Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1214)

Complainant,
v.
Oak Grove Liquors, Inc.,
Respondent.
Docket No. C-14-1730
Decision No. CR3429
Date: October 24, 2014
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Oak Grove Liquors, Inc., at 300 Holly Drive, Middle

River, Maryland 21220, and by filing a copy of the complaint with the Food and Drug
Administration’s (FDA) Division of Dockets Management. The complaint alleges that
Oak Grove Liquors, Inc. unlawfully sold cigarettes to minors, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $250 civil money
penalty against Respondent Oak Grove Liquors, Inc.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 25, 2014, CTP served the
complaint on Respondent Oak Grove Liquors, Inc. 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 Oak Grove Liquors, Inc. 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:

e At Respondent’s business establishment, 300 Holly Drive, Middle River,
Maryland 21220, on September 12, 2013, at approximately 4:14 PM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Newport
Box cigarettes to a person younger than 18 years of age;

e Ina warning letter issued on November 7, 2013, CTP informed Respondent of the
inspector’s observation from September 12, 2013, and that such an action violates
federal law, 21 C.F.R. § 1140.14(a). 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;

e At Respondent’s business establishment, 300 Holly Drive, Middle River,
Maryland 21220, on February 19, 2014, at approximately 12:14 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Newport Box 100s cigarettes to a person younger than 18 years of age.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 CFR. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

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

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent
Oak Grove Liquors, Inc. 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/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Donald Kent Blaine,
(OI File No. 4-09-40801-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1070
Decision No. CR3427

Date: October 20, 2014

DECISION

Petitioner, Donald Kent Blaine, was employed by his wife’s company, Respi-Test, which
provided in-home oximetry testing. He was convicted on one felony count of making
false statements in a health care matter. Based on his conviction, the Inspector General
(.G.) has excluded him for twenty years from participation in the Medicare, Medicaid,
and all federal health care programs, as authorized by section 1128(a)(1) of the Social
Security Act (Act). Petitioner concedes that he is subject to exclusion but challenges its
length. For the reasons discussed below, I find that the 1.G. properly excluded Petitioner
Blaine and that the twenty-year exclusion falls within a reasonable range.

I. Background

Section 1128(a)(1) of the Act mandates that the Secretary of Health and Human Services
exclude an individual who has been convicted under federal or state law of a criminal
offense related to the delivery of an item or service under Medicare or a state health care
program (which includes Medicaid). 42 C.F.R. § 1001.101(a).
In a letter dated February 28, 2014, the I.G. notified Petitioner that he was excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
twenty years because he had been convicted of a criminal offense related to the delivery
of an item or service under the Medicare or a state health care program. The letter
explained that section 1128(a)(1) of the Act authorizes the exclusion. LG. Ex. 1.

Petitioner concedes that he was convicted and is subject to exclusion under section
128(a)(1). P. Br. at 1-2; see Order and Schedule for Filing Briefs and Documentary
Evidence at 1 (May 29, 2014). The parties agree that this case does not require an in-
person hearing. I.G. Br. at 9; P. Br. at 9. Each party submitted an initial brief (I.G. Br.;
P. Br.). The I.G. submitted two exhibits (I.G. Exs. 1-2) and a reply brief (I.G. Reply). In
the absence of an objection, I admit into evidence IG. Exs. 1-2.

IL. Issue
Because the parties agree that the I.G. has a basis upon which to exclude Petitioner from

program participation, the sole issue before me is whether the length of the exclusion
(twenty years) is reasonable.

III. Discussion

Petitioner Blaine was the Medicare billing agent for his wife’s company, Respi-Test. P.
Br. at 5. In that capacity, he billed Medicare, Medicaid, and various private insurers for
sleep studies. P. Br. at 5-6. However, the company did not perform sleep studies; it
provided less comprehensive and less expensive oximetry testing services. P. Br. at 4-5.
Petitioner Blaine was charged in a multi-count criminal indictment, and, on July 11,
2013, pled guilty in Federal District Court for the Eastern District of North Carolina to
one felony count of making a false statement in a health care matter, in violation of 18
U.S.C. § 1035. IG. Ex. 2 at 1,2. The court sentenced him to 60 months (5 years) in
prison, and ordered him to pay $4,782,569.90 in restitution. I.G. Ex. 2 at 11.

Based on the aggravating factors in this case, and the
absence of any mitigating factor, the twenty-year exclusion
falls within a reasonable range.

Aggravating factors. An exclusion under section 1128(a)(1) must be for a minimum
period of five years. Act § 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a); 1001.2007(a)(2).
Federal regulations set forth criteria for lengthening exclusions beyond the five-year
minimum. 42 C.F.R. § 1001.102(b). Evidence that does not pertain to one of the
aggravating or mitigating factors listed in the regulations may not be used to decide
whether an exclusion of a particular length is reasonable.

'T make this one finding of fact/conclusion of law.
Among the factors that may serve as bases for lengthening the period of exclusion are the
two that the IG. cites to justify the period of exclusion in this case: 1) the acts resulting
in the conviction, or similar acts, resulted in a financial loss to Medicare and state health
care programs of $5,000 or more; and 2) the sentence imposed by the court included
incarceration. 42 C.F.R. § 1001.102(b)(1) and (5). The presence of an aggravating factor
or factors not offset by any mitigating factor or factors justifies lengthening the
mandatory period of exclusion.

Petitioner concedes the aggravating factors but argues that they are insufficient to justify
extending the period of exclusion beyond the mandatory five years. P. Br. at 2.

Financial loss to Medicare and Medicaid programs (42 C.F.R. § 1001.102(b)(1)).
Petitioner’s actions resulted in program financial losses many times greater than the
$5,000 threshold for aggravation. The sentencing judge ordered him to pay a whopping
$4,782,569.90 in restitution to the victims of his crime. Of this amount, he was to pay
$3,259,420.01 to the Medicare and Medicaid programs ($2,035,311.78 to Medicare and
$1,224,108.23 to Medicaid), with the rest payable to a long list of private insurers. LG.
Ex. 2 at 5-7.

Petitioner challenges the alleged amount of program losses. He concedes that the
company “upcoded,” i.e., billed for services that were more complicated and expensive
than the ones provided, but argues that the company, nevertheless, provided beneficial
services that had some value. In his view, the amount of program losses should be
reduced by the value of the services provided. He offers no evidence as to what that
value might have been. In any event, the criminal court determined the amount of
restitution, presumably after the parties presented their evidence and arguments, and I
defer to the court’s findings.

Restitution has long been considered a reasonable measure of program losses. Jason
Hollady, M.D., DAB No. 1855 (2002). I consider the enormity of the program’s financial
losses here an exceptionally aggravating factor that compels a period of exclusion
significantly longer than the five-year minimum. See Jeremy Robinson, DAB No. 1905
(2004); Donald A. Burstein, Ph.D., DAB No. 1865 (2003).

Petitioner also asserts that approximately $300,000 has already been paid in restitution,
and suggests that this justifies decreasing the period of exclusion. P. Br. at 7. His
argument fails because the regulations direct me to consider the entire amount of
financial loss “regardless of whether full or partial restitution has been made.” 42 C.F.R.
§ 1001.102(b)(1).

Incarceration (42 C.F.R. § 1001.102(b)(5)). The criminal court sentenced Petitioner to a
substantial period of incarceration — 60 months — which underscores the seriousness of
his crimes. I.G. Ex. 3 at 1.

Any period of incarceration, no matter how short, justifies increasing the period of
exclusion. Generally, the longer the jail time, the greater the increase, because a lengthy
sentence evidences a more serious offense. See Jeremy Robinson, DAB No. 1905; Jason
Hollady, M.D., DAB No. 1855 at 12 (characterizing a nine-month incarceration as
“relatively substantial”); Stacy Ann Battle, DDS., DAB No. 1843 (2002) (finding that
four months in a halfway house, followed by four months home confinement, justifies
lengthening the period of exclusion); Brenda Mills, M.D., DAB CR1461, aff'd DAB No.
2061 (2007) (finding that six months home confinement justifies increase in length of
exclusion). Indeed, that the court sentenced Petitioner Blaine to such a lengthy period of
incarceration defeats all of his arguments that he was merely an ill-informed employee
whose only real crime was following the instructions given by others (such as his wife),
who were in a better position to know that they were violating the law.

No mitigating factors. The regulations consider mitigating just three factors: 1) a
petitioner was convicted of three or fewer misdemeanor offenses and the resulting
financial loss to the program was less than $1,500; 2) the record in the criminal
proceedings demonstrates that a petitioner had a mental, physical, or emotional condition
that reduced his culpability; and 3) a petitioner’s cooperation with federal or state
officials resulted in others being convicted or excluded, or additional cases being
investigated, or a civil money penalty being imposed. 42 C.F.R. § 1001.102(c).

Obviously, because Petitioner’s felony conviction involved program financial losses
many times greater than $5,000, the first factor does not apply here. Nor does Petitioner
claim any mental, physical, or emotional condition that reduced his culpability.

Petitioner claims that, in an incident apparently unrelated to his crimes, he and his wife
discovered that one of the company’s respiratory therapists falsified test results. They
informed the home health agency that had requested the services and the North Carolina
Respiratory Care Board. The company also retested the affected patients and reimbursed
insurers.

