknown.
However, whether it is was mishandled by the United States Postal Service, returned to
Petitioner but missed in its winding-down operations, or arrived at NSC but was
misplaced, the evidence the parties presented in this case with the motions for summary
judgment is sufficient for at least one determination: Petitioner has not come forward
with evidence that, if proven, would show that it effectively notified NSC that it was
ceasing all business operations and voluntarily terminating its Medicare enrollment.

Petitioner, not CMS, bears the burden of establishing by a preponderance of the evidence
any defense to an otherwise appropriate revocation. See MediSource Corp., DAB No.
2011, at 2-3 (2006). Indeed, Petitioner has acknowledged its burden. See P. Br. at 12
(“[AJll that is required is that the supplier show compliance by a preponderance of the
evidence ....”). Thus, Petitioner’s ultimate burden is to show that, more likely than not,
NSC was on notice that Petitioner intended to cease operations on August 31, 2013 and
voluntarily terminate its enrollment. Petitioner claims that its proof of mailing
sufficiently meets that burden.

However, while Petitioner was not required to mail the CMS-855S using certified mail or
some other tracking service that can provide evidence of receipt, this case highlights the
supplier’s dilemma by not doing so and the inability of a supplier to carry its burden of
showing that it effectively notified the CMS contractor of certain information. Petitioner
has come forward with evidence to prove that it mailed the CMS-855S to NSC on August
15,2013, and I will infer that fact for purposes of summary judgment. Petitioner has not
come forward, however, with any evidence to prove that NSC ever received it.

Petitioner claims that proof of mailing is sufficient to carry its burden because the
regulations only require a supplier of DMEPOS to “report changes in their enrollment
status,” but do not require NSC to receive and properly process the reported changes for
the supplier to have effectively “reported” those changes. P. Br. at 11 (citing 42 C.F.R.
§ 424.57(c)(2)). Petitioner also claims that CMS is applying an incorrect standard — “a
new regulatory requirement without the benefit of rulemaking” (P. Br. at 11) — by
requiring a supplier to send notifications to CMS contractors through a special method of
delivery. Petitioner is correct that such a requirement does not exist in the regulations
applicable to suppliers of DMEPOS; Petitioner is incorrect, however, in asserting that
CMS has required Petitioner to prove NSC’s receipt of certain notifications in order to
comply with the regulations. CMS’s position — with which I agree — is that Petitioner is
required to show that NSC received the August 15, 2013 CMS-855S in order to
ultimately meet its burden of proof with regard to its own defense to the revocation, by
showing that NSC was effectively on notice of Petitioner’s voluntary termination from
the Medicare program. Definitive proof that Petitioner mailed this notice alone simply
does not carry that burden.

Petitioner relies on a legal presumption of receipt, the “mailbox rule,” to support its
argument that it effectively notified NSC that it was terminating its Medicare enrollment.
P. Br. at 17-19. However, there is no general authority that permits the application of the
“mailbox rule” in provider and supplier enrollment cases, and doing so is inconsistent
with other requirements that CMS has imposed on providers and suppliers when filing
enrollment applications, which require actual receipt, not just the mailing, of an
application. See 73 Fed. Reg. 69,725, 69,769 (Nov. 19, 2008) (discussing “date of filing”
in 42 C.F.R. § 424.520 as the date the contractor “receives” the enrollment application).
To permit a supplier of DMEPOS to presume that NSC has received an enrollment
application in some instances (such as terminating enrollment) but not in others (such as
initial enrollment) is too arbitrary of a standard to apply. Therefore, in the absence of any
authority permitting the application of the “mailbox rule” in cases such as this one, and to
maintain consistency among Medicare provider and supplier enrollment cases, I decline
to apply the “mailbox rule” in this case.

I note that Petitioner provides a diligent and thorough analysis of prior cases similar to
this one and presents evidence here that either the ALJ or the Board noted was missing in
those prior cases. P. Br. at 15-18. Petitioner’s case is unique from those prior cases
because I am inferring it mailed a CMS-855S that sought to voluntarily terminate its
Medicare enrollment prior to the attempted on-site inspections. Thus, the ultimate legal
question here is: does proof of mailing and proof of what was actually mailed more
likely than not show that the CMS contractor had notice of the information mailed? As
stated above, I conclude that it does not. Absent any proof of receipt, CMS and
Petitioner are simply left accusing one another: CMS claims that Petitioner did not
properly notify it; Petitioner claims that the CMS contractor mishandled the notification.
CMS Br. at 12-17; P. Br. at 10-11.

Considering the burden to show proper notice is on the party making the assertion —
Petitioner in this case — the mere inference of the fact Petitioner mailed its termination
notice does not create an issue of material fact regarding whether CMS or its agent
received that notice. I note further that, in addition to of a lack of delivery receipt here,
Petitioner has not similarly come forward with any other evidence suggesting NSC had
awareness of its termination notice such as, for example, an NSC acknowledgment or
mail addressed to Petitioner’s forwarding address. Therefore, I must grant summary
judgment in CMS’s favor and sustain Petitioner’s revocation.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Kimberly Bergeron NP, et al.,
Petitioners,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-642!
Decision No. CR3438

Date: October 29, 2014

DECISION

Petitioners here are employees of Tri-City Express Care, PLLC, d/b/a FastMed Urgent
Care (FastMed), a physician-owned urgent care company that participates in the
Medicare program. The company describes itself as “rapidly growing,” and, from
September 2011 through October 2012, it hired 28 healthcare professionals who began
providing services to Medicare beneficiaries. In error, a FastMed employee delayed
filing Medicare enrollment applications for these new employees. As a result, the
employees were not enrolled until months after they started providing services. Medicare
will not pay for services provided by individuals who are not yet enrolled in the Medicare
program (in this case, services provided to approximately 1,161 program beneficiaries).

Petitioners asked the Medicare contractor, Noridian Healthcare Solutions, to issue earlier
effective dates. In a series of 38 reconsidered determinations, dated December 4, 2013
(12 determinations) and December 11, 2013 (26 determinations), a Medicare hearing
officer denied their requests; in every case except one, the hearing officer found no

' The individual petitioners are listed in the attached appendix by the docket number they
were assigned prior to consolidation of the cases. The provider transaction access
numbers (PTANs) of each Petitioner are also listed.
evidence to support an earlier effective date.> The individual employees separately
appealed those determinations, and, because their resolution turns on the same issue, I
have consolidated their appeals.

The Centers for Medicare & Medicaid Services (CMS) has submitted a pre-hearing brief
(CMS Br.) and motion for summary judgment, along with 38 exhibits (CMS Exs. 1- 38).
In the absence of any objection, I admit into evidence CMS Exs. 1-38. Petitioners
submitted a pre-hearing brief asking that I decide this case based on its initial filing.
Because neither party proposes calling any witnesses, an in-person hearing would serve
no purpose, and the cases may be decided based on the written record.

For the reasons set forth below, I affirm the reconsidered determinations.
Discussion
CMS properly determined the effective dates for the FastMed employees’

Medicare enrollment because their effective dates can be no earlier than
the dates they filed their enrollment applications.’

To receive Medicare payments for services furnished to program beneficiaries, a
Medicare supplier must be enrolled in the Medicare program. 42 C.F.R. § 424.505.
“Enrollment” is the process used by CMS and its contractors to: 1) identify the
prospective supplier; 2) validate the supplier’s eligibility to provide items or services to
Medicare beneficiaries; 3) identify and confirm a supplier’s owners and practice location;
and 4) grant the supplier Medicare billing privileges. 42 C.F.R. § 424.502. To enroll in
Medicare, a prospective supplier must complete and submit an enrollment application.
42 CFR. §§ 424.510(d)(1); 424.515(a). An enrollment application is either a CMS-
approved paper application or an electronic process approved by the Office of
Management and Budget. 42 C.F.R. § 424.502. When CMS determines that a physician
or nonphysician practitioner meets the applicable enrollment requirements, it grants
Medicare billing privileges, which means that the practitioner can submit claims and
receive payments from Medicare for covered services provided to program beneficiaries.

For physicians and nonphysician practitioners, the effective date for billing privileges “is
the later of the date of filing” a subsequently approved enrollment application or “the
date an enrolled physician or nonphysician practitioner first began furnishing services at a
new practice location.” 42 C.F.R. § 424.520(d) (emphasis added).

> In error, one reconsidered determination omits any actual decision section. Kimberly
Bergeron NP, Docket No. C-14-642. I discuss below my authority to correct this error
and decide the case.

> T make this one finding of fact/conclusion of law.
If a physician or nonphysician practitioner meets all program requirements, CMS allows
him/her to bill retrospectively for up to “30 days prior to their effective date if
circumstances precluded enrollment in advance of providing services to Medicare
beneficiaries ....” 42 C.F.R. § 424.521(a)(1)."

Here, the parties agree that certain FastMed employees — physicians, nurse practitioners,
and physician assistants — began providing services to Medicare beneficiaries before
submitting their Medicare enrollment applications. Eventually, their applications were
filed, and the Medicare contractor approved each of them, effective the date of filing,
with billing privileges beginning 30 days prior to the effective date. Specifically:

e C-14-642 — Kimberly Bergeron NP. Application filed June 6, 2012. CMS Ex. 1
at 1° Enrollment effective June 6, 2012. Retrospective billing date: May 6,
2012. Petitioner Bergeron asks for an effective date of January 21, 2012.°

e C-14-643 — Kimberly Bergeron NP. Application filed June 6, 2012. CMS Ex. 2
at 1. Enrollment effective June 6, 2012. Retrospective billing date: May 6, 2012.
Petitioner Bergeron asks for an effective date of January 21, 2012.

e C-14-644 — Kimberly Bergeron NP. Application filed June 6, 2012. CMS Ex. 3
at 1. Enrollment effective June 6, 2012. Retrospective billing date: May 6, 2012.
Petitioner Bergeron asks for an effective date of January 21, 2012.

