Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Double AA Shah Inc.
d/b/a Shah Food Mart #2,

Respondent.

Docket No. C-14-38
FDA Docket No. FDA-2013-H-1248

Decision No. CR3048
Date: December 23, 2013
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Double AA Shah Inc. d/b/a Shah Food Mart #2,
alleging facts and legal authority sufficient to justify the imposition of a civil
money penalty of $500. Respondent did not timely answer the Complaint, nor did
Respondent request an extension of time within which to file an answer.
Therefore, I enter a default judgment against Respondent and order that
Respondent pay a civil money penalty in the amount of $500.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent’s staff unlawfully
sold cigarettes to minors and failed to verify that the cigarette purchasers were of
sufficient age, thereby violating the Federal Food, Drug, and Cosmetic Act (Act)
and its implementing regulations found at 21 C.F.R. Part 1140. CTP seeks a civil
money penalty of $500.
On October 24, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that within 30 days Respondent should
pay the penalty, file an answer, or request an extension of time within which to file
an answer. CTP warned Respondent that if it failed to take one of these actions
within 30 days an Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision by default ordering Respondent to pay the full
amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor
has it requested an extension. Therefore, pursuant to 21 C.F.R. § 17.11(a), lam
required to issue an initial decision by default if the Complaint is sufficient to
justify a penalty. Accordingly, I must determine whether the allegations in the
Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Shah Food Mart #2, an establishment that sells tobacco
products and is located at 601 Texas Avenue, Texas City, Texas 77590.
Complaint 3.

e On January 21, 2013, an FDA-commissioned inspector observed that “‘a
person younger than 18 years of age was able to purchase a package of
Camel Crush Regular Fresh cigarettes .. . at approximately 12:36 PM
CT[.]” The inspector also noted that “the minor’s identification was not
verified before the sale ... on January 21, 2013 ....” Complaint § 10.

e On February 7, 2013, CTP issued a Warning Letter to Shah Food Mart #2
explaining that the inspector’s January 21, 2013 observations constituted
violations of regulations found at 21 C.F.R. § 1140.14(a) and (b)(1). In
addition to describing the violations, the letter advised Respondent that the
FDA may initiate a civil money penalty action or take other regulatory
action against Respondent if it failed to correct the violations. The letter
also stated that it was Respondent’s responsibility to comply with the law.
Complaint § 10.

e¢ On February 14, 2013, Noman Shah, Respondent’s owner, responded in
writing to the Warning Letter on Respondent’s behalf. “Mr. Shah stated
that he will make sure that his employees do not fail to check an underage
customer’s ID again.” Complaint 11.
e On May 24, 2013, FDA-commissioned inspectors documented additional
violations of 21 C.F.R. Part 1140 during another inspection of
Respondent’s establishment. The inspectors noted that “a person younger
than 18 years of age was able to purchase a package of Marlboro cigarettes
... at approximately 7:17 PM[.]” The inspectors also noted that “the
minor’s identification was not verified before the sale . . . on May 24, 2013
....” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under

21 C.F.R. § 1140.14(a), retailers are prohibited from selling cigarettes to any
person younger than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer
must verify, by means of photo identification containing the bearer’s date of birth,
that no cigarette purchasers are younger than 18 years of age.

Here, Respondent violated 21 C.F.R. § 1140.14(a) on January 21, 2013, and May
24, 2013, when its staff sold cigarettes to minors. Respondent also violated 21
C.F.R. § 1140.14(b)(1) on those same dates when its staff did not verify, by
checking the cigarette purchasers’ photographic identification, that the cigarette
purchasers were 18 years of age or older. Therefore, Respondent’s actions and
omissions on two separate occasions at the same retail outlet constitute violations
of law for which a civil money penalty is merited. Accordingly, I find that a civil
money penalty of $500 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Yemco Fuel Inc.
d/b/a Marathon,

Respondent.

Docket No. C-14-53
FDA Docket No. FDA-2013-H-1264

Decision No. CR3046
Date: December 23, 2013
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint
(Complaint) against Respondent, Yemco Fuel Inc. d/b/a Marathon, alleging facts
and legal authority sufficient to justify the imposition of a civil money penalty of
$500. Respondent did not timely answer the Complaint, nor did Respondent
request an extension of time within which to file an answer. Therefore, I enter a
default judgment against Respondent and order that Respondent pay a civil money
penalty in the amount of $500.

CTP began this case by serving a Complaint on Respondent and filing a copy of
the Complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The Complaint alleges that Respondent’s staff unlawfully
sold cigarettes to minors and failed to verify that the cigarette purchasers were of
sufficient age, thereby violating the Federal Food, Drug, and Cosmetic Act (Act)
and its implementing regulations found at 21 C.F.R. Part 1140. CTP seeks a civil
money penalty of $500.

On October 30, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that within 30 days Respondent should
pay the penalty, file an answer, or request an extension of time within which to file
an answer. CTP warned Respondent that if it failed to take one of these actions
within 30 days an Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision by default ordering Respondent to pay the full
amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor
has it requested an extension. Therefore, pursuant to 21 C.F.R. § 17.11(a), lam
required to issue an initial decision by default if the Complaint is sufficient to
justify a penalty. Accordingly, I must determine whether the allegations in the
Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns Marathon, an establishment that sells tobacco products
and is located at 4111 East 7 Mile Road, Detroit, Michigan 48234.
Complaint §[ 3.

¢ On January 25, 2013,' an FDA-commissioned inspector observed that “a
person younger than 18 years of age was able to purchase a package of
Newport Box 100s cigarettes ... at approximately 5:05 PM ET[.]” The
inspector also noted that “the minor’s identification was not verified before
the sale... on January 25, 2013... .” Complaint § 10.

e On February 7, 2013, CTP issued a Warning Letter to Marathon explaining
that the inspector’s January 25, 2013 observations constituted violations of
regulations found at 21 C.F.R. § 1140.14(a) and (b)(1). In addition to
describing the violations, the letter advised Respondent that the FDA may
initiate a civil money penalty action or take other regulatory action against
Respondent if it failed to correct the violations. The letter also stated that it
was Respondent’s responsibility to comply with the law. Complaint § 10.

*CTP states “an FDA-commissioned inspector observed violations at the
establishment on January 25, 2012.” Complaint § 10. Elsewhere in that
paragraph, CTP states that the violations occurred on January 25, 2013. I infer
that CTP meant to state that the FDA-commissioned inspector observed the
violations on January 25, 2013.
e¢ On February 16, 2013, an unidentified person responded in writing to the
Warning Letter on Respondent’s behalf. “This person stated that the
establishment is conscientious and deeply concerned about the violation
and cannot figure out how it happened.” Complaint § 11.

e On May 25, 2013, FDA-commissioned inspectors documented additional
violations of 21 C.F.R. Part 1140 during another inspection of
Respondent’s establishment. The inspectors noted that “‘a person younger
than 18 years of age was able to purchase a package of Newport Box 100s
cigarettes ... at approximately 9:36 AM[.]” The inspectors also noted that
“the minor’s identification was not verified before the sale . .. on May 25,
2013....” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under

21 C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than
18 years of age. Under 21 C.F.R. § 1140.14(b)(1), a retailer must verify, by means
of photo identification containing the bearer’s date of birth, that no cigarette
purchasers are younger than 18 years of age.

Here, Respondent violated 21 C.F.R. § 1140.14(a) on January 25, 2013, and May
25, 2013, when its staff sold cigarettes to minors. Respondent also violated 21
C.F.R. § 1140.14(b)(1) on those same dates when its staff did not verify, by
checking the cigarette purchasers’ photographic identification, that the cigarette
purchasers were 18 years of age or older. Therefore, Respondent’s actions and
omissions on two separate occasions at the same retail outlet constitute violations
of law that warrant a civil money penalty. Accordingly, I find that a civil money
penalty of $500 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Matthew D. Nourse,
(O.1. No. 5-11-40363-9),

Petitioner,
v.

The Inspector General
Department of Health and Human Services.

Docket No. C-13-945
Decision No. CR3045
Date: December 23, 2013
DECISION

Petitioner, Matthew D. Nourse, is excluded from participating in Medicare, Medicaid,
and all federal health care programs pursuant to section 1128(a)(1) of the Social Security
Act (Act) (42 U.S.C. § 1320a-7(a)(1)) effective May 20, 2013, based on his conviction of
a criminal offense related to the delivery of an item or service under Medicare or a state
health care program. There is a proper basis for the exclusion. Petitioner’s exclusion for
ten years’ is mandatory pursuant to section 1128(c)(3)(G)(i) of the Act (42 U.S.C.

§ 1320a-7(c)(3)(G)(i)) because Petitioner was convicted on one previous occasion of an
offense for which exclusion may be effected under section 1128(a) of the Act.

' Pursuant to 42 C.F.R. § 1001.3001, Petitioner may apply for reinstatement only after the
period of exclusion expires. Reinstatement is not automatic upon completion of the
period of exclusion.
I. Background

The Inspector General (I.G.) for the Department of Health and Human Services (HHS)
notified Petitioner by letter dated April 30, 2013, that he was being excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
ten years. The I.G. advised Petitioner that he was being excluded pursuant to section
128(a)(1) of the Act, based on his conviction in the United States District Court,
Southern District of Ohio, of a criminal offense related to the delivery of an item or
service under Medicare or a state health care program. The I.G. further advised
Petitioner that the ten-year period of exclusion was mandatory under section
128(c)(3)(G)(i) of the Act because Petitioner had been convicted on one other occasion
of one or more offenses for which exclusion could have been effected under section
128(a) of the Act. LG. Ex. 1.

Petitioner timely requested a hearing on June 26, 2013 (RFH). The case was assigned to
me on July 8, 2013, for hearing and decision. On July 24, 2013, I convened a prehearing
conference by telephone, the substance of which is memorialized in my Prehearing
Conference Order and Schedule for Filing Briefs and Documentary Evidence (Prehearing
Order) issued on the same date. During the prehearing conference, Petitioner did not
waive an oral hearing. The I.G. requested to file a motion for summary judgment prior to
further development of the case for hearing and I set a briefing schedule.