“Tt is entirely Petitioner’s burden” to show that his cooperation resulted in others being
convicted or excluded, or additional cases being investigated or excluded, or a civil
money penalty being imposed. Stacey R. Gale, DAB No. 1941 at 9 (2004). Section
1001.102(c)(3) “should be viewed narrowly (i.e., that it is designed to accommodate
‘only significant cooperation’).” Marcia C. Smith, DAB No. 2046 at 10 (2006). The
regulation is “designed to authorize mitigation for significant or valuable cooperation that
yielded positive results for the state or federal government in the form of a new case
actually being opened for investigation. ...” Marcia C. Smith, DAB No. 2046 at 9,
citing Stacey R. Gale, DAB No. 1941 at 11 (emphasis in the original).
Petitioner has described a situation in which the company was obligated to report its
employee’s actions and return any money it received for the fraudulent testing. Its failure
to do so would have been yet another crime. I am not sure that declining to commit a
wholly separate crime would ever qualify as a mitigating factor. But I need not consider
that issue because Petitioner has not shown that his cooperation resulted in a conviction,
exclusion, investigation, or civil money penalty. He has therefore not established a
mitigating factor to offset the significant aggravating factors cited by the LG.

So long as the period of exclusion is within a reasonable range, based on demonstrated
criteria, I have no authority to change it. Jeremy Robinson, DAB No. 1905 at 5; Joann
Fletcher Cash, DAB No. 1725 at 7 (2000), citing 57 Fed. Reg. 3298, 3321 (1992). In this
case, Petitioner’s crime demonstrates that he presents significant risks to the integrity of
health care programs. He engaged in illegal conduct that cost health care programs an
enormous amount of money. He was sentenced to a lengthy period of time in prison. No
mitigating factors offset these aggravating factors.

IV. Conclusion

For these reasons, I conclude that the I.G. properly excluded Petitioner from participation
in Medicare, Medicaid, and all federal health care programs, and I sustain as reasonable
the twenty-year period of exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
V Care Medical Equipment, Inc.,
(NPI: 1093864126; Supplier No. 4547500001)
Petitioner
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-997
Decision No. CR3426
Date: October 20, 2014
DECISION

The Medicare enrollment and billing privileges of Petitioner, V Care Medical Equipment,
Inc. are revoked pursuant to 42 C.F.R. § 424.57(e) and 424.535(a)(1),' effective
December 22, 2013, based on noncompliance with 42 C.F.R. § 424.57(c)(7) (supplier
standard 7).
I. Procedural History and Jurisdiction
Palmetto GBA, National Supplier Clearinghouse (Palmetto), a Medicare administrative
contractor for the Centers for Medicare & Medicaid Services (CMS), notified Petitioner

by letter dated November 22, 2013, that Petitioner’s Medicare enrollment was revoked
effective October 17, 2013. CMS Exhibit (CMS Ex.) 2 at 1, 4. Palmetto cited 42 C.F.R.

" Citations are to the 2013 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise indicated.
§§ 405.800, 424.57(e), 424.535(a)(1), 424.535(a)(5)(ii), and 424.535(g)* as the legal
authority for the revocation based on noncompliance with 42 C.F.R. §§ 424.57(c)(7)
(supplier standard 7), and 424.57(c)(10) (supplier standard 10). Palmetto also notified
Petitioner that it was subject to a two-year bar to re-enrollment pursuant to 42 C.F.R.
§ 424.535(c). CMS Ex. 2 at 1, 4.

On January 6, 2014, Petitioner requested reconsideration of the initial determination.
CMS Ex. 3. On February 25, 2014, Palmetto issued a reconsidered determination
upholding the revocation of Petitioner’s Medicare enrollment and billing number based
on a violation of supplier standard 7 (42 C.F.R. § 424.57(c)(7)) and supplier standard 10
(42 C.F.R. § 424.57(c)(10)). CMS Ex. 4.

Petitioner requested a hearing before an administrative law judge (ALJ) by letter dated
April 15, 2014 (RFH) that was filed on April 21, 2014. The case was assigned to me for
hearing and decision on April 25, 2014, and an Acknowledgment and Prehearing Order
(Prehearing Order) was issued at my direction. No issue has been raised as to the
timeliness of Petitioner’s request for hearing, the parties do not challenge my authority to
decide this case, and I conclude that I have jurisdiction.

On May 23, 2013, CMS filed a motion for summary judgment (CMS Br.) with CMS Exs.
1 through 6. On June 23, 2014, Petitioner filed a response to CMS’s motion for summary
judgment (P. Br.) with attachments 1A through 1C, 2A and 2B, 3A through 3H, 4A
through 4F, and 5A and 5B.° CMS filed a reply (CMS Reply) on July 7, 2014. The
parties have not objected to my consideration of any of the offered exhibits and all are
admitted.

To... ANE ops. : : : ey .
“ Sections 405.800 and 424.57(g) of Title 42 establish notice requirements and effective
date determinations for revocations.

> The attachments offered by Petitioner were clearly offered as substantive evidence.
However, Petitioner violated Civil Remedies Division Procedures § 9 when marking the
attachments. There is also little likelihood of confusion based on the current marking of
the exhibits. Therefore the attachments are treated as Petitioner’s exhibits (P. Exs.) 1A,
1B, 1C, 2A, 2B, 3A, 3B, 3C, 3D, 3E, 3F, 3G, 3H, 4A, 4B, 4C, 4D, 4E, 4F, 5A, and 5B.
IL. Discussion
A. Applicable 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. Administration of the Part B program is through contractors, such as
Palmetto. Act § 1842(a) (42 U.S.C. § 1395u(a)). Payment under the program for
services rendered to Medicare-eligible beneficiaries may only be made to eligible
providers of services and suppliers.* Act §§ 1834(j)(1) (42 U.S.C.§ 1395m(j)(1));
1835(a) (42 U.S.C. § 1395n(a)); 1842(h)(1) (42 U.S.C. § 1395(u)(h)(1)). Petitioner is a
durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) supplier.

The Act requires the Secretary to issue regulations that establish a process for the
enrollment of providers and suppliers, including the right to a hearing and judicial review
in the event of denial or non-renewal. Act § 1866(j) (42 U.S.C. § 1395cc(j)). Pursuant to
42 C.F.R. § 424.505, a supplier must be enrolled in the Medicare program and be issued a
billing number to have billing privileges and to be eligible to receive payment for services
rendered to a Medicare eligible beneficiary. To receive direct-billing privileges, a
DMEPOS supplier must meet and maintain the Medicare application certification
standards set forth in 42 C.F.R. § 424.57(c). Among other requirements, a DMEPOS
supplier must maintain a physical facility on an appropriate site. 42 C.F.R.

§ 424.57(c)(7). An appropriate site for the physical facility must meet certain criteria,
including that the practice location is in a location accessible to the public, Medicare
beneficiaries, and CMS and its agents, and that the practice location must be accessible
and staffed during posted hours of operation. 42 C.F.R. § 424.57(c)(7)(i)(B), (C). A
DMEPOS supplier must provide complete and accurate information in response to
questions on its application for Medicare billing privileges and must report to CMS any

* A “supplier” furnishes services and supplies under Medicare. The term supplier applies
to physicians or other practitioners and facilities that are not included within the definition
of the phrase “provider of services.” Act § 1861(d) (42 U.S.C. § 1395x(d)). A
“provider of services,” commonly shortened to “provider,” includes hospitals, critical
access hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation
facilities, home health agencies, hospice programs, and a fund as described in sections
1814(g) and 1835(e) of the Act. Act § 1861(u) (42 U.S.C. § 1395x(u)). The distinction
between providers and suppliers is important because they are treated differently under
the Act for some purposes.

changes in information supplied on the application within 30 days of the change.

42 C.F.R. § 424.57(c)(2). A DMEPOS supplier must permit CMS or its agent to conduct
on-site inspections to ascertain supplier compliance with the Medicare enrollment
standards. 42 C.F.R. § 424.57(c)(8). Finally, a DMEPOS supplier must at all times be
“operational,” which means it “has a qualified physical practice location, is open to the
public for the purpose of providing health care related services, is prepared to submit
valid Medicare claims, and is properly staffed, equipped, and stocked . . . to furnish these
items or services.” 42 C.F.R. § 424.502.

The Secretary has delegated the authority to revoke enrollment and billing privileges to
CMS. 42 C.F.R. § 424.535. CMS or its Medicare contractor may revoke an enrolled
supplier’s Medicare enrollment and billing privileges and supplier agreement for any of
the reasons listed in 42 C.F.R. § 424.535. Specifically, CMS may revoke a supplier’s
enrollment and billing privileges if the supplier is determined not to be in compliance
with the enrollment requirements. 42 C.F.R. § 424.535(a)(1). CMS may also revoke a
currently enrolled supplier’s Medicare enrollment and billing privileges if CMS
determines, upon on-site review, that the supplier is no longer operational to furnish
Medicare covered items or services, or the supplier fails to satisfy any or all of the
Medicare enrollment requirements, or has failed to furnish Medicare covered items or
services as required by the statute or regulations. 42 C.F.R. § 424.535(a)(5)(ii). After a
supplier’s Medicare enrollment and billing privileges are revoked, the supplier is barred
from reenrolling in the Medicare program for one to three years. 42 C.F.R. § 424.535(c).

A supplier whose enrollment and billing privileges have been revoked may request
reconsideration and review as provided by 42 C.F.R. pt. 498. A supplier submits a
written request for reconsideration to CMS or its contractor. 42 C.F.R. § 498.22(a).
CMS or its contractor must give notice of its reconsidered determination to the supplier,
giving the reasons for its determination and specifying the conditions or requirements the
supplier failed to meet, and advising the supplier of its right to an ALJ hearing. 42 C.F.R.
§ 498.25. If the decision on reconsideration is unfavorable to the supplier, the supplier
has the right to request a hearing by an ALJ and further review by the Departmental
Appeals Board (the Board). Act § 1866(j)(8) (42 U.S.C. § 1395ce(j)(8)); 42 C.F.R.