* As authorized by the regulation, the Medicare contractor approved billing 30 days prior
to the effective date of enrollment for each of the petitioners. The contractor refers to
those earlier billing dates as the “effective dates.” But “the effective date for billing
privileges” in each of these cases is the date of filing, not the retrospective billing date.
42 CFR. § 424.520(d).

> The parties agree to all of these filing dates. In addition, CMS submits the applications
themselves, each of which is stamped with a “Julian date stamp.” On Petitioner
Bergeron’s June 6 application, for example, the number “121581633.0425” appears
stamped on the lower left side of its cover. The first five digits signify the date of filing.
“12” indicates the year, 2012. “158” refers to the date — the 158" day of 2012 — which is
June 6.

® The reconsidered determinations in these cases do not mention the petitioners’
proposed effective dates. CMS provides those dates, citing sections of the petitioners’
enrollment applications and a “Summary by Provider” spreadsheet, which the petitioners
attached to their hearing requests. CMS Br. at 3-16. Petitioners have not disputed the
dates proffered by CMS.
C-14-645 — Mary Bieber NP. Application filed May 30, 2012. CMS Ex. 4 at 1.
Enrollment effective May 30, 2012. Retrospective billing date: April 30, 2012.
Petitioner Bieber asks for an effective date of January 10, 2012.

C-14-646 — Ryan Brower PA. Application filed June 6, 2012. CMS Ex. 5 at 1.
Enrollment effective June 6, 2012. Retrospective billing date: May 6, 2012.
Petitioner Brower asks for an effective date of October 10, 2011.

C-14-647 — Patricia Daly NP. Application filed May 30, 2012. CMS Ex. 6 at 1.
Enrollment effective May 30, 2012. Retrospective billing date: April 30, 2012.
Petitioner Daly asks for an effective date of March 12, 2012.

C-14-648 — Lisa Daniels PA. Application filed July 16,2012. CMS Ex. 7 at 1.
Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Daniels asks for an effective date of November 30, 2011.

C-14-649 — Lisa Daniels PA. Application filed May 30, 2012. CMS Ex. 8 at 1.
Enrollment effective May 30, 2012. Retrospective billing date: April 30, 2012.
Petitioner Daniels asks for an effective date of November 30, 2011.

C-14-650 — Kelli Favata MD. Application filed June 6, 2012. CMS Ex. 9 at 1.
Enrollment effective June 6, 2012. Retrospective billing date: May 6, 2012.
Petitioner Favata asks for an effective date of November 3, 2011.

C-14-651 — Kelli Favata MD. Application filed July 16, 2012. CMS Ex. 10 at 1.
Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Favata asks for an effective date of November 3, 2011.

C-14-652 — Erin Ford PA. Application filed February 6, 2012. CMS Ex. 11 at 1.
Enrollment effective February 6, 2012. Retrospective billing date: January 6,
2012. Petitioner Ford asks for an effective date of December 6, 2011.

C-14-653 — Georgette George NP. Application filed July 16,2012. CMS Ex. 12
at 1. Enrollment effective July 16,2012. Retrospective billing date: June 16,
2012. Petitioner George asks for an effective date of March 7, 2012.

C-14-654 — Georgette George NP. Application filed May 30, 2012. CMS Ex. 13
at 1. Enrollment effective May 30,2012. Retrospective billing date: April 30,
2012. Petitioner George asks for an effective date of March 7, 2012.

e C-14-655 — Jennifer Francyk PA. Application filed July 16,2012. CMS Ex. 14 at
1. Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Francyk asks for an effective date of January 24, 2011.

e C-14-665 — Lynn Helseth MD. Application filed June 14,2012. CMS Ex. 15 at
1. Enrollment effective June 14, 2012. Retrospective billing date May 14, 2012.
Petitioner Helseth asks for an effective date of March 5, 2012.

e C-14-666— Kyle Hoffman PA. Application filed May 30, 2012. CMS Ex. 16 at
1. Enrollment effective May 30, 2012. Retrospective billing date April 30, 2012.
Petitioner Hoffman asks for an effective date of September 9, 2011.

e C-14-667 — Kyle Hoffman PA. Application filed July 16,2012. CMS Ex. 17 at 1.
Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Hoffman asks for an effective date of September 9, 2011 J

e C-14-668 — Stephanie Hulme NP. Application filed May 30, 2012. CMS Ex. 18
at 1. Enrollment effective May 30,2012. Retrospective billing date: April 30,
2012. Petitioner Hulme asks for an effective date of February 28, 2012.

e¢ C-14-669 — Abigail Kraemer PA. Application filed May 30, 2012. CMS Ex. 19 at
1. Enrollment effective May 30, 2012. Retrospective billing date: April 30,
2012. Petitioner Kraemer asks for an effective date of October 26, 2011.

e C-14-670 — Abigail Kraemer PA. Application filed July 16,2012. CMS Ex. 20 at
1. Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Kraemer asks for an effective date of October 26, 2011.

e C-14-671 — Jane Lykins MD. Application filed July 16,2012. CMS Ex. 21 at 1.
Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Lykins asks for an effective date of January 14, 2012.

e C-14-672 — Jane MacDonald PA. Application filed July 16,2012. CMS Ex. 22 at
1. Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner MacDonald asks for an effective date of December 1, 2011.

TIn error, the December 11, 2013 reconsidered determination lists August 23, 2012 as
the filing/effective date and July 23, 2012 as the retrospective billing date. CMS
concedes that these dates are not correct. CMS Br. at 9-10; CMS Ex. 17 at 1,7.
e¢ C-14-673 — Jane MacDonald/Stevenson PA. Application filed May 30, 2012.
CMS Ex. 23 at 1. Enrollment effective May 30, 2012. Retrospective billing date:
April 30, 2012. Petitioner MacDonald/Stevenson asks for an effective date of
December 1, 2011.

e C-14-674— Thomas Morris NP. Application filed August 17,2012. CMS Ex. 24
at 1. Enrollment effective August 17,2012. Retrospective billing date: July 17,
2012. Petitioner Morris asks for an effective date of February 1, 2012.

e C-14-675 — Diane Musante PA. Application filed February 27,2012. CMS Ex.

25 at 1. Enrollment effective February 27, 2012. Retrospective billing date:
January 28, 2012. Petitioner Musante asks for an effective date of December 1,
2011.

e C-14-676 — Diane Musante PA. Application filed July 16,2012. CMS Ex. 26 at
1. Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Musante asks for an effective date of November 29, 2011.

e C-14-677—Ian Myers PA. Application filed May 30, 2012. CMS Ex. 27 at 1.
Enrollment effective May 30, 2012. Retrospective billing date: April 30, 2012.
Petitioner Myers asks for an effective date of December 19, 2011.

e C-14-678 — Ian Myers PA. Application filed July 16, 2012. CMS Ex. 28 at 1.
Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Myers asks for an effective date of December 19, 2011.

e C-14-679 — Rudy Noriega PA. Application received July 16,2012. CMS Ex. 29
at 1. Enrollment effective July 16,2012. Retrospective billing date: June 16,
2012. Petitioner Noriega asks for an effective date of February 13, 2012.

e C-14-680 — Guy O’Connor MD. Application received June 14, 2012. CMS Ex.
30 at 1. Enrollment effective June 14,2012. Retrospective billing date: May 14,
2012. Petitioner O’Connor asks for an effective date of February 1, 2012.

e C-14-681 — Deepali Rastogi MD. Application received June 14,2012. CMS Ex.
31 at 1. Enrollment effective June 14,2012. Retrospective billing date: May 14,
2012. Petitioner Rastogi asks for an effective date of February 20, 2012.

8 Again, the December 11, 2013 reconsidered determination lists wrong filing/effective
and retrospective billing dates (April 2, 2012 and March 2, 2012). CMS concedes these
dates are not correct. CMS Br. at 12; CMS Ex. 25 at 1,7.
e C-14-682 — Dana Robinson NP. Application received May 30, 2012. CMS Ex. 32
at 1. Enrollment effective May 30, 2012. Retrospective billing date: April 30,
2012. Petitioner Robinson asks for an effective date of March 15, 2012.

e C-14-683 — Stephanie Schmit PA. Application received January 21,2013. CMS
Ex. 33 at 1. Enrollment effective January 21,2013. Retrospective billing date:
December 22, 2012. Petitioner Schmit asks for an effective date of May 6, 2012.

e C-14-684 — Janet Scott NP. Application received June 14,2012. CMS Ex. 34 at
1. Enrollment effective June 14,2012. Retrospective billing date: May 14, 2012.
Petitioner Scott asks for an effective date of February 19, 2012.

e C-14-685 — Kimberly Thuillez’ PA. Application received July 16,2012. CMS
Ex. 35 at 1. Enrollment effective July 16, 2012. Retrospective billing date: June
16,2012. Petitioner Thuillez asks for an effective date of February 10, 2012.

e C-14-686— Benjamin Tyau PA. Application received July 16, 2012. CMS Ex. 36
at 1. Enrollment effective date July 16,2012. Retrospective billing date: June 16,
2012. Petitioner Tyau asks for an effective date of January 21, 2012.

e C-14-687 — Craig Wells NP. Application received July 16, 2012. CMS Ex. 37 at
1. Enrollment effective July 16,2012. Retrospective billing date: June 16, 2012.
Petitioner Wells asks for an effective date of January 17, 2012.

e C-14-688 — Myles Whitfield PA. Application received July 16,2012. CMS Ex.
38 at 1. Enrollment effective date July 16, 2012. Retrospective billing date: June
16, 2012. Petitioner Whitfield asks for an effective date of March 30, 2012.