The LG. filed a motion for summary judgment and supporting brief (1.G. Br.) on
September 9, 2013, with I.G. exhibits (I.G. Ex.) 1 through 8. Petitioner filed a response
in opposition to the I.G. motion (P. Br.) on October 21, 2013, with 31 pages of
documents that I treat as P. Ex. 1.’ Petitioner filed several documents with his request for

> Petitioner failed to properly mark his exhibits as instructed in my July 24, 2013
Prehearing Order and the Civil Remedies Division Procedures (CRDP). The documents
were not returned to Petitioner for correction, therefore, I will refer to the documents
collectively as P. Ex. 1, and any reference to page numbers corresponds to the page
counter for these e-filed documents. The documents filed with Petitioner’s brief are:
letter from the I.G. dated November 8, 2012; Petitioner’s December 3, 2012 response
letter to the November 8, 2012 LG. letter; Petitioner’s July 8, 2011 reinstatement letter
from the I.G.; the District Court’s Bill of Information filed May 11, 2012; Petitioner’s
sentencing memorandum filed in the District Court on August 6, 2012; the prosecutor’s
response to Petitioner’s sentencing memorandum filed in the District Court on August 13,
2012; the District Court’s August 20, 2012 Judgment in a Criminal Case; the notice of
satisfaction of criminal judgment regarding money penalties filed in the District Court by
the prosecutor on October 4, 2012; and a newspaper article discussing drug abuse.
hearing that were also not marked exhibits that I treat as P. Ex. 2.7 The I.G. filed a reply
brief (1.G. Reply) on November 5, 2013. On November 6, 2013, Petitioner filed a motion
for leave to file a sur-reply with his sur-reply (P. Sur-Reply). Petitioner’s motion is
granted and Petitioner’s sur-reply is accepted.

Petitioner has not objected to I.G. Exs. | through 8 and they are admitted as evidence.
The L.G. did not object to my consideration of the documents that Petitioner submitted
with his request for hearing (P. Ex. 2). The I.G. does object to my consideration of the
newspaper article at pages 29 through 31 of P. Ex. 1 on ground that the article is not
relevant. I.G. Reply at 2, n. 1. I agree with the LG. that the newspaper article has no
relevance to any issue that I may decide and, accordingly, P. Ex. 1, pages 29 through 31
are not admitted. P. Ex. 1, pages 1 through 28 and P. Ex. 2 are admitted.

IL. Discussion
A. Applicable Law
The Act provides, in relevant part:

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

1. Conviction of program related crimes. — Any
individual or entity that has been convicted of a criminal
offense related to the delivery of an item or service under
[Medicare] or any State health care program.

Act § 1128(a)(1) (42 U.S.C. § 1320a-7(a)(1)). The Secretary has promulgated
regulations implementing this provision of the Act. 42 C.F.R. § 1001.101(a).

Exclusion for a minimum period of five years is mandatory for any individual or entity
convicted of a criminal offense for which exclusion is required by section 1128(a) of the

> The documents filed with the request for hearing appear in the e-file database as
Attachment 1, 2, and 3. P. Ex. 2 includes the following documents: Attachment lis the
April 30, 2013 notice of exclusion letter from the I.G.; Attachment 2 is a copy of Ohio
Revised Code § 2951.041 regarding intervention in lieu of conviction; and Attachment 3
is a copy of section 1128 of the Act.
Act. Act § 1128(c)(3)(B) (42 U.S.C. § 1320a-7(c)(3)(B)); 42 C.F.R. § 1001.102(a).
However, if an excluded individual has “been convicted on one previous occasion of one
or more offenses for which an exclusion may be effected,” a ten-year exclusion is
mandated. Act § 1128(c)(3)(G)(i); 42 C.F.R. § 1001.102(d)(1). Pursuant to 42 C.F.R.

§ 1001.102(b), an individual’s period of exclusion may be extended based on the
presence of specified aggravating factors. If the aggravating factors justify a longer
exclusion than the mandatory minimum period of exclusion, then mitigating factors may
be considered as a basis of reducing the period of exclusion to no less than the mandatory
minimum period of exclusion. 42 C.F.R. § 1001.102(c).

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) establishes Petitioner’s right to a
hearing before an administrative law judge (ALJ) and judicial review of the final action
of the Secretary. The standard of proof in a hearing before an ALJ is preponderance of
the evidence. 42 C.F.R. § 1001.2007(c). Petitioner may not collaterally attack the
conviction that provides the basis for the exclusion. Jd. § 1001.2007(d). Petitioner bears
the burden of proof, which includes the burden of going forward and the burden of
persuasion, on any affirmative defenses or mitigating factors, and the I.G. bears the
burden of proof on all other issues. Jd. § 1005.15(b).

B. Issue
The Secretary has by regulation limited my scope of review to two issues:
Whether there is a basis for the imposition of the exclusion; and
Whether the length of the exclusion is unreasonable.
42 CFR. § 1001.2007(a)(1).
C. Findings of Fact, Conclusions of Law, and Analysis

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

1. Petitioner’s request for hearing was timely, and I have jurisdiction.

There is no dispute that Petitioner timely requested a hearing and preserved his right to
review of the issues I am permitted to decide. 42 C.F.R. §§ 1001.2007, 1005.2(c).
However, in his request for hearing, Petitioner urges some issues that I am not permitted
to decide and that are not properly before me for decision. Petitioner argues that the
definition of conviction within section 1128 of the Act is unconstitutionally vague; that
the application of that section is in conflict with state law; and that the imposition of a
ten-year exclusion is contrary to public policy. RFH at 2. I offer no opinion on these
issues as I have no authority to “find invalid or refuse to follow Federal statutes or
regulations.” 42 C.F.R. § 1005.4(c)(1).

2. Summary judgment is appropriate in this case.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to
reasonable notice and an opportunity for a hearing. The Secretary has provided by
regulation that a sanctioned party has the right to a hearing before an ALJ and both the
sanctioned party and the LG. have a right to participate in the hearing. 42 C.F.R.

§§ 1001.2007, 1005.2, 1005.3. Either or both parties may choose to waive appearance at
an oral hearing and to submit only documentary evidence and written argument for my
consideration. 42 C.F.R. § 1005.6(b)(5).

An ALJ may also resolve a case, in whole or in part, by summary judgment. 42 C.F.R.

§ 1005.4(b)(12). Summary judgment is appropriate and no hearing is required where
either: there are no disputed issues of material fact and the only questions that must be
decided involve application of law to the undisputed facts; or the moving party prevails
as a matter of law even if all disputed facts are resolved in favor of the party against
whom the motion is made. A party opposing summary judgment must allege facts which,
if true, would refute the facts relied upon by the moving party. See, e.g., Fed. R. Civ. P.
56(c); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab & Med. Ctr.,
DAB No. 1628 at 3 (1997) (holding in-person hearing required where non-movant shows
there are material facts in dispute that require testimony); Thelma Walley, DAB No. 1367
(1992); see also New Millennium CMHC, DAB CR672 (2000); New Life Plus Ctr., DAB
CR700 (2000).

Petitioner states in his request for hearing and his opposition to the motion for summary
judgment that he is challenging the reasonableness of the length of the exclusion. RFH at
1; P. Br. at 1. He argues that there are genuine issues of material fact that preclude
summary judgment. P. Br. at 2. Petitioner argues that the material facts are related to
whether his should be a permissive exclusion rather than a mandatory exclusion and
provides a list of alleged mitigating facts. P. Br. at 3; P. Sur-Reply at 2. As noted above,
42 C.F.R. § 1001.102(c) states that “[o]nly if any of the aggravating factors set forth in
paragraph (b) of this section justifies an exclusion longer than 5 years, may mitigating
factors be considered as a basis for reducing the period of exclusion to no less than 5
years.” The L.G. has not cited any aggravating factors to extend Petitioner’s period of
exclusion beyond the minimum required by law. The ten-year period of exclusion
proposed by the LG. in this case is the minimum required by section 1128(c)(3)(G)(i),
therefore, I may not consider any mitigating factors to reduce the period of exclusion
below the mandated ten-year period. 42 C.F.R. §§ 1001.102(c) and (d), 1005.4. My
discretion is limited in these cases and I cannot reduce the period of an exclusion below
the minimum mandated by the Act. Accordingly, Petitioner’s argument that a dispute
exists regarding “numerous mitigating factors” that are present and material to the
resolution of this case must be resolved against Petitioner as a matter of law.

In his response brief, Petitioner argues that the I.G. did not give proper consideration to
Petitioner’s December 3, 2012 letter and request for waiver submitted prior to the I.G.’s
final exclusion determination and, thus, there is a material dispute about whether
Petitioner’s exclusion should have been a permissive exclusion. P. Br. at 1-3. This issue
must also be resolved against Petitioner as a matter of law. There is no factual dispute
that Petitioner was previously convicted and excluded or that he has been convicted a
second time of an offense that triggers section 1128(a)(1) of the Act. It is well-settled
that when a conviction triggers the mandatory exclusion provisions of section 1128(a),
the I.G. is precluded from exercising permissive exclusion authority under section
1128(b) of the Act. Gregory J. Salko, M.D., DAB No. 2437 at 4 (2012); Craig Richard
Wilder, DAB No. 2416 at 6-8 (2011); Stacy Ann Battle, D.D.S., DAB No. 1843 (2002);
Lorna Fay Gardner, DAB No. 1733 at 5 (2000); Tanya A. Chuoke, DAB No. 1721 at 14
(2000).

There are no genuine issues of material fact in dispute in this case. The issues raised by
Petitioner must be resolved against him as a matter of law. There is no dispute that
Petitioner’s conviction triggers the mandatory exclusion provisions of section 1128(a) of
the Act. The minimum period of exclusion is dictated by the Act. Accordingly,
summary judgment is appropriate.