§§ 424.545, 498.3(b)(17), 498.5. A hearing on the record, also known as an oral hearing,
is required under the Act. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 748-
751 (6th Cir. 2004). The supplier bears the burden to demonstrate that it meets
enrollment requirements with documents and records. 42 C.F.R. § 424.545(c).

B. Issue
Whether summary judgment is appropriate; and

Whether there was a basis for the revocation of Petitioner’s billing
privileges and Medicare enrollment.
C. Findings of Fact, Conclusions of Law, and Analysis

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

1. Summary judgment is appropriate.

CMS has requested summary judgment. A provider or supplier denied enrollment in
Medicare or whose enrollment has been revoked has a right to a hearing and judicial
review pursuant to section 1866(h)(1) and (j) of the Act and 42 C.F.R. §§ 498.3(b)(1),
(5), (6), (8), (15), (17), 498.5. A hearing on the record, also known as an oral hearing, is
required under the Act. Act §§ 205(b), 1866 (h)(1) and (j)(8); Crestview, 373 F.3d at
748-51. A party may waive appearance at an oral hearing, but must do so affirmatively
in writing. 42 C.F.R. § 498.66. In this case, Petitioner has not waived the right to oral
hearing or otherwise consented to a decision based only upon the documentary evidence
or pleadings. Accordingly, disposition on the written record alone is not permissible,
unless the CMS motion for summary judgment has merit.

Summary judgment is not automatic upon request but is limited to certain specific
conditions. The Secretary’s regulations that establish the procedure to be followed in
adjudicating Petitioner’s case are at 42 C.F.R. pt. 498. 42 C.F.R. §§ 405.800, 405.803(a);
424.545(a), 498.3(b)(5), (6), (15), (17). The regulations do not establish a summary
judgment procedure or recognize such a procedure. However, the Board has long
accepted that summary judgment is an acceptable procedural device in cases adjudicated
pursuant to 42 C.F.R. pt. 498. See, e.g., Ill. Knights Templar Home, DAB No. 2274, at 3-
4 (2009); Garden City Med. Clinic, DAB No. 1763 (2001); Everett Rehab. & Med. Ctr.,
DAB No. 1628, at 3 (1997). The Board also has recognized that the Federal Rules of
Civil Procedure (Fed. R. Civ. Pro.) do not apply in administrative adjudications such as
this, but the Board has accepted that Fed. R. Civ. Pro. 56 and related cases provide useful
guidance for determining whether summary judgment is appropriate. Furthermore, a
summary judgment procedure was adopted as a matter of judicial economy within my
authority to regulate the course of proceedings and made available to the parties in the
litigation of this case by my Prehearing Order. The parties were given notice by the
Prehearing Order that summary judgment is an available procedural device and that the
law as it has developed related to Fed. R. Civ. Pro. 56 will be applied.

Summary judgment is appropriate when there is no genuine dispute as to any issue of
material fact for adjudication and/or the moving party is entitled to judgment as a matter
of law. The party requesting summary judgment bears the burden of showing that there
are no genuine issues of material fact for trial and/or that it is entitled to judgment as a
matter of 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. Generally, the non-movant may
not defeat an adequately supported summary judgment motion by relying upon the
denials in its pleadings or briefs but must furnish evidence of a dispute concerning a
material fact, i.e., a fact that would affect the outcome of the case if proven. Mission
Hosp. Reg’! Med. Ctr., DAB No. 2459, at 4 (2012) (and cases cited therein); Experts Are
Us, Inc., DAB No. 2452, at 4 (2012) (and cases cited therein); Senior Rehab. & Skilled
Nursing Ctr., DAB No. 2300, at 3 (2010) (and cases cited therein); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The standard for deciding a case on summary judgment and an ALJ’s decision-making in
deciding a summary judgment motion differs from that used in resolving a case after a
hearing. On summary judgment, the ALJ does not make credibility determinations,
weigh the evidence, or decide which inferences to draw from the evidence, as would be
done when finding facts after a hearing on the record. Rather, on summary judgment, the
ALJ construes the evidence in a light most favorable to the non-movant and avoids
deciding which version of the facts is more likely true. Holy Cross Vill. at Notre Dame,
Inc., DAB No. 2291, at 5 (2009). The Board also has recognized that on summary
judgment it is appropriate for the ALJ to consider whether a rational trier of fact could
find that the party’s evidence would be sufficient to meet that party’s evidentiary burden.
Dumas Nursing & Rehab., L.P., DAB No. 2347, at 5 (2010). The Secretary has not
provided in 42 C.F.R. pt. 498, for the allocation of the burden of persuasion or the
quantum of evidence required to satisfy the burden. However, the Board has provided
some persuasive analysis regarding the allocation of the burden of persuasion in cases
subject to 42 C.F.R. pt. 498. Batavia Nursing & Conv. Ctr., DAB No. 1904 (2004), aff'd,
Batavia Nursing & Conv. Ctr. v. Thompson, 129 Fed. App’x 181 (6th Cir. 2005).

In this case, there is no genuine dispute as to any material fact pertinent to revocation
under 42 C.F.R. §§ 424.57(e) and 424.535(a)(1) based on noncompliance with 42 C.F.R.
§ 424.57(c)(7) (supplier standard 7) that requires a trial. The issues Petitioner raises
related to revocation under 42 C.F.R. §§ 424.57(e) and 424.535(a)(1) are issues of law.
The issues in this case must be resolved against Petitioner as a matter of law. The
undisputed evidence shows that there is a basis for revocation of Petitioner’s Medicare
enrollment and billing privileges. Accordingly, summary judgment based on the
violation of 42 C.F.R. § 424.57(c)(7) is appropriate.

Summary judgment is not appropriate for revocation pursuant to 42 C.F.R.

§§ 424.535(a)(5)(ii) on a theory that Petitioner was no longer operational when a site visit
occurred. Summary judgment is also not appropriate for revocation based on an alleged
violation of 42 C.F.R. § 424.57(c)(10) (supplier standard 10) on the theory that Petitioner
did not have the required liability insurance. Both of the alternative grounds for
revocation involve genuine disputes as to material fact that would require a trial. CMS
argues in its motion for summary judgment that Petitioner also violated 42 C.F.R.

§ 424.57(c)(8) (supplier standard 8). CMS acknowledges that this additional basis was

not cited in the initial determination. Though not specifically acknowledged by CMS,
42 C.F.R. § 424.57(c)(8) was also not mentioned in and apparently not considered on
reconsideration. The Secretary has accorded Petitioner a right to reconsideration and
specific notice of what requirements of law or regulations that Petitioner failed to meet
prior to an ALJ hearing. 42 C.F.R. §§ 498.22(a), 498.25(a)(2)-(3). Accordingly, before
passing upon the alleged violation of 42 C.F.R. § 424.57(c)(8), remand to CMS to ensure
Petitioner received a reconsidered determination on the new basis for revocation may be
appropriate. Even if I concluded that remand was not necessary, whether or not
Petitioner failed to permit CMS or its agents an opportunity to conduct an on-site
inspection in violation of 42 C.F.R. § 424.57(c)(8), involves disputed issues of material
fact that would require a trial.

2. There was a basis to revoke Petitioner’s Medicare enrollment and
billing privileges pursuant to 42 C.F.R. §§ 424.57(e) and 424.535(a)(1)
for violation of 42 C.F.R. § 424.57(c)(7) (supplier standard 7).

3. The effective date of revocation of Petitioner’s Medicare enrollment
and billing privileges based on a violation of 42 C.F.R. § 424.57(c)(7)
(supplier standard 7) is December 22, 2013, 30 days after the date on
which notice of revocation was mailed to Petitioner.

a. Facts
The facts are not disputed and any inferences are drawn in favor of Petitioner.

On October 17, 2013, Inspector Doug Warner went to 2096 S. Wayne Road, Suite A,
Westland, Michigan 48166, to conduct a site inspection of Petitioner. Petitioner does not
dispute that the 2096 S. Wayne Road, Suite A address was the address for Petitioner on-
file with Palmetto and CMS on October 17, 2013. Inspector Warner found that there
were no signs showing the Petitioner was located at the address and no posted hours of
operation. Inspector Warner looked through the door of the office and determined that
the suite was empty. Petitioner does not deny that it was no longer operating at 2096 S.
Wayne Road, Suite A on October 17, 2013. Inspector Warner called Petitioner’s owner,
Vidhya Jain on October 17, 2013, and left a message. Ms. Jain returned Inspector
Warner’s call and advised him that Petitioner had moved and that she would be
contacting Medicare soon but she did not give Inspector Warner the new address for
Petitioner. Inspector Warner included in his report that he advised Ms. Jain to notify
CMS of Petitioner’s new address. CMS Ex. 1. Photographs submitted by CMS are not
clear enough to determine the condition of the interior of 2096 S. Wayne Road, Suite A.
CMS Ex. | at 10-11; CMS Ex. 6 at 2-3.

In its request for reconsideration dated January 6, 2014, Petitioner admitted that on
October 17, 2013 Petitioner was moving its inventory to a new location. Petitioner stated
that the move was not completed until November 15, 2013. Petitioner asserted that it was
still operational at its practice location on October 17, 2013. Petitioner does not assert
and has not presented any evidence that it was open and accessible to the public at 2096
S. Wayne Road, Suite A at any time on October 17, 2013, or at any time thereafter.
Petitioner also asserted in its request for reconsideration that it has submitted all required
paperwork for a change of address and proof of liability insurance coverage but the dates
of submission are not alleged. CMS Ex. 3 at 1-2. Petitioner filed with its request for
reconsideration a lease agreement dated August 1, 2012, that Ms. Jain signed as President
of Petitioner for 33116 Palmer Road, Suite C, Westland, Michigan 48186. CMS Ex. 3 at
6; P. Ex. 1B. Petitioner filed with its request for reconsideration a letter to Palmetto
dated December 2, 2013, advising that Petitioner relocated effective November 15, 2013
from 2096 S. Wayne Road, Suite A, Westland, Michigan, the address Investigator
Warner visited, to 8010 Greenfield Road, Detroit, Michigan. CMS Ex. 3 at 7. Petitioner
also filed a copy of a Medicare enrollment application dated December 2, 2013, reporting
a change in enrollment information, specifically its current business location. The form
indicates Petitioner changed its business location to 8010 Greenfield Road, Detroit,
Michigan, effective November 15, 2013. CMS Ex. 3 at 8-20.

