Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Parallel Parkway Emergency Physicians,
Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-367
Decision No. CR2582

Date: August 8, 2012

DECISION

Parallel Parkway Emergency Physicians' (Petitioner) appeals a December 14, 2011
reconsideration decision. I grant summary judgment and sustain the determination of the
Centers for Medicare and Medicaid Services (CMS) finding that the undisputed evidence
establishes Petitioner does not qualify as a supplier for Medicare purposes and that CMS
properly denied Petitioner’s enrollment in the Medicare program.

I. Background and Procedural History

To obtain billing privileges from Medicare for care provided to beneficiaries, Petitioner
submitted a Medicare enrollment application. Petitioner sought to enroll in the Medicare
program as an ambulatory surgical center clinic/group practice that provided physicians’
services. P. Ex. 7 at 7.

' This case was originally captioned as Mark J. Slepin, M.D.; however, Petitioner’s
Hearing Request and the Hearing Officer’s December 14, 2011 reconsideration decision
clearly relate to Parallel Parkway Emergency Physicians (PPEP), an entity Mark J.
Slepin, M.D. owns. I amend the case caption to clarify this.
Wisconsin Physicians Service Insurance Corporation (WPS), a CMS contractor,
notified Petitioner by letter dated October 25, 2011 that it was denying Petitioner’s
enrollment application because Petitioner was not operational or did not meet Medicare
requirements to furnish Medicare covered items or services. CMS Ex. 1. Petitioner
requested reconsideration of this initial decision, and a WPS hearing officer issued
Petitioner an unfavorable reconsideration decision. The hearing officer found Petitioner
was not operational to furnish Medicare covered items or services, or it did not meet
Medicare enrollment requirements. CMS Ex. 2.

Petitioner then requested a hearing with the Civil Remedies Division of the Departmental
Appeals Board, and the case was assigned to me for hearing and decision. In accordance
with my Acknowledgment and Pre-hearing Order, CMS filed a Motion for Summary
Disposition and Supporting Brief (CMS Br.), accompanied by three exhibits (CMS Exs.
1-3). Petitioner filed a response to CMS’s Motion for Summary Disposition and
Supporting Brief (P. Br.) accompanied by eleven exhibits (P. Exs. 1-11). Thereafter,
CMS filed a Response Brief (CMS Response). In the absence of objection, I admit CMS
Exs. 1-3 and P. Exs. 1-11 into the record.

Il. Background Law

Section 1831 of the Social Security Act (the Act) (42 U.S.C. § 1395j) establishes the
supplementary medical insurance benefits program for the aged and disabled known as
Medicare Part B. Payment under the program for services rendered to Medicare
beneficiaries may only be made to eligible providers of services and suppliers. Act

§§ 1835(a) (42 U.S.C. § 1395n(a)), 1842(h)(1) (42 U.S.C. § 1395u(h)(1)). The Act
requires the Secretary of Health and Human Services to issue regulations that establish a
process for the enrollment of providers and suppliers, including the right to a hearing and
judicial review of certain enrollment determinations. Act § 1866(j) (42 U.S.C.

§ 1395cc(j)).

The Act and regulations establish that a supplier is an individual or entity that furnishes
health care services under Medicare. Act § 1861(d), (42 U.S.C. § 1395x(d)); 42 C.F.R.

§ 400.202. Medicare Part B pays for physicians’ services, including diagnosis, therapy,
surgery, consultations, and home, office, and institutional calls. See 42 C.F.R. § 410.20.
A supplier must be enrolled in the Medicare program and be issued a billing number to be
eligible to receive payment from Medicare. 42 C.F.R. § 424.505. Medicare may pay a
supplier’s employer if the supplier is required, as a condition of employment, to turn over
the fees from the supplier’s services. 42 C.F.R. § 424.80(b). Medicare will also pay an
entity billing for a supplier’s services if the entity is enrolled in Medicare and there is a
contractual arrangement between the entity and the supplier. 42 C.F.R. § 424.80(b)(2).

Il. Analysis
A. Issue

The issue in this case is whether CMS’s contractor and CMS had a legitimate basis for
denying Petitioner’s Medicare enrollment for billing privileges.

B. Applicable Standard for Summary Judgment

Board Members of the Appellate Division of the Departmental Appeals Board (the
Board) stated the standard for summary judgment:

Summary judgment is appropriate when 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. ... The party moving for summary judgment
bears the initial burden of showing that there are no genuine issues of
material fact for trial and that it is entitled to judgment as a matter of

law. ... 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. ... In
determining whether there are genuine issues of material fact for trial, the
reviewer must view the evidence in the light most favorable to the non-
moving party, drawing all reasonable inferences in that party’s favor.

Senior Rehab. & Skilled Nursing Ctr., DAB No. 2300, at 3 (2010) (citations omitted).

The role of an Administrative Law Judge (ALJ) in deciding a summary judgment motion
differs from the ALJ’s role in resolving a case after a hearing. The ALJ should not assess
credibility or evaluate the weight of conflicting evidence. Holy Cross Vill. at Notre
Dame, Inc., DAB No. 2291, at 5 (2009). Here, the material facts are not disputed, and I
draw all reasonable inferences in favor of Petitioner.

C. Finding of Facts and Conclusions of Law

1) CMS had a legitimate basis for denying Petitioner’s Medicare enrollment
because Petitioner was not eligible for Medicare enrollment as an
operational supplier.

Petitioner applied for Medicare enrollment as an ambulatory surgical center clinic/group
practice and defines itself through a “partnership agreement” submitted with its Medicare
enrollment application. CMS Ex. 3. The agreement states that “[t]he sole purpose of the
Partnership is to provide a ‘pay to’ address when billing third party payors to facilitate
the bookkeeping of the payments received from such payors.” CMS Ex. 3 at 1. The
agreement also indicates that Petitioner does not employ any of the physicians for which
Petitioner is acting as the billing entity. CMS Ex. 3 at 2. The partnership agreement does
not indicate that Petitioner would furnish health care services under Medicare, but instead
states that Petitioner is an entity formed solely to act as a billing entity. CMS Ex. 3.