3. There is a basis to exclude Petitioner pursuant to section 1128(a)(1) of
the Act.

The LG. cites section 1128(a)(1) of the Act as the basis for Petitioner’s mandatory
exclusion. Section 1128(a)(1) requires that the Secretary exclude from participation in
Medicare or Medicaid any individual or entity: (1) convicted of a criminal offense,
whether a felony or a misdemeanor; and (2) the offense is related to the delivery of an
item or service under Medicare or a state health care program. Petitioner does not dispute
that he was convicted or that his offense related to the delivery of an item or service
under Medicare or a state health care program.

Petitioner is clear in both his request for hearing and briefing that he only challenges the
reasonableness of the ten-year exclusion. RFH at 1; P. Br. at 1. Petitioner does not
dispute that on August 16, 2012, he was convicted pursuant to his guilty plea in the
United States District Court, Southern District of Ohio of one count of concealing the
material fact that he was excluded from participation in all federal health care programs
at the time he filled a prescription for a Medicaid patient. I.G. Exs. 2-3. Petitioner does
not dispute that the acceptance of his guilty plea and the entry of a judgment of
conviction was a conviction within the meaning of section 1128(i) of the Act. He does
not dispute the obvious relationship between his criminal conduct and a state health care
program.

Accordingly I conclude that the elements of section 1128(a)(1) of the Act are satisfied
and that Petitioner’s exclusion is required.

4. Pursuant to section 1128(c)(3)(G)(i) of the Act, a ten-year period of
exclusion is mandatory.

5. A ten-year period of exclusion is not unreasonable in this case as a
matter of law. Act § 1128(c)(3)(G)(i).

Congress requires that an individual or entity excluded pursuant to section 1128(a) of the
Act be excluded for no fewer than five years. Act § 1128(c)(3)(B). Congress also
requires that an individual who is excluded pursuant to section 1128(a) of the Act be
excluded for ten years if the individual has a prior conviction for an offense that would
trigger exclusion under section 1128(a). Act § 1128(c)(3)(G)(i).

Petitioner does not dispute that on October 27, 2004, in the Court of Common Pleas,
General Division, Pike County, Ohio, he pled no contest to five counts of felony theft of
drugs and that the court entered a finding of guilt and judgment of conviction based on
those pleas. Petitioner also does not dispute that on November 16, 2004, the court
granted Petitioner intervention in lieu of conviction pursuant to Ohio Revised Code

§ 2951.04(B), ordering further proceedings stayed to allow a one-year period of
rehabilitation. I.G. Ex. 5, 7. Petitioner does not deny that effective February 20, 2006,
the I.G. excluded him from participation in Medicare, Medicaid, and all federal health
care programs pursuant to section 1128(a)(3) of the Act for a minimum five-year period
due to his felony conviction in the Court of Common Pleas, General Division, Pike
County, Ohio. LG. Ex. 4. There is no evidence that Petitioner requested review or
otherwise challenged the exclusion. It appears that it was during the five-year exclusion
that began on February 20, 2006 and ran through February 19, 2011, that Petitioner
dispensed the prescription that resulted in his second conviction on August 16, 2012.
Based on these undisputed facts, I conclude that Petitioner’s exclusion for ten years is
mandated by Congress pursuant to Act § 1128(c)(3)(G)(i). The I.G. and I are granted no
discretion to impose a lesser period. Because the minimum period mandated by Congress
is ten years, I conclude that that period is not unreasonable as a matter of law.

Petitioner argues that a ten-year period of exclusion is unreasonable. RFH; P. Br. at 1, 4-
6. Petitioner urges me to consider mitigating facts when determining whether the length
of his exclusion is reasonable. Petitioner lists the following alleged mitigating facts: “a
single count Bill of Information (not indictment) for filling prescriptions while under an
exclusion . . . ; no fraud, theft, embezzlement, breach of fiduciary duty, or financial

misconduct; a successful record of personal recovery from the disease of addiction; no

risk to the public; the U.S. Government’s allowing Petitioner to continue to work
throughout the proceedings; Petitioner’s prompt cooperation with the Government’s
investigation; and the renewal of his professional license by the Ohio State Board of
Pharmacy.” P. Br. at 3-6. The regulations are clear, however, that I may only consider
mitigating factors when the LG. argues aggravating factors to justify a period of
exclusion in excess of the mandatory minimum. 42 C.F.R. § 1001.102(c). The I.G. has
not cited any aggravating factors to extend Petitioner’s period of exclusion beyond the
ten-year minimum required by section 1128(c)(3)(G)(i) of the Act. Accordingly, I
conclude that I may not consider any mitigating fact cited by Petitioner to reduce the
period of exclusion below the mandated ten-year period, even if for purposes of summary
judgment I accept them as true and draw all inferences in Petitioner’s favor.

Petitioner also argues in his request for hearing that his October 27, 2004 no contest
pleas, and the findings of guilty and judgment of conviction entered against him in the
Court of Common Pleas, General Division, Pike County, Ohio, should not be considered
a prior conviction for purposes of section 1128(c)(3)(G)(i) of the Act because the Court
granted Petitioner intervention in lieu of conviction pursuant to Ohio Revised Code

§ 2951.04(B). LG. Ex. 5, 7. Petitioner argues “that his participation in an intervention in
lieu of conviction program for which acceptance is based upon drug addiction or mental
illness . . . should not be used as a predicate to a longer minimum exclusionary period.”
RFH at 2. Petitioner’s argument is without merit. Pursuant to section 1128(i) of the Act,
for purposes of section 1128, an individual is convicted of a criminal offense: (1) when a
judgment of conviction is entered regardless of whether there is a subsequent appeal or
the record related to the criminal conduct is expunged; (2) when there has been a finding
of guilt; (3) when a plea of guilty or no contest is accepted; or (4) when an individual
enters a first offender, deferred adjudication, or other arrangement or other program
where a judgment of conviction is withheld. On October 24, 2004, Petitioner’s no
contest plea was accepted and a judgment of guilt was entered. I.G. Ex. 5. Pursuant to
section 1128(i), Petitioner was therefore convicted for purposes of section 1128 of the
Act, despite the fact that he was permitted to participate in an intervention in lieu of
conviction program that may have ultimately resulted in the judgment of conviction being
vacated and/or removed from his record.*

+ Petitioner’s right to challenge the basis for his February 20, 2006 exclusion pursuant to
section 1128(a)(1) of the Act expired in April 2006 and is not subject to further review.
42 C.F.R. §§ 1001.2007(d); 1005.2(c).
III. Conclusion

For the foregoing reasons, Petitioner is excluded from participation in Medicare,
Medicaid, and all federal health care programs for the minimum statutory period of ten
years effective May 20, 2013.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Gordon T. Noakes, D.D.S.,
Petitioner,
v.
The Inspector General.
Docket No. C-13-919
Decision No. CR3044

Date: December 23, 2013

DECISION

The Inspector General (1.G.) of the Department of Health and Human Services notified
Petitioner Gordon T. Noakes, D.D.S., that he was being excluded from participation in
Medicare, Medicaid, and all other federal health care programs for a minimum period of
five years under 42 U.S.C. § 1320a-7(a)(1). For the reasons stated below, I conclude that
the I.G. has a basis for excluding Petitioner from program participation and that the five-
year exclusion is mandated by law.

I. Background

In an April 30, 2013 letter, the I.G. notified Petitioner that he was being excluded from
Medicare, Medicaid, and all federal health care programs for the minimum statutory
period of five years under 42 U.S.C. § 1320a-7(a)(1). I.G. Exhibit (Ex.) 1, at 1. The LG.
excluded Petitioner as a result of his conviction “in the Franklin County Municipal Court,
Columbus, Ohio, of a criminal offense related to the delivery of an item or service under
Medicare or a State health care program....” I.G. Ex. 1, at 1. The letter referenced OI
File Number H-12-41813-9. Petitioner timely filed a request for hearing (RFH) and the
Director of the Civil Remedies Division assigned this case to me for hearing and
decision.
On July 24, 2013, I convened a telephonic prehearing conference, the substance of which
is summarized in my July 25, 2013 Order and Schedule for Filing Briefs and
Documentary Evidence (Order). See 42 C.F.R. § 1005.6. Pursuant to the Order, the I.G.
filed a brief (1.G. Br.) on August 22, 2013, with I.G. Exs. 1-8. Petitioner filed a response
(P. Br.) on October 22, 2013. Petitioner did not submit any exhibits with his response.
The LG. filed a reply brief (I.G. Reply) on October 31, 2013.

II. Motion for Sanctions

The I.G. requested that I sanction Petitioner because Petitioner submitted his brief late.
1.G. Reply at 1. Based on the circumstances in this matter, I deny the I.G.’s motion.

On September 23, 2013, Petitioner filed a motion (P. Mot. for Leave) seeking 30
additional days in which to file his brief because he had recently retained new counsel.
See P. Mot. for Leave at 1. The I.G. did not oppose Petitioner’s request. P. Mot. for
Leave at 1. Unfortunately, I was out of the office when the Civil Remedies Division
received Petitioner’s motion, but the staff attorney assisting me with this case, Joshua
Jowers, granted Petitioner a 15-day extension, consistent with the authority I delegated to
Mr. Jowers in my absence. See By Direction Letter of September 23, 2013. Pursuant to
the By Direction Letter of September 23, 2013, Petitioner’s brief was due October 8,
2013. Subsequently, a significant portion of the Federal government, including the Civil
Remedies Division, was shut down between October 1, 2013, and October 16, 2013. On
October 10, 2013, Petitioner filed a second motion (P. Mot. for Additional Time) seeking
7 more days in which to file his brief. See P. Mot. for Additional Time at 1. Again, the
1.G. did not oppose Petitioner’s motion. P. Mot. for Additional Time at 1. Due to the
partial shutdown of the Federal government, I could not respond to Petitioner’s Motion
for Additional Time until I returned to the office on October 17, 2013, the day the
extension ended. Although Petitioner’s counsel filed his brief late, counsel for the I.G.
as failed to demonstrate how the late filing prejudiced the LG. The government
shutdown was an unfortunate and disruptive event, and I will not deprive Petitioner of the
full opportunity to be heard under these circumstances.

