Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Victor E. Igiebor,
Petitioner
Vv.
The Inspector General.
Docket No. C-09-416
Decision No. CR2114

Date: April 19, 2010

DECISION

Petitioner, Victor E. Igiebor, filed a request for hearing seeking administrative review of
the Inspector General’s (I.G.’s) determination to exclude him for twenty (20) years from
participation in Medicare, Medicaid, and all federal health care programs under section
1128(a)(1) of the Social Security Act (Act). For the reasons discussed below, I find that
the I.G. is authorized to exclude Petitioner, and the imposition of a 20-year exclusion is
reasonable.

I. Background

On March 31, 2009, the I.G. notified Petitioner that he had determined to exclude him
from participation in Medicare, Medicaid, and other federally-funded health care
programs for a period of 20 years, based on his conviction of a criminal offense as
described at section 1128(a)(1) of the Act. The I.G. informed Petitioner that the length of
the exclusion, 20 years, was based on evidence relating to two aggravating
circumstances: the acts resulting in his conviction caused a financial loss to a
government program of more than $5,000; and the sentence imposed by the court
included incarceration. I.G. Ex. 1.
Petitioner requested a hearing and the case was assigned to me for a hearing and a
decision.

A Civil Remedies Division Acknowledgment letter, dated April 30, 2009, was sent to the
parties. This letter advised the parties that I had scheduled a telephone prehearing
conference for May 26, 2009, and instructed Petitioner to provide my office with a
telephone number five days before the scheduled conference. Because Petitioner did not
provide my office with a telephone number, I cancelled the conference and issued an
Order to Show Cause to Petitioner. Petitioner submitted a response to the Order to Show
Cause, in which he provided a telephone number where he could be reached. I accepted
Petitioner’s submission and rescheduled the telephone prehearing conference for
September 9, 2009. Due to logistical reasons relating to setting up a call at the prison, the
prehearing conference could not be held with the parties until September 11, 2009.
During the conference, I advised Petitioner of his right to be represented by an attorney.
Petitioner stated that he intended to write a letter to his former attorney, and I stated that I
would give him 45 days in which to contact his former attorney. The I.G. expressed his
position that this case could be resolved on the basis of written briefs, as the case
involved purely legal issues. I scheduled another telephone prehearing conference for
October 30, 2009.

At the second telephone prehearing conference on October 30, 2009, Petitioner stated that
e had not been able to contact his attorney and that he would represent himself in these
proceedings. Petitioner agreed to have this case decided on written submissions and
agreed to a briefing schedule.

The L.G. filed his brief on December 4, 2009, accompanied by six exhibits (1.G. Exs. 1-
6). Petitioner filed a brief in response on January 31, 2010. The I.G. advised me by
letter, dated February 22, 2010, that because the I.G. had not received a copy of
Petitioner’s brief, he would not be filing a reply brief. On February 23, 2010, my office
sent a letter to the parties, advising them that Petitioner had submitted a response brief,
and that the LG. had not received a copy of Petitioner’s brief. With the letter, my office
enclosed a copy of Petitioner’s brief for the I.G. and set a deadline for the L.G.’s filing of
a reply brief, or to advise me in writing that no reply would be filed. The LG. submitted
a reply brief on March 4, 2010. In the absence of any objection, I admit into the record
LG. Exs. 1-6.

II. Issues

The Secretary of the Department of Health and Human Services (Secretary) has by
regulation limited my scope of review to two issues:

1) whether the LG. has a basis for excluding Petitioner from program participation,
pursuant to section 1128(a)(1) of the Act; and
2) whether the length of the exclusion, 20 years, is reasonable.
Act § 1128(c)(3)(B); 42 C.F.R. § 1001.2007(a)(1).
II. Discussion

A, Petitioner must be excluded under section 1128(a)(1) of the
Act, because he was convicted of a criminal offense related to the
delivery of an item or service under the Medicare program.

Section 1128(a)(1) of the Act requires that the Secretary exclude an individual who has
been convicted under federal or state law of a criminal offense related to the delivery of
an item or service under Medicare or a state health care program. 42 C.F.R. §
1001.101(a).

During the relevant time period, Petitioner was a co-owner of the Wingate Drug &
Alcohol Rehabilitation Center (Wingate), operating in Houston, Texas. I.G. Ex. 4. An
investigation by a Medicaid Fraud Unit revealed that Wingate submitted $487,536.04 in
alse claims to the Medicaid program for chemical dependency treatment, through the
accounts of 220 Medicaid recipients, and received $406,577.50 in payment from
Medicaid for services not provided. The investigation revealed that any Medicaid claims
submitted for chemical dependency treatment services provided by Wingate interns from
December 2003 through November 2004 were fraudulent, because Wingate was not
registered with the Texas Department of State Health Services as a Counselor Training
Institute. 1.G. Ex. 4 at 1. In addition, Petitioner was illegally buying Medicaid numbers
rom several different individuals. Jd.

On October 8, 2007, a grand jury in the 351st District Court of Harris County, Texas
charged Petitioner with one count of felony Aggregate Theft by a Governmental
Contractor. LG. Ex. 5. Petitioner waived a jury trial, and, on September 23, 2008,
Petitioner was found guilty in a bench trial and was convicted of a First Degree Felony,
Theft by a Government Contractor. I.G. Ex. 6. On that same date, the judge sentenced
Petitioner to 10 years in jail and ordered Petitioner to pay $230 in court costs, $1,319.86
in extradition costs, and restitution in the amount of $500,000. Jd. at 2.

The court records conclusively establish the fact of Petitioner’s conviction. The court’s
adjudication of his guilt and its judgment of conviction satisfy the definitions of
“conviction” set out at sections 1128(i)(1) and (2) of the Act. Therefore, Petitioner was
“convicted” of an offense within the meaning of the Act.

' My findings of fact/conclusion of law are set forth, in italics and bold, in the discussion
captions of this decision.
The undisputed evidence also establishes that Petitioner’s conviction is related to the
delivery of an item or service under the Medicaid program. As stated above, Petitioner
fraudulently billed Medicaid for chemical dependency treatment services to Medicaid
recipients at Wingate. See I1.G. Ex. 4. This conduct resulted in $487,536.04 in false
billings to the Medicaid program. Petitioner was ordered to pay restitution in the amount
of $500,000. The submission of false claims to the Medicare and Medicaid programs has
been consistently held to be a program-related crime within the reach of section
1128(a)(1) of the Act. Jack W. Greene, DAB No. 1078 (1989), aff'd sub nom. Greene v.
Sullivan, 731 F. Supp. 835 (E.D. Tenn. 1990); Julius Williams, III, DAB CR1464 (2006);
Kennard C. Kobrin, DAB CR1213 (2004); Norman Imperial, DAB CR833 (2001);
Egbert Aung Kyang Tan, M.D., DAB CR798 (2001); Lorna Fay Gardner, DAB CR648
(2000); Mark Zweig, M.D., DAB CR563 (1999); Alan J. Chernick, D.D.S., DAB CR434
(1996). I find that the required nexus and common-sense connection between the crime
of which Petitioner was convicted and the Medicaid program is present here as a matter
of fact. See Berton Siegel, D.O., DAB No. 1467 (1994).

Petitioner challenges the facts and circumstances of his underlying conviction. He asserts
that his conviction is not “final,” because it is currently under appeal, “based on
procedural errors.” As such, he requests that I hold his exclusion in abeyance, until the
court has issued a ruling on his appeal. P. Br. at 2, 3; Petitioner’s Hearing Request. But
federal regulations explicitly preclude any collateral attacks on his conviction.

When the exclusion is based on the existence of a criminal conviction . . . where
the facts were adjudicated and a final decision was made, the basis for the

underlying conviction . . . is not reviewable and the individual or entity may not
collaterally attack it, either on substantive or procedural grounds, in this appeal.

42 C.F.R. § 1001.2007(d); Joann Fletcher Cash, DAB No. 1725 (2000); Chander
Kachoria, R.Ph., DAB No. 1380 at 8 (1993) (“There is no reason to ‘unnecessarily
encumber the exclusion process’ with efforts to reexamine the fairness of state
convictions.”); Young Moon, M.D., DAB CR1572 (2007).

With respect to Petitioner’s pending appeal, the Act specifically precludes my
considering whether such an appeal is pending. Act § 1128(i) (“[A]n individual . . . is
considered to have been ‘convicted’ of a criminal offense . . . regardless of whether there
is an appeal pending ... .”).” Moreover, I am without the authority to hold Petitioner’s
exclusion in abeyance, or to order the I.G. to remove his exclusion.

> If, after issuance of this decision, Petitioner’s conviction is overturned on appeal, the
1.G. would no longer have basis to impose the exclusion. See 42 C.F.R. § 1001.3005.
Petitioner has also indicated in his brief that an in-person hearing is necessary and lists
witnesses whose testimony he wishes to offer. P. Br. at 4. Petitioner claims that these
witnesses’ proposed testimony will “verify who is the actual owner/biller of Wingate.”
Id. However, because I have no authority to review his criminal conviction, such
testimony would be irrelevant. An in-person hearing is therefore not necessary; indeed, it
would serve no purpose. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48
(1986); Livingston Care Ctr. v. U.S. Dep’t of Health and Human Servs., 388 F.3d 168,
173 (6th Cir. 2004) (hearing unnecessary because case turns on a question of law and
presents no genuine dispute as to any material fact).