For Medicare purposes, “[s]upplier means a physician or other practitioner, or an entity
other than a provider, that furnishes health care services under Medicare.” 42 C.F.R.

§ 400.202. A supplier must be operational to furnish Medicare covered items or services
before being granted Medicare billing privileges. See 42 C.F.R. § 424.510(d)(6).
“Operational means the provider or supplier has a qualified physical practice location, is
open to the public for the purpose of providing health care related services, is prepared to
submit valid Medicare claims, and is properly staffed, equipped, and stocked (as
applicable, based on the type of facility or organization, provider or supplier specialty, or
the services or items being rendered), to furnish these items or services.” 42 C.F.R.

§ 424.502. “Services means medical care or services and items, such as medical
diagnosis and treatment, drugs and biologicals, supplies, appliances, and equipment,
medical social services, and use of hospital, [critical access hospital], or [skilled nursing]
facilities.” 42 C.F.R. § 400.202. In order to enroll in the Medicare program, a supplier
must demonstrate that it has the ability to furnish health care items or services. If CMS
determines upon reliable evidence that an entity is not operational or is not meeting
Medicare enrollment requirements, CMS may deny enrollment. See 42 C.F.R.

§ 424.530(a)(5).

A supplier must be enrolled in the program before receiving payment for services
covered by Medicare Part B. See 42 C.F.R. §§ 410.20, 424.505. Moreover, lawmakers’
concerns about enrollment in the Medicare program by unqualified or fraudulent
suppliers resulted in CMS establishing the current enrollment requirements with stringent
controls on supplier entry into the Medicare program. 71 Fed. Reg. 20,754, 20,755-6
(April 21, 2006). The Medicare enrollment requirements are designed to ensure that
Medicare only conducts business with legitimate suppliers and enables CMS to verify
that it is paying an entity that actually exists and is providing the services that it
represented it would provide in its Medicare enrollment application. Id. at 20,754-55.

Petitioner provided no evidence to show it qualifies as a supplier that furnishes health
care services or is operational to furnish health care services covered by Medicare as an
ambulatory surgical center clinic/group practice that provides physicians’ services. Nor
does Petitioner dispute that it is not an ambulatory surgical center clinic/group practice or
an employer of health care practitioners.

Petitioner, however, contends it is a subsidiary under the control and ownership of a
related entity (Kansas Emergency Room Services, P.A. or “KERS”) that does provide
physicians’ health care services. Petitioner argues it meets the statutory definition set
forth in 42 C.F.R. § 400.202 because “[Petitioner] furnishes items and services through
its general partner, which is under the common control and management with
[Petitioner].” P. Br. at 5. Petitioner contends it has “satisfied the plain terms of the
Medicare Part B supplier enrollment regulations.” P. Br. at 5. Nonetheless, Petitioner
does not dispute it is a separate legal entity from the entity furnishing the physicians’
health care services:

To facilitate efficient and effective billing and collecting for the
professional medical services of KERS’s contracted physicians at
Hospital and to avoid potential issues with billing and collecting for
services provided at KERS’s current and future client sites in
Kansas, KERS created [Petitioner], a Kansas general partnership
with KERS and Kansas Account Management, Inc. (KAMI) as its
partners. P. Ex. 5. KAMI is a Kansas professional corporation also
owned by Petitioner. As a result, [Petitioner] is under common
ownership and control with KERS.

P. Br. at 2.

I will assume for purposes of summary judgment that Petitioner’s partner does in fact
provide health care services and would qualify as a supplier under Medicare
requirements. Yet, I find that Petitioner did not meet the applicable Medicare enrollment
requirements because Petitioner itself does not furnish healthcare services. CMS’s
enrollment denial here is similar to that in US Ultrasound, DAB No. 2302 (2010). In that
case, US Ultrasound sought to enroll as an independent diagnostic testing facility;
jowever, a contract submitted with the enrollment application indicated that US
Ultrasound did not own any ultrasound equipment and was not responsible for any
technical or professional services. Jd. at 6. The agreement between US Ultrasound and
another entity that actually furnished services provided that US Ultrasound pay that entity
a professional services fee for billing, scheduling, and patient records. Jd. at 4. The
Board found that CMS had the legal authority to deny US Ultrasound’s enrollment
application because it failed to comply with Medicare enrollment requirements in that it
did not furnish services and thus failed to meet the definition of a Medicare “supplier.”

Here, Petitioner is a general partnership established solely to receive payments for the
services of a physician group. Petitioner does not employ physicians, have a contractual
arrangement with physicians, and does not furnish health care services in any capacity.
Petitioner does not directly provide Medicare covered physician health care services just
as US Ultrasound did not directly provide Medicare covered testing services. Thus, CMS
ad a legitimate basis for denying Petitioner’s Medicare enrollment application because it
did not meet the definition of a Medicare supplier.

If CMS granted Petitioner’s enrollment application and later needed to revoke
Petitioner’s Medicare enrollment for fraudulent activity or for not meeting Medicare
requirements, the related entity providing the actual health care services would not be
subject to the revocation or the related reenrollment bar, actions intended to hold entities
accountable and to protect the Medicare Trust Fund.

2) Petitioner received due process.

Petitioner also claims that CMS failed to articulate a rational basis for denying
Petitioner’s enrollment in Medicare. Petitioner claims that US Ultrasound can be
distinguished because the CMS contractor in this case did not provide Petitioner with an
explanation of why its enrollment could not be approved in either the CMS contractor’s
initial determination or in the reconsideration decision. P. Br. at 7-8. However, a
Petitioner is not deprived of due process when CMS provides Petitioner sufficient notice
of the legal basis for the denial and a reasonable opportunity to respond at the ALJ
hearing level. See Green Hills Enters., LLC, DAB No. 2199, at 8 (2008)(““The Board has
consistently held that after an administrative appeal has commenced, a federal agency
may assert and rely on new or alternative grounds for the challenged action or
determination as long as the non-federal party has notice of and a reasonable opportunity
to respond to the asserted new grounds during the administrative proceeding.”).