In its April 15, 2014 request for hearing, Petitioner admits that its President, Ms. Jain, did
tell the site inspector that Petitioner was moving its inventory to a new location in Detroit
and the inspector informed her to report the change to Medicare within 30 days.
Petitioner does not assert that it was open and accessible to the public at 2096 S. Wayne
Road at any time on October 17, 2013, or at any time thereafter.

Petitioner asserts in its response to the CMS motion for summary judgment that
Petitioner evacuated its 2096 S. Wayne Road location due to a fire on July 16, 2012, and
relocated to 33116 Palmer Road, Westland, Michigan. This is inconsistent with the
December 2, 2013 letter to Palmetto. CMS Ex. 3 at 7. Petitioner asserts that a “change
of location due to fire” was mailed to Palmetto on August 3, 2012. P. Br. at 1-2.
Petitioner filed no affidavit or declaration in support of these assertions and they are
entitled to no weight as I may only consider testimony that is under oath or affirmation.
42 C.F.R. § 498.62. Petitioner submitted as evidence a Westland Fire Department report
showing that a fire occurred on July 16, 2012, between 4:00 and 7:00 a.m. at 2118 S.
Wayne Road in Westland, Michigan. P. Ex. 1A. Petitioner submitted the August 1, 2012
lease agreement for 33116 Palmer Road, Suite D. CMS Ex. 3 at 6; P. Ex. 1B. Petitioner
submitted insurance and bond documents reflecting the Palmer Road address but those
documents are dated August 13, 2013 and November 27, 2013, more than a year after the
alleged fire (P. Ex. 2A and 2B). Petitioner also submitted a letter dated August 28, 2012,
from Palmetto to Petitioner at yet another address at 6658 Whispering Woods Drive,
West Bloomfield, Michigan, advising Petitioner that there was an update to Petitioner’s
file related to liability insurance. P. Ex. 1C. The August 28, 2012, Palmetto letter makes
no reference to the 33116 Palmer Road address, and I can draw no inference from the
Palmetto letter or the other documents that Petitioner notified Palmetto that it was

operating at an address other than 2096 S. Wayne Road. Petitioner admits that it was not
open and accessible to the public at 2096 S. Wayne Road on October 17, 2013; that
Inspector Warner did call Ms. Jain on October 17, 2013, and Ms. Jain explained
Petitioner was moving to a new address, and Inspector Warner told her to notify CMS
within 30 days. Petitioner asserts, pointing to the evidence it submitted, that had
Inspector Warner gone to the 33116 Palmer Road address, he would have found
Petitioner open and accessible to the public with signage and posted hours of operation.
P. Br. at 2-3.

b. Analysis

CMS argues that Petitioner’s billing privileges and participation in Medicare may be
revoked: (1) for violation of 42 C.F.R. § 424.57(c)(7) (supplier standard 7) because
Petitioner’s facility at the address on file with CMS was not operational in that it was not
accessible to the public, Medicare beneficiaries, CMS, or its agents; (2) for violation of
42 C.F.R. § 424.57(c)(10) because Petitioner did not have a current liability insurance
policy; (3) for violation of 42 C.F.R. § 424.57(c)(8) (supplier standard 8) because CMS
agents could not conduct a site investigation of the vacant facility; and (4) pursuant to

42 C.F.R. § 424.535(a)(5), because it was determined that Petitioner was not operational
when an on-site review was attempted. CMS Br. at 1-2, 5-11; CMS Reply. Petitioner
has submitted evidence, which if viewed in a light most favorable to Petitioner and with
all inferences drawn in Petitioners favor, shows the existence of genuine disputes of
material facts related to whether or not Petitioner had the required liability insurance and
was operational and could have been inspected on October 17, 2013, albeit at a different
address than the address on file with CMS. Therefore, summary judgment will not lie for
revocations based on 42 C.F.R. §§ 424.57(c)(8) and (10) and 424.535(a)(5). There are no
genuine disputes as to the facts that establish a violation of 42 C.F.R. § 424.57(c)(7) and,
as matter of law, revocation pursuant to 42 C.F.R. §§ 424.57(e) and 424.535(a)(1) is
appropriate.

I also note that revocation was upheld on reconsideration based on noncompliance with
42 C.F.R. §§ 424.57(c)(7) and (10) (supplier standards 7 and 10) not 42 C.F.R.

§ 424.535(a)(5). CMS Ex. 4. Therefore, whether or not there was a basis for revocation
pursuant to 42 C.F.R. § 424.535(a)(5) because Petitioner was not operational, is not at
issue before me because it was not a basis for revocation upheld on reconsideration.
However, it is well established that even a single violation of a single supplier standard is
an adequate basis for revocation of billing privileges and enrollment. Complete Home
Care, DAB No. 2525, at 6 (2013) (not necessary to decide whether or not operational
where supplier found to be in violation of supplier standard 7); 18661CPayday.com, DAB
No. 2289, at 13 (2009).

Supplier standard 7 (42 C.F.R. § 424.57(c)(7)) requires that Petitioner maintain an
appropriate site that meets specified criteria, including that it be accessible and staffed
10

during posted hours of operation. CMS or its agents must also be able to inspect the site
during normal hours of operation to ensure compliance with participation requirements.
Petitioner does not deny it was not accessible and staffed during normal hours of
operation at the address on file with CMS when Investigator Warner attempted to
conduct an inspection on October 17, 2013. Accordingly, Petitioner violated supplier
standard 7 (42 C.F.R. § 424.57(c)(7)(i)(C)) and there is a basis for the revocation of
Petitioner’s enrollment and billing privileges pursuant to 42 C.F.R. §§ 424.57(e) and
424.535(a)(1).

I conclude that the effective date for revocation of Petitioner’s Medicare enrollment and
billing privileges based on a violation of 42 C.F.R. § 424.57(c)(7) (supplier standard 7) is
30 days after the date on which notice of revocation was mailed. My conclusion is based
on the analysis of the Board in Neb Group of Arizona LLC, DAB No. 2573, at 7-8 (2014)
in which the Board gave effect to regulatory changes to 42 C.F.R. § 424.57 that were
published in the Federal Register but not the C.F.R. Accordingly, I conclude that the
effective date of the revocation of Petitioner’s Medicare enrollment and billing privileges
is December 22, 2013.°

Il. Conclusion

For the foregoing reasons, I conclude that Petitioner’s Medicare enrollment and billing
privileges are properly revoked effective December 22, 2013.

/s/
Keith W. Sickendick
Administrative Law Judge

> CMS argues that the effective date should be October 17, 2013, the date the failed
inspection attempt found Petitioner’s location empty and closed. The retroactive
effective date of October 17, 2013, would only be authorized in this case if revocation
was based on a determination that Petitioner was no longer operational. 42 C.F.R.

§ 424.535(g). If CMS wishes to attempt to prove that Petitioner was not operational in
order to establish the earlier effective date, CMS may file a motion to reopen in
accordance with 42 C.F.R. § 498.100(a) within 60 days of the date of notice of this
decision.


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Samir F. Zaky, D.P.M.,
(OI File No. 1-09-40066-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-945
Decision No. CR3425

Date: October 21, 2014

DECISION

Petitioner, Samir F. Zaky, D.P.M., was a podiatrist, licensed to practice in the State of
Connecticut. He was convicted on fourteen felony counts of health care fraud and
fourteen felony counts of making false statements relating to a health care matter. Based
on his convictions, the Inspector General (I.G.) has excluded him for ten years from
participating in the Medicare, Medicaid, and all federal health care programs, as
authorized by section 1128(a)(1) of the Social Security Act (Act). Petitioner now
challenges the exclusion. For the reasons discussed below, I find that the I.G. properly
excluded Petitioner and that the ten-year exclusion falls within a reasonable range.

I. Background

Petitioner Zaky practiced as a podiatrist under the name of Affiliated Podiatrists, LLC,
for which he was the principal and only agent. In that capacity, he participated in the
Medicare program. I.G. Exhibit (Ex.) 4 at 1. He was charged in federal district court
with fourteen counts of health care fraud and fourteen counts of making false statements
relating to a health care matter, in violation of 18 U.S.C. §§ 1347 and 1035. I.G. Ex. 4.
On June 14, 2013, a jury convicted him on all counts. I.G. Exs. 2, 3. Specifically, the
jury found that Petitioner Zaky provided routine foot care (e.g., clipping toe nails) to
Medicare beneficiaries but billed the program for a more complicated and expensive
surgical procedure. I.G. Ex. 4 at 2.

In a letter dated March 31, 2014, the I.G. notified Petitioner that he was excluded from
participation in Medicare, Medicaid, and all federal health care programs for a period of
ten years, because he had been convicted of a criminal offense related to the delivery of
an item or service under the Medicare or state health care program. The letter explained
that section 1128(a)(1) of the Act authorized the exclusion. I.G. Ex. 1. Petitioner
requested review, and the matter is before me.