III. Decision on the Record

Without objection, I admit I.G. Exs. 1-8 into the record. The I.G. indicated that it did not
ave any witnesses to offer and that it was not necessary to hold an in-person hearing.
1.G. Br. at 8. Additionally, Petitioner neither requested an in-person hearing, nor offered
any witnesses. Therefore, I issue this decision on the basis of the written record.

IV. Issue

The sole issue before me is whether the I.G. has a basis for excluding Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs based on
a conviction related to the delivery of an item or service under Medicare or a State health
care program.' I have jurisdiction to decide this issue. 42 C.F.R. §§ 1001.2007(a)(1)-(2),
1005.2(a); see also 42 U.S.C. § 1320a-7(f).

V. Findings of Fact, Conclusions of Law and Analysis”

A, Petitioner entered ano contest plea in an Ohio court to one count of
Medicaid Fraud.

Petitioner has been a licensed dentist in the state of Ohio since 1995. LG. Ex. 2. On June
26, 2012, the Attorney General of Ohio filed a complaint against Petitioner in the
Franklin County Municipal Court accusing him of Medicaid Fraud in violation of Ohio
Rev. Code Ann. § 2913.40(B), a first-degree misdemeanor. IG. Ex. 3. According to the
complaint, Petitioner made false statements or representations to obtain reimbursements
between July 1, 2007, and August 23, 2010. LG. Ex. 3. Specifically, Petitioner:

[D]id knowingly make or cause to be made a false or misleading statement
or representation for use in obtaining reimbursement from the medical
assistance program, to wit: submitting claims for service with false dates of
service, the value or the property, services, of funds obtained for each false
representation was less than one thousand dollars ($1,000)[.]

1.G. Ex. 3. Petitioner pled no contest to the charge on June 26, 2012, and the court
entered a judgment of guilty the same day. I.G. Ex. 4. The court ordered Petitioner to
pay $748.50 in restitution to the Ohio Department of Jobs and Family Services.* I.G.
Exs. 5, 6.4 The court also ordered Petitioner to pay $2,184.60 in restitution to United

' Petitioner originally raised a number of issues in his RFH; however, he now concedes
that this is the only issue in the case. P. Br. at 1.

> My findings of fact and conclusions of law are set forth in italics and bold font.

> The Ohio Department of Job and Family Services is the state agency that administers
Ohio’s Medicaid program. Ohio Rev. Code Ann. § 2913.40(A)(2); see also Ohio Dept.
of Job and Family Servs v. Tultz, 152 Ohio App. 3d 405, 407 (2003) (describing the Ohio
Department of Job and Family Services as the entity that “paid $74,613.41 out of
Medicaid funds” to a beneficiary); Kinasz-Reagan v. Ohio Dept. of Job and Family Servs,
164 Ohio App. 3d 458, 459 (2005) (describing the Ohio Department of Job and Family
Services as the entity that “imposed a period of restrictive coverage for Medicaid
benefits” on a beneficiary).

* The LG.’s Ex. 5 is cut off at the bottom where the court delineated the amounts owed
and recipients to whom Petitioner owed restitution. The I.G. submitted letters indicating
Healthcare Community Plan and $3,369.02 in restitution to Caresource. I.G. Exs. 7, 8.
The court also fined Petitioner $200.00. LG. Ex. 5.

B. Petitioner was convicted of a criminal offense that related to the delivery of
an item or service under a State health care program .

An individual must be excluded from participation in any federal health care program if
the individual was 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 U.S.C.
§ 1320a-7(a)(1). For purposes of exclusion, an individual is “convicted” of a criminal
offense when: (1) a judgment of conviction has been entered against him or her in a
federal, state, or local court whether an appeal is pending or the record of the conviction
is expunged; (2) there is a finding of guilt by a court; (3) a plea of guilty or no contest is
accepted by a court; or (4) the individual has entered into a first offender program,
deferred adjudication program, or other arrangement where a judgment of conviction is
withheld. 42 U.S.C. § 1320a-7(i). In the present case, Petitioner admits and the record
demonstrates that Petitioner entered a plea of no contest, or nolo contendre, to
committing Medicaid Fraud in violation of Ohio Rev. Code § 2913.40(B), and the court
accepted this plea. P. Br. at 2, 3-4.; 1.G. Ex. 4, 5. Further, the court entered both a
judgment of conviction and a finding of guilt. I.G. Ex. 4. Therefore, Petitioner was
convicted of a criminal offense for purposes of 42 U.S.C. § 1320a-7(a)(1).

In order for Petitioner’s conviction to support an exclusion under 42 U.S.C. § 1320a-
7(a)(1), there must be a “nexus” between his conduct and the delivery of an item or
service under Medicare or a State health care program. See, e.g., James O. Boothe, DAB
No. 2530, at 5 (2013); 6 Cf. Friedman v. Sebelius, 686 F.3d 813, 820 (D.C. Cir. 2012)
(describing the phrase “relating to” in another part of section 1320a-7 as a “deliberately
expansive” phrase, “the ordinary meaning of [which] is a broad one,” and one that is not
subject to “crabbed and formalistic interpretation”) (internal quotes omitted).

that the day after the court entered judgment, the Ohio Attorney General dispersed
restitution checks from Petitioner to the entities affected by his misconduct. See I.G. Exs.
6-8. L accept the amounts of restitution delineated in the letters from the Ohio Attorney
General as evidence of the amount of restitution that was ordered by the court.

> The term “State health care program” is a health plan approved under Title XIX of the
Social Security Act (i.e., Medicaid). 42 U.S.C. § 1320a-7(h)(1); 42 C.F.R. § 1001.2
(definition of State health care program).

® Administrative decisions cited in this decision are accessible on the internet at:
http://www.hhs.gov/dab/decisions/index.html.
In the present matter, Petitioner pled no contest to violating Ohio Rev. Code

§ 2913.40(B), entitled “Medicaid fraud.” Section 2913.40(B) prohibits individuals from
“knowingly mak[ing] or caus[ing] to be made a false or misleading statement or
representation for use in obtaining reimbursement from the medical assistance program.”
The statute further defines “medical assistance program” as “the program established by
the department of job and family services to provide medical assistance under . . . Title
XIX of the ‘Social Security Act’.”

The fact that Petitioner pled guilty to a violation of Ohio Rev. Code § 2913.40(B)
appears to demonstrate that there is a “nexus” between Petitioner’s criminal conduct and
the delivery of an item or service under Medicaid. However, relying solely on the
statutory provision that Petitioner was convicted of violating is not conclusive as to
whether Petitioner’s conviction is related to the delivery of an item or service under a
State health care program. See, e.g., Dewayne Franzen, DAB No. 1165 (1990). Further,
Petitioner argues that his offense pertains to misleading reimbursement claims and,
therefore, “does not involve any crime relating to the delivery of an item or service”
under Medicaid. P. Br. at 5. Specifically, Petitioner argues that the facts in the case
support the notion that his misconduct, as vaguely stated in the record, only involved
inaccurate billing dates for services that were actually provided. P. Br. at 4-7. Therefore,
I must review the record to determine whether it supports the conclusion that the nexus
requirement is met.

There is sufficient evidence in the record to conclude that there is a nexus between
Petitioner’s conviction and the delivery of items or services under the Medicaid program.
Petitioner pled no contest to a charge of “submitting claims for service with false dates of
service.” I.G. Ex. 3. It is well established that submitting false Medicaid claims is
“related to” the delivery of an item or service of health care. Juan de Leon, Jr., DAB No.
2533 (2013) (submission of “false and fraudulent Medicare and Medicaid claims” is
related to the delivery of an item or service of health care); Gregory J. Salko, M.D., DAB
No. 2437 (2012) (characterizing the proposition that an offense does not have to result in
the actual delivery of an item or service in order to be “related to” delivery as “repeatedly
confirmed”); Michael Travers, M.D., DAB No. 1237 (1991), aff'd, Travers v. Sullivan,
791 F. Supp. 1471, 1481 (E.D. Wash. 1992) and Travers v. Shalala, 20 F.3d 993 (9th Cir.
1994); Jack W. Greene, DAB No. 1078 (1989) aff'd, Green v. Sullivan, 731 F. Supp. 835
(E.D. Tenn. 1990) (a conviction for submitting a false bill is “directly related to the
delivery of the item or service since the submission of a bill or claim for Medicaid
reimbursement is the necessary step, following the delivery of the item or service, to
bring the item within the purview of the program”) (internal quotations omitted).

Further, the fact that the state court ordered Petitioner to pay restitution to the Ohio
Department of Job and Family Services (1.G. Exs. 5, 6) is evidence of a nexus to the
Medicaid program. Alexander Nepumuceno Jamais, DAB CR1480 (2006) (holding that
a sentence involving restitution to an agency that administers a program can serve as a
rebuttable presumption that there is a nexus between the criminal conviction and the
delivery of items or services under the program administered by that agency). Therefore,
the facts regarding the circumstances underlying Petitioner’s conviction support the
existence of a nexus between his conviction and the delivery of an item or service under
Medicaid.

In his brief, Petitioner raises conjecture about why Petitioner was not charged with a
different, and perhaps more egregious, offense under Ohio law. P. Br. at 5-6.
Petitioner’s supposition does not change the fact that Petitioner knowingly submitted
claims with false dates of services. Petitioner also asserts that “‘it is clear that
[Petitioner’s] conduct may not even [have] satisfied the statute [Ohio Rev. Code

§ 2913.40(B)].” P. Br. at 5-6. This argument is an impermissible collateral attack on his
conviction that I cannot entertain. 42 C.F.R. § 1001.2007(d). Finally, Petitioner argues
that the I.G. should have considered imposing a permissive exclusion under 42 U.S.C.