Here I find that CMS, through its brief, provided Petitioner sufficient notice of the legal
basis for the Medicare enrollment denial, and I provided a reasonable opportunity for
Petitioner to respond. Moreover, both the initial determination and the CMS contractor’s
reconsideration decision accurately stated, albeit generally, that Petitioner was not
“operational” pursuant to 42 C.F.R. § 424.530(a)(5) and explained that Petitioner was not
meeting Medicare enrollment requirements to furnish Medicare-covered items or
services. CMS Exs. | and 2.

IV. Conclusion

The undisputed evidence establishes that Petitioner is a billing entity which does not
provide the intended Medicare services described in Petitioner’s enrollment application
for an ambulatory surgical center clinic/group practice. Accordingly, I uphold the
enrollment denial and grant summary judgment in favor of CMS.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

The General Counsel
v.

Winston C. San Agustin, M.D.,
(OCR No. 06-56803).

Docket No. C-12-544
Decision No. CR2580

Date: August 2, 2012

DECISION AND ORDER

The General Counsel of the Department of Health and Human Services brings this action
pursuant to section 504 of the Rehabilitation Act of 1973, as amended (Act), and its
implementing regulations, 45 C.F.R. Parts 81 and 84.' The General Counsel charges that
Respondent, Winston C. San Agustin, M.D., who is a practicing physician and surgeon,
violated the statute and regulations because he refused to provide medical services to an
individual based on that person’s disability.”

For the reasons set forth below, I find that Respondent San Agustin has waived his right
to a hearing and consents to my making a decision based on the information available.
Respondent San Agustin violated section 504 of the Act: he discriminated against an
individual by refusing to provide medical services solely because the individual was
HIV-positive. Respondent’s compliance with the Act and regulations cannot be secured
by voluntary means, and his receipt of federal financial assistance shall be terminated
until such time as he demonstrates that he will comply with the requirements of the Act
and regulations.

' The Act, Pub. L. 93-112 (enacted September 26, 1973) is codified at 29 U.S.C. § 701.

* In support of his position, the General Counsel has submitted eight exhibits (HHS Exs.
1-8).
Discussion

1. Respondent San Agustin has waived his right to a hearing and consents to my
deciding this case based on the information filed.?

On March 29, 2012, the General Counsel sent to Respondent San Agustin, by first class
mail, return receipt requested, a Notice of Opportunity for Hearing. According to the
applicable regulations, the respondent may file an answer to this notice within 20 days
after service. Failure to answer within the 20-day period following service of the notice
“may be deemed an admission of all matters of fact recited in the notice.” 45 C.F.R. §
81.52. Further, within 20 days after service of a notice of opportunity for hearing, the
respondent may request a hearing. The respondent’s failure to request a hearing “shall”
be deemed a waiver of the right to a hearing and constitutes the respondent’s “consent to
the making of a decision on the basis of such information as is available.” 45 C.F.R. §§
80.9; 81.54.

The regulations provide that the date of service of the notice of opportunity for hearing is
“the date of its delivery, or of its attempted delivery if refused.” 45 C.F.R. § 81.35
(emphasis added). The General Counsel has submitted a copy of the return receipt and
the relevant “Track & Confirm” page from the U.S. Postal Service website, showing an
April 11, 2012 delivery. HHS Exs. 2, 3.

The time for responding has long since passed. Because Respondent San Agustin neither
filed an answer nor requested a hearing, he has waived his right to a hearing and
consented to my deciding the case based on “such information as may be filed as the
record.” See 45 C.F.R. § 80.9(a). He has also admitted all of the facts set forth in the
notice, which is in the record as HHS Ex. 1.

2. Respondent San Agustin violated section 504 of the Act when he denied medical
treatment to an individual based on that individual’s handicap.

Respondent San Agustin is a California physician, who practices neurological surgery in
Monterey Park, California. He participates in the joint state/federal Medicaid program,
referred to in California as Medi-Cal. HHS Ex. | at 3-4. Because he participates in the
Medi-Cal program, Respondent San Agustin receives federal financial assistance. 45
C.F.R. § 84.3(f) and (h). As a recipient of federal financial assistance, he may not
discriminate against any qualified handicapped person. 45 C.F.R. § 84.4. Examples of
“prohibited discriminatory actions” include denying an individual a service or other
benefit provided under a program that receives federal financial assistance from the
Department of Health and Human Services. 45 C.F.R. §§ 80.3(b)(1); 84.4(b).

* My rulings on each of the findings, conclusions, or exceptions are set forth, in italics
and bold, in the discussion captions of this decision. See 45 C.F.R. § 80.10(d).
In this case, the injured party is a young man, insured through the Medi-Cal program,
who suffers from HIV (human immunodeficiency virus) disease. Because of his
condition, he is a handicapped person within the meaning of the Act and regulations. 45
C.F.R. § 84.3(j); see Bragdon v. Abbott, 524 U.S. 624, 637 (1998). The injured party also
suffered from back and hip pain, and his primary care physician referred him to
Respondent San Agustin for treatment. On July 18, 2006, Respondent San Agustin
examined the injured party, diagnosed spondylolisthesis, and recommended surgery, a
laminectomy. HHS Exs. 5, 6. Respondent agreed to perform the surgery at Garfield
Medical Center and to arrange treatment authorization from the Medi-Cal program. HHS
Ex. 1 at 5; HHS Ex. 4 at 3; HHS Ex. 6.