Each party submitted a written argument (I.G. Br.; Petitioner (P.) Br.). The I.G.
submitted four exhibits (I.G. Exs. 1- 4) and a reply brief (IG. Reply). Petitioner
submitted 10 exhibits (P. Exs. 1-10) and a sur-reply (P. Reply). In the absence of any
objection, I admit into evidence I.G. Exs. 1-4 and P. Exs. 1-2 and 10.

The L.G. objects to my admitting P. Exs. 3-9. The I.G. argues that the documents, which
describe Medicare-reimbursable services and their codes, are irrelevant, because they
address facts underlying Petitioner’s conviction, and Petitioner’s conviction is not
reviewable here. I agree. As discussed below, Petitioner may not use this forum to
attack collaterally his conviction. 42 C.F.R. § 1001.2007(d); Joann Fletcher Cash, DAB
No. 1725 (2000). The documents are therefore irrelevant, and, by regulation, I must
exclude irrelevant or immaterial evidence. 42 C.F.R. § 1005.17(c). I therefore decline to
admit these documents.

I directed the parties to indicate in their briefs whether an in-person hearing would be
necessary, and, if so, “to provide the written direct testimony of any proposed witness in
writing and under oath or affirmation.” I also directed the party “to explain why the
testimony is relevant” and why any witness’s “proposed testimony does not duplicate
something that is already stated in an exhibit.” Order and Schedule for Filing Briefs and
Documentary Evidence at 3 (May 29, 2014). The I.G. indicates that an in-person hearing

is not necessary and submits no declarations from proposed witnesses. I.G. Br. at 6.

Petitioner, on the other hand, asserts that an in-person hearing is necessary, and asks that
I subpoena ten witnesses, including federal investigators and agents, the United States
Attorney and assistant U.S. attorneys who, he charges, falsified federal documents,
resulting in his purportedly wrongful conviction. Again, Petitioner’s criminal conviction
may not be attacked collaterally in this forum, and I must exclude irrelevant or
immaterial evidence. 42 C.F.R. §§ 1001.2007(d), 1005.17(c). Iam therefore obligated to
exclude the testimony that Petitioner proposes, so an in-person hearing would serve no

purpose.
IL. Issues

The issues before me are: 1) was Petitioner Zaky convicted of a criminal offense related
to the delivery of an item or service under Medicare or a state health care program, within
the meaning of section 1128(a)(1), thus providing a basis for excluding him from
program participation; and 2) if so, is the length of the exclusion (ten years) reasonable.

III. Discussion

A. Petitioner Zaky must be excluded from program
participation because he was convicted of a criminal
offense related to the delivery of an item or service under
Medicare or a state health care program, within the
meaning of section 1128(a)(1). '

Under section 1128(a)(1) of the Act, the Secretary of Health and Human Services must
exclude an individual who has been convicted under federal or state law of a criminal
offense related to the delivery of an item or service under Medicare or a state health care
program. See also 42 C.F.R. § 1001.101(a).

Petitioner concedes, as he must, that he was convicted of a criminal offense, but he
claims that the I.G. and his agents and attorneys falsified documents and engaged in other
wrongful conduct in order to obtain the conviction. Federal regulations explicitly
preclude such a collateral attack on Petitioner’s conviction:

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

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

42 C.F.R. § 1001.2007(d); Cash, DAB No. 1725; Chander Kachoria, R.Ph., DAB No.
1380 at 8 (1993) (citing Olufemi Okonuren, M.D., DAB No. 1319 (1992)) (“There is no
reason to ‘unnecessarily encumber the exclusion process’ with efforts to reexamine the
fairness of state convictions.”); Young Moon, M.D., DAB CR1572 (2007).

Petitioner also mentions that he appealed the conviction, although it appears that the
appellate court may have ruled against him. See Petitioner’s Motion to Attach Additional

' My findings of fact and conclusions of law are set forth, in italics and bold, in the
discussion captions of this opinion.
Evidence to the Record (September 2, 2014); U.S. v. Zaky, No. 13-3541-CR (2nd Cir.
August 21, 2014) (Summary Order). In any event, the Act specifically provides that a
pending appeal is irrelevant to whether an individual has been convicted: “[A]n
individual . . . is considered to have been ‘convicted’ of a criminal offense . . . regardless
of whether there is an appeal pending... .” Act § 1128(i)(1).

In yet another attack on his underlying conviction, Petitioner argues that he would not
have been convicted but for the malfeasance of government agents, and therefore his
criminal offense was not related to the delivery of an item or service under Medicare or a
state health care program. His argument is without merit. Inasmuch as he was convicted
of defrauding the Medicare program and making false statements “in connection with the
delivery of and payment for health care benefits, items, and services involving
Medicare,” his crimes plainly meet the requirement that they be related to the Medicare
program. See I.G. Exs. 2, 4.

Petitioner also argues that his exclusion should be waived because he was the sole
practicing podiatrist in his community. P. Br. at 9. The waiver provision, 42 C.F.R.

§ 1001.1801(b), authorizes the I.G. to grant or deny a state health care program’s request
that an exclusion be waived “if the individual . . . is the sole community physician or the
sole source of essential specialized services in a community.” So a state health care
official must present the request to the I.G. But “the decision to grant, deny, or rescind a
request for a waiver is not subject to administrative or judicial review.” 42 C.F.R.

§ 1001.1801(f); Act § 1128(c)(3)(B).

Finally, Petitioner raises some constitutional challenges, which I have no authority to
review. Donna Rogers, DAB No. 2381 at 5 (2011); see 42 C.F.R. § 1005.4(c)(1).

Thus, Petitioner was convicted of a program-related crime and must be excluded for at
least five years. I now consider whether the length of his exclusion beyond five years
falls within a reasonable range.

B. Based on the aggravating factors present in this case, the
ten-year exclusion falls within a reasonable range.

An exclusion under section 1128(a)(1) must be for a minimum period of five years. Act
§ 1128(c)(3)(B); 42 C.F.R. §§ 1001.102(a), 1001.2007(a)(2). Federal regulations set
forth criteria for lengthening exclusions beyond the five-year minimum. 42 C.F.R.

§ 1001.102(b). Evidence that does not pertain to one of the aggravating or mitigating
factors listed in the regulations may not be used to decide whether an exclusion of a
particular length is reasonable.

Among the factors that may serve as bases for lengthening the period of exclusion are
two relied on by the LG. in determining the length of Petitioner’s exclusion: 1) the acts
resulting in the conviction, or similar acts, resulted in a financial loss to Medicare or state
health care programs of $5,000 or more; and 2) the sentence imposed by the court
included incarceration. 42 C.F.R. § 1001.102(b). The presence of an aggravating factor
or factors not offset by any mitigating factor or factors justifies lengthening the
mandatory period of exclusion.

Program financial loss (42 C.F.R. § 1001.102(b)(1)). Petitioner’s actions resulted in
program financial losses almost 27 times greater than the $5,000 threshold for
aggravation. The sentencing judge ordered him to pay $134,139.60 in restitution. I.G.
Ex. 3 at 2. Restitution has long been considered a reasonable measure of program losses.
Jason Hollady, M.D., DAB No. 1855 (2002). Because the financial losses were
significantly in excess of the threshold amount for aggravation, the I.G. may justify a
significant increase in Petitioner’s period of exclusion. See Jeremy Robinson, DAB No.
1905 (2004); Donald A. Burstein, Ph.D., DAB No. 1865 (2003).

Petitioner suggests that the ordered amount of restitution is incorrect because it includes
more payments than alleged in the indictment. P. Br. at 8. As the LG. points out,
program financial loss is not so limited, but includes “similar acts” that caused a financial
loss to the program. 42 C.F.R. § 1001.102(b)(1). Moreover, $134,139.60 represents the
criminal court’s assessment of program losses, and I again defer to the court’s findings.
42 C-F.R. § 1001.2007(d).

Incarceration (42 C.F.R. § 1001.102(b)(5)). The criminal court sentenced Petitioner to a
substantial period of incarceration — 41 months — which underscores the seriousness of
his crimes. I.G. Ex. 3 at 1.

Petitioner does not claim that any mitigating factor justifies decreasing his period of
exclusion. See 42 C.F.R. § 1001.102(c).

So long as the period of exclusion is within a reasonable range, based on demonstrated
criteria, I have no authority to change it. Cash, DAB No. 1725 at 7 (citing 57 Fed. Reg.
3298, 3321 (1992)). In this case, Petitioner’s crime demonstrates that he presents
significant risks to the integrity of health care programs. He engaged in illegal conduct
that cost the Medicare program a significant amount of money. He was sentenced to a
lengthy period of time in jail. No mitigating factors offset these aggravating factors. I
therefore find that the ten-year exclusion falls within a reasonable range.
IV. Conclusion

For these reasons, I conclude that the I.G. properly excluded Petitioner from participation
in Medicare, Medicaid and all federal health care programs, and I sustain as reasonable
the ten-year period of exclusion.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In re CMS LCD COMPLAINT:
Glucose Monitors (L11530)

Contractor: NHIC, Corp.
Docket No. C-14-1196
Decision No. CR3424
Date: October 20, 2014
DECISION DISMISSING LCD COMPLAINT

A Medicare beneficiary (Aggrieved Party)! filed a complaint challenging a Local
Coverage Determination (LCD), titled “Glucose Monitors,” issued by the Medicare
contractor NHIC, Corp. After providing an opportunity to amend, I must dismiss the
Aggrieved Party’s complaint as unacceptable because the challenge still does not meet
the regulatory requirements.