§ 1320a-7(b)(1) because exclusion under 42 U.S.C. § 1320a-7(a)(1) is not warranted. P.
Br. at 7-9. In support of this argument, Petitioner asserts that the term “in connection
with” used in the former statute is broader than the term “related to” in the latter, and that
the former term would better accommodate the facts underlying his conviction. P. Br. at
8-9. Petitioner is incorrect. The reason that 42 U.S.C. § 1320a-7(a)(1) applies to
Petitioner is because his criminal offense related to the Medicaid program. The
permissive exclusion that Petitioner identified expressly does not apply to convictions
involving Medicare or State health care programs (such as Medicaid). 42 U.S.C.

§ 1320a-7(b)(1)(ii). Therefore, the I.G. correctly excluded Petitioner under 42 U.S.C.

§ 1320a-7(a)(1), rather than 42 U.S.C. § 1320a-7(b)(1).

C. Petitioner must be excluded for the statutory minimum period of five years
under 42 U.S.C. § 1320a-7(c)(3)(B).

Because there is a basis for Petitioner’s exclusion under 42 U.S.C. § 1320a-7(a)(1),
Petitioner must be excluded for a minimum period of five years. 42 U.S.C. § 1320a-
7(c)(3)(B); 42 C.F.R. § 1001.102(a).

VI. Conclusion

For the foregoing reasons, I affirm the I.G.’s determination to exclude Petitioner from
participating in Medicare, Medicaid, and all other federal health care programs for the
statutory minimum period of five years pursuant to 42 U.S.C. § 1320a-7(a)(1), (c)(3)(B).

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Multi-Medical Services,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-561
Decision No. CR3042
Date: December 20, 2013
DECISION

I sustain the revocation of the Medicare enrollment and billing privileges of Multi-
Medical Services (Petitioner) based on its noncompliance with 42 C.F.R. § 424.57(c)(2),
(c)(10) and (c)(26) (Supplier Standards 2, 10, and 26).

I. Background

Petitioner, a supplier of durable medical equipment, prosthetics, orthotics and supplies
(DMEPOS), enrolled in Medicare in 1996. By letter dated August 20, 2012, Palmetto
GBA National Supplier Clearinghouse (NSC), a Medicare contractor responsible for
enrolling and issuing billing numbers to Medicare suppliers, revoked Petitioner’s
Medicare number and billing privileges effective September 19, 2012 and imposed the
minimum one-year re-enrollment bar after determining that Petitioner was not in
compliance with supplier standards. Centers for Medicare & Medicaid Services Exhibit
(CMS Ex.) 3.

Petitioner submitted a corrective action plan (CAP) and a request to reconsider the
revocation to NSC. CMS Ex. 4. By letter dated December 11, 2012, NSC determined
that Petitioner’s CAP did not demonstrate its compliance with supplier standards and
forwarded Petitioner’s request to reconsider the revocation decision to its “Medicare Fair
Hearing Officer.” CMS Ex. 5. NSC issued its reconsideration decision on January 22,
2013, determining that Petitioner was noncompliant with Supplier Standards 2, 10, and
26 and informing Petitioner that it could not “be granted access to the Medicare Trust
Fund by way of a Medicare supplier number.” CMS Ex. 6.

Petitioner timely filed a request for hearing on March 19, 2013. Petitioner’s hearing
request does not assert that it was in compliance with supplier standards as of April 30,
2012, the date NSC conducted an inspection of Petitioner. Instead, as discussed below,
Petitioner asserts that it came into compliance with supplier standards at a later date.
Petitioner filed copies of four documents with its hearing request: a document entitled
“Surety Bond, Suppliers of Durable Medical Equipment, Prosthetics, Orthotics and
Supplies, Medicare Program” that the American Safety Casualty Insurance Co. issued on
December 13, 2012 in the amount of $50,000; a Certificate of Liability Insurance issued
June 1, 2012; the “Sender’s Copy” of a FedEx transmittal showing that Petitioner sent a
package to NSC on February 11, 2012; and the NSC Medicare Hearing Officer’s January
22, 2013 reconsideration decision.!

The case was assigned to me for hearing and decision on March 28, 2013, and I issued an
Acknowledgment and Pre-hearing Order (Order) on that date. In the Order, I set dates
for the parties to exchange arguments and evidence. I informed the parties that I would
only schedule a hearing if a party filed admissible, written direct testimony, and the
opposing party then requested cross-examination. Order 410.

On May 2, 2013, CMS filed a motion for summary judgment (CMS Br.), accompanied by
eight exhibits (CMS Exs. 1-8), which I admit without objection. CMS did not list any
witnesses or file written direct testimony.

On June 7, 2013, Petitioner filed a one-page response titled “Petitioner Motion to
Dismiss” (P. MTD) asking me to dismiss the determination revoking Petitioner’s
Medicare enrollment and billing privileges and assuring me that it would henceforth
remain in compliance with supplier standards. Petitioner did not list any witnesses or file
any written direct testimony. Petitioner asserts under its “Exhibit List” that it is offering

' Under the notation “Enclosed” on the bottom left-hand corner of page two of its
hearing request, Petitioner states it is enclosing a “Western Company Surety Bond,” a
“VGM Insurance Certificate,” “an 855s Application — Proof of Mailing,” and a “Request
of change Medicare Letter (confirmed letter has been mailed out to our company address
and has not been received).” While the first three documents Petitioner filed appear to be
the first three documents that Petitioner indicates are enclosed, Petitioner did not file a
“Request of change Medicare Letter” with its March 19, 2013 filing. However, as
explained below, whether or not Petitioner filed this letter does not impact my decision in
the case.
documents “previously provided.” Petitioner indicates that, as “P. Ex. 1,” it is offering
“General Liability Coverage,” as “P. Ex. 2,” it is offering “Surety Bond,” and as “P. Ex.
3,” it is offering “Medicare Change of Ownership Application.” However, Petitioner did
not previously file a document titled “Medicare Change of Ownership Application.” See
supra, p. 2, n.1. I accept the Certificate of Liability Insurance issued June 1, 2012 as P.
Ex. 1, and I accept the Surety Bond issued by American Safety Casualty Insurance Co. on
December 13, 2012 as P. Ex. 2.”

I do not find it necessary to convene an in-person hearing because neither party filed
admissible written direct testimony. Accordingly, the record is closed. Having
considered all of the documentary evidence, I issue this decision based on the complete
written record. See Order ¥ 10.

II. Discussion
A. Applicable Authority

The Social Security Act (Act) requires that the Secretary of the U.S. Department of
Health and Human Services issue regulations establishing a process for the Medicare
enrollment of providers and suppliers. Act, section 1866(j) (42 U.S.C.

§ 1395u(a). A provider or supplier must be enrolled in the Medicare program and be
issued a billing number to have billing privileges and thus be eligible to receive payment
for services rendered to eligible Medicare beneficiaries. 42 C.F.R. § 424.505. DMEPOS
suppliers are subject to on-site surveys, both announced and unannounced, for
accreditation purposes. 42 C.F.R. § 424.58(a).

DMEPOS suppliers must meet the supplier standards found at 42 C.F.R. § 424.57(c) in
order to enroll in Medicare and maintain Medicare billing privileges. As relevant here,
section 424.57(c) provides:

(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

> CMS objects to admission of the documents attached to Petitioner’s hearing request as
exhibits, asserting that they constitute new documentary evidence not previously
produced to the contractor hearing officer. CMS Br. at 6 n.3, citing 42 C.F.R.

§ 498.56(e); Homemakers A+ Servs., DAB CR2322, at 3 (2011). I admit these
documents into evidence because they do not prejudice CMS and actually corroborate
Petitioner’s past noncompliance with supplier standards.
(2) Has not made, or caused to be made, any false statement or
misrepresentation of a material fact on its application for billing privileges.
(The supplier must provide complete and accurate information in response
to questions on its application for billing privileges. The supplier must
report to CMS any changes in information supplied on the application
within 30 days of the change.); . . .

(10) Has a comprehensive liability insurance policy in the amount of at
least $300,000 that covers both the supplier’s place of business and all
customers and employees of the supplier . . . Failure to maintain required
insurance at all times will result in revocation of the supplier’s billing
privileges retroactive to the date the insurance lapsed; . . .

(26) Must meet the surety bond requirements specified in paragraph (d) of
this section.

The regulations provide generally that CMS will revoke a supplier’s billing privileges if
the supplier is found not to meet the supplier standards or other requirements in section
424.57(c). 42 C.F.R. § 424.57(e).2 CMS may also revoke a currently enrolled supplier’s
Medicare billing privileges and any corresponding supplier agreement for noncompliance
when the supplier is determined not to be in compliance with enrollment requirements.
42 C.F.R. § 424.535(a)(1). A supplier may be granted an opportunity to correct the
deficient compliance before a final determination to revoke billing privileges.* 42 C.F.R.
§ 424.535(a)(1) Failure to comply with even one supplier standard is a sufficient basis
to revoke a supplier’s billing privileges. /866/CPayday.com, LLC, DAB No. 22839, at 13
(2009).

B. Issue

The issue in this case is whether CMS was legally authorized to revoke Petitioner’s
Medicare billing privileges based upon its noncompliance with supplier standards.

> Paragraph (e) of section 424.57 was previously designated paragraph (d) and was re-
designated by the rulemaking that imposed the surety bond requirements at paragraph (d);
however, the re-designations have not yet been incorporated in the Code of Federal
Regulations. 42 C.F.R. § 424.57, Editorial Note (2012).

* Petitioner was given the opportunity to file a CAP, but the contractor did not accept it.
In a letter dated December 11, 2012, the contractor stated that Petitioner’s “CAP does not
demonstrate [Petitioner’s] compliance with supplier standards.” CMS Ex. 5, at 1. Ido
not have the authority to review the rejection of a CAP. See, e.g., Conchita Jackson,
M.D., DAB No. 2495, at 6-7 (2013); DMS Imaging, Inc., DAB No. 2313, at 5-8 (2010).
C. Findings of Fact and Conclusions of Law

On September 26, 2005, Petitioner’s “President/Owner,” Samuel De Avila, signed a
CMS Form 8555S certification statement agreeing to adhere to, and continue to meet, all
Medicare enrollment requirements. CMS Ex. 7, at 13. It is a Medicare supplier’s duty to
familiarize itself with program requirements. Waterfront Terrace, Inc., DAB No. 2320,
at 7 (2010), citing Heckler v. Cmty. Health Servs. of Crawford County, 467 U.S. 51, 63-
64 (1984). Petitioner also admits that “Multi Medical Services did not meet compliance
with these standards upon inspection.” P. MTD.