But shortly thereafter, Respondent’s secretary told him about the injured party’s HIV
status. HHS Ex. | at 5; HHS Ex. 4 at 2-3. Respondent San Agustin immediately stopped
the Medi-Cal authorization process and scheduled another appointment with the injured
party. HHS Ex. 1 at 5; HHS Ex. 4 at 3. At that second appointment, which occurred on
July 21, 2006, he asked the injured party about his HIV status. When the injured party
confirmed that he was HIV-positive, Respondent San Agustin refused to perform the
surgery and told the injured party to go to the county hospital for treatment. HHS Ex. |
at 5-6; HHS Ex. 4 at 3; HHS Ex. 7. He discharged the injured party from his practice,
and, in correspondence advising the referring physician that he had done so, he
specifically mentioned that the young man was HIV-positive. HHS Ex. 7.

The information in the record thus establishes that Respondent San Agustin refused to
provide medical services to an individual because of that individual’s disability. He
therefore violated the Act and regulations and the HHS Office for Civil Rights (OCR)
may appropriately act to correct the noncompliance.

3. Respondent San Agustin’s compliance with the Act and regulations cannot be
secured by voluntary means, so his receipt of federal financial assistance must
be terminated, until he shows that he will comply with statutory and regulatory
requirements.

To effect compliance with the Act and regulations, the responsible department (in this
case, OCR) should, “to the fullest extent practicable,” seek the recipient’s cooperation.
45 C.F.R. § 80.6(a). However, if noncompliance cannot be corrected by such informal
means, the department may suspend or terminate the recipient’s federal financial
assistance. 45 C.F.R. § 80.8(c).

Here, the record documents that OCR attempted repeatedly but unsuccessfully to secure
Respondent San Agustin’s agreement to comply voluntarily with the requirements of the
Act and regulations:
e Ina letter dated September 14, 2009, it advised Respondent San Agustin that,
based on the results of its investigation, the department concluded that Respondent
had discriminated against the injured party because of his disability, in violation of
section 504, by denying him the surgery for which he was otherwise qualified.
OCR included a proposed settlement agreement with that letter, and gave
Respondent 60 days in which to negotiate a settlement;*

¢ On September 30, 2009, OCR telephoned Respondent’s office to discuss
settlement, but office staff said that he was not available;

e Ina letter dated October 16, 2009, Respondent San Agustin asked for 30
additional days in which to respond to OCR’s September 14 letter;

e Ina letter dated October 20, 2009, OCR asked Respondent to discuss settlement
and warned that, unless settlement was reached by the end of the 60-day
negotiating period, it would “undertake appropriate measures to effect
Respondent’s compliance”;

e Ina letter dated October 27, 2009, Respondent denied the allegations of
discrimination but said that he was interested in resolving the case through a non-
attorney representative;

e OCR discussed informal resolution of the case with Respondent’s non-attorney
representative during telephone conversations held on November 5, 13, and 25,
2009;

e Respondent San Agustin participated in the November 25 conversation, and
indicated that he was considering the proposed settlement agreement;

¢ On November 25, 2009, OCR provided Respondent’s representative with a revised
settlement agreement that reflected the results of their negotiations;

¢ On December 4, 2009, OCR telephoned Respondent’s representative, who said
that Respondent agreed “in principle” with the proposed agreement; the
representative promised to respond further by the following week;

+ The proposed settlement seems fairly benign. Respondent San Agustin was not
required to admit liability; OCR agreed to suspend its administrative action against him
and promised not to initiate enforcement proceedings. For his part, Respondent San
Agustin essentially had to agree to comply with section 504, i.e., not to deny treatment
based on a patient’s HIV status. He also had to agree to six hours of AlDs education for
himself and his staff. He had to display a notice of nondiscrimination. HHS Ex. 4 at 11-
20.
e OCR telephoned Respondent’s representative on December 8, 11, and 16, 2009, to
ask about the status of the settlement;

¢ On December 9 and 18, 2009, OCR sent email communications to Respondent’s
representative, asking him to respond to the proposed settlement;

e Neither Respondent nor his representative responded to any of these (December 8,
9, 11, 16, and 18, 2009) communications from OCR.

HHS Ex. | at 6-8; HHS Ex. 4. Respondent’s lack of cooperation establishes that he will
not voluntarily comply with the Act and regulations and that OCR will not be able to
assure his compliance by informal means. Termination of his federal financial
participation is therefore an appropriate remedy for his refusal to comply voluntarily. 45
CFR. § 80.8(c).

Order

I therefore order that the responsible HHS officials suspend, terminate, refuse to grant or
continue Respondent San Agustin’s federal financial assistance, until he satisfies those
officials that he will comply with the Act and regulations.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.
Country Manor Properties LLC d/b/a Country Store,

Respondent.

Docket No. C-12-766

FDA Docket No. FDA-2012-H-0550
Decision No. CR2579

Date: August 2, 2012

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated the above-captioned matter when it
filed an Administrative Complaint for Civil Money Penalties (Complaint) with the Civil
Remedies Division and the Food and Drug Administration’s (FDA) Division of Dockets
Management. CTP seeks to impose civil money penalties under the Federal Food, Drug,
and Cosmetic Act (Act) and the Act’s implementing regulations.

The Complaint alleges the following facts. Respondent owns an establishment in
Watkins, Colorado that sells tobacco products. Complaint § 2. CTP conducted two
inspections of the establishment. Complaint § 8. During the first inspection, on March
29, 2011, the FDA-commissioned inspector observed that Respondent:

[Sold] cigarettes or smokeless tobacco products to a person younger than
18 years of age, in violation of 21 C.F.R. § 1140.14(a); [and] fail[ed] to
verify by means of photographic identification, containing the bearer’s
2
date of birth, that no person purchasing cigarettes or smokeless tobacco
is younger than 18 years of age, as required by 21 C.F.R. § 1140.14(b)(1).

Complaint § 10.

On May 26, 2011, CTP issued a warning letter to Respondent specifying the violations
the inspector observed. The letter warned Respondent that a failure to correct the
violations could result in the imposition of civil money penalties and that it was
Respondent’s responsibility to ensure compliance with the law. Complaint § 10.