Thus, pursuant to 42 C.F.R. § 424.520(d), CMS correctly determined the effective dates
of enrollment for all of the petitioners.

Petitioners complain that they provided substantial services to Medicare beneficiaries, for
which the Medicare program will not reimburse FastMed. This is unfortunate but does
not entitle them to earlier effective dates. Under the regulations, suppliers must be
enrolled before the Medicare program can pay them for the services they provide. US
Ultrasound, DAB No. 2302 at 8 (2010).

Flawed Reconsidered Determination. Unfortunately, one of the reconsidered
determinations contains a significant error. In Kimberly Bergeron NP, C-14-642, the

° The reconsidered determination cites Petitioner’s last name as Thuille. Her last name is
actually Thuillez. CMS Ex. 35.
decision section of the December 4 reconsidered determination has not been completed.
It says:

[Provider/Supplier Name] SELECT ONE Choose an item.
Therefore, we SELECT ONE you access to the Medicare
Trust Fund (by way or issuance) of a SELECT ONE.

This decision is SELECT ONE DECISION. Please see
below for additional appeal rights.

Reconsideration at 2; see CMS Ex. | at 7. In an attached exchange of emails, dated
December 12, 2013, the FastMed representative points out the error, and a contractor
representative (presumably the hearing officer) apologizes: “Oops, should be
unfavorable sorry about that.” Reconsideration at 5.

Neither party suggests that this December 4 issuance is not a reconsidered determination.
It identifies the prospective supplier (Petitioner Bergeron) and refers to the initial
determination (although, based on the record before me, I cannot verify that the
determination accurately indicates the date of its issuance). A follow-up email clarifies
that the determination is unfavorable to the Petitioner, although neither it nor the
reconsidered determination itself explains why.

Until May of this year, this would not have presented a significant problem.'°
Notwithstanding the quality or content of a reconsidered determination, administrative
law judges (ALJs) could consider bases other than those relied on by the hearing officer,
so long as the parties were given adequate notice.'! The Departmental Appeals Board
summarized the scope of the ALJ’s review authority in Fady Fayad, M.D., DAB No.
2266 (2009), aff'd, 803 F. Supp.2d 699 (E.D. Mich. 2011). There, a physician (supplier),
whose Medicare billing privileges had been revoked, argued that, during the
administrative review process, CMS changed the bases for its actions. He claimed that
the revocation notice did not cite the applicable statutes and regulations and contained no
“detailed factual rationale” for the determination, deficiencies that, he maintained, were
not corrected by the hearing officer at reconsideration. The Board rejected this position:

To the extent that Petitioner is claiming that the revocation
should be overturned because he lacked sufficient notice of
the basis of CMS’s revocation determination at the

0 Indeed, CMS, which filed its brief in March, did not even mention the flawed
reconsidered determination.

ny recognize that ALJs may be limited with respect to admitting new evidence. See 42
CFR. § 498.56(e).
reconsideration stage . . . we stress that Petitioner
subsequently received a de novo hearing before the ALJ
concerning the validity of the revocation determination. In
general, the ALJ proceeding is not an appellate or quasi-
appellate review of the adequacy of the federal agency's
decision-making or review process. Rather, the ALJ hearing
under 42 C.F .R. Part 498 is a de novo proceeding in which
the ALJ determines the legality of the challenged
determination based on the evidence presented in that
proceeding.

DAB No. 2266 at 11 (first emphasis in the original; second emphasis added). The Fayad
decision reflected the Board’s long-standing position on the scope of ALJ review under
Part 498. Indeed, hearings held pursuant to section 205(b) of the Social Security Act
(Act), as provider and supplier enrollment cases are (Act § 1866(j)(8)), have long been
considered de novo. Heckler v. Campbell, 461 U.S. 458, 463 n.6 (1983); see also
Matthews v. Eldridge, 424 U.S. 319, 339 n.21 (1976). This position is consistent with
general principals of administrative law, allowing the ALJ to correct administratively any
errors made below. It achieves the laudable goals of administrative efficiency and
ensuring that cases are decided on their merits, without being side-tracked because the
contractor hearing officer omitted a reference or committed some procedural error.

The regulations have not changed since the Board issued Fayad. However, without
mentioning that decision or any of the myriad decisions that consistently describe Part
498 hearings as de novo, the Board recently issued several decisions that dramatically
change the scope of ALJ review to something even more limited than standard appellate
review. The Board now says that 42 C.F.R. § 498.5(1) “limits ALJs to considering the
basis or bases for denial or revocation of enrollment and billing privileges set forth in the
CMS contractor’s reconsidered determination.” Precision Prosthetic, Inc., DAB No.
2597 at 11 (2014); see Benson Ejindu, d/b/a Joy Medical Supply, DAB No. 2572 (2014);
Neb Group of Arizona LLC, DAB No. 2573 (2014).’”

2 Most recently the Board said that it has “repeatedly” articulated this view and chided
an ALJ for his apparent disregard of its position. Precision Prosthetic, Inc., DAB No.
2597 at 11. The Board cited Ortho Rehab Designs Prosthetics and Orthotics, Inc., DAB
No. 2591 (2014), and Better Health Ambulance, DAB No. 2475 (2012) as the “repeated”
instances in which it held that section 498.5(1) restricts an ALJ’s review authority. But
Better Health Ambulance did not say that. It said that ALJ jurisdiction is triggered by the
reconsidered determination; it said nothing about the scope of the ALJ’s review. See
Better Health Ambulance, DAB No. 2475 at 4. Moreover, Ortho Rehab and the decisions
limiting an ALJ’s review authority were issued on or after May 2014. See Ortho Rehab,
DAB No. 2591 at 9. The harshness of the Board’s admonishment in Precision Prosthetic
is puzzling inasmuch as the ALJ decision in that case predated Joy Medical and its
10

In Joy Medical Supply, the Board mentioned, for the first time, that ALJs are limited to
the four corners of the reconsidered determination. The Board there cited with approval
the ALJ’s limiting the scope of his review:

The ALJ properly refrained from going beyond that issue to
address other possible grounds for revocation because the
reconsidered determination which Petitioner appealed (in
contrast to the initial determination) did not rely on any
additional legal ground for revocation. ... 42 C.F.R.

§ 498.5(1)(2) (with respect to denial or revocation of billing
privileges, the provider or supplier’s appeal rights lie from the
reconsidered or revised reconsidered determination, not the
initial determinations.).

DAB No. 2572 at 5 (emphasis added).

The impact of the Joy Medical Supply decision might not have been great, since the
Board was not resolving an issue raised in the case before it. The language quoted is
dicta. However, immediately thereafter the Board issued Neb Group of Arizona. Citing
Joy Medical Supply, the Board faulted the ALJ for considering whether the facility was
operational and therefore subject to revocation under 42 C.F.R .§ 424.535(a)(5)(ii).. The
Board acknowledged that CMS’s initial determination made that finding, but ruled that,
because the contractor’s reconsidered determination did not, the ALJ improperly
considered the issue. In the Board’s view the “only issue properly before the ALJ” was
that addressed in the reconsidered determination. DAB No. 2573 at 7 (2014). Several
months later, in Ortho Rehab, the Board relied on Joy Medical Supply and Neb Group to
reach the same conclusion, faulting the ALJ for considering an issue raised in CMS’s
initial determination but not mentioned in the reconsideration.

The Board’s newfound position creates some serious problems:

First, I am not aware of any reviewing authority that is so limited — and with good reason.
Issues raised in the initial determination as well as issues raised by the parties during the
reconsideration process are necessarily before the hearing officer. But the issues raised
do not always find their way into the final reconsidered determination. Indeed, a hearing
officer could preclude further review of a thorny issue by simply omitting it from his/her
written determination. Under the Neb reasoning, the issue is lost forever. A petitioner

progeny, having been issued on April 2, 2014, more than a month before the first of those
Board decisions, when the prevailing — indeed the only — view was that ALJs provided de
novo review.
11

would have no definitive way of preserving an issue for appeal, which seems a fairly
obvious denial of due process.

Second, as this case illustrates, hearing officers, like everyone else, make mistakes. They
cite the wrong regulation, they leave things out — even the entire “Decision” portion of a
determination. Sometimes they cite regulations unrelated to the case before them. Pre-
Neb, ALJs were empowered to correct such errors. Post-Neb, they are hamstrung by
them.

In Rey R. Palop, M.D., DAB CR3273, for example, the reconsidered determination was
seriously flawed. Nevertheless, the proper outcome of the case was certain: the
supplier’s Medicare number had to be revoked retroactively because, in his application
for it, he misled the Medicare contractor about an earlier felony conviction. The parties
to the ALJ proceedings were fully apprised of the issues. Basing my decision there on
the weaknesses of the reconsidered determination would, at best, have caused the parties
needless expenses of time and money, and, at worst, would have perverted the
administrative review process:

I recognize that the quality of the reconsidered determination
here leaves something to be desired. Nevertheless, the
purpose of administrative review is to correct agency errors
and reach the correct decision, based on the evidence
presented. Here, Petitioner has been fully apprised of the
bases for CMS’s actions and has not complained about the
adequacy of the notice provided. The matter has been fully
briefed, and the law and undisputed facts lead to one
conclusion. Petitioner is absolutely not entitled to prevail, no
matter what the shortcomings of the reconsidered
determination. My remanding the case — to allow CMS to
present a more thorough determination — would unnecessarily
prolong these proceedings, requiring all parties to expend
additional time and resources to achieve the same result.

DAB CR3273 at 5 n.4 (2014).