1. Petitioner failed to comply with Medicare requirements by not timely
notifying CMS of a change in ownership, violating 42 C.F.R.
§ 424.57(c)(2) (Supplier Standard 2).

A supplier is required to notify CMS of any changes in the information it previously
provided on its enrollment application. This update must be completed within 30 days of
the change. 42 C.F.R. § 424.57(c)(2). Here, however, Petitioner failed to notify CMS of
a change in its ownership within 30 days of the change occurring. NSC’s Supplier Audit
and Compliance Unit (SACU) uncovered Petitioner’s failure to report the change in
ownership during the April 30, 2012 inspection.

The SACU site investigation report indicates that “Sam De Avila” is the “sole owner” of
Petitioner. CMS Ex. 1, at 1. However, documentation on file with the NSC shows
another individual, “Arturo De Avila,” is also an owner. CMS Ex. 7, at 6.

Petitioner asserts that it:

took action on February 11, 2013 by means of resending the 855s application to
Medicare indicating the changes of ownership and/or managing control
information within the organization. It was stated to the Medicare Hearing Officer
that this change took effect in 1999. Alternatively, it was understood by Sam De
Avila that the announcement of this change had been reported years ago. The
official application was sent and confirmed received on February 14, 2013 but was
not able to be processed on March 12, 2013 due to the revocation of the Medicare
number.

P. MTD. Nowhere in this communication, however, does Petitioner offer evidence to
show that the purported 1999 change of ownership was reported to Medicare within 30
days of the change.* In contrast, CMS offers a form 855S enrollment application that

> On October 15, 2012, Petitioner submitted one page of a CMS 8558 enrollment
application purporting to show that Arturo De Avila was no longer an owner as of
Petitioner filed with NSC in 2005, which lists Arturo De Avila as one of Petitioner’s
owners in 2005. CMS Ex. 7, at 6, 13. Petitioner has thus not proven that it submitted
notification deleting Arturo De Avila as an owner within 30 days of the purported 1999
change of ownership date. Absent such a showing, Petitioner was not in compliance with
42 CFR. § 424.57(c)(2).

2. Petitioner failed to comply with Medicare requirements by failing to
maintain liability insurance at all times, violating 42 C.F.R.
§ 424.57(c)(10) (Suppler Standard 10).

CMS found Petitioner out of compliance with 42 C.F.R. § 424.57(c)(10) because
Petitioner failed to submit information supporting the existence of a valid, active
insurance policy for its business, where the information provided could be verified with
the underwriter as the company covering Petitioner’s business. CMS Ex. 5, at 1.

Petitioner does not assert that it was in compliance with Supplier Standard 10 at all times.
Instead, it asserts that it “took action on June 1, 2012 by means of contacting VGM
Insurance Services and requested to revise the certificate to identify The National
Supplier Clearinghouse-AG-495 as the insurance certificate holder. The requested
revision was processed and a new certificate of liability insurance was provided with
coverage of three million dollars for coverage from 05/24/12 — 05/24/13 with certificate
holder National Supplier Clearinghouse AG-495.” P. MTD. Petitioner has not shown,
however, that it maintained a comprehensive liability insurance policy at all times,
including at the time of the inspection.

3. Petitioner failed to comply with Medicare requirements by failing to
comply with supplier surety bond requirements, violating 42 C.F.R.
§ 424.57(c)(26) (Supplier Standard 26).

The Secretary may not issue or renew a Medicare provider number to a DMEPOS
supplier unless the supplier “provides the Secretary on a continuing basis... with a
surety bond in a form specified by the Secretary and in an amount that is not less than
$50,000.” Act, section 1834(a)(16)(B) (42 U.S.C. § 1395m(a)(16)(B)). A DMEPOS
supplier must submit a surety bond from an authorized surety of $50,000 which is
continuous, names CMS as obligee, and provides that the surety is liable for unpaid

September 9, 1999. CMS Ex. 4, at 4. The January 22, 2013 reconsideration decision
notes that until October 15, 2012, CMS had not been apprised of this change in
ownership. CMS Ex. 6, at 2.
claims, civil money penalties, or assessments that occur during the term of the bond. 42
C.E.R. § 424.57(c)(26), (d)(1)(ii), (2), (4), (5), (10).° The supplier must meet the
specific surety bond requirements at section 424.57(d), and CMS will revoke a DMEPOS
supplier’s billing privileges if the supplier fails to obtain, file timely, or continuously
maintain the surety bond. 42 C.F.R. §§ 424.57(c)(26), 424.57(d)(4).

On June 27, 2012, Petitioner’s surety company canceled Petitioner’s surety bond as of
September 30, 2012. CMS Ex. 8, at 1. Petitioner admits that it let its surety bond lapse
and did not obtain a new bond until December 2012. CMS Ex. 8, at 1; CMS Ex. 4, at 8,
10; Petitioner Hearing Request. Petitioner asserts specifically that it “took action on
December 4, 2012 by means of contacting American Safety Insurance Company
requesting confirmation of Surety Bond Coverage in the amount of fifty thousand dollars
for Medicare DMEPOS. The requested documentation was furnished and consists of a
two year coverage term from 12/14/2013-12/14/2015.” P. MTD. The undisputed fact
that Petitioner obtained a surety bond over two months after its prior surety bond lapsed
does not satisfy the statutory and regulatory objective of providing continuous protection
to the Medicare program, which requires revocation of billing privileges where the
supplier doesn’t provide a new surety bond before the effective date of the cancellation.
During the time the surety bond was lapsed, CMS was unprotected from potential fraud
or billing errors. Pepper Hill Nursing & Rehab. Ctr., LLC, DAB CR2293, at 6-7 (2010),
aff'd, DAB No. 2395, at 5-7 (2011); .A Brighter Future Healthcare Servs., Inc., DAB
CR2267, at 6 (2010). Accordingly, Petitioner is not in compliance with Supplier
Standard 26.

Petitioner argues that it will henceforth remain in compliance with supplier standards.
Asserting that it will prospectively comply with supplier standards, however, is not a
valid defense to the revocation of Petitioner’s Medicare enrollment and billing privileges.
Even if I assume Petitioner’s statements to be true, the applicable regulations still bind
me. | lack authority to invalidate or change an existing regulation or grant Petitioner an
exemption from compliance with regulatory requirements. /866/CPayday.com, DAB
No. 2289, at 14.

4. CMS was authorized to revoke Petitioner’s Medicare enrollment and
billing privileges due to its failure to comply with Supplier Standards
effective September 19, 2012.

I must sustain CMS’s determination to revoke if a legitimate basis exists and where the
facts establish noncompliance with one or more of the regulatory standards.

° As noted at footnote 3, paragraph (d) of 42 C.F.R. § 424.57 was amended to add surety
bond requirements. However, the re-designation has not yet been incorporated into the
Code of Federal Regulations. 42 C.F.R. § 424.57, Editorial Note (2012).
18661CPayday.com, LLC, DAB No. 2289, at 13. Petitioner failed to comply with three
supplier standards, any one of which authorizes CMS to revoke its enrollment and billing
privileges.

Revocation generally becomes effective 30 days after CMS or the CMS contractor mails
notice of its determination to the supplier. 42 C.F.R. § 424.535(g). Here, I find NSC
mailed notice of Petitioner’s revocation and one-year re-enrollment bar on August 20,
2012 giving 30-day notice before the September 19, 2012 revocation date.

A supplier whose billing privileges are revoked is “barred from participating in the
Medicare program from the effective date of the revocation until the end of the re-
enrollment bar. The re-enrollment bar is a minimum of 1 year, but not greater than 3
years, depending on the severity of the basis for revocation.” 42 C.F.R. § 424.535(c).
The length of the re-enrollment bar CMS imposes is not a determination subject to review
by an administrative law judge. See Ravindra Patel, M.D., DAB CR2171, at 7 n.5
(2010); Emmanuel Brown M.D. and Simeon K. Obeng, M.D., DAB CR2145, at 10
(2010); see also 42 C.F.R. § 498.3(b)(17) (establishing as an initial decision subject to
review “[w]hether to deny or revoke a... supplier’s Medicare enrollment . . . ,” but not
the length of re-enrollment bar).

III. Conclusion

CMS, through its contractor NCS, had a legitimate basis to revoke Petitioner’s Medicare
enrollment and billing privileges based on any of the three supplier standards with which
it was noncompliant. Accordingly, I sustain the September 19, 2012 revocation of
Petitioner’s Medicare enrollment and billing privileges and its one year re-enrollment bar.

/s/
Joseph Grow
Administrative Law Judge


Department of Health

DEPARTMENTAL

and Human Services

APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,

Complainant

Vv.

Bootheel Petroleum Co., Inc.
d/b/a B J’s Kwik Shop,

Respondent.

Docket No.
FDA Docket No. F

. C-14-41
DA-2013-H-1252

Decision No. CR3037

Date: Decem|

INITIAL DECISION AND

The Center for Tobacco Products (CTP) fi

ber 19, 2013
DEFAULT JUDGMENT

ed an Administrative Complaint

(Complaint) against Respondent, Bootheel Petroleum Co., Inc. d/b/a B J’s Kwik

Shop, alleging facts and legal authority su:
civil money penalty of $250. Respondent

nor did Respondent request an extension o

ficient to justify the imposition of a
did not timely answer the Complaint,
f time within which to file an answer.