On June 2, 2011, Jim Hood contacted CTP by telephone and responded to the warning
letter on Respondent’s behalf. Mr. Hood told CTP that he spoke with his employees
about the violations and informed them to cease selling tobacco to minors. Complaint
4 11. Mr. Hood stated that he would send a letter further describing Respondent’s plans
to prevent future tobacco sales to minors; however, CTP never received such a letter.
Complaint § 11.

Subsequently, on February 2 and 7, 2012, during a two-part follow-up inspection, the
inspector “documented a violation for using a self-service display in a non-exempt
facility, in violation of 21 C.F.R. § 1140.16(c)(1).” Complaint 9. “Specifically, the
establishment [had] a self-service display of smokeless tobacco hanging on a wall and
[was] open to the general public during business hours. Therefore, this facility does not
qualify as one where minors are permitted to enter at any time.” Complaint § 9.

In compliance with 21 C.F.R. §§ 17.5 and 17.7, CTP served Respondent with the
Complaint on June 6, 2012, via United Parcel Service. CTP charged Respondent with
violating 21 C.F.R. § 1140.14(a) (sale of tobacco products to a minor); 21 C.F.R.

§ 1140.14(b)(1) (failure to verify the age of a person purchasing tobacco products by
means of photographic identification containing the bearer’s date of birth); and 21 C.F.R.
§ 1140.16(c)(1) (using a self-service display in a non-exempt facility). Complaint ¥§ 1,
9, 10. CTP asked the Civil Remedies Division to impose a $250.00 civil money penalty
on Respondent based on two alleged violations of the regulations within a 12-month
period. Complaint § 13.

Both the cover letter to the Complaint and the Complaint provided detailed instructions
regarding filing an answer and requesting an extension of time to file an answer. The
letter and Complaint stated that failure to file an answer could result in the imposition of
a civil money penalty against Respondent. Respondent neither filed an answer nor
requested an extension of time within the 30-day time period prescribed in 21 C.F.R.

§ 17.9.
3
If a respondent does not file an answer within 30 days of a properly served complaint, the
regulations provide that the:

presiding officer shall assume the facts alleged in the complaint to be true,
and if such facts establish liability under the relevant statute, the presiding
officer shall issue an initial decision within 30 days of the time the answer
was due, imposing: (1) The maximum amount of penalties provided for by
law for the violations alleged; or (2) The amount asked for in the complaint,
whichever amount is smaller.

21 C.F.R. § 17.11 (a). Further, a failure to file a timely answer means that “respondent
waives any right to a hearing and to contest the amount of penalties and assessments”
imposed in the initial decision. 21 C.F.R. § 17.11(b).

Accepting the facts alleged in the Complaint as true, I find that those facts establish
Respondent’s liability under the Act. See 21 U.S.C. §§ 333(f)(9), 387c(a)(7)(B), 387£(d);
21 C.F.R. §§ 1140.1(b), 1140.14. I also find that CTP’s request to impose a $250.00 civil
money penalty is permissible. ' See 21 C.F.R. § 17.2.

Therefore, Respondent is directed to pay a civil money penalty in the amount of $250.00.
This initial decision becomes final and binding upon both parties within 30 days of the
date of its issuance. 21 C.F.R. § 17.11(b).

It is so ordered.

/s/
Scott Anderson
Administrative Law Judge

'The CTP Complaint alleges that three regulatory violations occurred within 24 months.
Complaint §{ 9-10. However, CTP “requests that a civil money penalty in the amount of
$250.00 be assessed against Respondent for two violations of 21 C.F.R. Part 1140 within
a twelve month period.” Complaint § 13. This is less than the maximum penalty allowed
under the regulations because CTP could have sought a $500 penalty. See 21 C.F.R.

§ 17.2.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Mebin Thomas, PA
(NPI: 1598082737)

Petitioner,
v.
Centers for Medicare and Medicaid Services.
Docket No. C-12-587
Decision No. CR2578

Date: July 27, 2012

DECISION DISMISSING APPEAL FOR CAUSE

The request for hearing of Petitioner, Mebin Thomas, PA, is dismissed pursuant to 42
C.F.R. § 498.70(b).

I. Procedural History

On July 5, 2011, Petitioner submitted his initial CMS-8551 application to CMS’s
contractor, TrailBlazer Health Services. CMS Ex. 1, at 1. TrailBlazer denied the
application because the medical group that employed Petitioner, Davenport Medical
Center, was not active in the Medicare system. CMS Ex. 2, at 4. After Davenport
Medical Center submitted its application and was enrolled in the Medicare program,
Petitioner submitted a second CMS-855I application on December 6, 2011. CMS Ex. 3,
at 1. Trailblazer accepted Petitioner’s second CMS-855] application and enrolled
Petitioner into the Medicare program with an effective date of December 6, 2011 and
retroactive billing privileges from November 7, 2011. CMS Ex. 4, at 2. Petitioner
received notice of his effective enrollment date on January 9, 2012. CMS Ex. 4, at 1.
On February 6, 2012, Trailblazer received a request for reconsideration from Petitioner
regarding its determination of his effective date. CMS Ex. 5, CMS Ex. 6. Trailblazer
denied this request because the signatory on the reconsideration request, Tracy
Wohlgemuth, was not Petitioner’s authorized representative. CMS Ex. 6; CMS Ex. 7, at
4. Trailblazer received a second reconsideration request signed by Petitioner on March
19, 2012, 70 days after Petitioner received notice of his effective date. CMS Ex. 8; CMS
Ex. 9. Therefore, TrailBlazer denied Petitioner’s second reconsideration request as
untimely. CMS Ex. 9.

On April 16, 2012, my office received a request for hearing dated April 8, 2012. The
case was assigned to me for hearing and decision, and I issued an Acknowledgment and
Prehearing Order on April 18, 2012. The request for hearing purported to request a
hearing on behalf of Mebin Thomas, PA. The hearing request was not signed by
Petitioner, but by Tracy Wohlgemuth. Accordingly, I directed that Petitioner file a
notice, signed by him, appointing Ms. Wohlgemuth as his representative in this matter,
which he did.