This case presents a similar dilemma. The parties are fully aware of and agree to the
issues presented; the regulations dictate that Petitioner cannot prevail, so the outcome, on
the merits, is certain. Yet, I cannot review the findings included in the reconsidered
determination, because the hearing officer mistakenly omitted any findings. My
undesirable alternatives include: 1) to decide that there has been no reconsideration and
dismiss, thus denying Petitioner Bergeron any review because the reconsidered
determination is inadequate; 2) to rule in favor of Petitioner based on the inadequate
reconsidered determination, contrary to the regulations that I am required to follow; or 3)
12

to remand the case with instructions to issue a new reconsidered determination. As in
Palop, a remand would unnecessarily prolong these proceedings and require the parties to
expend additional time and resources to achieve an inevitable result.

Moreover, the Board recently cast doubt on the ALJ’s authority to remand these cases.

In Precision Prosthetic, the reconsidered determination discussed revocation under 42
C.F.R. § 424.535(a)(3) only. The Board held that the ALJ could not properly remand the
matter to CMS to consider denial under 42 C.F.R. § 424.530 (a provision that,
substantively, is nearly identical to section 424.535(a)(3)).'3 If ALJs can neither correct
reconsideration errors nor remand cases so that CMS can correct them, they are left with
very little recourse.

Third, the Board’s underlying support for limiting the scope of ALJ review is particularly
weak. The Board cited its own decisions and its (apparently new) interpretation of 42
CFR. § 498.5(1)(2). That regulation provides that any supplier “dissatisfied with a
reconsidered determination . . . or a revised reconsidered determination is entitled to a
hearing before an ALJ.” I see nothing in this language to preclude de novo review of the
reconsidered determination. Moreover, the language of section 498.5(1)(2) is identical in
all key respects to the language of 42 C.F.R. § 498.5(1)(3): any supplier “dissatisfied
with a hearing decision may request Board review.” To my knowledge, the Board has
never interpreted this language to limit its own review of ALJ decisions. See, e.g.,
Complete Home Care, Inc., DAB No. 2525 (2013) (“[W]e conclude that CMS had
authority to revoke Complete Home Care’s enrollment based on the same facts . . . but on
a different legal basis.”); Main Street Pharmacy, LLC, DAB No. 2349 (2010) (“[W]e
uphold the revocation of MSP’s billing privileges but modify the rationale.”); Robert F.
Tzeng, M.D., DAB No. 2169 (2008) (“Although our analysis . . . differs... we... affirm
[the ALJ’s] ultimate conclusion.”)

Fortunately, I am not required to follow the Board’s dictates in this instance. I recognize
that ALJ reliance on prior Board decisions makes obvious practical sense, given the
Board’s review authority. Of course, this is much more difficult where, as here, the

'S The Board was particularly harsh in this regard, suggesting that the ALJ effectively
coerced CMS. Precision Prosthetic, DAB No. 2597 at 13 (stating that the ALJ’s remand
order “clearly influenced CMS” to make a different determination). I find baffling the
suggestion that either CMS or a petitioner would act improperly rather than appeal a
purportedly objectionable ruling. In any event, remanding the case to CMS for a more
careful analysis seems preferable to issuing a plainly incorrect decision — e.g. on the one
hand, allowing an obvious bad actor to remain in the program, or, on the other,
wrongfully barring a perfectly blameless supplier from program participation for up to
three years. In this case, those options would be dismissing the case entirely (based on
the absence of a reconsidered determination) versus deciding the matter against CMS, an
outcome contrary to the regulations.
13

Board decisions are in conflict. Compare Fayad, DAB No. 2266 (reaffirming the ALJ’s
review under Part 498 as de novo) with Neb Group, DAB No. 2573 (limiting the ALJ’s
review to the four corners of the reconsidered determination). In any event, with only
one exception, I am aware of no authority, inherent or express, establishing that a Board
decision binds the ALJs beyond the immediate case in which it is rendered. The
Secretary has been explicit in defining what she considers binding authorities. She has
expressly provided that Board decisions in cases reviewing local coverage determinations
(LCDs) have a degree of precedential effect. 42 C.F.R. § 426.43 1(a)(4) (“Treat as
precedent any previous Board decision under § 426.482 that involves the same LCD
provision(s), same specific issue and facts in question, and the same clinical
conditions.”). Outside this narrow standard, the ALJ is directed to follow “all applicable
laws, regulations, rulings, and [national coverage determinations].” 42 C.F.R.

§ 426.431(c).

Likewise, the Secretary made CMS rulings, which are published under the authority of
the CMS Administrator, binding “on all HHS components that adjudicate matters under
the jurisdiction of CMS ....” 42 C.F.R. § 401.108(c); see also 42 C.F.R. § 405.1063(b);
70 Fed. Reg. 11,420, 11,457 (Mar. 8, 2005) (expanding the scope of CMS rulings to all
matters in CMS jurisdiction was done to “help ensure consistency among appeals
decisions.”); 42 C.F.R. § 401.108(a) (providing that “a precedent final opinion or order or
a statement of policy or interpretation . . . may be published in the Federal Register as a
CMS Ruling and will be made available in the publication entitled CMS Rulings.”).'*

I note also that, if the Board decisions were binding precedent, such departure from its
prior norms without any explanation would be contrary to generally accepted
administrative procedures. As the Supreme Court has noted, we presume that an agency
will follow its existing policies, procedures, and decisions in order to uphold
congressional mandates. From this presumption “flows the agency’s duty to explain its
departure from prior norms.” Atchison, T. & S. Fe Ry. Co. v. Wichita Bd. of Trade, 412
U.S. 800, 808 (1973). The Board made no attempt to do so in Joy Medical Supply, Neb
Group, or Ortho Rehab. Moreover, the Court of Appeals for the D.C. Circuit has
determined that “agencies act arbitrarily and capriciously when they ‘ignore [their] own
relevant precedent,” and that “agencies may depart from precedent, but ‘an agency
changing its course must supply a reasoned analysis indicating that prior policies and
standards are being deliberately changed, not casually ignored.’” Nat’l Fed’n of Fed.
Emps. v. FLRA, 412 F.3d 119, 121 (2005) (quoting B B & L, Inc. v. NLRB, 52 F.3d 366,
369 (D.C. Cir. 1995) and Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852
(D.C. Cir. 1970).

‘4 Tn contrast, Board and ALJ decisions are merely posted on the DAB website, as
required by the Freedom of Information Act, 5 U.S.C. § 552(a)(2)(A).
14

For all of these reasons, I follow the Board’s well-reasoned decision in Fayad and its
predecessors and consider whether the Medicare contractor properly determined the
effective date for Petitioner Bergeron’s program enrollment. As with the effective

enrollment dates for FastMed’s other employees, I affirm the contractor’s determination.
42 CFR. § 424.520(d).

Conclusion

For the reasons set forth above, I affirm CMS’s determinations as to the effective dates
for Petitioners’ participation in the Medicare program.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

4-642

4-643

4-644

4-645

4-646

4-647

4-648

4-649

4-650

4-651

4-652

4-653

4-654

4-655

4-665

4-666

4-667

4-668

4-669

4-670

4-671

15

APPENDIX
Kimberly Bergeron NP (PTAN Z153964)
Kimberly Bergeron NP (PTAN Z153963)
Kimberly Bergeron NP (PTAN Z153962)
Mary Bieber NP (PTAN Z153657; PTAN Z153656; PTAN Z153655)
Ryan Brower PA (PTAN Z154926; PTAN Z154927; PTAN Z154928)
Patricia Daly NP (PTAN Z155027; PTAN Z155028; PTAN Z155029)
Lisa Daniels PA (PTAN Z155012; PTAN Z155013)
Lisa Daniels PA (PTAN Z154051)
Kelli Favata MD (PTAN Z153632)
Kelli Favata MD (PTAN Z154636; PTAN Z154637)
Erin Ford PA (PTAN Z151102; PTAN Z151103)
Georgette George NP (PTAN Z154635)
Georgette George NP (PTAN Z153482; PTAN Z153481)
Jennifer Francyk PA (PTAN Z154989; PTAN Z154990; PTAN Z154991)
Lynn Helseth MD (PTAN Z153877; PTAN Z153878; PTAN Z153879)
Kyle Hoffman PA (PTAN Z154050)
Kyle Hoffman PA (PTAN Z154608; PTAN Z154609)
Stephanie Hulme NP (PTAN Z153658; PTAN Z153659; PTAN Z153514)
Abigail Kraemer PA (PTAN Z153684)
Abigail Kraemer PA (PTAN Z154584; PTAN Z154585)

Jane Lykins MD (PTAN Z154804; PTAN Z154805; PTAN Z154640)
4-672

4-673

4-674

4-675

4-676

4-677

4-678

4-679

4-680

4-681

4-682

4-683

4-684

4-685

4-686

4-687

4-688

16

Jane MacDonald PA (PTAN Z154596; PTAN Z154597)

Jane MacDonald/Stevenson PA (PTAN Z154049)

Thomas Morris NP (PTAN Z90178; PTAN Z90179; PTAN Z90180)
Diane Musante PA

Diane Musante PA (PTAN Z154590; PTAN Z154591)

Ian Myers PA (PTAN Z153687)

Ian Myers PA (PTAN Z154587; PTAN Z154588)

Rudy Noriega PA (PTAN Z155033; Z155034)

Guy O’Connor MD (PTAN Z153885; Z153886; Z153887)

Deepali Rastogi MD (PTAN Z153882; PTAN Z155883; Z153884)
Dana Robinson NP (PTAN Z153538; PTAN Z153539; PTAN Z153540)
Stephanie Schmit PA (PTAN Z93438; PTAN Z93439; PTAN Z93440)
Janet Scott NP (PTAN Z153855; PTAN Z153856; PTAN Z153857)
Kimberly Thuillez PA (PTAN Z155018; PTAN Z155019; PTAN Z155020)
Benjamin Tyau PA (PTAN Z154543; PTAN Z154544; PTAN Z154545)
Craig Wells NP (PTAN Z155119; PTAN Z155120; PTAN Z155121)

Myles Whitfield PA (PTAN Z155022; PTAN Z155023; PTAN Z155024)


I. Introduction

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
The Green House Cottages of Southern Hills
(CCN: 04-5377),

Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-14-730
Decision No. CR3437

Date: October 28, 2014

DECISION

I enter summary judgment in favor of the Centers for Medicare & Medicaid Services
(CMS) and sustain imposition of the following remedies against Petitioner, The Green
House Cottages of Southern Hills:

e A per-instance civil money penalty of $2000;

e A per-diem civil money penalty of $5050 for each day of a period that began on
October 9, 2013 and that ran through November 7, 2013; and

e A per-diem civil money penalty of $500 for each day of a period that began on
November 8, 2013 and that ran through December 4, 2013.
I base my decision on undisputed material facts establishing that Petitioner, a skilled
nursing facility doing business in the State of Arkansas, failed to comply with Medicare
participation requirements. The findings of noncompliance were made at surveys of
Petitioner’s facility that were completed on September 13 and November 14, 2013.'