Therefore, I enter a default judgment against Respondent and order that

Respondent pay a civil money penalty in t

CTP began this case by serving a Complai

the Complaint with the Food and Drug Ad

ie amount of $250.

nt on Respondent and filing a copy of
ministration’s (FDA) Division of

Dockets Management. The Complaint alleges that Respondent’s staff unlawfully

sold smokeless tobacco to minors, thereby

violating the Federal Food, Drug, and

Cosmetic Act (Act) and its implementing regulations found at 21 C.F.R. Part

1140. CTP seeks a civil money penalty o:

$250.
On October 24, 2013, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and
accompanying cover letter, CTP explained that within 30 days Respondent should
pay the penalty, file an answer, or request an extension of time within which to file
an answer. CTP warned Respondent that if it failed to take one of these actions
within 30 days an Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision by default ordering Respondent to pay the full
amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor
has it requested an extension. Therefore, pursuant to 21 C.F.R. § 17.11(a), lam
required to issue an initial decision by default if the Complaint is sufficient to
justify a penalty. Accordingly, I must determine whether the allegations in the
Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its
Complaint:

e Respondent owns B J’s Kwik Shop, an establishment that sells tobacco
products and is located at 623 North State Route 25, Dexter, Missouri
63841. Complaint § 3.

e On March 12, 2013, an FDA-commissioned inspector observed that “‘a
person younger than 18 years of age was able to purchase a package of
Grizzly Pouches Premium Wintergreen smokeless tobacco . . . at
approximately 5:19 PM CT.” Complaint § 10.

e¢ On March 28, 2013, CTP issued a Warning Letter to B J’s Kwik Shop
explaining that the inspector’s March 12, 2013 observation constituted a
violation of a regulation found at 21 C.F.R. § 1140.14(a). In addition to
describing the violation, the letter advised Respondent that the FDA may
initiate a civil money penalty action or take other regulatory action against
Respondent if it failed to correct the violation. The letter also stated that it
was Respondent’s responsibility to comply with the law. Complaint § 10.

e Inan undated letter, Christopher K. Barbour, Treasurer of Bootheel
Petroleum Co., Inc., responded to the Warning Letter on Respondent’s
behalf. “Mr. Barbour stated [that] a calendar was purchased to assist
employees [when] calculating the age of the patrons wishing to purchase
tobacco.” Complaint § 11.
e On July 3, 2013, FDA-commissioned inspectors documented an additional
violation of 21 C.F.R. § 1140.14(a) during another inspection of
Respondent’s establishment. The inspectors noted that “‘a person younger
than 18 years of age was able to purchase a package of Grizzly Long Cut
Premium Wintergreen smokeless tobacco . . . at approximately 9:15 AM.”
Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). Under

21 C.F.R. § 1140.14(a), retailers are prohibited from selling smokeless tobacco to
any person younger than 18 years of age.

Here, Respondent violated 21 C.F.R. § 1140.14(a) on March 12, 2013 and July 3,
2013, when its staff sold smokeless tobacco to minors. Therefore, Respondent’s
actions and omissions on two separate occasions at the same retail outlet constitute
violations of law for which a civil money penalty is merited. Accordingly, I find
that a civil money penalty of $250 is permissible under 21 C.F.R. § 17.2.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL

APPEALS BOARD

Civil Remedies Division

Lynda L. Hook,
(OI File No. H-12-42979-9),

Petitioner,

Vv.

The Inspector General.

Docket No.

ALJ Ruling

. C-13-1326

No. 2014-17

Date: December 13, 2013

DISMISSAL

Petitioner, Lynda L. Hook, was a licensed practical nurse, working in New Hampshire.

She pled guilty in state court to one count o:

theft by deception. Specifically, while

employed at a doctor’s office, she called in a false prescription, utilizing Medicaid
insurance funds to cover its costs. I.G. Ex. 2 at 2-3. Pursuant to section 1128(a)(1) of the

Social Security Act (Act), the Inspector Gen
participating in Medicare, Medicaid, and all
five years. Petitioner appeals, challenging t

The I.G. has moved to dismiss, arguing that
properly addressed in a hearing. I agree and

1.G.’s Motion to Dismiss.

Discussion

eral (I.G.) has excluded her from
federal health care programs for a period of
e length of the exclusion.

Petitioner fails to raise an issue that may be
, for the reasons discussed below, grant the

In a letter dated August 30, 2013, the LG. a

vised Petitioner Hook that she was excluded

from participation in Medicare, Medicaid, and all federal health care programs because
she had been convicted of a criminal offense related to the delivery of an item or service
under Medicare or a state health care program. The letter explained that section
1128(a)(1) of the Act authorizes the exclusion. I.G. Ex. | at 1.

Petitioner concedes that she was convicted and is subject to exclusion under section
1128(a)(1), but argues that the period of exclusion is too severe, and that her character
and other factors justify reducing the period of exclusion. P. Response; P. Request for
Hearing (Sept. 4, 2013).

Section 1128(a)(1) of the Act mandates that the Secretary of Health and Human Services
exclude from program participation any individual who has been convicted under federal
or state law of a criminal offense related to the delivery of an item or service under the
Medicare or a state health care program. See also 42 C.F.R. § 1001.101(a). The
exclusion must be for a minimum period of five years. Act § 1128(c)(3)(B); 42 C.F.R.

§ 1001.102(a). Mitigating factors may be considered as bases for reducing the period of
exclusion only if the exclusion period is longer than five years. 42 C.F.R. § 1001.102(c).

An excluded individual may challenge the basis for the exclusion and the length of the
exclusion. 42 C.F.R. § 1001.2007(a)(1). However, where, as here, the I.G. imposes an
exclusion of five years, the length of the exclusion is not reviewable. 42 C.F.R.

§ 1001.2007(a)(2). Iam required to dismiss a request for hearing where that request fails
to raise any issue that may properly be addressed in a hearing. 42 C.F.R. § 1005.2(e)(4).
Because Petitioner’s hearing request does not raise an issue that I am empowered to
resolve, I grant the I.G.’s motion and dismiss Petitioner’s appeal.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

' The LG. filed a motion to dismiss and supporting brief, along with two exhibits (I.G.
Exs. 1-2). Petitioner filed a response, which included character references. The I.G.
filed a reply.


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

Wesley Medical Center, LLC, d/b/a Galichia Heart Hospital
(CCN: 170202),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-13-956
Decision No. CR3033
Date: December 13, 2013
DECISION

Petitioner, Wesley Medical Center, LLC, d/b/a Galichia Heart Hospital, challenges the
effective date of its participation in the Medicare program. Initially and on
reconsideration, the Centers for Medicare & Medicaid Services (CMS) determined that
the hospital first met Medicare program requirements on April 20, 2012. CMS therefore
approved the hospital’s program participation effective that date. Petitioner appeals,
arguing that it is entitled to an earlier effective date. The parties have filed cross-motions
for summary judgment.

For the reasons set forth below, I grant CMS’s motion and deny Petitioner’s.
Background

Under the Medicare statute, a hospital is defined as an institution that is primarily
engaged in providing diagnostic, therapeutic and rehabilitation services to inpatients,
under the supervision of physicians, and meets other specified requirements. Social
Security Act (Act) § 1861(e). It may participate in the Medicare program as a provider of
services, if it meets the statutory definition and complies with regulatory requirements
called conditions of participation. Act § 1866; 42 C.F.R. §§ 488.3(a); 489.10(a). A
“condition of participation” represents a broad category of services. Each condition is
contained in a single regulation, which is divided into subparts called standards. 42
CFR. Part 482.

To determine whether certain prospective providers (such as hospitals) qualify for
Medicare certification, CMS authorizes certain accreditation organizations to survey and
accredit the applicants and recommend Medicare certification. Institutions accredited by
approved accreditation bodies are generally “deemed” to meet Medicare conditions of
participation. Act § 1865; 42 C.F.R. § 488.5. However, if CMS finds that the
prospective provider has significant deficiencies, it will be deemed not to meet those
conditions. Act § 1865(c). Ultimately, CMS makes that call, and its decision to reject
the accreditation body’s survey and recommendations based on that survey is not
reviewable. See 42 C.F.R. § 498.3, and discussion, below.!

Here, prior to February 1, 2012, Wesley Medical Center, LLC, was a Medicare-certified
acute care hospital, located in Wichita, Kansas. On February 1, 2012, it acquired the
assets of Galichia Heart Hospital, also located in Wichita. Prior to this change of
ownership, Galichia had been a Medicare-certified provider; however, Petitioner did not
accept assignment of Galichia’s provider agreement. It therefore acquired a non-certified
entity, which would be treated the same way as any new applicant to the program. CMS
Survey & Certification Letter 09-08 (October 17, 2008).

Det Norske Veritas Healthcare (DNV Healthcare) is a national accrediting organization,
approved by CMS to accredit prospective providers and recommend Medicare
certification. Petitioner contracted with DNV Healthcare to survey Galichia for
accreditation. On February 1, 2012, a three-person survey team visited the facility and
conducted a one-day (8:30 a.m. to 4:30 p.m.) accreditation survey. CMS Exhibit (Ex.) 4.
In a letter dated March 28, 2012, DNV Healthcare told Petitioner that it would
recommend certification, effective February 1, 2012. CMS Ex. 2 at 1; P. Ex. 4.
However, because the surveyors cited deficiencies that had to be corrected, DNV
Healthcare subsequently changed the recommended effective date to February 17, 2012,
the date the hospital submitted an acceptable plan of correction. P. Exs. 2, 3, 5.

Thereafter, however, CMS determined that DNV Healthcare had conducted an
inadequate survey, and, by letter dated April 16, 2012, CAPT Cindy R. Melanson, the
health evaluation officer for CMS’s Office of Clinical Standards and Quality, advised the
accrediting organization that its survey did not comply with CMS requirements for a full,
standard survey. CMS Ex. 8 at 4 (Melanson Decl. § 6). DNV Healthcare agreed to
conduct promptly a more adequate survey. CMS Ex. 8 at 4 (Melanson Decl. § 7).

' Whether a prospective provider qualifies as a provider is, of course, reviewable (42
C.F.R. § 498.3(b)(1), but that issue is separate from CMS’s administrative determination
as to the adequacy of the accrediting organization’s survey performance.
Surveyors from DNV Healthcare returned to the hospital and, from April 17 through 19,
2012, conducted another survey, again finding deficiencies, which did not rise to
condition-level. The hospital submitted a written plan of correction, which DNV
Healthcare accepted on April 20, 2012. P. Ex. 6. By letter dated May 11, 2012, CMS
advised Petitioner that, based on the survey findings and the hospital’s acceptable plan of
correction, the hospital met the applicable requirements for Medicare participation,
effective April 20, 2012. P. Ex. 7.

Petitioner challenges this effective date, arguing that it should have been certified
effective February 17, 2012. The parties have submitted memoranda in support of their
respective motions for summary judgment (CMS MSJ; P. MSJ). CMS has submitted a
reply (CMS Reply) and Petitioner a response (P. Response). CMS has submitted 12
exhibits (CMS Exs. 1-12) and Petitioner has submitted 10 exhibits (P. Ex. 1-10).?

Discussion

I. CMS properly determined the April 20, 2012 effective date for
Petitioner’s Medicare enrollment, because the undisputed
evidence establishes that the hospital failed to meet program
requirements prior to that date. *

> T note that Petitioner objects to my admitting CMS Exs. 9-12, which were filed late.

Petitioner also asked that I issue a subpoena compelling the production of a wide but ill-
defined array of documents (“all communications between DNV and CMS regarding the
Galichia . . . survey”; “all internal communications regarding the Galichia survey”; “all
documents and communications regarding the April 3, 2012 call between DNV and CMS

99, 66,

...”; “all documents . . . that define the time period that must pass after a CHOW before
the survey can occur”; “all documents related to surveys that were initiated the first day
that the new owner was responsible for the operation of the hospital . . .”; and “‘all CMS
guidance provided directly to DNV and other accreditation organizations defining the
requirements for post-CHOW surveys.”). I deny the subpoena request. Petitioner has not
specifically identified the documents it seeks, has not specified the pertinent facts it
expects to establish by the documents, and has not indicated why it could not establish
those facts without the use of a subpoena, as required by 42 C.F.R. § 498.58(c)(3). I find
insufficient to satisfy the requirements of the regulation Petitioner’s very general claims
that it “cannot obtain this information” or “does not have access to this information.” I
note also that much of the information sought is privileged. Petitioner is not entitled to
discover the agency’s internal deliberative documents.

> My findings of fact/conclusions of law are set forth, in italics and bold, in the
discussion captions of this decision.
The parties spend a lot of time arguing issues that are peripheral to the dispositive
question here: when did the hospital demonstrate that it met Medicare certification
requirements. As noted above, to be certified, CMS must determine that the prospective
provider meets Medicare conditions of participation. Act § 1866; 42 C.F.R. §§ 488.3(a);
489.10(a). If a provider is deficient with respect to one or more of the standards within
the conditions of participation, it may participate in the program only if, within a
reasonable period of time, it submits an acceptable plan of correction. 42 C.F.R. §§
488.28(a); 489.13(c)(2)(ii)(A); Cmty. Hosp. of Long Beach, DAB No. 1938 (2004).

The parties agree that the hospital did not meet Medicare requirements as of the April 19,
2012 survey. CMS MSJ at 3; P. MSJ at 4; P. Exs. 6, 7. At that time, the surveyors cited
deficiencies under surgical services (42 C.F.R. § 482.51(b)(6)), medical records (42
C.F.R. § 482.24(c)(1)), and physical environment/life safety management (42 C.F.R.

§ 482.41(b)(1)()). The hospital submitted a plan of correction, which DNV Healthcare
accepted on April 20, 2012. CMS Ex. 7 at 4 (Friedrich Decl. § 11). Thus, because the
hospital did not meet program requirements prior to April 20, 2012, it could not have
been certified before that date.

2. [have no authority to review CMS’s refusal to accept as adequate DNV
Healthcare’s February 1, 2012 survey.

According to Petitioner, under section 1865(a)(1)(A) of the Act, CMS has no discretion,
but must accept the conclusions of a hospital accrediting organization unless CMS finds
that the hospital has significant deficiencies. P. MSJ at 1. This argument fails for two
reasons: first, this is not what the statute says; second, even if CMS arguably exceeded
its authority (which it assuredly did not), I have no authority to review its refusal to
accept the adequacy of an accrediting organization’s survey and recommendations based
on that survey.

Petitioner misreads the statute. The statute says that CMS accepts the accreditation if it
finds that the accreditation “demonstrates that all of the applicable conditions or
requirements” are met. Here, CMS did not make that finding with respect to the
February survey. It found that the accrediting body conducted an inadequate and
unreliable survey, so could not demonstrate that all requirements were met.* CMS Ex. 3;

* That the surveyors found standard-level deficiencies when they finally conducted an
acceptable survey in April buttresses CMS’s determination that the February visit had
been inadequate. Moreover, this case illustrates why CMS oversight and approval is so
critical to protecting the integrity of the certification process. Here, Petitioner selected
DNV Healthcare to survey and accredit the hospital. In January 2012, a DNV Healthcare
official told the surveyors that they should not “feel compelled to visit all areas of the
hospital” and that the hospital “should concur with legitimacy of [any] finding.” CMS
Ex. 5.

CMS Ex. 7 at 3-4 (Friedrich Decl. § 9); CMS Ex. 8 at 2-4 (Melanson Decl. §f 4, 5); see
42 C.F.R. § 488.6(c)(2) (authorizing CMS to determine that a provider does not meet
Medicare conditions based on its own investigation of the accreditation survey “or any
other information related to the survey.”).

In any event, I have no authority to review CMS’s rejection of the February survey. A
provider’s hearing rights are established by federal regulations: 42 C.F.R. Part 498. A
provider dissatisfied with an initial determination is entitled to further review, but
administrative actions that are not initial determinations are not subject to appeal. 42
C.F.R. § 498.3(a); Florida Health Sciences Ctr., Inc., d/b/a/ Tampa General Hosp., DAB
No. 2263 at 4 (2009). The regulations specify which actions are “initial determinations”
and set forth examples of actions that are not. Insisting that an accrediting organization’s
survey comply with minimal federal requirements, as CMS did here, is not an initial
determination under 42 C.F.R. § 498.3(b) and therefore not reviewable.°

Conclusion

CMS is entitled to summary judgment because the parties agree -- and undisputed
evidence establishes -- that the hospital failed to meet program requirements prior to the
April 20, 2012 effective date. As a matter of law, CMS was authorized to reject the
adequacy of the February survey, and to order a valid one, and I have no authority to
review its decision to do so. I therefore grant CMS’s motion for summary judgment, and
deny Petitioner’s motion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

> Instead of allowing DNV Healthcare to conduct an adequate survey, CMS could have
directed the state survey agency to conduct a validation survey under 42 C.F.R.

§ 488.7(a), and its decision to do so would not have been reviewable. See Apollo
Behavioral Health Hosp. LLC, DAB CR2908 (2013).


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2013-H-1218)

Complainant
v.

Sukhparm LLC
d/b/a Xpress Mart,

Respondent.
Docket No. C-14-17
Decision No. CR3032

Date: December 12, 2013

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an
administrative complaint on Respondent, Sukhparm LLC d/b/a Xpress Mart, at
2070 North Arlington Avenue, Indianapolis, Indiana 46218, and by filing a copy
of the complaint with the Food and Drug Administration's (FDA) Division of
Dockets Management. The complaint alleges that Xpress Mart impermissibly sold
cigarettes and smokeless tobacco to minors and failed to verify, by means of photo
identification containing a date of birth, that the tobacco purchasers were 18 years
of age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act),
21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. Part 1140.
CTP seeks to impose a $500 civil money penalty against Respondent Xpress Mart.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on October 18, 2013, CTP served
the complaint on Respondent Xpress Mart by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time
in which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the Administrative Law Judge could, pursuant to 21
C.F.R. § 17.11, issue an initial decision ordering it to pay the full amount of the
proposed penalty.

Respondent Xpress Mart has neither filed an answer within the time prescribed,
nor requested an extension of time within which to file an answer. Pursuant to 21
C.F.R. § 17.11, L assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

At Respondent’s business establishment, 2070 North Arlington Avenue,
Indianapolis, Indiana 46218, on November 8, 2012, at approximately 7:24
PM, an FDA-commissioned inspector observed Respondent’s staff sell a
package of Grizzly Long Cut smokeless tobacco to a person younger than
18 years of age. The inspector also observed that Respondent’s staff failed
to verify, by means of photo identification containing the bearer's date of
birth, that the tobacco purchaser was 18 years of age or older;

a

In a warning letter issued on December 6, 2012, CTP informed Respondent
of the inspector's November 8, 2012 observations, and that such actions
violate federal law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further
warned that if Respondent failed to correct its violations, the FDA could
impose a civil money penalty or take other regulatory action;

At Respondent’s business establishment, 2070 North Arlington Avenue,
Indianapolis, Indiana 46218, on April 21, 2013, at approximately 8:06 PM,
FDA-commissioned inspectors documented Respondent’s staff selling a
package of Camel Blue cigarettes to a person younger than 18 years of age;
staff also failed to verify, by means of photo identification containing the
bearer’s date of birth, the purchaser’s age.

These facts establish Respondent Xpress Mart's liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco
product is misbranded if sold or distributed in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21
C.F.R. § 1140.1(b). The Secretary issued the regulations at 21 C.F.R. Part 1140
under section 906(d) of the Act. 21 U.S.C. 387(a); see 21 U.S.C. § 387£(d)(1); 75
Fed. Reg. 13,229 (Mar. 10, 2010). Under 21 C.F.R. § 1140.14(a), no retailer may
sell cigarettes or smokeless tobacco to any person younger than 18 years of age.
Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photo
identification containing the bearer's date of birth, that no purchaser of cigarettes
or smokeless tobacco is younger than 18 years of age.

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

For these reasons, I enter default judgment in the amount of $500 against
Respondent Sukhparm LLC d/b/a Xpress Mart. Pursuant to 21 C.F.R.

§ 17.11 (b), this order becomes final and binding upon both parties after 30 days
of the date of its issuance.

/s/
Carolyn Cozad Hughes
Administrative Law Judge