On May 18, 2012, CMS filed a motion for summary judgment, with supporting brief and
CMS Exs. | through 9. I treat the CMS motion for summary judgment as a motion to
dismiss. Petitioner filed an undated two- page response that was received on June 25,
2012. CMS filed a reply brief on July 2, 2012. In the absence of any objection, I admit
CMS Exs. | through 9.

II. Applicable Law

When a prospective provider or supplier receives an initial determination from CMS that
affects his or her ability to participate in the Medicare program, the provider or supplier
may request reconsideration of that decision. 42 C.F.R. § 498.5(d) and (1). The request
for reconsideration must be filed with CMS, either directly by the provider or through the
provider’s designated representative, within 60 days of receipt of the notice of the initial
determination. 42 C.F.R. § 498.22(b). The date of receipt is presumed to be five days
after the date on the notice from CMS, unless there is a showing that it was received
earlier or later. 42 C.F.R. § 498.22(b).

III. Findings of Fact and Conclusions of Law

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

A. Petitioner has no right to a hearing before an ALJ because there has been
no reconsideration determination.

B. Dismissal is required as Petitioner has no right to a hearing.
The issue raised by Petitioner’s request for hearing does not involve his eligibility to
enroll in Medicare. Rather, Petitioner was dissatisfied solely with TrailBlazer’s
determination that the effective date of his enrollment is November 7, 2011. Petitioner
was informed of his enrollment and effective date by letter dated January 9, 2012, which
was faxed to his representative on the same date. CMS Ex. 4. The letter fully informed
Petitioner of his right to reconsideration; it clearly stated that the reconsideration request
must be received within 60 days of the postmark date of the notice letter; and that the
reconsideration request must be signed and dated by the physician or any responsible
authorized official who was included on the original CMS-855] application. The notice
also informed Petitioner that failure to timely request reconsideration would be treated as
a waiver of all rights to further administrative review.

The regulations require that a supplier, such as Petitioner, request reconsideration if the
supplier is dissatisfied with a CMS initial determination. The determination of the
effective date of enrollment in Medicare is an initial determination. 42 C.F.R.

§ 498.3(b)(15). If dissatisfied with the decision on reconsideration, the supplier has a
right to review by an ALJ. The regulation, 42 C.F.R. § 498.5(d) and (1), establish
Petitioner’s right to reconsideration and review by an ALJ:

Appeal rights of prospective suppliers. (1) Any prospective
supplier dissatisfied with an initial determination or a revised
initial determination that its services do not meet the
conditions for coverage may request reconsideration in
accordance with § 498.22(a).

(2) Any prospective supplier dissatisfied with a reconsidered
determination under paragraph (d)(1) of this section, or a
revised reconsidered determination under § 498.30, is entitled
to a hearing before an ALJ.

(1) Appeal rights related to provider enrollment. (1) Any
prospective provider, an existing provider, prospective
supplier or existing supplier dissatisfied with an initial
determination or revised initial determination related to the
denial or revocation of Medicare billing privileges may
request reconsideration in accordance with § 498.22(a).

(2) CMS, a CMS contractor, any prospective provider, an
existing provider, prospective supplier, or existing supplier
dissatisfied with a reconsidered determination under
paragraph (1)(1) of this section, or a revised reconsidered
determination under § 498.30, is entitled to a hearing before
an ALJ.

Petitioner does not have a right to an ALJ hearing in this case. Petitioner failed to timely
request reconsideration regarding the effective date of his participation in Medicare, and
no reconsideration decision was issued by CMS or its contractor. I have no authority to
consider whether or not the request for reconsideration to TrailBlazer was timely or to
grant specific relief in the form of an order to CMS or its contractor to conduct
reconsideration. Because there was no reconsideration decision, Petitioner has no right to
a hearing by an ALJ. Dismissal is required. 42 C.F.R. § 498.70(b).

III. Conclusion

For the foregoing reasons, Petitioner’s request for hearing is dismissed. I may vacate a
dismissal if either party files such a request within 60 days of receipt of this dismissal and
states good cause for such action. 42 C.F.R. § 498.72.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

San Fernando Post Acute Hospital,
(CCN: 05-6053),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-12-668
Decision No. CR2577

Date: July 27, 2012
DECISION DISMISSING REQUESTS FOR HEARING

This matter is before me on the Motion to Dismiss filed May 4, 2012, by the Centers for
Medicare & Medicaid Services (CMS). Citing a long line of decisions by the
Departmental Appeals Board (Board) and the Administrative Law Judges (ALJs) of the
Civil Remedies Division, CMS argues that a provider has no right to a hearing to contest
citations of noncompliance with program requirements if CMS declines to impose a
sanction or remedy against the provider based on those citations. Petitioner candidly
acknowledges those decisions, but points to recent rulings in the United States District
Court for the District of Nebraska as casting doubt on the validity of that long line of
authority. Thus, this Decision is issued in a unique procedural context and in full
awareness of the apparent conflict of authorities on the central question: whether a long-
term care facility that participates in the Medicare and Medicaid programs may appeal
citations of deficiencies if those citations do not result in the imposition of remedies, or if
remedies imposed as a result of those citations are later rescinded, or reduced to zero. As
I shall explain below, I conclude that I am obliged to follow the long and unvarying line
of decisions announced by the Board and applied by the ALJs. Accordingly, | GRANT
the CMS Motion to Dismiss.