CMS offered exhibits that it identified as CMS Ex. 1 — CMS Ex. 3, CMS Ex. 6, CMS Ex.
15, CMS Ex. 19 - CMS Ex. 21, CMS Ex. 23 — CMS Ex. 27, CMS Ex. 30— CMS Ex. 41,
and CMS Ex. 47 — CMS Ex. 53. Petitioner offered exhibits that it identified as P. Ex. 1 —
P. Ex. 30. I receive all of these exhibits for purposes of deciding CMS’s motion for
summary judgment.

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

The issues in this case are whether undisputed material facts establish that: Petitioner
failed to comply substantially with Medicare participation requirements; CMS’s
determination of immediate jeopardy noncompliance is clearly erroneous; and CMS’s
remedy determinations are reasonable.

B. Findings of Fact and Conclusions of Law

CMS alleges the following instances of noncompliance by Petitioner with Medicare
participation requirements:

e Failure to comply with the requirements of 42 C.F.R. § 483.25. This regulation
directs that each resident of a skilled nursing facility must receive and the facility
must provide the necessary care and services so that the resident attains or
maintains the highest practicable physical, mental, and psychosocial well-being, in
accordance with the resident’s comprehensive assessment and plan of care. CMS
asserts that it determined at the survey ending September 13 that Petitioner failed
to comply with the regulation in that it failed to administer pain medication to a
resident who is identified as Resident # 9, in accordance with the resident’s
physician’s orders. CMS bases the $2000 per-instance civil money penalty
determination on this noncompliance assertion.

' On November 21, 2013 there was a third survey of Petitioner’s facility resulting in
noncompliance findings. CMS, however, appears not to be basing any of its remedy
determinations on the findings that were made at this survey and it has offered no
evidence pertaining to it. Petitioner moved for summary judgment as to the November
21, 2013 survey findings and I grant Petitioner’s motion.
e Failure to comply with the requirements of 42 C.F.R. §§ 483.13(b) and (c)(1)(i).
These two subsections effectively prohibit a facility or any member of its staff
from abusing a resident, either mentally or physically. CMS asserts that it
determined at the November 14 survey that a member of Petitioner’s staff, a
certified nursing assisted who is identified as CNA # 5, engaged in unchecked
abuse of several of Petitioner’s residents. CMS asserts further that the
noncompliance was so egregious as to cause immediate jeopardy for Petitioner’s
residents. CMS bases the $5050 and $500 per-diem civil money penalty
determinations on this allegation of noncompliance and the ones that follow.

e Failure to comply with the requirements of 42 C.F.R. §§ 483.13(c)(1)(ii) — (ili),
(c)(2), (c)(3), and (c)(4). These subsections, read together in relevant part,
establish investigation and reporting requirements for a skilled nursing facility
when confronted with allegations or suspicions of abuse.” Subsection (c)(2)
requires all abuse allegations to be reported promptly to a facility’s administrator
and to State authorities in accordance with State law. Subsection (c)(3) requires a
facility to investigate thoroughly all allegations of abuse and to protect its
residents from abuse while investigations are ongoing. Subsection (c)(4) imposes
reporting requirements on skilled nursing facilities of the results of abuse
investigations. CMS alleges that it determined at the November 14 survey that
Petitioner failed to comply with these requirements in that it failed to investigate
thoroughly injuries sustained by a resident who is identified as Resident # 1. It
alleges further that Petitioner failed timely to report incidents of resident abuse to
Arkansas authorities in accordance with State law. CMS alleges that this
noncompliance was so egregious as to put residents at immediate jeopardy.

e Failure to comply with the requirements of 42 C.F.R. § 483.13(c). This allegation
also arises from the November 14 survey and CMS contends that Petitioner’s
noncompliance was at the immediate jeopardy level. The regulation requires a
skilled nursing facility to develop and implement policies that protect residents
against abuse, mistreatment, and neglect. CMS asserts that Petitioner failed to
comply with this regulation in that it failed to implement its own abuse policy.

2 In fact, 42 C.F.R. §§ 483.13(c)(1)(ii) and (iii) have no relevance here. These
subsections prohibit a facility from employing any individual who has been convicted of
abusing, neglecting, or mistreating residents and they impose reporting requirements on a
facility when it becomes aware of an adverse finding relating to abuse, neglect, or
mistreatment by a court of law. CMS makes no allegations that CNA #5 had a record of
a conviction for abuse or that Petitioner was aware of such a record and failed to report it.
Specifically, CMS contends that Petitioner failed to implement its policy because
its staff failed to report to Petitioner’s administrator suspected resident abuse.
CMS alleges that Petitioner also violated its anti-abuse policy by failing to
interview Resident # | and other individuals with potential knowledge when it
investigated allegations of abuse of that resident.

e Failure to comply with the requirements of 42 C.F.R. § 483.75. This is another
noncompliance allegation, at the immediate jeopardy level, arising from the
November 14 survey. The regulation at issue requires a skilled nursing facility to
be administered in a manner that enables it to use its resources effectively and
efficiently to attain or maintain the highest practicable physical, mental, and
psychosocial well-being of each resident. CMS alleges that Petitioner’s
management failed repeatedly to ensure that its staff carried out policies that
protected residents against abuse.

The undisputed material facts strongly substantiate CMS’s noncompliance allegations
and I sustain them. Additionally, these facts support CMS’s assertions of immediate
jeopardy and I sustain them as well. Finally, the undisputed material facts support
CMS’s remedy determinations.

The undisputed facts relating to Petitioner’s noncompliance with the requirements of 42
C.F.R. § 483.25 are that Petitioner’s staff failed to administer a pain relieving medication
to Resident # 9 that had been prescribed to the resident by his physician. On the morning
of September 10, 2013, the physician ordered the staff to discontinue administering
hydrocodone 7.5/500 milligrams (mg) to the resident and to give him 650mg of Lorcet-10
every four hours as needed. CMS Ex. 14 at 6. This medication change represented an
increased dosage of narcotics for pain management. CMS Ex. 52 at 13. The facility’s
Medication Administration Record shows that its staff did not provide any pain
medication to Resident # 9 during the day after 8:15 a.m. on September 10. CMS Ex. 14
at 6. Petitioner argues that its staff checked on Resident #9 during the day and he denied
pain that needed control with the prescribed pain medication. I accept that as true for the
purpose of summary judgment. However, in the evening of September 10 an Arkansas
State agency surveyor observed the resident complaining of pain during and immediately
after the staff’s attempt to move him. CMS Ex. 52 at 10. After approximately one hour,
Petitioner’s staff gave the resident a dosage and medication (Lortab) that was not part of
the resident’s current prescription and not the Lorcet-10 that had been prescribed by the
resident’s physician. CMS Ex. 14 at 10. The resident’s treatment records do not show
that the staff ever offered the appropriate medication to the resident on September 10. Id.
As a result, Petitioner’s staff provided a lower dosage of pain medication than what the
physician had ordered to control Resident #9’s pain.

Petitioner does not deny these facts. Rather, Petitioner responds by asserting that its staff
regularly administered pain medication to Resident # 9 as needed and appropriately on
September 10,2013. That assertion begs the question, however. That the staff may have
given pain medication to the resident at certain times is clear. But, the staff did not give
the resident the medication for over an hour when the resident complained of pain on
September 10, and when they eventually did, it was not the proper amount of pain
medication that the physician had prescribed. Staff did not document any justification for
its failure to do so. Obviously, there was a reason for the physician changing the
resident’s pain medication to Lorcet-10. The physician’s order allowed no room for the
staff to substitute their judgment for that of the physician and to give the resident
something other than precisely what had been ordered. The staff’s failures to provide the
prescribed dose of pain medication to the resident when he complained of pain and to
carry out the physician’s order are inconsistent with providing him the care and services
necessary to maintain his highest level of well-being and are patent regulatory violations.