Background

The Centers for Medicare & Medicaid Services (CMS) administers the Medicare
program and contracts with carriers and intermediaries (Medicare contractors) to act on
its behalf in determining and making payments to providers and suppliers of Medicare
items and services. Social Security Act (Act) §§ 1816, 1842. Medicare contractors issue
written determinations, called LCDs, addressing whether, on a contractor-wide basis, a
particular item or service is covered through Medicare. Act § 1869(f)(2)(B); see also 42
C.F.R. § 400.202.

A Medicare beneficiary who has been denied coverage for an item or service based on a
LCD may challenge that LCD before an administrative law judge (ALJ). The Medicare
beneficiary initiates the review by filing a written complaint that meets the criteria

' The names of Medicare beneficiaries are not listed in published decisions to protect
their privacy. 68 Fed. Reg. 63,691, 63,708 (Nov. 7, 2003).
specified in the governing regulations. 42 C.F.R. §§ 426.400; 426.410(b)(2). After the
LCD complaint is docketed, the ALJ evaluates whether the complaint is “acceptable.”
42 C.F.R. § 426.410(b). An ALJ does not have authority to review the merits of an
“unacceptable complaint.” See 42 C.F.R. §§ 426.405(d)(7); 426.410(c)(2). If the
complaint is determined to be unacceptable, the ALJ must provide the beneficiary an
opportunity to amend the compliant. 42 C.F.R. § 426.410(c)(1). If the ALJ also
determines that the amended complaint is unacceptable, the ALJ must issue a decision
dismissing the LCD complaint. 42 C.F.R. § 426.410(c)(2). Ifa complaint is determined
unacceptable after one amendment, the beneficiary is precluded from filing again for six
months after being informed that the complaint is unacceptable. 42 C.F.R.

§ 426.410(c)(3).

On May 15, 2014, the Aggrieved Party filed a letter in which she requested to “. . . illicit
help and support and to supply pertinent, crucial information to obtain approval for
coverage of my diabetic medical equipment Dexcom Continuous Glucose Monitor
system .. . that includes sensors which must be replaced weekly.” The letter was
construed to be a complaint challenging LCD L11530, titled “Glucose Monitors,” which
applies in the Aggrieved Party’s state of residence. The case was assigned to me on June
2, 2014.

lI evaluated the complaint as required by 42 C.F.R. § 426.410(b), (c) and (d) and found
that it was unacceptable. I advised the Aggrieved Party, through an order dated June 13,
2014, why her complaint was unacceptable, and I granted her an opportunity to amend it.
also advised the Aggrieved Party that if she did not submit an amended, acceptable
complaint, I was required to issue a decision dismissing the complaint as unacceptable.
See 42 C.F.R. § 426.410(c). On July 14, 2014, the Aggrieved Party filed her amended
complaint.

Discussion

I find the Aggrieved Party’s amended complaint is unacceptable, and I must
dismiss it because the amended complaint does not meet all of the regulatory
requirements for an acceptable challenge to the LCD.

In her amended complaint, the Aggrieved Party discussed her personal need for a
continuous glucose monitoring system and, in support of her challenge, provided the
following documents: two physician prescriptions, one for a DexCom Continuous
Glucose Monitoring System and a second for sensors; an invoice from DexCom, Inc.
showing she purchased the glucose monitor system and sensors on June 6, 2014; a copy
of her personal daily blood glucose log for the week of July 1, 2014; a copy of a blood
glucose trend graph showing her personal glucose values for the period May 28, 2014
through June 3, 2014, along with a data sheet showing her blood glucose readings for the
same time period; and a copy of page 15 from the DexCom G4 PLATINUM User’s
Guide, which shows pictures of the various components of the monitoring system.

Upon reviewing the Aggrieved Party’s July 14, 2014 amended complaint, I find that it
still does not comply with all of the regulatory requirements needed for an acceptable
LCD challenge. The Aggrieved Party did not identify in her amended complaint the
specific provision of an LCD that adversely affected her as required by 42 C.F.R.

§ 426.400(c)(4)(iii). The Aggrieved Party also did not explain why the provision(s) of
the LCD are not valid under the reasonableness standard as required by 42 C.F.R.

§ 426.400(c)(5). Additionally, the Aggrieved Party did not provide copies of clinical or
scientific evidence that support her complaint as well as an explanation as to why she
thinks the evidence shows that the LCD is not reasonable as required by 42 C.F.R.

§ 426.400(c)(6)(i).

It is evident that the Aggrieved Party and her treating physician agree that the Aggrieved
Party needs the glucose monitoring system to treat her medical conditions; however, that
is not enough to support an acceptable challenge to the LCD. Accordingly, I must
dismiss the Aggrieved Party’s complaint as unacceptable pursuant to 42 C.F.R.

§ 426.410(c)(2).

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1013)

Complainant,
v.

Cob Investment Management, LLC / Linda Hansen
d/b/a Lu’s Smoke Shop,

Respondent.
Docket No. C-14-1503
Decision No. CR3423
Date: October 17, 2014
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Cob Investment Management, LLC / Linda Hansen d/b/a Lu’s
Smoke Shop, at 1227 North Goerig Street, Suite C, Woodland, Washington 98674 and by
filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division
of Dockets Management. The complaint alleges that Lu’s Smoke Shop unlawfully sold
cigarettes to minors and failed to verify, by means of photo identification containing a
date of birth, that a cigarette purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $250 civil money
penalty against Respondent Lu’s Smoke Shop.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 19, 2014, CTP served the
complaint on Respondent Lu’s Smoke Shop 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 Lu’s Smoke Shop 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:

e At Respondent’s business establishment, 1227 North Goerig Street, Suite C,
Woodland, Washington 98674, on November 25, 2013, at approximately 4:03 PM,
an FDA-commissioned inspector observed Respondent’s staff sell a package of
Camel Blue 99’s cigarettes 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 cigarette purchaser was
18 years of age or older;

e Ina warning letter issued on February 6, 2014, CTP informed Respondent of the
inspector’s observations from November 25, 2013, 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;

e At Respondent’s business establishment, 1227 North Goerig Street, Suite C,
Woodland, Washington 98674, on April 23, 2014, at approximately 2:16 PM,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Marlboro cigarettes to a person younger than 18 years of age.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 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 cigarette or smokeless
tobacco purchaser is younger than 18 years of age.

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent
Cob Investment Management, LLC / Linda Hansen d/b/a Lu’s Smoke Shop. Pursuant to
21 CFR. § 17.11(b), this order becomes final and binding upon both parties after 30
days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Marvin Reich, M.D.,
(OI File No. H-13-41667-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1958
ALJ Ruling No. 15-1

Date: October 20, 2014

DISMISSAL

Petitioner, Marvin Reich, M.D., is a Florida physician who appeals his two-year
exclusion from participation in Medicare, Medicaid, and all federal health care programs.
For the reasons discussed below, I dismiss his appeal as untimely filed.

Ina letter dated February 28, 2014, the Inspector General (I.G.) advised Petitioner that,
based on his conviction “of a misdemeanor offense related to the unlawful manufacture,
distribution, prescription, or [dispensing] of a controlled substance” he was excluded
from participation in Medicare, Medicaid, and all federal health care programs for a
period of two years. With the notice letter, the I.G. sent Petitioner an explanation of his
appeal rights: he was entitled to a hearing before an administrative law judge if he filed a
written request for review within sixty days after receipt of the notice.

Petitioner filed his hearing request six months later, well after the filing deadline had
passed. Although the request is dated July 16, 2014, its envelope is postmarked August
26, 2014. The Civil Remedies Division received it on September 2, 2014.
The regulations governing these appeals provide that an aggrieved party must request a
hearing within sixty days after receiving notice of the exclusion. 42 C.F.R.

§ 1001.2007(b). The date of receipt is presumed to be five days after the date of the
notice unless there is a reasonable showing to the contrary. 42 C.F.R. § 1005.2(c). The
regulations include no good-cause exceptions for untimely filing, providing that the ALJ
will dismiss a hearing request that is not filed in a timely manner. 42 C.F.R.

§ 1005.2(e)(1); John Maiorano, R. Ph. v. Thompson, Civ. Action No. 04-2279, at 6 (D.
N.J. 2008), WL 304899.

Petitioner acknowledges timely receipt of the notice, and says that he instructed his
attorney to file an appeal, but his attorney failed to do so. Because the regulations
provide no good cause exception for untimely filing, I need not consider whether
attorney error excuses the late filing. Under the regulations, I have no discretion and
must dismiss his appeal as untimely filed.

Petitioner’s hearing request is therefore dismissed.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Gayle Pugh, PA,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-14-1317
Decision Number CR3420

Date: October 17, 2014

DECISION

The Centers for Medicare & Medicaid Services (CMS), through its administrative
contractor Novitas Solutions, denied the revalidation enrollment application of Petitioner,
Gayle Pugh, as a physician assistant because Petitioner indicated that she was a sole
practitioner on her application. Because I conclude that Petitioner serves as a physician
assistant with the rural health clinic (RHC) Petitioner owns, I reverse CMS’s
determination.

I. Background and Procedural History

Petitioner is a physician assistant for and the owner of Buna Medical Clinic (Buna), an
RHC located in Buna, Texas. Petitioner Declaration (P. Decl.) at 1-3; P. Exhibit (Ex.) 1,
at 1, 8. Petitioner enrolled in Medicare as a physician assistant. CMS Ex. 2; P. Exs. 2,
at 1; 10, at 5. As the owner and authorized representative of Buna, she enrolled Buna in
Medicare Part B as a RHC. P. Decl. at 1-3; P. Ex. 10, at 2-4, 8-9, 14; CMS Ex. 11.
Petitioner states her Medicare Part B services as a physician assistant are billed under
Buna’s PTAN and NPI. P. Decl. at 3.
In a March 1, 2013 letter, Novitas notified Petitioner that she had to revalidate her
enrollment information. CMS Ex. 1. The letter was sent to Petitioner as a physician
assistant, not to Buna as a RHC, although the letter inconsistently cited Petitioner’s NPI
and Buna’s PTAN. CMS Ex. 1, at 1-2. Petitioner submitted a revalidation enrollment
application.