Although both sides in this appeal agree that the enforcement history that led to
Petitioner’s appeal is somewhat convoluted, its material aspects are rather more
straightforward. Petitioner is a skilled nursing facility located in Los Angeles County,
California. It participates in the Medicare and Medicaid programs, and because it does, it
is subject to the inspection-and-compliance mechanism established by the Social Security
Act. In December 2011, the Los Angeles County Department of Public Health
(LACDPH) conducted a recertification survey of Petitioner’s facility and noted certain
deficiencies, including a violation of 42 C.F.R. § 483.25(h) —Tag F-314 — at a scope-
and-severity level of G. LACDPH notified Petitioner of the deficiencies in January
2012, informed Petitioner that it would recommend that CMS impose a denial of payment
for new admissions (DPNA), and informed Petitioner that it was entitled to challenge the
LACDPH’s findings through a state informal dispute resolution proceeding (IDR).

At this point, CMS did not act as LACDPH had recommended. On March 2, 2012, CMS
notified Petitioner that it would impose a per-instance civil money penalty (PICMP)
based on the F-314 citation. On March 16, 2012, Petitioner filed its Request for Hearing
in this forum and the matter was docketed as C-12-487. But while CMS was considering
the LACDPH recommendation, the IDR proceeding began on February 21, 2012, and
Petitioner won a substantial revision of the citations it challenged there. In particular,
Petitioner won the reduction of the scope-and-severity level of the F-314 citation from G
to D, and a recommendation from LACDPH to CMS that the PICMP be rescinded. This
result was communicated to Petitioner by LACDPH on March 22, 1012.

CMS this time concurred in LACDPH’s recommendation. On April 16, 2012, CMS
notified Petitioner that it would not impose the PICMP or the DPNA. Petitioner filed its
Request for Hearing in response to the CMS notice on May 1, 2012, and that appeal was
docketed as C-12-668. By Order of May 9, 2012, I consolidated the two appeals into this
case and this docket number; the earlier docket number, C-12-487, was dismissed; and I
directed that motion practice would proceed on the basis of the Motion to Dismiss filed
by CMS in C-12-487 on May 4, 2012.

CMS asserts that all enforcement remedies it once sought to impose against Petitioner
have been rescinded. The PICMP was withdrawn and the DPNA proposed by LACDPH
never took effect. Thus, the issue before me is whether Petitioner has a right to a hearing
when CMS has withdrawn the enforcement remedies provided for in 42 C.F.R.

§ 488.406. As I noted above, this issue has been addressed many times by the ALJs of
this forum and by the Board, and without exception, each time the issue has been
considered, it has come to the same resolution that I announce here. The parties have
briefed the issue immediately before me with candor, and in the acknowledged awareness
that a substantial body of authority leaves little room for speculation as to the outcome of
the present debate at least as far as my review in this forum. I find and conclude that San
Fernando Post Acute Hospital is not entitled to a hearing, and on the basis of 42 C.F.R.

§ 498.70(b), I grant CMS’s Motion to Dismiss.
The hearing rights of a long-term care facility are established by federal regulations at

42 C.F.R. Part 498. A provider dissatisfied with CMS’s initial determination is entitled
to further review, but administrative actions that do not constitute initial determinations
are not subject to appeal. 42 C.F.R. § 498.3(d). The regulations specify which actions
are “initial determinations” and set forth examples of actions that are not. A finding of
noncompliance that results in the imposition of a remedy specified in 42 C.F.R.

§ 488.406 is an initial determination for which a facility may request a hearing. 42
C.F.R. § 498.3(b)(13). Unless the finding of noncompliance results in the actual
imposition of a specified remedy, the finding is not an initial determination. 42 C.F.R.

§ 498.3(d)(10)(ii). Where, as here, CMS rescinds all proposed remedies, a facility has no
hearing right because no determination properly subject to a hearing exists. It is the final
imposition of an enforcement remedy or sanction and not the citation of a deficiency that
triggers a facility’s right to a hearing pursuant to 42 C.F.R. Part 498. Golden Living
Center-Grand Island Lakeview, DAB No. 2364 (2011); Columbus Park Nursing and
Rehabilitation Center, DAB No. 2316 (2010); Fountain Lake Health and Rehabilitation,
Inc., DAB No. 1985 (2005); Lakewood Plaza Nursing Center, DAB No. 1767 (2001);
The Lutheran Home-Caledonia, DAB No. 1753 (2000); Schowalter Villa, DAB No. 1688
(1999); Arcadia Acres, Inc., DAB No. 1607 (1997).

Petitioner resists the CMS Motion, vigorously maintaining that not permitting it to appeal
the underlying survey findings or the scope and severity of the deficiencies as cited have
the potential to make it subject to inclusion in CMS’s Special Focus Facility program, or
to damage its standings in various public rating media, a result that Petitioner argues must
adversely affect its reputation and limit its ability to compete in the marketplace. A great
deal of Petitioner’s argument is based on its success in winning endorsement of its
position in Golden Living Center-Grand Island Lakeview v. Sebelius, No. 8:11CV119,
(D. Neb. 2012). While acknowledging that the United States District Court’s resolution
of that case represents a direct contradiction of the Board’s decision in Golden Living
Center-Grand Island Lakeview, DAB No. 2364 — and implicitly of mine in that appeal
when it was before me — I note that the instant case arises in neither the District of
Nebraska nor the Eighth Circuit, and that of the Board decisions on which I rely above,
three — Fountain Lake, Lakewood Plaza, and Lutheran-Caledonia — are longstanding
Board precedents that did arise in the Eighth Circuit. I believe that I am bound to follow
them, and that I simply cannot provide the form of relief Petitioner seeks on these facts.
The potential for Petitioner to be included in the Special Focus Facility program list is
neither an enforcement remedy nor an initial determination subject to my review. 42
C.F.R. §§ 488.406, 498.3(b).

Petitioner also asserts, partly in reliance on language in the United States District Court’s
Orders of July 6, 2012 and December 16, 2011, that I must consider its claim that it
would be denied its constitutional rights to due process of law if not allowed to appeal the
deficiencies and scope and severity ratings determined by CMS. However, similar
arguments have not found success when they have been raised before the Board. Neither
the ALJs of this forum nor the Board may consider such challenges to CMS actions.
Carrington Place of Muscatine, DAB No. 2321, at 24 (2010); Columbus Park Nursing
and Rehabilitation Center, DAB No. 2316, at 10. The regulations and prior decisions in
this forum and before the Board uniformly adhere to the doctrine that there is no right to
a hearing where deficiencies are identified, but where CMS had thereafter rescinded the
initial determination to impose enforcement sanctions or remedies. Here, the PICMP and
the DPNA were both completely rescinded, and after the CMS letter of April 16, 2012,
Petitioner faced no sanctions or remedies whatsoever. The authority delegated to me by
the Secretary of this Department in cases involving CMS is specified at 42 C.F.R.

§§ 498.3 and 498.5. The regulations limit my authority to hear and decide only cases
involving specified initial determinations by CMS, and since April 16, 2012, none have
been present in this case.

Section 498.70(b) of 42 C.F.R. authorizes me to dismiss a hearing request when a
petitioner does not have a right to a hearing, and for that reason I do so now in this
matter. Petitioner’s March 16, 2012 and May 1, 2012 Requests for Hearing. consolidated
into this proceeding by Order of May 9, 2012, must be, and they are, DISMISSED.

The parties may request that an order dismissing a case be vacated pursuant to 42 C.F.R.
§ 498.72.

/s/
Richard J. Smith
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.
Amaury Espinal d/b/a Liberty Mini Market,
Respondent.

Docket No. C-12-731
FDA Docket No. FDA-2012-H-0506

Decision No. CR2575

Date: July 26, 2012

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated the above-captioned matter when it
filed an Administrative Complaint for Civil Money Penalties (Complaint) with the Civil
Remedies Division and the Food and Drug Administration’s (FDA) Division of Dockets
Management. CTP seeks to impose civil money penalties under the Federal Food, Drug,
and Cosmetic Act (Act) and the Act’s implementing regulations.

The Complaint alleges the following facts. Respondent owns an establishment in
Philadelphia, Pennsylvania that sells tobacco products. Complaint § 2. CTP conducted
two inspections of the establishment. Complaint § 8. During a June 24, 2011 inspection,
an FDA-commissioned inspector observed that Respondent:

[Sold] cigarettes or smokeless tobacco products to a person younger than
18 years of age, in violation of 21 C.F.R. § 1140.14(a); [and] fail[ed] to
verify by means of photographic identification, containing the bearer’s
date of birth, that no person purchasing cigarettes or smokeless tobacco
is younger than 18 years of age, as required by 21 C.F.R. § 1140.14(b)(1).

Complaint § 10.

On September 29, 2011, CTP issued a warning letter to Respondent specifying the
violations that the inspector observed. The letter warned Respondent that a failure to
correct the violations could result in the imposition of civil money penalties and that it
was Respondent’s responsibility to ensure compliance with the law. Complaint § 10.
The CTP did not receive a response to the warning letter. Complaint § 11.

During an inspection, an FDA-commissioned inspector documented that “a person
younger than 18 years of age was able to purchase a package of Newport Box 100s
cigarettes on March 8, 2012, at approximately 4:01 PM.” Complaint § 9. The inspector
also documented that “the minor’s identification was not verified before the sale. . . on
March 8, 2012, at approximately 4:01 PM.” Complaint § 9.

In compliance with 21 C.F.R. §§ 17.5 and 17.7, CTP served Respondent with the
Complaint on May 29, 2012, via United Parcel Service. CTP charged Respondent with
violating 21 C.F.R. § 1140.14(a) (sale of tobacco products to a minor) and 21 C.F.R.

§ 1140.14(b)(1) (failure to verify the age of a person purchasing tobacco products by
means of photographic identification containing the bearer’s date of birth). Complaint
41 1,9, 10. CTP asked to impose a $500 civil money penalty based on three alleged
violations of the regulations in a 24-month period. Complaint § 13. Both the cover letter
to the Complaint and the Complaint provided detailed instructions related to filing an
answer and requesting an extension of time to file an answer. The letter and Complaint
stated that failure to file an answer could result in the imposition of a civil money penalty
against Respondent. Respondent neither filed an answer nor requested an extension of
time within the 30-day time period prescribed in 21 C.F.R. § 17.9.

If a respondent does not file an answer within 30 days of a properly served complaint, the
regulations provide that the:

presiding officer shall assume the facts alleged in the complaint to be true,
and if such facts establish liability under the relevant statute, the presiding
officer shall issue an initial decision within 30 days of the time the answer
was due, imposing: (1) The maximum amount of penalties provided for by
law for the violations alleged; or (2) The amount asked for in the complaint,
whichever amount is smaller.
3
21 C.F.R. § 17.11 (a). Further, a failure to file a timely answer means that “respondent

waives any right to a hearing and to contest the amount of penalties and assessments”
imposed in the initial decision. 21 C.F.R. § 17.11(b).

Accepting the facts alleged in the Complaint as true, I find that those facts establish
Respondent’s liability under the Act. See 21 U.S.C. §§ 333(f)(9), 387c(a)(7)(B), 387£(d);
21 C-F.R. §§ 1140.1(b); 1140.14. Lalso find that CTP’s request to impose a $500 civil
money penalty is permissible.! See 21 C.F.R. § 17.2.

Therefore, Respondent is directed to pay a civil money penalty in the amount of $500.00.
This initial decision becomes final and binding upon both parties within 30 days of the
date of its issuance. 21 C.F.R. § 17.11(b).

It is so ordered.

/s/
Scott Anderson
Administrative Law Judge

'The CTP Complaint alleges that four regulatory violations occurred within 24 months.
Complaint §{ 9-10. However, CTP “requests that a civil money penalty in the amount of
$500 be assessed against Respondent for three violations of 21 C.F.R. Part 1140 within a
twenty-four month period.” Complaint § 13. This is less than the maximum penalty
allowed under the regulations because CTP could have sought a $2,000 penalty. See

21 C.F.R. § 17.2.