The undisputed facts establish that CNA # 5 carried out something akin to a reign of
terror against Petitioner’s residents, a reign that went unchecked until Arkansas State
agency surveyors uncovered it. There is a mass of evidence — which was not rebutted in
the least by Petitioner — that establish several instances in which CNA # 5 brutalized
residents of the facility. The CNA’s conduct was abusive in every sense of the word, and
it falls squarely within the regulatory definition of “abuse,” the willful infliction of harm
or injury. 42 C.F.R. § 488.301. Such abuse is a plain violation of the requirements of 42
CFR. §§ 483.13(b) and (c)(1)(i).

e CNA #5 verbally and physically abused Resident # 4, an individual who was
cognitively impaired, at risk for malnutrition, and who expressed extreme anxiety,
especially at mealtimes. CMS Ex. 31 at 1, 6, 43.

co. The resident’s daughter reported that CNA #5 made derogatory statements
to her about her mother. CMS Ex 51 at 3; P. Ex. 8 at 5.

o Petitioner’s certified dietary manager reported that the CNA made insulting
comments to the resident as the resident attempted to eat. CMS Ex. 51 at 3.

o Another CNA, CNA # 7, reported that she had witnessed CNA # 5 slap
Resident # 4 on the side of her head. Id.; P. Ex. 11 at 2.

e CNA #5 verbally abused Resident # 13, an individual who suffered from anxiety
and depression along with severe physical impairments.
o Two other CNAs, CNA # 6 and CNA #7, observed CNA # 5 threatening
the resident, telling the resident that she would not provide assistance to the
resident if the resident used the call light to request assistance in going to
the bathroom. CMS Ex. 51 at 3; P. Ex. 12 at 3.

e CNA #5 physically abused Resident # 14, a totally dependent individual who
suffered from, among other things, cerebral palsy that caused the resident to
experience severe physical and cognitive impairments. CMS Ex. 34 at 1.

o CNA #6 and CNA #7 observed CNA # 5 on several occasions physically
forcing Resident # 14 to eat by holding down the resident’s arms, forcing
food into her, and refusing to let her drink until she ate. CMS Ex. 34 at 5-6.

e CNA #5 verbally abused Resident # 15, an individual who suffered from
dementia that produced behavioral disturbances. CMS Ex. 35 at 1.

o CNA #6 and CNA #7 reported seeing CNA # 5, as she was providing care
to the resident, tell the resident to “shut up” and to lie down. Id. at 5-6.

Petitioner has offered no specific facts that rebut the foregoing. It has offered three
notices from the Arkansas Office of Long Term Care to CNA # 5 — after she had been
fired from Petitioner’s facility — stating that three abuse allegations against her were
“unfounded.” P. Ex. 1. But the notices do not explain what standard the agency used to
reach that result, the evidence it had before it, or which three out of the several abuse
allegations were unfounded. Nor does it offer any determinations about the remaining
allegations. In addition, Petitioner asserts that it disputes the assertions of CNAs # 6 and
#7. But, it offers no facts of its own that would show or even suggest that these
statements are inaccurate. It also asserts that its director of nursing will offer testimony
that refutes the CNAs’ statements. But, the written direct testimony of Petitioner’s
director of nursing contains nothing of the sort. P. Ex. 28. I directed the parties to file all
of their witnesses’ proposed testimony in writing. The failure of Petitioner’s director of
nursing to respond to the CNAs’ assertions in her written direct testimony cannot now be
cured by promised testimony because that testimony is inadmissible.*

In deciding a motion for summary judgment I am required to draw all possible inferences
from the facts before me that are favorable to the opposing party even if it is unlikely that
I would draw those inferences after an on the record hearing. But, I am not required to
draw inferences from bald assertions that are not backed up by admissible evidence. A

> Petitioner had a full month’s notice of CMS’s evidence and had plenty of opportunity
to produce a statement from its director of nursing addressing the allegations of CNA # 6
and CNA #7.
party cannot refute facts offered by the moving party simply by denying them. Looking
at Petitioner’s response to the allegations concerning abuse, I see nothing other than bald
denials. Given that, there are no inferences that I can draw that are favorable to
Petitioner.’

The undisputed facts also establish that Petitioner failed to comply with the abuse
investigation/reporting requirements of 42 C.F.R. §§ 483.13(c)(2), (c)(3), and (c)(4).
They establish that Petitioner failed to: conduct a complete and thorough investigation
into injuries sustained by Resident # 1; and report timely to appropriate State authorities
the results of investigations into abuse sustained by other residents at the hands of CNA
#5.

Resident # 1 was a dependent individual, beset with numerous medical problems that
included the residuals of a fractured hip, anemia, and dementia. CMS Ex. 30 at 1. On
October 9, 2013 the resident complained of leg pain. She revealed a grapefruit-size
swelling on her lower right leg that was determined subsequently to be a broken tibia.
Id. at 18-19.

Petitioner launched an investigation into the possible cause of the resident’s injuries.
During that investigation Petitioner’s management interviewed members of the staff, all
of whom denied knowing the cause or source of the resident’s injury. CMS Ex. 30 at 33-
34. The management eventually concluded that the resident’s injury was a consequence
of osteoporosis or some unknown event.

What Petitioner’s management did not do was significant because there were key
individuals who Petitioner never interviewed. Petitioner failed to interview: Resident
# 1; the driver of the van who transported the resident to the hospital on October 19; or
the resident’s physician.

Regulations require that any investigation into suspected abuse be “thoroughly
investigated.” 42 C.F.R. § 483.13(c)(3). The term is not susceptible to widely disparate
interpretations. A thorough investigation necessitates in depth interviews of every
individual who might have knowledge of the cause of a resident’s injury.

Here, key individuals plainly were not interviewed. The resident — albeit demented —
might have been able to provide critical information about the cause of her injury. In
fact, three weeks after her fractured leg, Resident # 1 told CNA #6 and CNA #7 that
CNA #5 had pushed her into the toilet, which caused her to hurt her leg. P. Ex. 28 at 5.
There is no record of anyone asking her before then about how she injured her leg, so it

* Even if I inferred based on the vague notices that that three instances of abuse by CNA
#5 were not true, that leaves other instances of abuse (outlined above) that these notices
do not address at all and for which there is no other contradictory evidence.
became nearly impossible, three weeks later, to determine the truth of her claim that a
staff member violently assaulted her. Similarly, the resident’s treating physician, a
person with intimate knowledge of the injury, might have been in a position to opine
whether the resident’s fracture was caused by the kind of blunt force that is associated
with abuse. The van driver might have talked to the resident during her drive to the
hospital and might have learned something from the resident during that trip. Indeed, the
van driver, apparently in transferring the resident, had told a licensed practical nurse at
Petitioner’s facility that Resident # 1 said she fell in the shower. CMS Ex. 30 at 35. But
there were no further inquiries about how the van driver knew that or what other
information he or she might have had. Id.

Petitioner’s oversight was not trivial. The very real possibility existed that Resident # 1 —
frail and helpless — was the victim of an assault by someone in Petitioner’s facility. Ata
minimum, Petitioner owed a duty to Resident # 1 to do everything possible to ascertain
the cause of the resident’s injury. Moreover, the possibility existed, as evidenced by the
injury sustained by the resident, that there was an extremely abusive individual on the
loose on Petitioner’s premises. Petitioner owed a duty, not just to Resident # 1, but to all
other residents as well to determine the cause of the resident’s injury by conducting a
thorough investigation and not presumptively dismissing potential and critical witnesses.

It is also evident that Petitioner failed to report the findings of other investigations as is
required by Arkansas law, and that failure is a violation of the requirements of 42 C.F.R.
§ 483.13(c)(2) and (c)(4). See Ark. Code § 12-12-1708. Petitioner failed to identify
allegations of CNA #5 verbally intimidating or humiliating residents as possible verbal
abuse. See P. Exs. 8,9, 12. Petitioner also failed to report timely and accurately the
results of investigations into abuse perpetrated against residents by CNA # 5 and offered
no excuse for its failure to do so. CMS Ex. 51 at 5.

Petitioner has offered no meaningful response to this evidence. Its essential response to
CMS’s motion for summary judgment is to attack the credibility of CNA # 6 and #7. I
have discussed above why denying the truth of witnesses’ assertions is not a defense to a
motion for summary judgment absent any evidence that establishes the witnesses not to
be credible. As I have explained, a bald denial is never sufficient to rebut admissible
evidence when that evidence establishes material facts that are the basis for the motion.
Furthermore, CMS’s assertions about Petitioner’s failure to comply with investigation
and reporting requirements have nothing to do with the statements of the two CNAs.
Their statements are not the basis for the allegations.

The uncontroverted facts offered by CMS additionally show a failure by Petitioner to
comply with the requirements of 42 C.F.R. § 483.13(c). Petitioner failed to follow its
own policies respecting investigating and reporting of incidents of possible abuse.
Petitioner’s policy governing possible abuse of residents essentially tracks the
requirements of 42 C.F.R. § 483.13(c)(2), (c)(3), and (c)(4). The facility pledges that its
administrator or an employee designated as its compliance officer will immediately
investigate any allegation of abuse. The policy explicitly directs the person conducting
an investigation to interview and document in detail an affected resident’s account of an
allegedly abusive episode. CMS Ex. 48 at 4.

Petitioner plainly failed to comply with its own policy in investigating the possible abuse
of Resident # 1 because it never interviewed that resident. True, the resident was
demented and her dementia might have called into question the reliability of her
statements. But, the resident was able to communicate. At a minimum, Petitioner owed
it to the resident to get her side of the story as best as it could. Statements given by the
resident might have proved valuable. But, Petitioner never made the effort.

Petitioner’s policy also requires its staff to report immediately to the facility administrator
all incidents that might comprise abuse. CMS Ex. 48 at 1. Petitioner’s staff failed to
discharge this responsibility by not immediately reporting episodes of abuse, at least in
the case of abuse perpetrated by CNA # 5 against Resident # 13. CNA #7 admitted that,
although she had witnessed abuse, she’d never reported it. CMS Ex. 21 at 18.

I find no controverted facts from which I can draw inferences favorable to Petitioner. It
failed to offer any affirmative proof that it complied with its abuse policies. In particular,
Petitioner has not denied that its management failed to interview Resident # 1.

Finally, the facts offered by CMS strongly support a finding that Petitioner was not
efficiently and effectively administered as is required by 42 C.F.R. § 483.75. That is
evident in Petitioner’s failure to protect its residents against the depredations of CNA #5,
its failure to investigate thoroughly the cause of the injury sustained by Resident # 1, its
failure to report to the State all abuse allegations and investigations timely and accurately,
and its failure to comply with its own abuse policy. All of these areas are areas that are
or should be subject to direction and guidance by Petitioner’s management and such
direction and guidance clearly was lacking.

CMS determined the deficiencies established at the November 14 survey posed
immediate jeopardy for Petitioner’s residents. “Immediate jeopardy” is defined at 42
C.F.R. § 488.301 to be noncompliance that has caused or is likely to cause serious injury,
harm, impairment, or death to a facility resident. I find that the uncontroverted material
facts of this case establish that all of the November 14 deficiencies were at the immediate
jeopardy level. Consider the situation that prevailed at Petitioner’s facility: a highly
abusive individual was employed by Petitioner and that individual was acting, essentially
unchecked, to perpetrate abuse against frail and dependent residents. Her abuses
included physical abuse in which she struck at least one resident and verbal abuse. The
repeated episodes of abuse that this employee committed put residents at risk, not only

10

for bodily harm, but for psychological harm as well. This is not simply a case where
there was a likelihood of serious harm. There was actual serious harm being perpetrated
by CNA #5. And, despite that, Petitioner’s management did little to protect the facility’s
residents. Compounding the problem was the failure by management to investigate
incidents of abuse thoroughly and to report to State authorities the abusive acts in the
facility.

Petitioner argues that there is no basis to find immediate jeopardy level noncompliance.
Its premise is that the whole case for immediate jeopardy rests on the unbelievable
assertions of CNA #7. I disagree with that characterization of CMS’s case. The
evidence of noncompliance pertaining to Petitioner’s failure to investigate abuse has
nothing whatsoever to do with CNA # 7’s assertions about what she witnessed.
Furthermore, and as I have discussed, denying CNA # 7’s assertions does not create a
fact controversy in the absence of any facts that show that CNA # 7’s reports are not
credible. Petitioner, as I have noted, now says that its director of nursing is prepared to
testify that CNA #7 is not credible. But, the written direct testimony of the director of
nursing says nothing of the kind and the time has long since passed when Petitioner can
offer new evidence in this case.

I find the remedies in this case to be reasonable. Petitioner has not challenged the
duration of its noncompliance. It has not asserted that it corrected deficiencies earlier
than was found to be the case by CMS. Consequently, the duration of remedies is not an
issue in this case. What remains at issue is the penalty amounts — that is to say, whether
the per-instance and per-diem civil money penalty amounts are reasonable.

Penalty amounts are governed by regulation. Per-instance civil money penalties are
assessed at amounts that fall within a range of from $1000 to $10,000 per instance of
noncompliance. 42 C.F.R. § 488.438(a)(2). Per-diem civil money penalties for
immediate jeopardy level noncompliance are assessed at amounts that fall within a range
of from $3050 to $10,000 for each day of noncompliance. 42 C.F.R. § 488.438(a)(1)(i).
Per-diem civil money penalties for non-immediate jeopardy level noncompliance are
assessed at amounts that fall within a range of from $50 to $3000 for each day of
noncompliance. 42 C.F.R. § 488.438(a)(1)(ii).

There are regulatory factors that may be used to decide where within the foregoing ranges
a penalty amount should fall. These factors may include: the seriousness of the
noncompliance; a facility’s noncompliance history; its culpability; and its financial
condition. 42 C.F.R. §§ 488.438(f)(1) — (4); 488.404 (incorporated by reference into 42
CFR. § 488.438(f)(3)).

The seriousness of Petitioner’s noncompliance more than justifies the amounts of the
penalties that were imposed here. The immediate jeopardy level noncompliance
manifested at the November 14 survey was egregious. Residents of Petitioner’s facility
11

were harmed, seriously, by the depredations of CNA # 5 and Petitioner allowed this
abusive conduct to go unchecked. As I have discussed, Petitioner allowed the CNA to
perpetrate a reign of terror against several frail and grievously ill residents. A penalty
amount of $5050 per day is actually very modest in light of the fact that the harm was so
egregious; it is only about one-half of the maximum allowable civil money penalty
amount for immediate jeopardy level noncompliance. I find also that the $2000 per-
instance civil money penalty that was imposed for the noncompliance found at the
September 13 survey is reasonable. Petitioner’s staff disregarded an explicit physician’s
order by failing to give a resident medication that the physician had prescribed and by
giving a non-prescribed medication to that resident. The potential for harm from such
misfeasance is evident. Finally, I find that the $500 per-diem penalty amount for the
period after November 7, 2013 is reasonable. As I have stated, Petitioner has not alleged
that it cured its deficiencies on or before November 7. Those deficiencies were serious
even if they were not at the immediate jeopardy level of noncompliance. The post-
November 7 penalty amount of $500 per day is not only reasonable but extremely
modest, constituting only one-sixth of the maximum that CMS could have imposed.

Petitioner argues that the penalty amounts are unreasonable. But, it has not offered
evidence showing why the penalty amounts are unreasonable. It contends that it has a
relatively good compliance history. However, CMS has offered evidence showing that
Petitioner was cited for a medication-related deficiency as recently as May 2013. CMS
Ex. 50 at 1-2. Even if I considered this a “good” compliance history, which I don’t,
Petitioner’s past history does not offset the egregiousness of the noncompliance that I
have found here. Petitioner argues also that the penalty amounts will have a severe
financial impact on it. But, it has offered no evidence proving that to be the case.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1254)

Complainant,
v.

Sullivan Road Quik Mart, Inc. / Dexter and Bernadine Stalls
d/b/a Sullivan Road Quik Mart / Exxon,

Respondent.
Docket No. C-14-1771
Decision No. CR3436

Date: October 28, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Sullivan Road Quik Mart, Inc. / Dexter and Bernadine Stalls d/b/a
Sullivan Road Quik Mart / Exxon, that alleges facts and legal authority sufficient to
justify the imposition of a civil money penalty of $250. Respondent did not answer the
Complaint, nor did Respondent request an extension of time within which to file an
answer. Therefore, I enter a default judgment against Respondent and assess a civil
money penalty of $250.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Respondent impermissibly sold individual
cigarettes, and sold tobacco products to a minor, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a civil money
penalty of $250.
On September 2, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

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

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Sullivan Road Quik Mart /Exxon, an establishment that sells
tobacco products located at 711 Sullivan Road, Statesville, North Carolina 28677.
Complaint § 3.

¢ On December 13, 2013, during an inspection of Respondent’s establishment, an
FDA-commissioned inspector observed the sale of individual cigarettes.
Complaint § 10.

¢ On February 12,2014, CTP issued a Warning Letter informing Respondent of the
inspector's December 13, 2013 observation. Based on UPS records, the Warning
Letter was received by “Stalls” on February 14, 2014. The letter explained that
the observation constituted a violation of regulations found at 21 C.F.R.
§ 1140.14(d), and that the named violation was not necessarily intended to be an
exhaustive list of all violations at the establishment. The letter further warned that
Respondent's failure to correct its violation could result in a civil money penalty or
other regulatory action. Complaint § 10.

e Lack of a response to the February 12, 2014 Warning Letter prompted CTP to
send another letter to Respondent on April 7, 2014. The letter indicated that “CTP
had not received a response to the Warning Letter and remind[ed] Sullivan Road
Quik Mark of its continuing obligation to be in compliance with the Act and its
implementing regulations.” Complaint § 10.

e Inan April 14, 2014 letter, Bernadine Stalls submitted a response to the Warning
Letter on behalf of Respondent. In the letter “Ms. Stall stated that the
establishment no longer allows any open packages of cigarettes behind the counter
and no single cigarettes are sold at the establishment anymore.” Complaint § 11.
e During a subsequent inspection of Respondent’s establishment conducted on May
29, 2014, FDA-commissioned inspectors documented that “a person younger than
18 years of age was able to purchase a package of L&M Menthol cigarettes . . . at
approximate 10:44 PM.” Complaint § 1.

These facts establish Respondent Sullivan Road Quik Mart / Exxon '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. § 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 CFR. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010).

The regulations prohibit the sale or distribution of individual cigarettes. 21 C.F.R.
§ 1140.14(d). Additionally, under 21 C.F.R. § 1140.14(a), no retailer may sell cigarettes
or smokeless tobacco to any person younger than 18 years of age.

Taking the above alleged facts as true, Respondent violated the prohibition of (i) sale or
distribution of individual cigarettes, 21 C.F.R. § 1140.14(d), on February 12, 2014; and
(ii) against selling cigarettes to persons younger than 18 years of age, 21 C.F.R.

§ 1140.14(a), on May 29, 2014. Therefore, Respondent’s actions constitute violations of
law that merit a civil money penalty.

CTP has requested a fine of $250, which is a permissible fine under the regulations. 21
C.F.R. § 17.2. Therefore, I find that a civil money penalty of $250 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1237)

Complainant
v.

US Super Saver Inc. / Hazem Youssef
d/b/a Convenient Express / BP,

Respondent.
Docket No. C-14-1755
Decision No. CR3433

Date: October 24, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an
administrative complaint on Respondent, US Super Saver Inc. / Hazem Youssef
d/b/a Convenient Express / BP, at 1651 Red Bank Road, Goose Creek, SC 29445,
and by filing a copy of the complaint with the Food and Drug Administration’s
(FDA) Division of Dockets Management. The complaint alleges that Convenient
Express / BP impermissibly sold tobacco products to minors and failed to verify,
by means of photo identification containing a date of birth, that the tobacco
purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money penalty
against Respondent Convenient Express / BP.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 28, 2014, CTP served
the complaint on Respondent by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent

should pay the penalty, file an answer, or request an extension of time in which to
file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.
§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

Respondent has neither filed an answer within the time prescribed, nor requested
an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

At approximately 11:01 a.m. on September 28, 2013, at Respondent’s
business establishment, 1651 Red Bank Road, Goose Creek, SC 29445, an
FDA-commissioned inspector observed Respondent’s staff selling a
package of Copenhagen Pouches smokeless tobacco to a person younger
than 18 years of age. The inspector also documented that Respondent’s
staff failed to verify, by means of photographic identification containing a
date of birth, that the purchaser was 18 years of age or older;

In a warning letter issued on December 5, 2013, CTP informed Respondent
of the inspector’s September 28, 2013 observations, and that such actions
violate federal law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further
warned that Respondent’s failure to correct its violations could result in a
civil money penalty or other regulatory action;

At approximately 6:23 p.m. on February 28, 2014, at Respondent’s
business establishment, 1651 Red Bank Road, Goose Creek, SC 29445,
FDA-commissioned inspectors documented Respondent’s staff selling a
package of Grizzly Long Cut Premium Wintergreen smokeless tobacco to a
person younger than 18 years of age. The inspector also documented that
Respondent’s 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 Convenient Express / BP’s liability under the
Act. The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k).

A tobacco product is misbranded if sold or distributed in violation of regulations
issued under section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C.

§ 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The Secretary of the U.S. Department of
Health and Human Services issued the regulations at 21 C.F.R. pt. 1140 under
section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. § 387£(d)(1); 75 Fed.
Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R. § 1140.14(a), no retailer
may sell tobacco products to any person younger than 18 years of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no cigarette purchasers
are younger than 18 years of age.

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against
Respondent US Super Saver Inc. / Hazem Youssef d/b/a Convenient Express / BP.
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/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Centers for Medicare & Medicaid Services,
Petitioner,

v.

Landmark Healthplan of California, Inc.,
Respondent.

Docket No. C-14-1278
CR3430
Date: October 23, 2014
DECISION DISMISSING CASE

The June 5, 2014 request for hearing filed by Respondent, Landmark Healthplan of
California, Inc., is dismissed pursuant to 45 C.F.R. § 150.411(c).

I. Background

On May 12, 2014, the Centers for Medicare & Medicaid Services (CMS) notified
Respondent that CMS intended to impose a civil money penalty (CMP) in the amount of
$390,000 against Respondent for violation of the Medical Loss Ratio (MLR)
requirements. 42 U.S.C. § 300gg-18; 45 C.F.R. § 158.613. Specifically, CMS alleged in
the notice that Respondent failed to submit its 2011 MLR Reporting Form and pay any
rebates owed. The notice acknowledges Respondent’s argument that it is not subject to
MLR requirements. The notice informed Respondent that it had the right to request a
hearing before an administrative law judge (ALJ) with the Departmental Appeals Board
within 30 days after the date of the notice letter as provided in 45 C.F.R. §§ 150.405 and
158.614. A copy of the notice was filed by Respondent with its request for hearing.

On June 5, 2014, Landmark filed a timely request for hearing. On June 19, 2014, the
case was assigned to me and an Acknowledgment and Prehearing Order was issued.
On August 15, 2014, Respondent filed its brief on the merits, a motion for summary
judgment, an affidavit of its President and Chief Executive Officer, and a waiver of oral
hearing.

On September 16, 2014, CMS moved to dismiss the request for hearing on grounds that
the proposed CMP was rescinded. CMS filed with its motion a copy of the September
16, 2014 notice to Respondent rescinding the proposed CMP. CMS states in the notice
that it rescinded the proposed CMP so that it could consider a new argument raised by
Respondent for the first time in its request for hearing. CMS purports to reserve the right
to impose a new CMP and acknowledges that if it does Respondent will again have the
right to request ALJ review. Respondent filed an opposition to the motion to dismiss on
September 17, 2014, and requested oral argument. CMS filed a motion for leave to file a
reply with its reply on September 18, 2014. Respondent filed its objection to CMS’s
motion for leave to file a reply on September 19, 2014. Respondent’s objection to the
CMS motion for leave to file a reply is overruled. Both the CMS reply and Respondent’s
objection, which is actually in the nature of a sur-reply, provide helpful elaboration of the
parties’ positions and legal analysis. Therefore, the CMS reply and Respondent’s sur-
reply are accepted and considered. Respondent’s motion for oral argument is denied.
The parties have skillfully set forth their arguments and legal analysis and I have no
questions that require discussion in an oral argument. I conclude that an oral argument
would not aide my decision and oral argument is, therefore, unnecessary.

IL. Findings of Fact, Conclusions of Law, and Analysis
My conclusions of law are in bold followed by the pertinent facts and analysis.
1. CMS has not proposed or assessed a CMP against Respondent.

2. Dismissal of Respondent’s request for hearing is required by
45 C.F.R. § 150.411 (c).

CMS advised Respondent in its May 12, 2014 notice that it proposed to impose a
$390,000 CMP against Respondent for failure to submit its 2011 MLR report and to pay
any rebates owned. The legal authority cited by CMS for imposition of the CMP was
42 U.S.C. § 300gg-18 and 42 C.F.R. § 158.601-.615. Among other requirements 42
U.S.C. § 300gg-18 imposes upon certain health insurance issuers the obligation to report
to the Secretary of Health and Human Service (the Secretary) its MLR for each plan year
and, under certain circumstances, to pay a rebate to each enrollee in its plan. The
Secretary was required to promulgate regulations for enforcement of 42 U.S.C.

§ 300gg-18 and granted authority to impose appropriate enforcement remedies.
Authorized enforcement remedies are established by 42 U.S.C. § 300gg-22. Under 42
U.S.C. § 300gg-22(b)(2)(D), only an entity assessed a CMP is required to be afforded a
hearing before an ALJ if requested within 30 days after the date of issuance of the notice
of assessment of the CMP. Judicial review is only available to an entity after an order
imposing a CMP is issued following an ALJ hearing. 42 U.S.C. § 300gg-22(b)(2)(E).

The Secretary promulgated regulations at 45 C.F.R. pt. 158 establishing reporting and
rebate requirements for certain insurance issuers. Regulations that delegate authority to
Health and Human Services (HHS) to impose CMPs are at 45 C.F.R. § 158.601-.615.
HHS is required to give an insurance issuer notice of its intent to assess a penalty and
advise the issuer of its right to request a hearing within 30 days after the date of the
notice. The notice must also advise the issuer that if a hearing is not requested the CMP
may be assessed with no right to further review. 45 C.F.R. § 158.613. Issuers against
which HHS has assessed a CMP may seek review in accordance with 45 C.F.R.

§ 150.400. 45 C.F.R. § 158.614. The authority to impose CMPs is delegated to CMS for
any insurer that is subject to CMS’s enforcement authority. 45 C.F.R. § 150.301. If
CMS proposes to assess a CMP, CMS must give notice to the entity, including notice of
the right to request a hearing under 45 C.F.R. § 150.401, within 30 days and that failure
to timely request a hearing permits CMS to assess the CMP without further appeal.

45 C.F.R. § 150.343. Pursuant to 45 C.F.R. § 150.345, an “entity against which CMS has
assessed” a CMP may request administrative and judicial review in accordance with

45 CFR. § 150.401-.465.

In this case CMS proposed a CMP against Respondent, but CMS has now rescinded the
proposed CMP. Because there is no longer an action by CMS proposing to assess a CMP
against Respondent, Respondent no longer has a right to ALJ review under 42 U.S.C.

§ 300gg-22(b)(2)(D) and 45 C.F.R. § 150.345. The plain language of the statute and
regulation require no interpretation. Respondent is no longer a “respondent” within the
meaning of 45 C.F.R. § 150.401, because the notice of intent to impose a CMP has been
rescinded. I am required to order the dismissal of a hearing request of an entity that is not
a “respondent” within the meaning of 45 C.F.R. § 150.401. 45 C.F.R. § 150.411(c).
Accordingly, dismissal of Respondent’s request for hearing is required.

Respondent raised several objections to dismissal, all of which are without merit. My
delegated authority under 45 C.F.R. § 150.401-.455 is limited. The issues that I may hear
and decide are:

(1) Whether a basis exits to assess a civil money penalty
against the respondent.

(2) Whether the amount of the assessed civil money penalty is
reasonable.

45 C.F.R. § 150.417. Iam granted no authority to: adjudicate a matter involving an
entity that is not a “respondent” within the meaning of 45 C.F.R. § 150.401; render an
advisory opinion on a legal issue; or grant equitable relief. Respondent argues that CMS
should pay its attorney fees. My authority to sanction a party is broad enough under

45 C.F.R. § 150.455(b)(8) to order the payment of fees and costs. However, CMS has
not committed any acts that are sanctionable under 45 C.F.R. § 150.455(a). Attorney fees
and expenses may be recovered in the appropriate case through an application filed
pursuant to the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504. The requirements
for filing an application for EAJA fees are strict and Respondent has not made such a
filing. Whether or not Respondent can make a colorable argument that it is a prevailing
party or that it satisfies the other requirements for an EAJA award cannot be answered
absent a timely filed application. 45 C.F.R. pt. 13.

III. Conclusion

For the foregoing reasons, Respondent’s request for hearing is dismissed. No right to
judicial review is triggered by this decision under 42 U.S.C. § 300gg-22(b)(2)(E) and
45 C.F.R. § 150.459, because no order imposing a CMP is issued.

/s/
Keith W. Sickendick
Administrative Law Judge