On January 9, 2014, Novitas issued an initial determination denying Petitioner’s
enrollment application under 42 C.F.R. § 424.530(a)(1) because, as a Medicare supplier,
Petitioner did not meet CMS enrollment requirements. Specifically, Novitas determined
that because Petitioner is a physician assistant she “cannot be enrolled into Medicare as a
Sole Proprietor. [She] must report an employer to receive payment for services rendered
in Part B Medicare.” The letter informed Petitioner that she could either submit a
corrective action plan (CAP) within 30 days from the date of the letter or exercise her
right to request reconsideration within 60 days from the date of the letter. CMS Ex. 3.

Petitioner requested reconsideration twice, once on February 25, 2014, ina letter signed
by her billing manager, and again on March 6, 2014, in a letter signed by Petitioner.
CMS Exs. 4, 5. Novitas treated the February 25, 2014 letter as a CAP and did not
process it as it “was not signed by the individual provider.” CMS Ex. 7. Novitas
considered Petitioner’s March 6, 2014 reconsideration request. On June 2, 2014, a
Novitas hearing officer issued a decision upholding the original revalidation denial.

In the decision, the hearing officer stated that,

Novitas Solutions is unable to process the revalidation
application that was received on March 20, 2013 since the
Medicare file is set up as a physician assistant sole proprietor.
Per 42 § CFR 410.74 . . . physician assistant’s services are
covered by Medicare Part B only if the services furnished are
billed by the employer of a physician assistant. Since the
Medicare file is only for the physician assistant and there is
no employer tied to this file, the denial of the revalidation
application was correct.

CMS Ex. 8, at 2.

On June 9, 2014, the Civil Remedies Division received Petitioner’s request for an
administrative law judge hearing. The case was assigned to me for hearing and decision.
In response to my June 25, 2014 Acknowledgment and Pre-Hearing Order, CMS filed a
pre-hearing brief and motion for summary judgment (CMS Br.), and 11 proposed exhibits
(CMS Exs. 1-11). CMS did not list any proposed witnesses. Petitioner filed a
declaration in opposition (P. Decl.) and 10 proposed exhibits (P. Exs. 1-10).
II. Decision on the Record

In the absence of objection, I admit CMS Exs. 1-5, 7-11 and P. Exs. 1-10 into the record.
I do not admit CMS Ex. 6 because, despite what CMS’s exhibit list indicates, CMS Ex. 6
is identical to CMS Ex. 5 and, therefore, repetitive.

My Order advised the parties that they must submit written direct testimony for each
proposed witness and that an in-person hearing would be necessary only if the opposing
party requested an opportunity to cross-examine a witness. Order §{j 8-10. CMS did not
submit written direct testimony for any proposed witnesses. Petitioner signed and
submitted a document entitled Petitioner’s Declaration in Opposition to Respondent’s
Motion for Summary Judgment. CMS neither objected to this document nor sought to
cross-examine Petitioner based on this document. Order {{] 7-9. Consequently, I will
issue a decision on the record. Order § 11.

III. Issue

The general issue is whether CMS had a legitimate basis to deny Petitioner’s revalidation
of enrollment as a physician assistant under 42 C.F.R. § 424.530(a)(1). The specific
issue is whether CMS correctly determined that Petitioner is not qualified to be enrolled
as a physician assistant because she is not employed and her employer does not bill for
her services. 42 C.F.R. § 410.74(a)(2)(v).!

IV. Jurisdiction

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

V. Findings of Fact, Conclusions of Law, and Analysis”
In order to maintain Medicare billing privileges, suppliers enrolled in the Medicare

program must periodically revalidate their enrollment by submitting an enrollment
application to CMS. 42 C.F.R. § 424.515. CMS may deny a supplier’s enrollment

' Petitioner, who appears pro se, appears to be somewhat confused regarding the actual
issue in the case, discussing whether Buna was in compliance with Medicare enrollment
requirements, not whether she is qualified to be enrolled as a physician assistant. P. Decl.
at 1. Although Petitioner’s argument may not be focused, her statements regarding the
nature of the relationship between her ownership of Buna and her employment by Buna
effectively address the issue I must decide.

> My findings of fact and conclusions of law in this case are set forth in italics and bold
font.
application in the Medicare program if a supplier is found not to be in compliance with
Medicare enrollment requirements applicable to the type of supplier enrolling. 42 C.F.R.
§ 424.530(a)(1).

For Medicare program purposes, physician assistants are suppliers. 42 C.F.R. §§ 400.202
(definition of Supplier); 498.2 (definition of Supplier). A “physician assistant” is an
individual “who performs such services as such individual is legally authorized to
perform (in the State in which the individual performs such services) in accordance with
State law (or the State regulatory mechanism provided by State law), and who meets such
training, education, and experience requirements (or any combination thereof) as the
Secretary [of HHS] may prescribe in regulations.” 42 U.S.C. § 1395x(aa)(5)(A).
Physician assistant services may be billed as physician services. 42 U.S.C.

§ 1395x(s)(2)(H)(i), K(i). However, “Medicare Part B covers physician assistants’
services only if [the services] . . . are billed by the employer of a physician assistant.”

42 CFR. § 410.74(a) and (a)(2)(v); see also 42 C.F.R. § 410.150(b)(15).

1. Petitioner is both the owner of and the physician assistant for Buna, a
rural health clinic.

Neither party disputes that Petitioner owns Buna. Petitioner states:

Petitioner, Gayle Pugh, PA, enrolled in Medicare A,
personally, as a provider, and was approved. Petitioner,
Gayle Pugh, PA was issued Medical Provider #8A3714,
UPIN #853556. Petitioner, as the owner and authorized
representative of Buna Medical Clinic, also enrolled Buna
Medical Clinic, as a sole proprietor in the Medicare B
program. Buna Medical Clinic was approved and issued
Medical Provider #67-3844, UPIN #00726U. Gayle Pugh is
the owner of the facility and is also employed by the facility
as the facilities provider of Medical services.

P. Decl. at 3. Petitioner asserts that her Medicare Part B services are billed through her
employer, Buna, and her Medicare Part A services are billed through her own transaction
numbers. P. Decl. at 1, 3. Enrollment documents filed by Petitioner in 2003 show that
she submitted two Medicare enrollment applications, one for Buna and one for herself as
a physician assistant. CMS Ex. 9. The first is Petitioner’s “Practitioner Enrollment
Application,” reflecting Buna Medical as a “legal business name,” giving Buna’s
location, stating that Petitioner practices at Buna, and that Medicare payment is to be sent
to Buna. Petitioner signed the certification statement for this enrollment application on
February 28, 2003. CMS Ex. 9, at 1-14. The second enrollment application is a supplier
application for Buna Medical Clinic, and reflects that Buna is organized as a “sole
proprietor.” It reflects that Petitioner is Buna’s owner and the individual with

management control. Buna is identified as a RHC. Petitioner signed the certification
statement as the “authorized official for Buna on February 27, 2003. CMS Ex. 9, at 16,
17, 29, 41; P. Ex. 1. Buna was assigned PTAN 00726U on March 31, 2003. P. Ex. 10,
at 8. Petitioner signed a Medicare “Participating Physician or Supplier Agreement” on
behalf of Buna as “Pa/Owner” on April 4, 2003, which was received by Medicare and
effectuated. P. Ex. 10, at 9, 14; CMS Ex. 11. Nothing in these enrollment applications
conflicts with Petitioner’s statement that she functions as both the owner of Buna and the
physician assistant of Buna as its “facilities provider.” Further, CMS also determined
that Buna met the requirements to be a RHC. P. Ex. 10, at 3.

Petitioner’s declaration that she is an employee of Buna and that Buna bills for her
Medicare Part B services is supported by the enrollment documents in evidence
indicating that she and Buna were separately enrolled in Medicare. From Petitioner’s
statements, I find that she is both the owner of Buna and serves as the physician assistant
for Buna.

2. Petitioner’s position as owner and the physician assistant for Buna, a
RHC, satisfies the requirement in 42 C.F.R. § 410.74(a)(2)(v) that she be
an employee of Buna because the specific regulations governing RHCs
permits this.

The only disputed issue in this case is whether Petitioner is employed as a physician
assistant and her employer bills the Medicare program for her services. Based on the
regulatory provisions related to RHCs, I conclude that Petitioner’s ownership position in
Buna, taken with the fact that Petitioner serves as the physician assistant for Buna, is
sufficient for Petitioner to meet the employment and billing requirements in 42 C.F.R.

§ 410.74(a)(2)(v).

As mentioned above, Petitioner declares in opposition to CMS’s position that she is the
owner of Buna, a sole proprietorship, and that she is also an employee of Buna. P. Decl.
at 3. Petitioner also asserts that Buna is enrolled in the Medicare program as an RHC,
and that Buna bills the Medicare program for Medicare Part B services that Petitioner
provides. P. Decl. at 3.

CMS states that it denied revalidation of Petitioner’s PTAN because “although Petitioner
applied to participate in Medicare as a physician’s assistant, she failed to include an
employer in her revalidation application.” CMS Br. at 1. Despite the fact that CMS
states in its exhibit list that it was filing Petitioner’s 2013 revalidation application as CMS
Ex. 10, CMS instead filed as CMS Ex. 10 an “Application Record Data Report” that is

essentially unreadable. Thus, there is no substantive exhibit admitted into the record that
supports CMS’s argument.’ However, even if Petitioner did not list Buna as her
employer, this would not change the analysis below.