B. Petitioner’s 20-year exclusion is reasonable.

Once a predicate conviction within the ambit of section 1128(a) of the Act has been
demonstrated, exclusion for the minimum period of five years is mandatory. Act §
1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a),1001.2007(a)(2); Mark K. Mileski, DAB No.
1945 (2004); Salvacion Lee, M.D., DAB No. 1850 (2002); Lorna Fay Gardner, DAB No.
1733 (2000); David A. Barrett, DAB No. 1461 (1994). The period of exclusion may be
enhanced to more than five years, if the 1.G. proves the existence of certain aggravating
factors listed at 42 C.F.R. §§ 1001.102(b)(1)-(9). Ifthe LG. undertakes to do so, a
petitioner may attempt to limit or nullify the proposed enhancement through proof of
certain mitigating factors set out at 42 C.F.R. §§ 1001.102(c)(1)-(3).

In this case, the I.G. has asserted the presence of two aggravating factors. The first
aggravating factor on which the L.G. relies is present when “[t]he acts resulting in the
conviction, or similar acts . . . caused . . . a financial loss to a Government program . . . of
$5,000 or more.” 42 C.F.R. § 1001.102(b)(1). Petitioner was ordered to pay $500,000 in
restitution as part of his sentence. His criminal conduct resulted in a loss to the Medicaid
program of over $400,000, well in excess of $5,000. The LG. has established this first
aggravating factor.

The second aggravating factor cited by the LG. is that incarceration was imposed, and
this factor is specified at 42 C.F.R. § 1001.102(b)(5). The sentence imposed by the
criminal court included a significant period of incarceration. Petitioner was sentenced to
10 years in prison. This is significant incarceration time and underscores the seriousness
of his crimes. The I.G. has established this second aggravating factor.

In arguing that a mitigating factor is present, Petitioner reiterates that his conviction is not
“final,” “[uJntil a mandate is issued after the appeal is exhausted.” P. Br. at 3. As I have
discussed above, Petitioner’s appeal of his conviction has no bearing on the issues before
me. There is no dispute that Petitioner was convicted within the meaning of section
1128(a)(1) of the Act, and there may be no collateral attack before me of the conviction
that is the basis of the exclusion. Furthermore, when the I.G. has offered evidence of
aggravating factors, the only mitigating factors that may be considered are those specified
at 42 C.F.R. §§ 1001.102(c)(1)-(3).

Because Petitioner appears here pro se, I have taken care in reading his brief and his
request for hearing, guided by the Departmental Appeals Board’s reminders that pro se
litigants should be offered “some extra measure of consideration” in developing their
records and their cases. Louis Mathews, DAB No. 1574 (1996); Edward J. Petrus, Jr.,
M.D., DAB No. 1264 (1991). I have reviewed the documents and searched for any
arguments or contentions relative to the mitigating factors specified in the regulations. I
find that Petitioner has not asserted the existence of any of the mitigating factors set out
at 42 C.F.R. §§ 1001.102(c)(1)-(3).

I conclude that the two aggravating factors present in this case justify significantly
increasing the period of exclusion beyond the five-year minimum. The amount of the
financial loss to the Medicaid program was high, and the seriousness of Petitioner’s
crimes is highlighted by the 10-year prison sentence imposed by the court. I find that it is
not unreasonable for Petitioner to be excluded from participation in Medicare, Medicaid,
and all federal health care programs for 20 years.

IV. Conclusion

Based on my review of all of the evidence, I find that the I.G. properly excluded
Petitioner from participation in Medicare, Medicaid, and all federal health care programs.
I also find that the 20-year exclusion imposed by the LG. is reasonable based on the
evidence in this case.

/s/
Alfonso J. Montafio
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

BioniCare Medical Technologies, Inc.
(Supplier No: 4697390001),

Petitioner,
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-10-156
Decision No. CR2113

Date: April 14, 2010

DECISION

In this case, the undisputed evidence establishes that, about two years after it ceased
doing business as a supplier of durable medical equipment, prosthetics, orthotics, and
supplies (DMEPOS), the Centers for Medicare and Medicaid Services (CMS) revoked
Petitioner’s supplier number. Petitioner, BioniCare Medical Technologies, Inc.,
nevertheless appeals the revocation, complaining that Medicare contractors have refused
to pay claims for services it rendered while it still had a supplier number.

The parties have filed their briefs and exhibits.' With its brief (CMS Br.), CMS submits
four exhibits (CMS Exs. 1-4). Petitioner has filed its response (P. Br.) with ten additional
exhibits (P. Exs. 1-10).

Because the parties agree that Petitioner was not operational at the time CMS revoked its
supplier number, and because I have no authority to review a contractors’ denials of
Medicare Part B claims -- the gravamen of Petitioner’s appeal -- I dismiss Petitioner’s
hearing request. 42 C.F.R. § 498.70.

' Inexplicably, CMS does not move to dismiss. However, since Petitioner limits its
arguments to an issue that I cannot resolve, I may, on my own, dismiss its request. 42
C.F.R. § 498.70.
Because Petitioner admits that it was not operational, CMS
properly revoked its supplier number, and I have no
authority to review Petitioner’s claims for reimbursement
under Medicare Part B.?

To receive Medicare payments for items furnished to a Medicare-eligible beneficiary, a
supplier of medical equipment and supplies must have a supplier number issued by the
Secretary of Health and Human Services. Social Security Act (Act) § 1834(j)(1)(A).

To obtain and retain its supplier number, a Medicare supplier must meet the standards set
forth in 42 C.F.R. § 424.57(c), and CMS may revoke its billing privileges if it fails to do
so. 42 C.F.R. §§ 424.57(c)(1) and (d); 42 C.F.R. § 424.535(a)(1). Among other
requirements, the supplier must permit CMS or its agents to conduct on-site inspections
to ascertain its compliance with governing regulations. The supplier’s location must be
accessible during reasonable business hours, and it must maintain a visible sign and post
its hours of operation. 42 C.F.R. § 424.57(c)(8). If, based on an on-site review, CMS
determines that the supplier is no longer operational to furnish Medicare-covered items or
services, or is not otherwise meeting Medicare enrollment requirements, it may revoke
the supplier’s billing privileges. 42 C.F.R. § 424.535(a)(5). A supplier is “operational”
when it has a “qualified physical practice location, is open to the public for the purpose of
providing health care related services, is prepared to submit valid Medicare claims, and is
properly staffed, equipped, and stocked . . . to furnish these items or services.” 42 C.F.R.
§ 424.502.

Here, Petitioner once participated in the Medicare program as a DMEPOS supplier. See
42 C.F.R. § 424.57. Petitioner concedes that it ceased supplying such equipment and
supplies to Medicare beneficiaries in July 2007, almost two years before its supplier
number was revoked. P. Br. at 2. Not surprisingly, investigators working for the
Medicare contractor, Palmetto GBA National Supplier Clearinghouse, found the facility
closed and the premises unoccupied, when they visited in January and March 2009. CMS
Exs. 1-4. Because the investigators could not inspect the premises, the contractor
revoked Petitioner’s supplier number effective March 17, 2009. In a decision dated
September 24, 2009, a Medicare hearing officer affirmed the revocation.

Based on these disputed facts, I find that CMS properly revoked Petitioner’s supplier
number, because the facility was no longer operational. 42 C.F.R. § 424.535(a)(5).
Moreover, Petitioner was not in compliance with all of the standards set forth in section
424.57(c), because it did not permit CMS or its agents to conduct on-site inspections, and
its supplier number properly could be revoked on that basis. 42 C.F.R. §§ 424.57(c)(8)
and (d).

> I make this one finding of fact/conclusion of law.
Petitioner does not really challenge the loss of its supplier number here. Instead, it
complains that Medicare contractors have refused to reimburse it for items it supplied
while it still had a valid supplier number. Petitioner may, in fact, be entitled to review of
those denials, but not in this forum. A party dissatisfied with an initial determination
regarding claims for benefits under Medicare Part B may request review and, if
dissatisfied with the review determination, may request a carrier hearing. A party to the
carrier hearing then has a right to a hearing before an administrative law judge, if it files a
timely request and meets requirements as to the amount in controversy. Such claims are
heard by administrative law judges with the Office of Medicare Hearings and Appeals.
42 C.F.R. §§ 405.803, 405.807, 405.815, 405.821, 405.855. See Medicare Prescription
Drug Improvement and Modernization Act of 2003 (P.L. 108-173) § 931. My
jurisdiction, on the other hand, stems from 42 C.F.R. § 498.3(b)(17), and my review is
limited to CMS’s determination to revoke Petitioner’s Medicare enrollment.

Finally, I reject Petitioner’s argument that revocation of Petitioner’s supplier number
violates the “automatic stay” provisions of the bankruptcy statute, 11 U.S.C. § 362(a).
The bankruptcy statute explicitly provides that a bankruptcy petition does not stay the
exclusion of the debtor from participation in the Medicare program. 11 U.S.C.

§ 362(b)(28). Nor is there any merit to Petitioner’s claim that revocation of Petitioner’s
supplier number affords CMS some pecuniary advantage. Petitioner concedes that it
stopped its Medicare participation years ago; revocation of its supplier number simply
confirms that it may not bill for items it admits it has not supplied to any Medicare
beneficiary since July 2007.

Thus, I find that CMS properly revoked Petitioner’s supplier number, and I dismiss
Petitioner’s claims for reimbursement.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Daniel H. Kinzie IV, M.D.
(PTAN Nos. 8L13941, 8K8110, and 889272)

Petitioner,
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-10-182
Decision No. CR2112

Date: April 12, 2010

DECISION

l enter summary disposition in favor of the Centers for Medicare & Medicaid Services
(CMS) and sustain the determination of its fiscal intermediary, TrailBlazer Health
Enterprises, LLC (TrailBlazer), to revoke the Medicare billing privileges and Medicare
Provider Transaction Access Numbers (PTAN) of Petitioner, Daniel H. Kinzie IV, M.D.,
effective October 10, 2008.

I. Background

Petitioner is a physician, who is presently located in the Midland, Texas area. He
participated in the Medicare program, and his participation in that program was governed
by applicable laws and regulations, including regulations stating requirements for
establishing and maintaining Medicare billing privileges at 42 C.F.R. §§ 424.500 et seq.
In August and September, 2009, TrailBlazer sent notifications to Petitioner and his places
of employment advising him that his Medicare billing privileges and PTANs were being
revoked. Petitioner requested reconsideration of this determination. Reconsideration was
denied. Then, Petitioner requested a hearing, and the case was assigned to me for a
hearing and a decision.
CMS filed a pre-hearing brief, which included a motion for summary disposition along
with six proposed exhibits identified as CMS Ex. 1 — CMS Ex. 6. Petitioner filed a pre-
hearing brief, which included opposition to CMS’s motion, and a proposed exhibit that is
identified as P. Ex. 1. Subsequently, I directed the parties to answers some questions
concerning issues that I identified after reading their briefs. Order to Develop the
Record, dated March 5, 2010. CMS and Petitioner filed responses to those questions. I
receive into the record of this case CMS Ex. 1 — CMS Ex. 6 and P. Ex. I.

IL. Issue, findings of fact and conclusions of law
A. Issue

The issue in this case is whether the undisputed material facts authorize CMS and/or
TrailBlazer to revoke Petitioner’s Medicare billing privileges and his PTANs.

B. Findings of fact and conclusions of law
I make the following findings of fact and conclusions of law (Findings).

I. The undisputed material facts establish that Petitioner failed to
comply with Medicare enrollment requirements. Therefore, CMS
and/or TrailBlazer were authorized to revoke Petitioner’s Medicare
billing privileges and his PTANs.

TrailBlazer revoked Petitioner’s Medicare billing privileges and PTANs on the authority
of 42 C.F.R. §§ 424.535(a)(1) and 424.516(d)(1)(ii). The first cited regulation authorizes
CMS to revoke a provider’s billing privileges when that provider has failed to comply
with Medicare enrollment requirements. The second regulation states, as a Medicare
enrollment requirement, that a physician must report within 30 days of its occurrence any
adverse legal action to CMS, or to his or her Medicare contractor (TrailBlazer in this
case).

The gravamen of CMS’s case against Petitioner is that Petitioner failed to report the
revocation of his license to practice medicine in California. Thus, according to CMS,
Petitioner failed to comply with the Medicare enrollment requirement that is stated at 42
C.F.R. § 424.516(d)(1)(ii) and, consequently, revocation was authorized pursuant to 42
C.F.R. § 424.535(a)(1). Further, 42 C.F.R. § 424.535(g) required CMS to make the
revocation of Petitioner’s enrollment and billing privileges effective as of October 10,
2008, the date his State medical license was revoked.

I find these assertions to be supported by the undisputed material facts. It is undisputed
that, on November 30, 2007, Petitioner entered into a consent order and settlement
agreement (Mediated Agreed Order) with the Texas Medical Board to resolve a
disciplinary action that had been brought against his license to practice medicine in that
State. CMS Ex. | at 15-22. As part of the consent order, the Texas Medical Board found
that Petitioner had failed to meet standards of professional care in his treatment of 13
patients at a minor emergency clinic. The Board found multiple violations of standards
of care, including: a lack of appropriate evaluation of patients’ complaints and physical
symptoms; failures to plan treatment provided to patients and failures to provide
rationales for treatment; nontherapeutic prescription of medications, including giving
patients multiple prescriptions or prescribing multiple medications that had the same or
similar mechanisms of action; failures to maintain adequate medical records for
treatments; and failure to supervise staff adequately. /d. at 16. The terms of the consent
order included training requirements and the appointment of a Texas Medical Board
designated monitor to oversee Petitioner’s practice of medicine. Jd. at 17-18. There were
additional requirements as well, and the consent order contained prescribed penalties for
violation of any of the order’s requirements.

It is also undisputed that, on June 18, 2008, a formal accusation (complaint) was file
against Petitioner before the Medical Board of California. CMS Ex. | at 9-13. That
complaint recited the action of the Texas Medical Board and asserted that this action
constituted unprofessional conduct and/or grounds for disciplinary action against
Petitioner’s license to practice medicine in California. /d. at 12. The complaint soug
relief, which included revocation or suspension of Petitioner’s license to practice
medicine in California. Jd.

The undisputed facts also are that, on October 10, 2008, the Medical Board of California
entered a default decision and order (Default) against Petitioner. CMS Ex. | at 4-7. The
Default recited that the complaint had been served on Petitioner but that Petitioner had
failed to file a response to it. /d. at 5. The Medical Board of California therefore revoked
Petitioner’s license to practice medicine in that State. Jd. at 6-7.

Finally, it is undisputed that Petitioner failed to notify either CMS or TrailBlazer of his
California license revocation. The foregoing facts plainly give CMS and/or TrailBlazer
the authority to revoke Petitioner’s Medicare billing privileges and his PTANs.

In revoking Petitioner’s billing privileges and his PTANs, CMS relied on 42 C.F.R.

§ 424.516(d)(1)(ii), a regulation that became effective on January 1, 2009. This
regulation requires a provider to notify CMS of any adverse legal actions within 30 days
of their occurrence. CMS construes a license revocation — such as that which was taken
against Petitioner’s license by the State of California — as an adverse legal action. See 42
C.F.R. § 424.502. It asserts that Petitioner failed to comply with the regulation’s
requirements by not reporting his California license revocation. It argues further that
Petitioner’s failure to report the license revocation in accord with regulatory requirements
is a violation of another regulation, 42 C.F.R. § 424.535(a)(1), which requires a provider,
such as Petitioner, to comply with all Medicare participation requirements. CMS

contends that Petitioner’s failure to report his license revocation is a failure by him to
comply with Medicare participation requirements and, therefore, grounds for revocation
of his billing privileges and PTANs.

The process that took place against Petitioner in California was both substantively and
procedurally an adverse legal action. The proceeding had the potential of depriving
Petitioner of his license to practice medicine in California and, in fact, that was its
outcome. The proceeding was conducted pursuant to rules of procedure that were
designed to ensure that Petitioner received due process of law. There was a formal
complaint against Petitioner, which he had a right to answer with a formal pleading.
CMS Ex. | at 30. That complaint was served with a statement (Statement to Respondent)
that had all of the trappings of a summons in a court of law and which spelled out in
detail Petitioner’s rights. /d. at 23-24. The statement also warned Petitioner that action
might be taken against him if he failed to answer the complaint. Jd. A discovery request
was also served against Petitioner. Id. at 25-27.

Petitioner essentially argues that the effective date of his revocation is inequitable.
Section 424.535 was amended pursuant to notice and comment rulemaking and became
effective January 1, 2009. Section 424.535(g) provides:

Revocation becomes effective 30 days after CMS or the CMS contractor mails
notice of its determination to the provider or supplier except if the revocation is
based on. . . license suspension or revocation. When a revocation is based on...
license suspension or revocation, the revocation is effective with the date of...
license suspension or revocation... .

42 C.F.R. § 424.535(g) (2009) (emphasis added). The preamble of the final rule
publication addressed the very issue raised by Petitioner. The preamble states that the
changes to the regulations that can result in the revocation of enrollment and billing
privileges becoming effective on a date earlier than the notice (effective retroactively to
the date a State license is revoked or suspended) does not constitute a violation of due
process rights because the physician is afforded appeal rights. 73 Fed. Reg. 69,726,
69,865 (Nov. 19, 2008). The preamble explains the rationale is to ensure that payments
to providers who have had a state medical license suspended or revoked are immediately
ceased to prevent wrongful payments. Jd. at 69,865-66. The preamble states:

We believe that these changes will ensure that providers and suppliers are afforded
due process rights under 42 CFR Part 498, but also ensure that Medicare is not
making or continuing to make payments to providers and suppliers who are no
longer eligible to receive payments.
We continue to believe that revocations such as felony convictions and license
suspensions or revocations are determinations that do not lend themselves to a
corrective action plan and that the revocation should be effective with the date of
the felony conviction or license suspension or revocation action.

Id. at 69,866.

42 C.F.R. § 424.516 became effective several months after Petitioner’s California license
was revoked. Applying that regulation to the facts of this case raises a question as to
whether that regulation also is being applied retroactively in Petitioner’s case and, if so,
whether that application is contrary to the Secretary’s intent in adopting it. However, I
do not have to reach this issue to decide this case.

The reporting requirements of 42 C.F.R. § 424.516 revised the previous reporting
requirements stated at another regulation, 42 C.F.R. § 424.520(b) (2008). This regulation
contains somewhat more general requirements than those set forth at 42 C.F.R.

§ 424.516. In relevant part, it states:

[A] provider . . . must report to CMS any changes to the information
furnished on the enrollment application and furnish supporting
documentation within 90 calendar days of the change . . . Failure to do so
may result in the deactivation or revocation of the provider or supplier’s
Medicare billing privileges.

42 C.F.R. § 424.520(b) (2008) (emphasis added). Petitioner’s failure to report the
revocation of his California license was a failure to report a change in the information he
supplied in his enrollment application. Consequently, CMS was authorized to revoke his
billing privileges and his PTANs, even if 42 C.F.R. § 424.516 does not apply
retroactively.

I take notice that the Medicare application form for physicians, CMS 8551, requires the
physician applicant to provide CMS with information as to his or her medical licensure. I
note furthermore, that at pages 12-13 of the form, the physician must notify CMS of any
adverse action, and these actions may include loss or revocation of a professional license.
Thus, any failure by Petitioner to report a loss of his medical license, after he enrolled in
Medicare, was a failure by him to report a change in his status, in that it was a failure to
report a new adverse action against him.

Petitioner argues that he was under no obligation to report a change in his licensure as a
change to the information he furnished on his enrollment application. According to him,
all that he was required to report were changes in the basic provider information that he
supplied as part of his application. That assertion is incorrect. As I have discussed,
Petitioner was under a continuing obligation to report adverse actions, because reporting
adverse actions is a necessary element of the enrollment application.

Petitioner argues that he did not bother to reply to the California complaint because:

He was told it was the policy of California that while it always revoked or
suspended a license in . . . [the circumstances of an adverse action by
another State’s board], it then stayed such action and placed the physician
on probation with the same terms as that contained in the other state.
Petitioner was faced with an expensive trip to California which included the
necessity to obtain counsel, the fact that he had not practiced in California
since the early 60s, and the time away from his practice. Given these
matters, Petitioner chose not to attend the hearing.

Petitioner’s Brief at 8 (citing P. Ex. 1). However, assuming these contentions to be true,
they do not provide any defense to Petitioner’s failure to report the adverse legal action in
California, nor do they vitiate TrailBlazer’s and CMS’s authority to revoke Petitioner’s
Medicare billing privileges and his PTANs. The undisputed facts are that Petitioner’s
California medical license was revoked and that the revocation was an adverse action.
The fact that Petitioner may have elected, for personal reasons, not to dispute the
California license revocation action does not change its status, nor does it eliminate his
requirement to report it.

2. Petitioner has not created a dispute as to the material facts nor has he
established that he has been denied due process.

Petitioner asserts that there is a dispute as to the facts on which I rely to find that

CMS and TrailBlazer were authorized to revoke Petitioner’s Medicare billing privileges
and his PTANs. I find that Petitioner has asserted no facts that create a legitimate dispute
as to material facts.

Petitioner asserts that he disputes that the allegations of the Board of Medical Examiners
of California were based on the consent order entered against him in Texas. According to
Petitioner, the consent order in Texas made “no mention” of unprofessional conduct by
Petitioner. Petitioner’s Brief at 5. Petitioner cites to nothing other than the consent order
to support this assertion. Id.; see CMS Ex. 1 at 15. Petitioner’s assertion is simply
incorrect. The consent order made specific findings of fact that Petitioner violated
professional standards of care, and Petitioner has offered nothing to show that the consent
order does not accurately reflect what was found by the Texas Medical Board. CMS Ex.
lat 16.
Moreover, Petitioner’s assertion is irrelevant, even if it is true. The issue before me is not
what was found in Texas but whether Petitioner failed to report an adverse legal action.
The California action against Petitioner was adverse by any definition.

Petitioner’s remaining assertions of fact and arguments relate to the notices that were sent
to him by TrailBlazer and Petitioner’s actions in reaction to those notions. Essentially,
Petitioner claims that he was not properly notified of TrailBlazer’s determination, not
given a fair opportunity to challenge that determination, and not given the requisite
opportunity to file a corrective action plan (CAP) to address the findings of
noncompliance that are the basis for his billing privileges and PTAN revocations.

I find these assertions to be unsupported by the facts, including those relied on by
Petitioner. The undisputed facts of this case are that: Petitioner received notice of
TrailBlazer’s determination and was fully apprised of his opportunity to file a CAP as
well as a request for reconsideration of the initial determination. This is established not
only by the notices that were sent to Petitioner but by the fact that Petitioner acted on
those notices. He timely requested reconsideration of TrailBlazer’s determination, and he
purported to file a CAP. There was no denial of due process to Petitioner. He received
all of the rights that he was entitled to receive and, indeed, exercised those rights.

TrailBlazer sent several notices of its adverse determination. On August 28, 2009, it sent
notices to: Midland Community Healthcare Services; Premier Family Care I, Inc.; and
Midland Minor PA. CMS Ex. 2 at 1-6. Each of these notices was captioned with the
heading “Disciplinary Action taken Against Daniel H. Kinzie IV.” I infer that these
entities were entities that provided healthcare using PTANs held by Petitioner. Petitioner
has offered no facts to challenge that inference. Moreover, it is clear that they, or at least
some of them, were referred to Petitioner. He contends that he did not see any of these
initial notices until September 22, 2009, but he does not deny having seen them. P. Ex. 1
at 3-4.

On September 18, TrailBlazer sent revised notices to the aforesaid entities, and one of
these was addressed directly to Petitioner. CMS Ex. 3 at 1-6. Petitioner contends that
these revised notices were “not appropriately addressed” and that he “did not see such
letters until after which inappropriate time was given for response.” Petitioner’s Brief at
5. In his affidavit, Petitioner contends that he did not see the revised notices until January
2010. P. Ex. 1 at 4. But, in fact, Petitioner had already replied to the previously sent
notices, and those notices had apprised Petitioner of the basis for TrailBlazer’s
determination. On September 23, 2009, Petitioner filed both a request for reconsideration
of that determination and a CAP. CMS Ex. 4 at 1-2. Petitioner does not dispute that he
did so.

Petitioner contends that he was unaware of the underlying basis for TrailBlazer’s
determination. In fact, he plainly was aware of it and responded to it. In a letter that
Petitioner wrote to TrailBlazer on September 23, 2009, he states:

The letter indicates that the reason . . . [for the revocation determination]
was failure to report pursuant to 42 C.F.R. Section 424.516(d)(1)(ii).. This
section requires physicians to report any adverse legal action within 30
days.

CMS Ex. 4 at 2. Thus, Petitioner has offered no basis either in fact or in law for
me to find any material dispute as to TrailBlazer’s and CMS’s authority to act in
this case.

I note, moreover, that I have authority to raise new issues in a case so long as I
provide notice to the parties and an opportunity for them to be heard. 42 C.F.R.

§ 498.56. I gave CMS and Petitioner notice that I might decide that Petitioner was
obligated to report his California license revocation, pursuant to the requirements
of 42 C.F.R. § 424.520. Both parties briefed that issue. Consequently, Petitioner
was given fair notice of the possible basis for my decision.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Peoples Pharmacy, Inc.
(Supplier No. 5108320001),

Petitioner,
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-08-509
Decision No. CR2111

Date: April 12, 2010

DECISION
l affirm the revocation of Petitioner, Peoples Pharmacy, Inc.’s, supplier number.
I. Background

Petitioner, a community pharmacy located in Miami, Florida (licensed by the Florida
Department of Health Board of Pharmacy and authorized to dispense medications by the
Board of Pharmacy), is an oxygen supplier, pharmacy, and medical supply company with
prosthetic/orthotic personnel and a registered pharmacist. CMS Exhibit (Ex.) 9 at 8.
Petitioner also is a supplier of items that include: commodes; diabetic equipment and
supplies; diabetic footwear; drugs and pharmaceuticals; durable medical equipment;
manual and electric hospital beds with accessories; nebulizers; custom-fabricated and
non-custom orthotics; oxygen; patient lifts and seat lift mechanisms; power mobility
devices, including power operated vehicles (or scooters) and power wheelchairs;
prosthetics; respiratory equipment, including bi-level positive airway pressure and
continuous positive airway pressure; surgical dressings; urinals and bedpans; walkers;
canes and crutches; and manual wheelchairs. /d. at 9.
By letter, dated October 31, 2007, the National Supplier Clearinghouse (NSC)’ notified
Petitioner that CMS had initiated a demonstration project, entitled “Medicare Provider
Enrollment Demonstration for Suppliers of Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) in High Risk Areas.” NSC advised Petitioner that it
was required to re-enroll with NSC within 30 days. CMS Ex. 8.

By letter, dated February 14, 2008, NSC notified Petitioner that its supplier number was
revoked 15 days from the postmark on the letter. The letter stated that Petitioner was not
in compliance with supplier standard eight, specifically,

Supplier standard number eight states that a supplier “permits CMS, or its agents
to conduct on-site inspections to ascertain supplier compliance with the
requirements of this section. The supplier location must be accessible during
reasonable business hours to beneficiaries and to CMS, and must maintain a
visible sign and posted hours of operation.” Recently a representative of the
SACU? attempted to conduct a visit of your facility; however, the visit was
unsuccessful because no one was available to conduct the inspection on multiple
attempts. Because we could not complete an inspection of your business, we could
not verify your compliance with the standards. Thus, you are considered to be in
violation of all 21 standards.

CMS Ex. 5 at 1 (emphasis in original). The letter informed Petitioner it could request
reconsideration or complete a corrective action plan (CAP). Petitioner requested
reconsideration. CMS Exs. 3, 5.

By letter, dated April 18, 2008, following a hearing conducted on April 4, 2008, a hearing
officer for the NSC rendered a decision unfavorable to Petitioner. She found that because
“the pharmacist was not available during the site inspection attempts, and the prescription
department of People’s Pharmacy was unavailable to Medicare beneficiaries, the facility
was non-compliant.” CMS Ex. 3 at 2-3. The decision noted that “[i]f during on-site
review a facility is found closed this becomes grounds for revocation because the facility
was found not in operation. A supplier must be found ‘operational’ upon the site
inspection in order to verify compliance with the Medicare Enrollment requirements.”

'NSC is the entity authorized by CMS to issue, revoke, and reinstate DMEPOS supplier
numbers. MediSource Corp., DAB No. 2011 at 1 n.1 (2006).

> SACU is an acronym for the Supplier Audit and Compliance Unit of the NSC.
Id. at 2. The letter informed Petitioner that it could appeal the hearing officer’s decision
to an administrative law judge (ALJ) of the Departmental Appeals Board.* Jd. at 3.

By letter, dated May 30, 2008, Petitioner requested a hearing. The case was assigned to
me for hearing and decision on June 18, 2008. I held a pre-hearing conference on July
17, 2008. During the conference, the parties agreed that the only issues left to be
resolved were legal issues and that the case could be decided based on written
submissions without the need for an in-person hearing. I set a schedule for the parties to
brief the case. I also informed Petitioner that it had the option to re-apply for its
Medicare supplier number at any time during the hearing process.

CMS filed its brief (CMS Br.) on August 22, 2008, accompanied by CMS Exs. 1-13.
Petitioner filed its brief on September 19, 2008, accompanied by Petitioner’s Exhibits (P.
Exs.) 1-10. Neither party filed a reply. In the absence of objection, I admit CMS Exs. 1-
13 and P. Exs. 1-10 into evidence.

II. Applicable Law

Under section 1834(j)(1)(A) of the Act, a supplier may not be paid for items provided to
an eligible beneficiary unless the supplier has a supplier number issued by the Secretary
of the Department of Health and Human Services (Secretary). A supplier may not obtain
a supplier number unless the supplier meets the standards prescribed by the Secretary.
Act, section 1834(j)(1)(B). A prospective DMEPOS supplier must meet all of the
standards specified at 42 C.F.R. § 424.57(b) and (c) to be issued supplier billing
privileges. Once billing privileges are issued, CMS or NSC may revoke a supplier’s
billing privileges for failure to meet all of the standards specified. 42 C.F.R. § 424.57(d);
42 C.F.R. § 405.874. CMS or NSC must send notice by certified mail of the revocation,
and the revocation becomes effective 15 days after the entity is sent notice of the
revocation. 42 C.F.R. § 405.874(b).* Supplier standard eight, the standard at issue in
this case, states:

> During the NSC hearing, Petitioner argued that the pharmacist’s not being at the
pharmacy during business hours was the fault of the company with which Petitioner
contracted to provide pharmacists and that the pharmacist’s failure to be there was thus
beyond Petitioner’s control. CMS Ex. 3. Petitioner did not make this argument in the
briefing before me. However, had Petitioner made the argument, I would have found the
argument without merit. It was Petitioner who had the supplier agreement with CMS,
and it is Petitioner’s responsibility to make sure that it is in compliance with all supplier
requirements.

+42 C.F.R. § 405.874 was amended effective August 26, 2008. Under the amended
regulation, the effective date of revocation is 30 days after CMS, or the CMS contractor,
mails the notice of its determination to a supplier. 42 C.F.R. § 405.874(b)(2).
(c) Application certification standards. The supplier must meet and must certify
in its application for billing privileges that it meets and will continue to meet the
following standards. The supplier: . . . (8) Permits CMS, or its agents to conduct
on-site inspections to ascertain supplier compliance with the requirements of this
section. The supplier location must be accessible during reasonable business
hours to beneficiaries and to CMS, and must maintain a visible sign and posted
hours of operation.

42 C.F.R. § 424.57(c)(8). CMS has the right to conduct on-site inspections to confirm
compliance with supplier standards. 42 C.F.R. § 424.535(a) states:

(a) Reasons for revocation. CMS may revoke a currently enrolled provider or
supplier’s Medicare billing privileges . . . for the following reasons: . . . (5) On site
review. CMS determines upon on-site review, that the provider or supplier is no
longer operational to furnish Medicare covered items or services, or is not meeting
Medicare enrollment requirements under statute or regulation to supervise
treatment of, or to provide Medicare covered items or services for, Medicare
patients. Upon on-site review, CMS determines that —. . . (ii) A Medicare Part B
supplier is no longer operational to furnish Medicare covered items or services, or
the supplier has failed to satisfy any or all of the Medicare enrollment
requirements, or has failed to furnish Medicare covered items or services as
required by the statute or regulations.

A supplier is “operational” when “the . . . supplier has a qualified physical practice
location, is open to the public for the purpose of providing health care related services, is
prepared to submit valid Medicare claims, and is properly staffed, equipped, and stocked
. .. to furnish these items or services.” 42 C.F.R. § 424.502.

A supplier has the right to request reconsideration of a determination to deny or revoke
its billing privileges (or to submit a CAP for a denied or revoked billing number (42
C.F.R. § 405.874(e))). 42 C.F.R. § 405.874(c)(2). If the hearing request is timely, a fair
hearing officer not involved in the original determination to revoke the billing number
will schedule a hearing in which both the entity and the carrier may offer evidence. A
supplier has the right to appeal the reconsidered determination to an ALJ.

Once CMS has established a prima facie case that a supplier is not in substantial
compliance with relevant statutory or regulatory provisions, the supplier must prove
substantial compliance by the preponderance of the evidence. MediSource Corp., DAB
No. 2011 at 2-3.
Ill. Findings of Fact and Conclusions of Law

1. The NSC inspector attempted to complete an inspection of Petitioner on
January 14, 2008 at 2:30 p.m., and on January 16, 2008 at 9:40 a.m. CMS Ex. 4 at
1, 6; P. Br. at 2-3.

2. Petitioner was out of compliance with supplier standard eight, because the site
inspector could not determine whether Petitioner was in or out of compliance with
supplier standards, as the pharmacist was not on the premises when the site
inspector arrived, and the inspector could not complete an inspection. Jd.

3. Petitioner had to be in compliance with all supplier standards to retain
Medicare billing privileges. 42 C.F.R. § 424.57(b) and (c).

4. CMS had a basis upon which to revoke Petitioner’s Medicare billing privileges.
42 CFR. §§ 424.57(d); 405.874.

IV. Analysis

It is undisputed that Petitioner timely filed its re-enrollment application. A site inspection
to verify Petitioner’s compliance with supplier standards is part of the enrollment
process. It is undisputed that Petitioner’s posted hours of operation were from 9:00 a.m.
to 5:00 p.m. Monday through Friday. CMS Ex. 4 at 2; CMS Ex. 12; P. Br. at 9. It is also
undisputed that on January 14, 2008 at 2:30 p.m., and on January 16, 2008 at 9:40 a.m.,
an NSC site inspector arrived at Petitioner’s pharmacy to inspect the facility. CMS Ex. 4
at 1, 6; P. Br. at 2-3. Petitioner does not dispute that on both occasions the pharmacist
was not present, and the inspector left without inspecting the facility. Id. The site
inspector found during the first visit that the drug door was locked and a “pharmacy
closed sign [was] posted on [the] interior door.” An employee stated to the investigator
that “it would be at least 2 hr until pharmacist returned, and probably 1 full hr.” Further,
the employee “did not want to do inspection himself, preferred to wait until a later date.”
CMS Ex. 4 at 6. On the second visit, the inspector found “[p]harmacist was not here
again. Lady states he doesn’t come in usually until 10 am (pharmacy hours are 9-5). I
reminded the employees this was my 2" visit, if not completed, the Medicare # would be
revoked. Supplier stated the pharmacist was always late & comes/goes as he pleases. He
ad no way to contact him (not an employee, contracted pharmacist), so he had no idea
when he would show up. I did not wait.” Jd.

In a sworn affidavit (CMS Ex. 13), Petitioner’s Administrator does not materially dispute
the site inspector’s comments, stating that during the first site visit the pharmacist was at
lunch, and, during the second site visit, a pharmacist had not been dispatched from the
staffing company to the facility as of 9:40 a.m. CMS Ex. 13 at 1. Petitioner’s
Administrator also stated in his affidavit that “[b]y law I am prohibited from opening the
prescription department to allow any non-pharmacist in the area without the pharmacist
being on-site.” Jd. Petitioner’s Administrator states that after the second site visit, he

fired the staffing company and hired another company to provide a full-time pharmacist
until Petitioner itself was able to hire a full-time pharmacist and pharmacy manager. As
of February 12, 2008, Petitioner passed an on-site Board of Pharmacy inspection. Jd.
Petitioner’s Administrator also stated that Petitioner’s corporate culture is that regardless
of whether a pharmacist is late for an emergency beyond the Administrator’s control that
the pharmacy is open 40 hours a week, five days a week. Id. at 2.

Petitioner asserts that on the dates in question it was “operational” as defined by 42
C.F.R. § 424.502, and that the site inspector unilaterally decided not to conduct a site
visit even though neither state nor federal law requires a pharmacist to be on-site for a
survey to be performed. P. Br. at 2.

Petitioner asserts that federal law is silent on the on-site inspection issue, other than for
the language at supplier standard eight. Petitioner asserts, however, that the Florida
Administrative Code at 64B16-28.101, “Prescription Area Accessible to Inspection,”
states:

(1) The prescription department compounding room or any other place where
prescriptions are . . . filled. . . dispensed . . . shall be so situated and located
that authorized agents and employees of the Department or other persons
authorized by law to enter and inspect, can observe and survey the confines of
said department, room or area and can enter into said department . . . for the
purposes of inspection at a reasonable hour or when the practice of the
profession of pharmacy is being carried on . . . without having been previously
detained or announced.”

P. Ex. 3; P. Br. 6. Petitioner asserts that, pursuant to Florida law, the NSC investigator
thus had the authority to perform the inspection regarding the drugs and pharmaceuticals
and the many other items and services provided by Petitioner not required to be dispensed
by a registered pharmacist and provided outside the confines of the prescription
department. Petitioner echoes the Administrator’s comment that on February 12, 2008, a
state inspection for compliance with Board of Pharmacy regulations passed Petitioner
without a single deficiency. P. Ex. 4.

That Petitioner passed a Board of Pharmacy inspection after January 16, 2008 is
irrelevant with regard to whether, on the two visits in question, it was in compliance with
supplier standards. Compliance at a later date does not prove compliance with
participation requirements at the time of the attempted inspections. Moreover,
Petitioner’s argument that the inspector could have performed an inspection in the
absence of the pharmacist either at a reasonable hour or when the profession of pharmacy
is being carried on (P. Br. at 6) is curious in light of the fact that its own Administrator
submitted a sworn affidavit that he was prohibited from opening the prescription
department to allow a non-pharmacist in the area without the pharmacist being on site.
Moreover, the pharmacy employees the site inspector encountered were apparently not
willing to have an inspection done without the pharmacist present. CMS Ex. 4 at 6.
While the Florida law cited by Petitioner would allow an inspection, it does not compel
the federal site inspector to conduct an inspection under these circumstances where, in the
absence of the pharmacist, the inspection cannot be completed. Petitioner also asserts
that although Florida law requires Petitioner to be open 40 hours and 5 days a week, it
does not specify what those hours might be. See P. Br. at 5-6. However, Petitioner chose
to post its business hours as from 9:00 a.m. to 5:00 p.m. Monday through Friday, and it
was required to be open those hours. If not, a sign should have been placed letting people
know when the pharmacist was out and when he would return. Petitioner did not do so.

Petitioner also asserts that NSC’s action is in violation of the Fifth and Fourteenth
Amendments to the United States Constitution. P. Br. at 7-8. Petitioner asserts that in an
unnamed case where a pharmacist was not on-site during an NSC inspection attempt the
NSC did not revoke the supplier number but allowed the provider to provide
documentation explaining the deficiency. P. Ex. 5. Even if I had the authority to decide
Constitutional issues (which I do not), the facts of the case cited by Petitioner are not
analogous to the case here. That case involves a different supplier standard, standard one
(42 C.F.R. § 424.57(c)(1)), which references whether a supplier operates its business and
urnishes Medicare-covered items in compliance with applicable federal and state
licensure and regulatory requirements. Specifically, that case concerned whether the
company involved had a current Florida Medical Oxygen Retailer license, or specific
proof that oxygen was only being dispensed as a drug by the pharmacist. Id.

Petitioner also asserts that the NSC site investigation form, CMS Ex. 4, refers only to
DME, and the only question on the form requiring the NSC inspector to do something is
or the inspector to view the prescription department area and that has nothing to do with
drugs and pharmaceuticals. Petitioner asserts the measure of the pharmacy’s compliance
should be a Florida inspection form, not the NSC site investigation form. P. Br. at 8. As
Petitioner’s employees did not want the site inspector to inspect in the absence of the
pharmacist, this is a moot point. However, as sworn to by Petitioner’s Administrator, the
site inspector was precluded from even viewing the prescription area in the absence of the
pharmacist.

Finally, Petitioner asserts that it was “operational” in that it had a qualified physical
practice location at 907 SW 87th Avenue, Miami, was open to the public from Monday
through Friday, 9:00 a.m. to 5:00 p.m., submitted valid Medicare claims, is now properly
staffed and had been staffed in January 2008 to provide pharmacists 40 hours a week and
five days a week, and was properly equipped and stocked. P. Br. at 9. However, during
the two site visits, Petitioner was not properly staffed, and the pharmacy was not fully
open for business as anything requiring dispensing by a pharmacist could not be
dispensed. Ifthe pharmacy was not open during lunch without posted explanation, or
opened at a later time than the hours of operation posted on the door without posted
explanation, Petitioner was not operational on those days.

V. Conclusion

Based on my review of all the evidence and arguments advanced by the parties, and for
the reasons discussed above, | affirm the revocation of Petitioner’s supplier number.

/s/
Alfonso J. Montafio
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

The Lodge at Maplecreek
(CCN: 23-5458),

Petitioner,
Vv.
Centers for Medicare & Medicaid Services.
Docket No. C-09-516
Decision No. CR2110

Date: April 12, 2010

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
impose a civil money penalty of $5,250 against Petitioner, The Lodge at Maplecreek, to
remedy Petitioner’s noncompliance with Medicare participation requirements on April 6,
2009. Additionally, I incorporate into this decision my ruling of December 10, 2009, in
which I granted partial summary disposition in favor of CMS. In that ruling, I authorized
CMS to impose: civil money penalties of $200 per day against Petitioner for each day of
a period that began on April 7, 2009 and ran through June 15, 2009; and a denial of
payment for new admissions for each day of a period, which began on May 3, 2009 and
ran through June 15, 2009.

I. Background

Petitioner is a skilled nursing facility in Grand Rapids, Michigan. It participates in the
Medicare program. Its participation in Medicare is governed by sections 1819 and 1866
of the Social Security Act, and by implementing regulations at 42 C.F.R. Parts 483 and
488.
Petitioner was surveyed for Medicare compliance on April 7, 2009 (April Survey) and on
May 29, 2009 (May Survey). The surveyors found that Petitioner was deficient in several
respects. The findings of noncompliance included a finding at the April Survey that
Petitioner manifested an immediate jeopardy level failure to comply with the
requirements of 42 C.F.R. § 483.13(c). CMS concurred with the surveyors’ findings and
determined to impose remedies against Petitioner consisting of those that I describe in the
opening paragraph of this decision.

Petitioner requested a hearing to challenge CMS’s determinations of noncompliance and
to impose remedies and the case was assigned to me for a hearing and a decision. CMS
filed a pre-hearing exchange that included a brief and proposed exhibits. With its
exchange, CMS filed a motion for summary disposition as to all alleged noncompliance.
Petitioner then opposed the motion and filed its own pre-hearing exchange.

On December 10, 2009, I issued a ruling granting in part and denying in part CMS’s
motion for summary disposition. I denied CMS’s motion insofar as it requested summary
disposition for the finding of immediate jeopardy level noncompliance and the $5,250
civil money penalty. I granted the motion insofar as it requested summary disposition for
non-immediate jeopardy level deficiency findings that were made at the April and May
surveys. I found that Petitioner had not opposed CMS’s motion with respect to these
deficiency findings. I also granted CMS’s motion as to the remedies that were imposed
to address the non-immediate jeopardy level deficiency findings.

I then scheduled an in-person hearing to address the issue of the immediate jeopardy level
deficiency finding. However, the parties agreed that the case could be heard and decided
based on their written exchanges. Each party submitted a final brief.
CMS filed a total of 55 proposed exhibits that it identified as CMS Ex. 1 - CMS Ex. 55.
Petitioner filed a total of 17 proposed exhibits that it identified as P. Ex. 1 — P. Ex. 17. I
receive all of the parties’ proposed exhibits into evidence.
II. Issues, findings of fact and conclusions of law

A. Issues

The issues in this case are whether:

1. Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.13(c);

2. CMS’s determination of immediate jeopardy level noncompliance is
clearly erroneous; and
3. CMS’s determination to impose a civil money penalty of $5,250 against
Petitioner is reasonable.

B. Findings of fact and conclusions of law
I make the following findings of fact and conclusions of law.
1. Tincorporate my ruling of December 10, 2009 into this decision.

l incorporate into this decision my ruling of December 10, 2009 granting in part CMS’s
motion for summary disposition. CMS is thus authorized to impose civil money penalties
of $200 per day against Petitioner for each day of a period that began on April 7, 2009
and continued through June 15, 2009. Additionally, CMS is authorized to impose against
Petitioner a denial of payment for new Medicare admissions for each day of the period
that began on May 3, 2009 and ran through June 15, 2009.

2. Petitioner failed to comply substantially with the requirements of 42
CF.R. § 483.13(c).

The regulation that is at issue here requires a skilled nursing facility to implement
policies and procedures to prohibit neglect, mistreatment, and abuse of residents.
“Neglect” is defined at 42 C.F.R. § 488.301 to consist of a failure by a facility to provide
its residents with goods and services that are necessary to avoid physical harm, mental
anguish, or mental illness. Failure by a facility to protect its residents from another
resident’s aggressive or sexually inappropriate behavior may constitute failure to protect
residents against neglect. Martha & Mary Lutheran Servs., DAB No. 2147 (2008); Barn
Hill Care Ctr., DAB No. 1848 (2002).

CMS’s allegations about Petitioner’s alleged noncompliance all relate to a resident who is
identified in the April Survey report as Resident # 30. At the time of the April Survey,
the resident was an 82-year-old woman who was afflicted with medical conditions that
included Alzheimer’s disease. CMS Ex. 22 at 1, 6, 11. Her dementia caused her to
experience behavioral disturbances. The resident suffered from paranoid delusions. Jd.
at 11, 32.

At times, Resident # 30’s dementia caused her to become both physically and sexually
aggressive towards other residents of Petitioner’s facility and staff. There were occasions
when the resident acted out violently.

Some of the resident’s inappropriate behavior was linked to attempts by her treating
physician to reduce, or eliminate, the resident’s consumption of antipsychotic medication.
The resident was prescribed the antipsychotic Lexapro in January 2007. CMS Ex. 22 at
11. In September of that year the resident’s treating physician reduced the dosage, and,

in December, administration of the medication was discontinued. Jd. However, in
January 2008, the resident began manifesting increased inappropriate sexual comments
and gestures, and so, her physician again prescribed Lexapro. Jd. Another attempt to
reduce the dosage of Lexapro began on February 1, 2008. However, in June 2008, the
resident again exhibited episodes of inappropriate sexual behavior, this time directed
towards her roommate. /d. at 31. Resident # 30 was moved to a different room in
Petitioner’s facility, and she underwent a psychiatric evaluation. Jd. at 33-34.

In September 2008, it was again recommended that the resident’s use of Lexapro be
discontinued. CMS Ex. 22 at 11. The medication was discontinued on September 18,
2008. Jd. at 11, 28.

However, the resident soon began exhibiting aggressive behavior. On November 12,
2008, Resident # 30, evidently suffering from a paranoid delusion, screamed at a member
of Petitioner’s staff. CMS Ex. 22 at 57. The next day the resident picked up a chair and
threatened to do bodily harm to another resident. Jd. at 16, 57. On November 15, 2008,
again evidently suffering from a paranoid delusion, Resident # 30 attacked a staff
member, scratching and pushing that individual. /d. at 57. Two days later, the resident,
suffering from paranoia, yelled at a staff member. Jd. at 58. The resident’s verbally
abusive and delusional behavior continued. On November 20, 2008, Resident # 30 struck
another resident’s family member. /d. at 24. The resident again began taking Lexapro on
November 20, 2008. /d. at 24, 25.

But, on the following day, November 21, 2008, Resident # 30 committed an act of sexual
aggression directed against another Resident, Resident #31. Resident # 30 was
discovered by Petitioner’s staff standing nude at the end of Resident # 31’s bed. CMS
Ex. 22 at 6. Resident # 31’s blanket had been removed, and her pants had been pulled
down. Id. at 6, 11. Resident # 31 complained that Resident # 30 had entered Resident #
31’s room, undressed, and climbed on top of Resident # 31. Resident # 31 complained
that Resident # 30 kissed her and touched her over her incontinence brief and breast area.
Id. Resident # 31 complained to Petitioner’s social worker that she had suffered
psychological distress as a result of the event. /d. at 11, 12.

Seroquel, another antipsychotic medication, was ordered on November 23, 2008, to
address Resident # 30’s paranoia, delusions, and inappropriate and aggressive sexual
behavior. See CMS Ex. 22 at 11. Notwithstanding, the resident continued to manifest
behavior that included the following incidents:

e On January 7, 2009, she kissed another resident;

e On January 9, 2009, she was found in another resident’s room;

¢ On January 23, 2009, she was found rubbing another resident’s stomach;
e On January 28, 2009, she was observed holding on to another resident’s arm;

¢ On January 29, 2009, she approached a male staff member in a sexually
inappropriate way;

e On January 31, 2009, she wandered into another resident’s room;
e On February 5, 2009, she struck a nurse three times;
e¢ On February 11, 2009, she threw objects at a nurse;

e On February 15, 2009, she touched another resident and became combative with a
nurse;

¢ On February 16, 2009, she made inappropriate comments of a sexual nature to a
staff member;

¢ On February 19, 2009, she had a violent outburst;

¢ On February 20, 2009, she attempted to choke a staff member;

¢ On February 23, 2009, she was combative towards Petitioner’s staff; and
e On March 11, 2009, she wandered into another resident’s room.

CMS Ex. 22 at 35, 41-44, 46. The dosage of Resident # 30’s Lexapro was increased on
March 13, 2009. However, the resident remained combative. On March 30, 2009, the
resident struck another resident, Resident # 34. Id. at 59.

CMS argues that the interventions implemented by Petitioner’s staff — principally
consisting of psychiatric consultations and adjustments of Resident # 30’s antipsychotic
medication — provided inadequate protection for the other residents of Petitioner’s
facility. It asserts that the resident’s combative and sexually aggressive behavior,
beginning with the series of incidents in November 2008 that I describe above, should
have motivated Petitioner’s staff to provide continuous supervision of Resident # 30 to
ensure the resident’s safety and to protect other residents from her.

I find CMS’s arguments to be persuasive. The behavior manifested by Resident # 30
beginning in November 2008 was not only inappropriate, but it posed both physical and
psychological threats to other residents in Petitioner’s facility. It should have been
obvious to Petitioner’s staff beginning with the November incidents that Resident # 30’s
dementia caused her to be capable of causing harm to others. Moreover, her behavior

was unpredictable, ranging from violent to sexually aggressive. The fact that this
behavior continued after November 2008, despite increases or resumed doses of
antipsychotic medication, should have put Petitioner’s staff on notice that much closer
supervision of the resident was necessary as a protective measure.

I have considered Petitioner’s several defenses, and I find them to be unpersuasive. First,
Petitioner argues that many of the incidents cited by CMS were actually benign and
cannot be considered fairly to be examples of aggressive or inappropriate sexual behavior
by Resident # 30. It asserts that much of the resident’s behavior actually was “normal
behavior” manifested by a demented resident. Petitioner’s Final Brief at 4.

I agree with Petitioner that some of the behavior manifested by Resident # 30 appears to
be rather benign when viewed outside of the pattern of behavior that she demonstrated
during the period from November 2008 until the April Survey. Holding on to another
resident’s arm or wandering into other residents’ rooms, for example, may at least
arguably be relatively benign episodes and might well be viewed as essentially harmless
when exhibited by an individual who has shown no propensity to commit violent or
sexually aggressive acts. But, that was not the case with Resident # 30. In her case, these
relatively benign episodes are embedded in a series of episodes that are far from benign.

In the case of Resident # 30, the only reasonable interpretation that the staff could have
made from her behavior, including the several instances of relatively benign but
inappropriate acts, is that this was a dangerously unstable individual who could engage in
injurious conduct at any moment. The evidence offered by CMS, and not rebutted by
Petitioner, shows that the resident frequently was combative and was at times physically
violent. The resident continued to perpetrate violence throughout the period between
November 2008 and the April Survey. Her violent outbursts were not directed solely
towards members of Petitioner’s staff. The evidence shows that, as late as March 30,
2009, Resident # 30 struck another resident. CMS Ex. 22 at 59.

Petitioner also attempts to characterize CMS’s case as essentially being an argument that
Petitioner’s staff should have watched Resident # 30 more closely on those occasions
when the administration of antipsychotic medications to the resident was reduced or
eliminated. Petitioner’s Final Brief at 5-6. Petitioner then argues that, in fact, the
behaviors exhibited by the resident on those occasions were “benign verbally
inappropriate comments and gestures, none of which would have suggested that
Petitioner should monitor for sexual assault.” Jd. at 6.

However, and contrary to Petitioner’s assertions, the behavior manifested by Resident #
30 on those occasions when her antipsychotic medication dosage was reduced or
eliminated was not limited to benign verbally inappropriate comments and gestures.
Resident # 30 perpetrated a sexual assault against Resident # 31 in November 2008,

immediately after one of the occasions when elimination of antipsychotic medication was
attempted. On other occasions, the resident became physically combative, paranoid, and
verbally abusive.

Furthermore, Petitioner mischaracterizes CMS’s argument. The issue here is not whether
Petitioner’s staff should have supervised Resident # 30 more closely on those occasions
when the resident’s antipsychotic medication was administered in reduced doses, or
eliminated altogether. Rather, it is CMS’s contention, amply supported by the evidence,
that Resident # 30 was so untrustworthy and her behavior so mercurial that she needed to
be watched closely throughout her stay at Petitioner’s facility, beginning with the
incidents that occurred in November 2008. The evidence establishes numerous occasions
of volatile behavior by Resident # 30, some of which included violence. These incidents
were only in some respects linked to efforts to reduce, or eliminate, the resident’s use of
antipsychotic medications. The incidents that occurred in January and February, 2009,

‘or example, appear to have nothing to do with an attempted dosage reduction during that
period. The evidence shows, and I find, that this resident was capable of violence even
when she was taking increased doses of antipsychotics.

Petitioner additionally characterizes CMS’s argument as being that Petitioner should have
done more to protect its residents from possible sexually aggressive behavior by Resident
# 30. Petitioner’s Final Brief at 11. That is also a mischaracterization of CMS’s case
against Petitioner and of the problems that Resident # 30 posed for other residents. It is
true that Resident # 30 had on occasion manifested sexually aggressive behavior towards
other residents. But, Resident # 30 also engaged in violent acts that were unrelated to
sexual conduct. Petitioner had a duty to protect its residents not only against possibly
sexually abusive behavior by Resident # 30, but also against Resident # 30’s violent
outbursts.

Petitioner also argues that the violent and sexually aggressive behavior that Resident # 30
manifested in November 2008 was likely due to the fact that the resident was suffering
from a urinary tract infection at the time and taking an antibiotic. Petitioner’s Final Brief
at 8. Petitioner has not offered persuasive evidence showing why, or how, a urinary tract
infection or the administration of antibiotics would have made the resident become
violent and sexually aggressive. But, in fact, the precise cause of the resident’s behavior
is not relevant. What is relevant is that the resident became violent and sexually
aggressive. That triggered an obligation by Petitioner to protect other residents from
Resident # 30 and also to protect Resident # 30 from her own violent behavior.

Petitioner argues that it responded appropriately to the November incidents by: giving

Resident # 30 psychiatric evaluations on November 20 and November 22, 2008; placing
the resident on Seroquel in addition to her other antipsychotic medication, Lexapro; and
moving the resident to a secure dementia unit where the resident was placed in a private

room. Petitioner’s Final Brief at 9. The problem, however, is that these measures — as
appropriate as they may have been — were quickly proven by subsequent events to be
inadequate. Resident # 30’s violent and inappropriate behavior continued after
November 2008. She perpetrated, as I have discussed, a string of violent acts.

Petitioner argues also that the aggressive acts manifested by Resident # 30 after
November 2008 were directed at Petitioner’s staff and not at other residents. Petitioner’s
Final Brief at 10. From this it argues that, while staff may have been victims of the
resident’s violent outbursts, other residents were not in danger. | find this argument to be
unpersuasive. Resident # 30’s violence may have been directed mainly against
Petitioner’s staff. But, there was more than one instance in which the resident perpetrated
violence against other residents, or a family member of another resident. The overall
pattern of the resident’s violent behavior leads me to infer that the resident was capable
of violence and not just violence directed at a specific and narrow class of individuals.

Finally, Petitioner argues that, on March 30, 2009, when Resident # 30 struck Resident #
34, Resident # 30 was being supervised directly by a staff member. Petitioner’s Final
Brief at 11. The inference Petitioner evidently would have me draw from this assertion is
that even direct supervision of Resident # 30 would have been inadequate to protect other
residents.

1 am not persuaded by this argument. There may be instances where even direct and one-
on-one supervision of a resident by staff will not be sufficient to protect other residents
from that resident’s violent acts. And, it may be that there are times when the staff is
doing all that one could reasonably expect them to do, and violence occurs
notwithstanding. But, the fact is that, in this case, Petitioner’s staff did not supply
Resident # 30 with continuous supervision. Many of the incidents that I have
documented occurred at times when the resident was not being closely supervised by
Petitioner’s staff. Thus, one cannot say that more supervision would have been futile.

3. CMS’s determination of immediate jeopardy level noncompliance is
not clearly erroneous.

“Immediate jeopardy” is noncompliance that is so egregious as to cause, or to be likely to
cause, serious injury, harm, impairment, or death to one or more residents of a skilled
nursing facility. 42 C.F.R. § 488.301. The evidence that CMS offered in this case
strongly supports its determination of immediate jeopardy level noncompliance.
Petitioner has offered no affirmative evidence to show that CMS’s determination is
clearly erroneous.
Resident # 30 could at times be dangerously violent. She struck other individuals, threw
objects at them, threatened to strike a resident with a chair, and, on one occasion,
attempted to choke a staff member. She suffered from paranoid delusions that clearly
provoked her into becoming enraged at times. Her sexual assault caused one resident to
assert that she had experienced psychological trauma as a result. Some of the individuals
who were the object of Resident # 30’s rage and outbursts were individuals who were
themselves frail and extremely vulnerable. In a situation such as that which prevailed at
Petitioner’s facility, the likelihood of — at a minimum - serious harm resulting from
Resident # 30’s conduct was very high.

That likelihood was not diminished by the way in which Petitioner dealt with Resident #
30. As I discuss above, at Finding 2, the failure to supervise Resident # 30 created
opportunities for the resident to do violence to others.

4. CMS’s civil money penalty determination is reasonable.

I find that a civil money penalty of $5,250 for one day of immediate jeopardy is a
reasonable remedy. It is justified by the seriousness of Petitioner’s noncompliance.
Moreover, it constitutes just a tiny fraction of the penalty amount that CMS could have
imposed, given the duration of Petitioner’s noncompliance.

Immediate jeopardy level civil money penalties, such as the one under consideration here,
must fall within a range of $3,050 to $10,000 per day. 42 C.F.R. § 488.438(a)(1)(i). The
criteria for deciding where within that range a penalty should fall are established by 42
C.F.R. §§ 488.438(f)(1) — (4) and 488.404 (incorporated by reference into 42 C.F.R.

§ 488.438(f)(3)). They may include the seriousness of a facility’s noncompliance, its
culpability, its compliance history, and its financial condition.

Here, the civil money penalty that CMS determined to impose falls more or less at the
middle of the range of penalties that may be imposed for immediate jeopardy level
noncompliance. It is, however, a very small penalty when measured against the duration
of Petitioner’s noncompliance. The persuasive evidence offered by CMS establishes that
Petitioner’s immediate jeopardy level noncompliance began in November 2008 when
Resident # 30 engaged in a series of violent outbursts and sexually assaulted another
resident, Resident # 31. CMS could have — but elected not to — imposed a civil money
penalty of at least $3,050 per day for each day of the period beginning in November 2008
and continuing through the April Survey. That penalty would have dwarfed the amount
that CMS determined to impose here, a penalty of $5,250 for a single day of immediate
jeopardy level noncompliance.

10

The penalty of $5,250 is more than justified by the seriousness of Petitioner’s
noncompliance. As I have described, Resident # 30’s behavior jeopardized the health
and safety of other residents of Petitioner’s facility and created the likelihood that,
inevitably, someone would be seriously injured at a minimum.

Petitioner has offered no evidence to challenge the penalty amount and offered no
argument to show that the penalty is unreasonable. Therefore, I sustain it.

/s/
Steven T. Kessel
Administrative Law Judge