This case presents a situation where there is a minor conflict between the general
regulatory provision involving physician assistant enrollment requirements, and the
statutory and regulatory provisions meant to permit RHCs to operate in areas of the
country that are underserved.

A RHC is defined by regulation as “a clinic that is located in a rural area designated as a
shortage area...” 42 C.F.R. § 491.2. A “shortage area” is defined by regulation as “a
defined geographic area designated by the Department [of HHS] as having either a
shortage of personal health services . . . or a shortage of primary medical care
manpower.” 42 C.F.R. § 491.2. The purpose of establishing special rules for RHCs is to
better address the problem of areas underserved by health care providers.

Physician assistants [and nurse practitioners] play a central role to the functions of RHCs.
In order for RHCs to be enrolled in the Medicare program: the RHC must employ a
physician assistant [or a nurse practitioner]; the RHC must have a physician assistant [or
nurse practitioner] present for at least half the RHC’s hours of operation; and the RHC
may designate a physician assistant to ensure the execution of the operating policies of
the RHC. 42 U.S.C. § 1395x(aa)(2)(F), (J), (K)(iii). There are also a variety of other
requirements in the regulations; however, once they have been met and CMS has
approved a provider agreement, the RHC may bill Medicare for physician assistant
services. 42 C.F.R. §§ 405.2402, 405.2414. Most significant for this decision, “[t]he
physician assistant . .. member of the [RHC] staff may be the owner or an employee of
the clinic... .” 42 C.F.R. § 491.8(a)(1), (3).

Petitioner’s position is that she owns and is employed by Buna. However, Petitioner has
also stated Buna is a sole proprietorship. The difficulty in this case arises from
Petitioner’s choice of ownership of Buna (i.e., a sole proprietorship). It is unlikely that
Petitioner can be, as she asserts, an employee of Buna. This is because sole
proprietorships have essentially the same legal personality as its owner. [deal Lease
Service, Inc. v. Amoco Production Co., Inc., 662 S.W.2d 951, 952 (Tex. 1983) (“Blue
Streak Welding Service was, in law and in fact, one and the same as Thompson because a
sole proprietorship has a legal existence only in the identity of the sole proprietor.”); see
also Black’s Law Dictionary (9" ed. 2009) (defining “sole proprietorship” as “[a]

> CMS also states that although Petitioner has been enrolled in Medicare since 2003, her
initial enrollment was in error because her initial Medicare enrollment applications all
reflect that she was a sole proprietor and no employer was listed to bill for the services
she furnished. CMS Br. at 4; CMS Ex. 9, at 5.
business in which one person owns all the assets, owes all the liabilities, and operates in
his or her personal capacity.”). Although CMS believes that the inquiry into Petitioner’s
enrollment ends with this conclusion, it does not.

It is significant that “[r]ural health clinic staffs must also include one or more physician
assistants” and “[t]he physician assistant ... member of the staff may be the owner or an
employee of the clinic... .” 42 C.F.R. § 491.8(a)(1), (3). From the context of the two
quoted provisions above, it is clear that the “[t]he physician assistant” who may be the
owner of the RHC is the same as the physician assistant who is a member of the RHC’s
staff. Further, the regulation permits that physician assistant to be either the owner or an
employee. It would create an absurdity, and be counter to Congress’ efforts to foster
rural health care using physician assistants, to interpret 42 C.F.R. § 410.74(a)(2)(v) ina
manner that would ensure that no physician assistant on the staff of a RHC could ever
own the RHC. Rather, a more reasonable interpretation would be to permit a physician
assistant who owns and is on the staff of a RHC to be enrolled as a physician assistant if
the RHC bills for the services provided by that physician assistant. See 42 C.F.R.

§§ 405.2402, 405.2414.

CMS argue that the Novitas hearing officer found that denial of Petitioner’s revalidation
application was correct because a physician assistant cannot enroll in Medicare as a sole
proprietor since the physician assistant requires a supervising physician to bill for
physician assistant services and Petitioner’s revalidation application did not include an
employing physician. CMS Br. at 2-3. However, the reconsideration determination did
not say this and, if it had, it would have been incorrect. 42 C.F.R. § 410.74(a)(2)(v).
The hearing officer in fact found that physician assistant services are covered by
Medicare Part B only if the services furnished are billed by the physician assistant’s
“employer”; it does not state that the employer must be a physician.’ CMS Ex. 8, at 2.

VI. Conclusion
Petitioner is a physician assistant who owns and is on the staff of an enrolled RHC. The

RHC bills for the Medicare Part B services Petitioner provides. Therefore, Petitioner
satisfies the requirement that physician assistant services be billed by an employer.

* CMS’s position that a physician assistant must be employed by a physician is also not
accurate in regard to the regulations that apply to RHCs. The regulations require that a
RHC be under the medical direction of a physician and that the physician supervise the
RHC’s health care staff, which must include a physician assistant or nurse practitioner.
However, the physician does not need to be on the RHC’s staff or be its owner to
accomplish this. Instead, the physician may provide physician services “under
agreement” with the RHC. 42 C.F.R. §§ 491.7; 491.8(a)(2).
For the reasons stated above, I reverse CMS’s determination to deny Petitioner’s
revalidation application.

/s/

Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1163)

Complainant,
v.
Abbas Willimatic LLC d/b/a Sam’s Food Stores / Citgo,
Respondent.
Docket No. C-14-1675
Decision No. CR3418
Date: October 15, 2014
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Abbas Willimatic LLC d/b/a Sam’s Food Stores / Citgo, at 217
Main Street, Willimantic, Connecticut 06226 and by filing a copy of the complaint with
the Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Sam’s Food Stores / Citgo unlawfully sold tobacco products to
minors and failed to verify, by means of photo identification containing a date of birth,
that the purchaser of a tobacco product was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. CTP seeks to impose a $500 civil money
penalty against Respondent Sam’s Food Stores / Citgo.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on August 14, 2014, CTP served the
complaint on Respondent Sam’s Food Stores / Citgo 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 Sam’s Food Stores / Citgo 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, I assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At Respondent’s business establishment, 217 Main Street, Willimantic,
Connecticut 06226, on May 21, 2013, at approximately 2:23 PM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Newport
Smooth Select Menthol Box 100s cigarettes to a person younger than 18 years of
age;

e Ina warning letter issued on June 13, 2013, CTP informed Respondent of the
inspector’s observation from May 21, 2013, and that such an action violates
federal law, 21 C.F.R. § 1140.14(a). 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;

e At Respondent’s business establishment, 217 Main Street, Willimantic,
Connecticut 06226, on January 29, 2014, at approximately 11:21 AM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Skoal Long Cut Xtra Wintergreen smokeless tobacco to a person younger than
18 years of age. The inspectors also documented that Respondent’s staff failed to
verify, by means of photo identification containing the bearer’s date of birth, that
the purchaser of a tobacco product was 18 years of age or older.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 CFR. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 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 cigarette or smokeless
tobacco purchaser 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
Abbas Willimatic LLC d/b/a Sam’s Food Stores / Citgo. 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/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

C Store, L.L.C.
d/b/a Selah Mini Mart and Smoke Shop,

Respondent.

Docket No. C-14-1687
FDA Docket No. FDA-2014-H-1174

Decision No. CR3416

Date: October 15, 2014

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, C Store, L.L.C. d/b/a Selah Mini Mart and Smoke Shop alleging
facts and legal authority sufficient to justify imposing 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 tobacco
products to minors and failed to verify, by means of photo identification containing a date
of birth, that a tobacco purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act) and its implementing regulations, found at
21 CFR. pt. 1140. CTP seeks a civil money penalty of $500.

On August 18, 2014, CTP served the Complaint on Respondent by United Parcel Service,
pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying cover letter,
CTP explained that within 30 days Respondent should pay the 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 issue an initial decision by default ordering Respondent to pay the full amount of
the proposed penalty. 21 C.F.R.§ 17.11.

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), 1 am 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 CFR. § 17.11(a). Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Selah Mini Mart, an establishment that sells tobacco products
and is located at 103 South First Street, Selah, Washington 98942. Complaint § 3.

e During an inspection of Respondent’s establishment on May 7, 2013, at
approximately 6:22 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Newport Box
cigarettes . . .[ .]” The inspector also observed that “the minor’s identification was
not verified before the sale... .” Complaint § 10.

¢ On May 23, 2013, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from May 7, 2013. The letter explained that the
observations constituted a violation of regulations found at 21 C.F.R.
§ 1140.14(a) and (b)(1), and that the named violations were not necessarily
intended to be an exhaustive list of all violations at the establishment. The
Warning Letter went on to state that if Respondent failed to correct the violations,
regulatory action by the FDA or a civil money penalty action could occur and that
Respondent is responsible for complying with the law. Complaint J 10.

e By letter, on August 21, 2013, Respondent’s Site Manager, responded to the
Warning Letter on Respondent’s behalf. “The site manager stated that the store’s
“system has been updated’ and that employees are trained to check for
identification for tobacco sales.” Complaint § 11.

e During a subsequent inspection of Respondent’s establishment conducted on
February 21, 2014, FDA-commissioned inspectors documented that “a person
younger than 18 years of age was able to purchase a package of Newport Box
cigarettes . . . at approximately 10:48 AM[.]” The inspectors also documented that
“the minor’s identification was not verified before the sale...’ 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). The regulations prohibit the sale of
cigarettes or smokeless tobacco to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations also require retailers to verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
tobacco products to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on
May 7, 2013 and February 21, 2014. On those same dates, Respondent violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no tobacco product purchasers are younger than 18 years of
age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of
law that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge